As filed with the Securities and Exchange Commission
on January 29, 1996
Registration No. 2-97817; 811-4305
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment No. 41
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 43 [x]
(Check appropriate box or boxes)
________________________
NATIONS FUND TRUST
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
__________________________
Registrant's Telephone Number, including Area Code: (800) 321-7854
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With copies to:
Robert M. Kurucza, Esq. Carl Frischling, Esq.
Marco E. Adelfio, Esq. Kramer, Levin, Naftalis,
Morrison & Foerster Nessen, Kamin & Frankel
2000 Pennsylvania Ave., N.W. 919 3rd Avenue
Suite 5500 New York, New York 10022
Washington, D.C. 20006
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant [ ] on __________, pursuant
to Rule 485(b), or to Rule 485(b), or
[x] 60 days after filing pursuant [ ] on __________, pursuant
to Rule 485(a), or to Rule 485(a).
[ ] 75 days after filing pursuant to [ ] on (date) pursuant to
paragraph (a)(2) paragraph (a)(2) of rule
485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
No filing fee is required under the Securities Act of 1933 because an
indefinite number of shares of beneficial interest in the Registrant, without
par value, has previously been registered pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. The Registrant filed on January 26,
1996, the notice required by Rule 24f-2 for its fiscal year ended November 30,
1995 (File No. 2-97817; 811-4305).
<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment is being filed in order to add a Shareholder
Administration Plan and Shareholder Administration Agreements for the Trust
B Shares.
<PAGE>
NATIONS FUND TRUST
CROSS REFERENCE SHEET
Part A
Item No. Prospectus
1. Cover Page . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . Expenses Summary
3. Condensed Financial
Information. . . . . . . . . . Expenses Summary; How
Performance is Shown
4. General Description of
Registrant . . . . . . . . . . Cover Page; Objectives; How Objectives
are Pursued; Organization and History
5. Management of the Fund. . . . . How the Funds are Managed
6. Capital Stock and Other
Securities. . . . . . . . . . . How to Buy Shares; How the
Funds Value Their Shares; How
Dividends and Distributions are
Made; Tax Information
7. Purchase of Securities Being
Offered. . . . . . . . . . . . Cover Page; How to Buy Shares
8. Redemption or Repurchase. . . . How to Redeem Shares; How to Exchange
Shares
9. Legal Proceedings . . . . . . . Inapplicable
Part B
Item No.
10. Cover Page. . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . Table of Contents
12. General Information and
History . . . . . . . . . . . . Introduction
<PAGE>
13. Investment Objectives and
Policies. . . . . . . . . . . . Additional Information on Fund
Investments
14. Management of the Fund. . . . . Investment Advisory, Administration,
Custody, Transfer Agency, Shareholder
Administration & Distribution
Services Agreements
15. Control Persons and Principal
Holders of Securities . . . . . Miscellaneous
16. Investment Advisory and Other
Services. . . . . . . . . . . . Investment Advisory, Administration,
Custody, Transfer Agency, Shareholder
Administration and Distribution
Services Agreements
17. Brokerage Allocation. . . . . . Fund Transactions and Brokerage
18. Capital Stock and Other
Securities. . . . . . . . . . . Description of Shares
19. Purchase, Redemption and Pricing
of Securities Being Offered . . Net Asset Value, Distributor
20. Tax Status. . . . . . . . . . . Additional Information Concerning
Taxes
21. Underwriters. . . . . . . . . . Distributor
22. Calculation of Performance Data. Additional Information on Performance
23. Financial Statements. . . . . . Independent Accountants and
Reports
<PAGE>
Part C
Item No. Other Information
Information required to be included
in Part C is set forth under the
appropriate Item, so numbered, in
Part C of this Document
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JANUARY 31, 1996
Prospectus
TRUST B SHARES
MARCH , 1996
This Prospectus describes the 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 B Shares.
This Prospectus sets forth concisely the information
about Nations Fund 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, Nations Fund, Inc. and Nations
Fund Portfolios, Inc. ("Nations Portfolios") is
contained in separate Statements of Additional
Information ("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.
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 Global Government Income 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)
<PAGE>
Table Of Contents
About The Funds
Expenses Summary 3
Objectives 5
How Objectives Are Pursued 6
How Performance Is Shown 18
How the Funds Are Managed 18
Organization and History 23
About Your
Investment
How to Buy Shares 25
Shareholder Administration Arrangements 25
How to Redeem Shares 26
How to Exchange Shares 26
How the Funds Value Their Shares 27
How Dividends and Distributions Are Made; Tax
Information 27
Appendix A -- Portfolio Securities 29
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' 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 B 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 EQUITY/BALANCED FUNDS TRUST B SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Nations Nations Nations
Nations Nations Inter- Nations Pacific Nations Emerging
Value Equity national Emerging Growth Capital Growth
Fund Income Fund Equity Fund Markets Fund Fund Growth Fund 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
</TABLE>
<TABLE>
<CAPTION>
Nations Nations
Disciplined Equity Nations
Equity Index Balanced
Fund Fund Assets Fund
<S> <C> <C> <C>
Sales Load Imposed on
Purchases None None None
Deferred Sales Load None None None
</TABLE>
ANNUAL FUND
OPERATING
EXPENSES
(as a percentage of
average net assets)
<TABLE>
<CAPTION>
Nations Nations Nations
Nations Nations Inter- Nations Pacific Nations Emerging
Value Equity national Emerging Growth Capital Growth
Fund Income Fund Equity Fund Markets Fund Fund Growth Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fees1 .75% .70% .90% 1.10% .90% .75% .75%
Other Expenses1 .67% .75% .70% 1.30% 1.30% .67% .70%
Total Operating Expenses1 1.42% 1.45% 1.60% 2.40% 2.20% 1.42% 1.45%
</TABLE>
<TABLE>
<CAPTION>
Nations Nations
Disciplined Equity Nations
Equity Index Balanced
Fund Fund Assets Fund
<S> <C> <C> <C>
Management Fees1 .75% .10% .75%
Other Expenses1 .75% .80% .70%
Total Operating Expenses1 1.50% .90% 1.45%
</TABLE>
1 After any waivers and reimbursements.
NATIONS FUND BOND FUNDS TRUST B SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Nations
Short-
Inter- Nations Nations Nations
mediate Government Short-Term Diversified
Government Securities Income Income
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Deferred Sales Load None None None None
</TABLE>
<TABLE>
<CAPTION>
Nations
Strategic Nations
Fixed Global
Income Government
Fund Income Fund
<S> <C> <C>
Sales Load Imposed on Purchases None None
Deferred Sales Load None None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Nations
Short-
Inter- Nations Nations Nations
mediate Government Short-Term Diversified
Government Securities Income Income
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Management Fees1 .40% .50% .30% .50%
Other Expenses1 .53% .65% .57% .67%
Total Operating Expenses1 .93% 1.15% .87% 1.17%
</TABLE>
<TABLE>
<CAPTION>
Nations
Strategic Nations
Fixed Global
Income Government
Fund Income Fund
<S> <C> <C>
Management Fees1 .50% 0.70%
Other Expenses1 .52% 0.95%
Total Operating Expenses1 1.02% 1.65%
</TABLE>
1 After any waivers and reimbursements.
3
<PAGE>
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 Nations Nations Nations
Equity International Emerging Pacific
Nations Value Fund Income Fund Equity Fund Markets Fund Growth Fund
<S> <C> <C> <C> <C> <C>
1 Year $ 14 $ 15 $ 16 $ 24 $ 22
3 Years $ 45 $ 46 $ 50 $ 75 $ 69
</TABLE>
<TABLE>
<CAPTION>
Nations
Capital Nations Emerging
Growth Fund Growth Fund
<S> <C> <C>
1 Year $ 14 $ 15
3 Years $ 45 $ 46
</TABLE>
<TABLE>
<CAPTION>
Nations Nations Nations Government
Nations Disciplined Equity Index Nations Balanced Short- Intermediate Securities
Equity Fund Fund Assets Fund Government Fund Fund
<S> <C> <C> <C> <C> <C>
1 Year $ 15 $ 9 $ 15 $ 9 $ 12
3 Years $ 47 $ 29 $ 46 $ 30 $ 37
</TABLE>
<TABLE>
<CAPTION>
Nations
Short-Term Income Nations Diversified
Fund Income Fund
<S> <C> <C>
1 Year $ 9 $ 12
3 Years $ 28 $ 37
</TABLE>
<TABLE>
<CAPTION>
Nations Strategic Nations Global
Fixed Income Government Income
Fund Fund
<S> <C> <C>
1 Year $ 10 $ 17
3 Years $ 32 $ 52
</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
Trust B Shares will bear either directly or indirectly. The "Other Expenses"
figures in the above tables are based on estimated amounts for each Fund's
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.
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.
("NASD"). For more complete descriptions of the Funds' operating expenses, see
"How the Funds are Managed."
Absent fee waivers and reimbursements, "Management Fees," "Other Expenses" and
"Total Operating Expenses" for Trust B Shares of the indicated Fund would have
been as follows: Nations Value Fund -- .75%, .75% and 1.52%, respectively;
Nations Equity Income Fund -- .70%, .85% and 1.55%, respectively; Nations
International Equity Fund -- .90%, .80% and 1.70%, respectively; Nations
Emerging Markets Fund -- 1.10%, 1.40% and 2.50%, respectively; Nations Pacific
Growth Fund -- 0.90%, 1.40% and 2.30%, respectively; Nations Capital Growth
Fund -- .75%, .77% and 1.52%, respectively; Nations Emerging Growth
Fund -- .75%, 80% and 1.55%, respectively; Nations Disciplined Equity
Fund -- .75%, .80% and 1.60%, respectively; Nations Equity Index Fund -- .50%,
.90% and 1.00%, respectively; Nations Balanced Assets Fund -- .75%, .80% and
1.55%, respectively; Nations Short-Intermediate Government Fund -- .60%, .78%
and 1.18%, respectively; Nations Government Securities Fund -- .64%, 90% and
1.40%, respectively; Nations Short-Term Income Fund -- .60%, .82% and 1.12%,
respectively; Nations Diversified Income Fund -- .60%, .92% and 1.42%,
respectively; Nations Strategic Fixed Income Fund -- .60%, .77% and 1.27%,
respectively; and Nations Global Government Income Fund -- 0.70%, 1.20% and
1.90%, 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.
4
<PAGE>
Objectives
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's objective is to
seek 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 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).
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.
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" 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.
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 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 prima-
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.
5
<PAGE>
rily 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 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.
Although the Adviser 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. 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.
How Objectives Are Pursued
EQUITY FUNDS:
NATIONS VALUE FUND: The Fund invests in stocks drawn from a universe of
approximately 800 stocks monitored by the Adviser, which 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 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
6
<PAGE>
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 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 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;
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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 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 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.
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, 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 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 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.
8
<PAGE>
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, 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.
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
9
<PAGE>
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 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.
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, the
Adviser will attempt to allocate the Fund's portfolio
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<PAGE>
among common stock 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.
The Adviser 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, the Adviser
judges the stock to be insufficiently liquid or believes the merit of the
investment has been substantially impaired by extraordinary events or financial
conditions. The Adviser 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, the Adviser 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 the Adviser believes that
market conditions warrant a temporary defensive posture, the Fund may invest
without limitation in high-quality short-term 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. 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 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 (except the Nations Equity
Index Fund) also may invest in restricted, private placement and other illiquid
securities, real estate investment trust securities and 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, 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
11
<PAGE>
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. S&P, Moody's, D&P, Fitch, IBCA and BankWatch
are the six Nationally Recognized Statistical Rating Organizations
(collectively, "NRSROs"). 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."
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 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 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 Fed-
12
<PAGE>
eral 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 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 six 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 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 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 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 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 NRSRO's, 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
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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 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 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.
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
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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 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 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.
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 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. Each of
those Funds 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
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investing. In addition, each of these Funds 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 it's 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 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 an 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: Generally, the Equity Funds, the Balanced Fund and the Bond
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. The portfolio turnover rates of the
indicated Funds for the fiscal years ended November 30, 1994 and 1993 were as
follows: Nations Value Fund -- 75% and 64%, respectively; Nations Capital Growth
Fund -- 56% and 81%, respectively; Nations Balanced Assets -- 156% and 50%,
respectively; Nations Short-Intermediate Government Fund -- 133% and 92%,
respectively; Nations Short-Term Income Fund -- 293% and 121%, respectively;
Nations Diversified Income Fund -- 144% and 86%, respectively; and Nations
Strategic Fixed Income Fund -- 307% and 161%, respectively. The portfolio
turnover rates for the Nations Disciplined Equity Fund for the periods ended
November 30, 1995 and April 30, 1994 were 177% and 475%, respectively. The
portfolio
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turnover rates of the Nations Emerging Growth Fund for the fiscal year ended
November 30, 1994 and the period from commencement of operations to November 30,
1993 were 129% and 159%, respectively. The portfolio turnover rate of the
Nations Equity Index Fund for the period from commencement of operations to
November 30, 1994 was 14%. The portfolio turnover rates for the indicated Fund
for the fiscal years ended May 31, 1995 and 1994 were as follows: Nations Equity
Income Fund -- 158% and 116%, respectively; Nations International Equity
Fund -- 92% and 39%, respectively; and Nations Government Securities Fund --
413% and 56%, respectively. If a Fund's portfolio turnover exceeds 100%, it may
result in higher brokerage costs and possible tax consequences for the Fund and
its shareholders.
RISK CONSIDERATIONS: Although the Adviser of 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 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, i.e.,
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 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 Investment Company Act of 1940, as amended (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 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 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 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.
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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. 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 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 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.
"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.
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 B Shares, the Money Market Funds offer Trust A, Investor A,
Investor B, Investor C and Investor D Shares. In addition to Trust B Shares, the
Non-Money Market Funds offer Trust A, 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 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 Institution, as defined below.
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 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. and Nations Portfolio's SAIs contain the names of and general
background information concerning each Director of Nations Fund, Inc. and
Nations Portfolios, respectively.
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. NationsBank 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.
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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. 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").
Seventy-five percent of the equity of Gartmore plc is owned by Banque Indosuez
S.A., a leading French bank. 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. 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. With
respect to the Non-Money Market Funds, 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
such 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: 0.50% of the average daily net assets
of Nations Equity Index Fund; 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 and Nations Strategic Fixed Income Fund; 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 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 the services provided and the expenses assumed pursuant to sub-advisory
agreements, NBAI will pay to TradeStreet sub-advisory fees, computed daily and
paid monthly, at the annual rates of: 0.15% of the average daily net assets of
each of Nations Short-Intermediate Government Fund, Nations Government
Securities Fund, Nations Short-Term Income Fund, Nations Diversified Income Fund
and Nations Strategic Fixed Income Fund; 0.20% of the average daily net assets
of each of Nations Equity Income Fund and Nations Equity Index Fund; 0.25% 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 Assets Fund.
For services provided and expenses assumed pursuant to sub-advisory agreements,
NBAI will pay Nations Gartmore sub-advisory fees, computed daily and paid
monthly, at the annual rates of: 0.70% of Nations International Equity Fund's
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. For the fiscal year ended May 31,
1994, Nations International Equity Fund paid its prior sub-adviser fees at the
rate of 0.41% of the Fund's average
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daily net assets. Although the advisory fees for the 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, NBAI, TradeStreet and/or Nations Gartmore may waive (either
voluntarily or pursuant to applicable state limitations) advisory or
sub-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 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%; and
Nations Strategic Fixed Income Fund -- 0.52%. 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 fees at the indicated rate of the
following Funds' average daily net assets: 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 International Equity Fund paid its prior sub-adviser fees at the rate of
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 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.
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 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.
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 at 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 Nations 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
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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 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.
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 at Chapel Hill.
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 the 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.
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 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.
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.
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.
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 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
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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 following Funds' average daily
net assets: 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. 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 following
Funds' average daily net assets: Nations Equity Income Fund, Nations
International Equity Fund and Nations Government Securities Fund.
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 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", 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 also serves as the sub-transfer agent for each Fund's Trust Shares and 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. 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 accountants 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 Trust B Shares, are deducted from the Fund's total accrued
income before dividends are declared. These expenses include, but are not
limited to: fees paid to the Adviser, 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 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. Trust B Shares also bear certain shareholder servicing
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
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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 B Shares
of the following funds of Nations Fund Trust: 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 and Nations Strategic Fixed Income 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 January , 1996, 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 the following
funds of Nations Fund, Inc.: 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
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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 January , 1996, 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 50,000,000,000 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 Emerging Markets Fund, Nations Pacific Growth Fund and
Nations Global Government Income 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 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 January , 1996, 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.
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About Your Investment
How To Buy Shares
Trust B Shares are sold primarily to qualified plans and other financial
institutions (including NationsBank and its affiliated and correspondent banks)
("Institutions") that have entered into shareholder administration agreements
("Administration 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 of the Funds may
be effected on days on which the New York Stock Exchange (the "Exchange") is
open for business ("NYSE Business Day"). A NYSE Business Day is a "Business Day"
as that term is used in this Prospectus.
There is a minimum initial investment of $1,000 for each record holder; there is
no minimum subsequent investment.
The Institutions have entered into Administration 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.
Purchase orders for Trust B 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 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.
Institutions are responsible for transmitting orders for purchases of Trust B
Shares by their Customers, and for delivering required funds, on a timely basis.
It is the responsibility of Stephens to transmit orders it receives to Nations
Fund.
Shareholder Administration Arrangements
The Funds have adopted a Shareholder Administration Plan (the "Administration
Plan") pursuant to which Institutions provide shareholder administration
services to their Customers who from time to time beneficially own Trust B
Shares. Payments under the Administration 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 0.60% of the average daily net asset value of the
Trust B Shares beneficially owned by Customers with whom the Institutions have a
servicing relationship. Additionally, in no event may the portion of the
shareholder administration fee that constitutes a "service fee," as that term is
defined in Article III, Section 26(b)(9) of the Rules of Fair Practice of the
NASD, exceed 0.25% of the average daily net asset value of such Trust B Shares
of a Fund. Holders of Trust B Shares will bear all fees paid to Institutions
under the Administration Plan.
Such shareholder services supplement the services provided by Stephens, TSSG and
the Transfer Agent to shareholders of record. The shareholder services provided
by Institutions may include: (i) aggregating and processing purchase and
redemption requests for Trust B Shares from Customers and transmitting promptly
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
Trust B Shares pursuant to specific or pre-authorized instructions; (iii)
processing dividend and distribution payments from the Funds on behalf of
Customers; (iv) providing information periodically to Customers
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showing their positions in Trust B Shares; (v) arranging for bank wires; (vi)
responding to Customers' inquiries concerning their investment in Trust B
Shares; (vii) providing sub-accounting with respect to Trust B Shares
beneficially owned by Customers or the information necessary for sub-accounting;
(viii) if required by law, forwarding shareholder communications (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers; (ix) forwarding to
Customers proxy statements and proxies containing any proposals regarding the
Administration Agreement; (x) employee benefit plan recordkeeping,
administration, custody and trustee services; (xi) general shareholder liaison
services; and (xii) providing such other similar services as may be reasonably
requested.
Nations Fund may suspend or reduce payments under the Administration Plan at any
time, and payments are subject to the continuation of the Administration Plan
described above and the terms of the Administration Agreement between
Institutions and Nations Fund. See the SAIs for more details on the
Administration Plan.
The Administration Plan also provides that, to the extent any portion of the
fees payable under the Administration Plan is deemed to be for services
primarily intended to result in the sale of Fund shares, such fees are deemed
approved and may be paid under the Administration Plan. Accordingly, the
Administration Plan has been approved and will be operated pursuant to Rule
12b-1 under the 1940 Act.
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 Administration Agreement with Nations Fund. The
Administration Agreement requires an Institution to disclose to its Customers
any compensation payable to the Institution by Nations Fund and any other
compensation payable by the 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 the responsibility of Stephens
to transmit orders that 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 B 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 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 B Shares if the balance in such
shareholder's account drops below $500 as a result of redemptions, and the
shareholder does not increase his or her 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 B 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 To Exchange Shares
The exchange feature enables a shareholder of Trust B Shares of a Fund to
acquire Trust B Shares of another Fund when that shareholder believes that a
shift between Funds is an appropriate investment decision.
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An exchange of Trust B Shares for Trust B 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 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 Institution through which the original shares were
purchased. Investors should consult their Institution or Stephens for further
information regarding exchanges.
Trust B Shares may be exchanged by directing a request directly to the
Institution through which the original Trust B Shares were purchased or in some
cases Stephens or the Transfer Agent. Investors should consult their Institution
or Stephens for further information regarding exchanges. Your exchange feature
may be governed by your account agreement with your Institution.
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 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 Exchange is closed (other than weekends) are:
New Year's Day, President's Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The 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
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 B 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 B 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
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including the day before the redemption order is executed.
The net asset value of Trust B Shares in the 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 B 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
B Shares in a Fund. Each Fund's net investment income available for distribution
to the holders of Trust B Shares will be reduced by the amount of shareholder
servicing fees payable to Institutions under the Servicing Agreements.
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. 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 Fund, Nations
Emerging Markets Fund and Nations Pacific Growth Fund 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.
Portions of the Nations International Equity Fund, Nations Emerging Markets
Fund, Nations Pacific Growth Fund and 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 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.
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
nonres-
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ident alien, non-U.S. partnership and non-U.S. corporation shareholder accounts.
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 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 the 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
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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 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
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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 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 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. 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
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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 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
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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 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: 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 equity swap contracts, 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.
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 as seperate 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
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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, and
meet quality and credit standards established by the Adviser. Generally, GICs
are not assignable or transferable without the permission of the issuing
insurance companies, and an active secondary market in GICs does not currently
exist. Also, a Fund may not receive the principal amount of a GIC from the
insurance company on seven days' notice or less. 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.
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 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
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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: 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 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, 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
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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.
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 of 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.
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
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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.
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.
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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.
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.
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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.
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".
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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.
40
<PAGE>
NATIONS FUND TRUST
Statement of Additional Information
Nations Government Money Market Fund
Nations Tax Exempt Fund
Nations Value Fund
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Equity Index Fund
Nations Managed Index Fund
Nations Disciplined Equity 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 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
Investor Shares and Trust Shares
September 30, 1995
as supplemented on October 20, 1995
and January 29, 1996
This Statement of Additional Information ("SAI") provides supplementary
information pertaining to the classes of shares representing interests in the
above listed thirty-two investment portfolios of Nations Fund Trust
(individually, a "Fund" and collectively, the "Funds"). This SAI is not a
prospectus, and should be read only in conjunction with the current prospectuses
for the aforementioned Funds related to the class or series of shares in which
one is interested, dated September 30, 1995 for all shares except the Trust B
Shares and March 16, 1996 for the Trust B Shares (each a "Prospectus"). All
terms used in this SAI that are defined in the Prospectuses will have the same
meanings assigned in the Prospectuses. Copies of these Prospectuses may be
obtained by writing Nations Fund, c/o Stephens Inc., One NationsBank Plaza, 33rd
Floor, Charlotte, North Carolina 28255, or by calling Nations Funds at
1-800-321-7854.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION.............................................................................. 1
FUND TRANSACTIONS AND BROKERAGE .......................................................... 2
ADDITIONAL INFORMATION ON FUND INVESTMENTS................................................ 6
Asset Backed Securities.......................................................... 6
Commercial Instruments........................................................... 10
Repurchase Agreements............................................................ 11
Reverse Repurchase Agreements.................................................... 11
Lending Securities............................................................... 11
American Depository Receipts..................................................... 11
Futures, Options and Other Derivative
Instruments................................................................ 12
When-Issued Purchases and Forward
Commitments................................................................ 16
Municipal Securities............................................................. 17
Insured Municipal Securities..................................................... 43
Real Estate Instrument Trusts.................................................... 43
Guaranteed Investment Contracts.................................................. 44
Variable and Floating Rate
Instruments................................................................ 44
Stand-by Commitments............................................................. 45
Variable & Floating Rate Government Securities................................... 46
Lower Rated Debt Securities...................................................... 46
Dollar Roll Transactions......................................................... 48
Foreign Currency Transactions.................................................... 49
Interest Rate Transactions....................................................... 50
Illiquid Securities.............................................................. 50
Other Securities................................................................. 50
Additional Investment Limitations................................................ 50
NET ASSET VALUE .......................................................................... 53
Money Market Funds............................................................... 53
Non-Money Market Funds........................................................... 53
Exchange Privilege............................................................... 54
DESCRIPTION OF SHARES .................................................................... 55
Dividends and Distributions...................................................... 57
ADDITIONAL INFORMATION CONCERNING TAXES .................................................. 57
Federal Taxes - In General....................................................... 57
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Federal Excise Tax on Regulated Investment
Companies.................................................................. 60
Distributions.................................................................... 60
Sale or Redemptions of Shares.................................................... 63
Foreign Shareholders............................................................. 63
Special Tax Considerations Pertaining to the Value,
Capital Growth, Emerging Growth, Equity Index,
Special Equity, Balanced Assets, Short Intermediate
Government, Managed Bond, Short-Term Income,
Diversified Income, Strategic Fixed, Adjustable Rate
Government and Mortgage-Backed Securities Funds............................ 64
Special Tax Considerations Pertaining to the Municipal
Income, Short-Term Municipal Income, Intermediate
Municipal Bond, State Intermediate Municipal Bond
and the State Municipal Bond Funds......................................... 65
TRUSTEES AND OFFICERS .................................................................... 69
Remuneration of Trustees......................................................... 71
Nations Funds Retirement Plan.................................................... 73
Nations Funds Deferred Compensation Plan......................................... 73
Shareholder and Trustee Liability................................................ 74
INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY,
TRANSFER AGENCY, SHAREHOLDER SERVICING AND
DISTRIBUTION SERVICES AGREEMENTS ......................................................... 75
Investment Adviser............................................................... 75
Investment Styles................................................................ 83
Administrator and Co-Administrator............................................... 87
Custodian and Transfer Agent..................................................... 91
Shareholder Servicing Agreements
(Trust B Shares Only)...................................................... 91
Shareholder Administration Plan
(Trust B Shares Only)..................................................... 92
Distribution Plans and Shareholder
Servicing Arrangements for Investor Shares.................................. 93
DISTRIBUTOR .............................................................................. 105
INDEPENDENT ACCOUNTANTS AND REPORTS....................................................... 106
COUNSEL................................................................................... 106
ADDITIONAL INFORMATION ON PERFORMANCE .................................................... 106
Yield Calculations............................................................... 106
Total Return Calculations........................................................ 117
MISCELLANEOUS ............................................................................ 130
Certain Record Holders........................................................... 130
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SCHEDULE A................................................................................ A-1
SCHEDULE B................................................................................ B-1
SCHEDULE C................................................................................ C-1
</TABLE>
iii
<PAGE>
INTRODUCTION
Nations Fund Trust ("Trust") was organized on May 6, 1985 under the name
"MarketMaster Trust," and in March 1992 changed its name to "Nations Fund," and
in September 1992 changed its name to "Nations Fund Trust." NationsBanc
Advisors, Inc. ("NBAI") is the investment adviser to the Funds. TradeStreet
Investment Associates, Inc. ("TradeStreet") is sub-investment adviser. As used
herein the "Adviser" shall mean NBAI and/or TradeStreet as the context may
require.
Nations Fund Trust currently consists of thirty-two different investment
portfolios. This SAI pertains to the Trust A, Trust B, Investor A, Investor B,
Investor C and Investor D Shares of the Nations Government Money Market Fund
("Government Money Market Fund") and Nations Tax Exempt Fund ("Tax Exempt Fund")
(collectively, the "Money Market Funds") and the Trust A, Trust B and Investor A
Shares of Nations Managed Index Fund ("Managed Index Fund") and the Trust A,
Trust B, Investor A, Investor C and Investor N Shares of Nations Value Fund
("Value Fund"), Nations Capital Growth Fund ("Capital Growth Fund"), Nations
Emerging Growth Fund ("Emerging Growth Fund"), Nations Equity Index Fund
("Equity Index Fund"), Nations Disciplined Equity Fund ("Disciplined Equity
Fund"), Nations Balanced Assets Fund ("Balanced Assets Fund"), Nations
Short-Intermediate Government Fund ("Short-Intermediate Government Fund"),
Nations Municipal Income Fund ("Municipal Income Fund"), Nations Short-Term
Municipal Income Fund ("Short-Term Municipal Income Fund"), Nations Intermediate
Municipal Bond Fund ("Intermediate Municipal Bond Fund"), Nations Short-Term
Income Fund ("Short-Term Income Fund"), Nations Diversified Income Fund
("Diversified Income Fund"), Nations Strategic Fixed Income Fund ("Strategic
Fixed Income Fund"), Nations Florida Intermediate Municipal Bond Fund ("Florida
Intermediate Municipal Bond Fund"), Nations Georgia Intermediate Municipal Bond
Fund ("Georgia Intermediate Municipal Bond Fund"), Nations Maryland Intermediate
Municipal Bond Fund ("Maryland Intermediate Municipal Bond Fund"), Nations North
Carolina Intermediate Municipal Bond Fund ("North Carolina Intermediate
Municipal Bond Fund"), Nations South Carolina Intermediate Municipal Bond Fund
("South Carolina Intermediate Municipal Bond Fund"), Nations Tennessee
Intermediate Municipal Bond Fund ("Tennessee Intermediate Municipal Bond Fund"),
Nations Texas Intermediate Municipal Bond Fund ("Texas Intermediate Municipal
Bond Fund"), and Nations Virginia Intermediate Municipal Bond Fund ("Virginia
Intermediate Municipal Bond Fund"), Nations Florida Municipal Bond Fund
("Florida Municipal Bond Fund"), Nations Georgia Municipal Bond Fund ("Nations
Municipal Bond Fund"), Nations Maryland Municipal Bond Fund ("Maryland Municipal
Bond Fund"), Nations North Carolina Municipal Bond Fund ("North Carolina
Municipal Bond Fund"), Nations South Carolina Municipal Bond Fund ("South
Carolina Municipal Bond Fund"), Nations Tennessee Municipal Bond Fund
("Tennessee Municipal Bond Fund"), Nations Texas Municipal Bond Fund ("Texas
Municipal Bond Fund"), and Nations Virginia Municipal Bond Fund ("Virginia
Municipal Bond Fund") (collectively, "Non-Money Market Funds," and with the
Money Market Funds, the "Funds"). The Florida Intermediate Municipal Bond Fund,
Georgia Intermediate Municipal Bond Fund, Maryland Intermediate Municipal Bond
Fund, North Carolina Intermediate Municipal Bond Fund, South Carolina
Intermediate Municipal Bond Fund, Tennessee Intermediate Municipal Bond Fund,
Texas Intermediate Municipal Bond Fund and Virginia Intermediate Municipal Bond
Fund are sometimes collectively referred to herein as the ("State Intermediate
Municipal Bond Funds").
<PAGE>
The Florida Municipal Bond Fund, Georgia
Municipal Bond Fund, Maryland Municipal Bond Fund, North Carolina Municipal Bond
Fund, South Carolina Municipal Bond Fund, Tennessee Municipal Bond Fund, Texas
Municipal Bond Fund and Virginia Municipal Bond Fund are sometimes collectively
referred to herein as the ("State Municipal Bond Funds"). The Disciplined Equity
Fund was formerly called "Nations Special Equity Fund." The Trust A Shares and
Trust B Shares of the Funds are sometimes collectively referred to as "Trust
Shares." The Investor A, Investor B, Investor C, Investor D and Investor N
Shares of the Funds are sometimes collectively referred to as "Investor Shares."
Much of the information contained in this SAI expands upon subjects
discussed in the Prospectuses. No investment in Trust Shares or Investor Shares
should be made without first reading the related Prospectuses.
FUND TRANSACTIONS AND BROKERAGE
Subject to the general supervision of the Board of Trustees, the Adviser
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Funds.
Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Transactions on foreign
stock exchanges involve payment of brokerage commissions which are generally
fixed.
Transactions in both foreign and domestic over-the-counter markets are
generally principal transactions with dealers, and the costs of such
transactions involve dealer spreads rather than brokerage commissions. With
respect to over-the-counter transactions, the Trust, where possible, will deal
directly with dealers who make a market in the securities involved except in
those circumstances in which better prices and execution are available
elsewhere.
Securities purchased and sold by the Non-Money Market Funds are generally
traded in the over-the-counter market on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. The cost of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down.
The Funds may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group. A
Fund will engage in this practice, however, only when the Adviser, in its sole
discretion, believes such practice to be otherwise in the Fund's interests.
In executing portfolio transactions and selecting brokers or dealers, the
Adviser will seek to obtain the best overall terms available for each Fund. In
assessing the best overall terms available for any transaction, the Adviser
shall consider factors deemed relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any,
2
<PAGE>
both for the specific transaction and on a continuing basis. The
Adviser may cause a Fund to pay a broker/dealer which furnishes
brokerage and research services a higher commission than that
which might be charged by another broker/dealer for effecting the
same transaction, provided that the Adviser determines in good faith
that such commission is reasonable in relation to the value of
the brokerage and research services provided by such broker/dealer,
viewed in terms of either the particular transaction or the overall
responsibilities of the Adviser. Such brokerage and research
services might consist of reports and statistics relating to specific
companies or industries, general summaries of groups of stocks or bonds
and their comparative earnings and yields, or broad overviews of the
stock, bond, and government securities markets and the economy.
Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by the Adviser and does not reduce
the advisory fees payable by the Funds. The Board of Trustees will periodically
review the commissions paid by the Funds to consider whether the commissions
paid over representative periods of time appear to be reasonable in relation to
the benefits inuring to the Funds. It is possible that certain of the
supplementary research or other services received will primarily benefit one or
more other investment companies or other accounts for which investment
discretion is exercised. Conversely, a Fund may be the primary beneficiary of
the research or services received as a result of portfolio transactions effected
for such other account or investment company.
Under Section 28(e) of the Securities Exchange Act of 1934, an adviser
shall not be "deemed to have acted unlawfully or to have breached its fiduciary
duty" solely because under certain circumstances it has caused the account to
pay a higher commission than the lowest available. To obtain the benefit of
Section 28(e), an adviser must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to a Fund in any transaction may be less favorable than that available
from another broker/dealer if the difference is reasonably justified by other
aspects of the portfolio execution services offered.
Broker/dealers utilized by the Adviser may furnish statistical, research
and other information or services which are deemed by the Adviser to be
beneficial to the Funds' investment programs. Research services received from
brokers supplement the Adviser's own research and may include the following
types of information: statistical and background information on industry groups
and individual companies; forecasts and interpretations with respect to U.S and
foreign economies, securities, markets, specific industry groups and individual
companies; information on political developments; portfolio management
strategies; performance information on securities and information concerning
prices of securities; and information supplied by specialized services to the
Adviser and to the Trust's Trustees with respect to the performance, investment
activities and fees and expenses of other mutual funds. Such information may be
communicated electronically, orally or in written form. Research services may
also include the providing of equipment used to communicate research
information,
3
<PAGE>
the arranging of meetings with management of companies and the
providing of access to consultants who supply research information.
The outside research assistance is useful to the Adviser since the brokers
utilized by the Adviser as a group tend to follow a broader universe of
securities and other matters than the staff of the Adviser can follow. In
addition, this research provides the Adviser with a diverse perspective on
financial markets. Research services which are provided to the Adviser by
brokers are available for the benefit of all accounts managed or advised by the
Adviser. In some cases, the research services are available only from the broker
providing such services. In other cases, the research services may be obtainable
from alternative sources in return for cash payments. It is the opinion of the
Adviser that because the broker research supplements rather than replaces their
research, the receipt of such research does not tend to decrease their expenses,
but tends to improve the quality of their investment advice. However, to the
extent that the Adviser would have purchased any such research services had such
services not been provided by brokers, the expenses of such services to the
Adviser could be considered to have been reduced accordingly. Certain research
services furnished by broker/dealers may be useful to the Adviser with clients
other than the Funds. Similarly, any research services received by the Adviser
through the placement of portfolio transactions of other clients may be of value
to the Adviser in fulfilling its obligations to the Funds. It is the opinion of
the Adviser that this material is beneficial in supplementing their research and
analysis; and, therefore, it may benefit the Trust by improving the quality of
the Adviser's investment advice. The advisory fees paid by the Trust are not
reduced because the Adviser receives such services.
Some broker/dealers may indicate that the provision of research services
is dependent upon the generation of certain specified levels of commissions and
underwriting concessions by the Adviser's clients, including the Funds.
The Trust will not execute portfolio transactions through, or purchase or
sell portfolio securities from or to the distributor, the Adviser, the
administrator, or the co-administrator, or their affiliates acting as principal
(including repurchase and reverse repurchase agreements), except to the extent
permitted by the Securities and Exchange Commission (the "SEC"). In addition,
the Trust will not give preference to correspondents of NationsBank N.A.
(Carolinas) ("NationsBank") or its affiliates with respect to such transactions
or securities. (However, 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 NationsBank or its affiliates, and to take into account the sale of Fund
shares 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.) In addition, a Fund will not purchase securities during the existence of
any underwriting or selling group relating thereto of which the distributor, the
Adviser, administrator, or the co-administrator, or any of their affiliates, is
a member, except to the extent permitted by the SEC. Under certain
circumstances, the Funds may be at a disadvantage because of these limitations
in comparison with other investment companies which have similar investment
objectives but are not subject to such limitations.
Certain affiliates of NationsBank Corporation and its subsidiary banks may
have deposit, loan or commercial banking relationships with the corporate users
of facilities financed by industrial development revenue bonds or private
activity bonds purchased by the Tax Exempt
4
<PAGE>
Fund, the Municipal Income Fund, the Short-Term Municipal Income
Fund, the Intermediate Municipal Bond Fund, the State Intermediate
Municipal Bond Funds and the State Municipal Bond Funds (the "Tax-Free
Bond Funds"). NationsBank or certain of its affiliates may serve as
trustee, tender agent, guarantor, placement agent, underwriter, or in
some other capacity, with respect to certain issues of municipal
securities. Under certain circumstances, the Tax-Free Bond Funds may
purchase municipal securities from a member of an underwriting
syndicate in which an affiliate of NationsBank is a member. The Trust
has adopted procedures pursuant to Rule 10f-3 under The Investment
Company Act of 1940 (the "1940 Act"), and intends to comply with the
requirements of Rule 10f-3, in connection with any purchases of
municipal securities that may be subject to such Rule.
Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Trust as a principal in the purchase and sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
Each of the Funds may purchase securities from underwriting syndicates of which
NationsBank or any of its affiliates is a member under certain conditions, in
accordance with the provisions of a rule adopted under the 1940 Act and any
restrictions imposed by the Board of Governors of the Federal Reserve System.
NationsBank has agreed to maintain its policy and practice of conducting
its trust department independently of its commercial department. In making
investment recommendations for the Funds, trust department personnel will not
inquire or take into consideration whether the issuer of securities proposed for
purchase or sale for those Funds' accounts are customers of the commercial
department. In dealing with commercial customers, the commercial department will
not inquire or take into consideration whether securities of those customers are
held by the Trust.
Investment decisions for each Fund are made independently from those for
the Trust's other investment portfolios, other investment companies, and
accounts advised or managed by the Adviser. Such other investment portfolios,
investment companies, and accounts may also invest in the same securities as the
Funds. When a purchase or sale of the same security is made at substantially the
same time on behalf of one or more of the Funds and another investment
portfolio, investment company, or account, the transaction will be averaged as
to price and available investments allocated as to amount, in a manner which the
Adviser believes to be equitable to each Fund and such other investment
portfolio, investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by a Fund or the size
of the position obtained or sold by the Fund. To the extent permitted by law,
the Adviser may aggregate the securities to be sold or purchased for the Funds
with those to be sold or purchased for other investment portfolios, investment
companies, or accounts in executing transactions. During the fiscal years ended
November 30, 1992, 1993 and 1994, the Value Fund paid aggregate brokerage
commissions of $0, $0 and $0 respectively. During the period from commencement
of operations through November 30, 1992, the Capital Growth Fund and the
Balanced Assets Fund each paid aggregate brokerage commissions of $0 and $0 and
for the fiscal year ended November 30, 1994 the funds paid $16,240 and $23,271,
respectively, to Dean Witter. The Florida Intermediate Municipal Bond Fund,
North Carolina Intermediate Municipal Bond Fund, Texas Intermediate Municipal
Bond Fund, Emerging Growth Fund, Special Equity Fund, Intermediate Municipal
Bond Fund, Short-Term Municipal Income Fund, Equity Index Fund and the State
Municipal Bond Funds had not commenced operations by the fiscal year
5
<PAGE>
ended November 30, 1992 and therefore also paid no brokerage
commissions. During the fiscal years ended November 30, 1992, 1993
and 1994, no Fund (except Nations Balanced Assets, Nations Emerging
Growth and Nations Disciplined Equity Funds, which paid $312, $7,698
and $280, respectively, to Dean Witter) paid brokerage commissions to
NationsBank, the distributor, or their affiliates.
The portfolio turnover rates described in the Prospectuses are calculated
by dividing the lesser of purchases or sales of portfolio securities for the
year by the monthly average value of the portfolio securities. The calculation
excludes all securities whose maturities at the time of acquisition were one
year or less. Fund turnover may vary greatly from year to year as well as within
a particular year, and may also be affected by the cash requirements for
redemptions of shares and by requirements which enable a Fund to receive certain
favorable tax treatment. Fund turnover will not be a limiting factor in making
portfolio decisions.
ADDITIONAL INFORMATION ON FUND INVESTMENTS
Asset Backed Securities
In General. Asset Backed Securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset Backed
Securities consist of both mortgage and non-mortgage backed securities.
Interests in pools of these assets 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. 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
6
<PAGE>
loans, differ from conventional debt securities, which provide for
periodic payment of interest in fixed amounts (usually semi-annually)
and principal payments at maturity or on specified call dates.
Mortgage pass-through securities provide for monthly payments that
are a "pass-through" of the monthly interest and principal payments
(including any prepayments) made by the individual borrowers on the
pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.
The guaranteed mortgage pass-through securities in which a Fund may invest
may include those issued or guaranteed by Government National Mortgage
Association ("GNMA"), by Federal National Mortgage Association ("FNMA") and
Federal Home Loan Mortgage Corporation ("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 of 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.
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<PAGE>
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
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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.
Non-Mortgage Asset Backed Securities. Non-mortgage asset backed securities
include interests in pools of receivables, such as motor vehicle installment
purchase obligations and credit card receivables. Such securities are generally
issued as pass-through certificates, which represent undivided fractional
ownership interests in the underlying pools of assets. Such securities also may
be debt instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt.
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 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, the
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Adviser, as adviser to
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.
Commercial Instruments
Commercial Instruments consist of short-term U.S. dollar-denominated
obligations issued by domestic corporations or by 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, the Funds may acquire unrated commercial paper and corporate bonds
that are determined by the Adviser at the time of purchase to be of comparable
quality to rated instruments that may be acquired by these Funds as previously
described.
Variable rate master demand notes are unsecured instruments that permit
the indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. While some of these notes are not rated by credit rating
agencies, issuers of variable rate master demand notes must satisfy the Adviser
that criteria similar to the following are met; (a) if rated by at least two
Nationally Recognized Statistical Rating Organizations ("NRSROs"), the
instruments are rated in the highest rating category for short-term 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
the Board of Trustees on the advice of the Adviser. Variable rate instruments
acquired by a Fund will be rated at a level consistent with such Fund's
investment objective and policies of high quality as determined by a major
rating agency or, if not rated, will be of comparable quality as determined by
the Adviser. Substantial holdings of variable rate instruments could reduce
portfolio liquidity.
Variable and floating rate instruments are unsecured instruments that
permit the indebtedness thereunder to vary. While there may be no active
secondary market with respect to a particular variable or floating rate
instrument purchased by a Fund, a Fund may, from time to time as specified in
the instrument, demand payment of the principal or may resell the instrument to
a third party. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of an instrument if the issuer defaulted on its
payment obligation or during periods when a Fund is not entitled to exercise its
demand rights, and a Fund could, for these or other reasons, suffer a loss. The
instruments are not typically rated by credit rating agencies, but issuers of
variable and floating rate instruments must satisfy similar criteria to that set
forth above for issuers of commercial paper. A Fund may invest in variable and
floating rate instruments only when the Adviser deems the investment to involve
minimal credit risk. If such instruments are not rated, the Adviser will
consider the earning power, cash flows, and other liquidity ratios of the
issuers of such instruments and will continuously monitor their financial status
to meet payment on demand. In determining average weighted portfolio maturity,
an instrument will be deemed to have a maturity equal to the longer of the
period remaining to the next interest rate adjustment or the demand notice
period specified in the instrument.
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Repurchase Agreements
The repurchase price under the repurchase agreements described in the
Prospectuses generally equals the price paid by a Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Securities subject
to repurchase agreements will be held by the Trust's custodian, or a
sub-custodian, in a segregated account or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by the Trust
under the 1940 Act.
Reverse Repurchase Agreements
At the time a Fund enters into a reverse repurchase agreement, it may
establish a segregated account with its custodian bank in which it will maintain
cash, U.S. Government securities or other liquid high grade debt obligations
equal in value to its obligations in respect of reverse repurchase agreements.
Reverse repurchase agreements involve the risk that the market value of the
securities the Funds are obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. Reverse repurchase agreements are
speculative techniques involving leverage, and are subject to asset coverage
requirements if the Funds do not establish and maintain a segregated account (as
described above). In addition, some or all of the proceeds received by a Fund
from the sale of a portfolio instrument may be applied to the purchase of a
repurchase agreement. To the extent the proceeds are used in this fashion and a
common broker/dealer is the counterparty on both the reverse repurchase
agreement and the repurchase agreement, the arrangement might be recharacterized
as a swap transaction. Under the requirements of the 1940 Act, the Funds are
required to maintain an asset coverage (including the proceeds of the
borrowings) of at least 300% of all borrowings. Depending on market conditions,
the Funds' asset coverage and other factors at the time of a reverse repurchase,
the Funds may not establish a segregated account when the Adviser believes it is
not in the best interests of the Funds to do so. In this case, such reverse
repurchase agreements will be considered borrowings subject to the asset
coverage described above.
Lending Securities
When a Fund lends its securities, it continues to receive interest or
dividends on the securities loaned and may simultaneously earn interest on the
investment of the cash loan collateral which will be invested in readily
marketable, high quality, short-term obligations. Although any voting rights, or
rights to consent, that may be attendant to securities on loan, pass to the
borrower, such loans may be called at any time. Securities on loan that have
voting rights will be called so that they may be voted by the Fund if a material
event affecting the investment is to occur.
American Depositary Receipts
The Non-Money Market Funds (consistent with their investment policies and
objectives) may invest in American Depositary Receipts ("ADRs"), which are
receipts issued by an
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American bank or trust company evidencing ownership of underlying
securities issued by a foreign issuer. ADRs may be listed on a
national securities exchange or may trade in the over-the-counter
market. The prices of ADRs are denominated in U.S. dollars; the
underlying security may be denominated in a foreign currency. The
underlying security may be subject to foreign government taxes
which would reduce the yield on such securities. Investments in such
securities also involve certain inherent risks, including those set
forth in the Prospectuses for the Funds under "Appendix A -- Foreign
Securities."
Futures, Options and Other Derivative Instruments
Certain of the Funds may purchase put and call options which are traded on
a national securities exchange in an amount not exceeding 5% of its net assets.
Such options may relate to particular securities or to various stock or bond
indices. Purchasing options is a specialized investment technique which entails
a substantial risk of a complete loss of the amount paid as premiums to the
writer of the option.
Futures Contracts and Related Options. In addition, the Adviser may
determine that it would be in the interest of a Fund to purchase or sell futures
contracts, or options thereon, as a hedge against changes resulting from market
conditions in the value of the securities held by one of the Funds, or of
securities which one of them intends to purchase. For example, a Fund may enter
into transactions involving a stock or bond index futures contract, which is a
bilateral agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to a specified dollar amount times the difference
between the index value (which assigns relative values to the common stocks or
bonds included in the index) at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. No
physical delivery of the underlying stocks or bonds in the index is made. During
the coming fiscal year, each of these Funds intends to limit its transactions in
futures contracts and options thereon so that: (i) no more than 5% of a Fund's
total assets would be committed to initial margin deposits or premiums on such
contracts and (ii) immediately after entering into such contracts, no more than
30% of a Fund's total assets would be represented by such contracts.
Options Trading. Call options written by a Fund give the holder the right
to buy the underlying securities from the Fund at a fixed exercise price up to a
stated expiration date or, in the case of certain options, on such date. Put
options give the holder the right to sell the underlying securities to the Fund
during the term of the option at a fixed exercise price up to a stated
expiration date or, in the case of certain options, on such date. Call options
are "covered" by a Fund, for example, when it owns the underlying securities and
put options are "covered" by the Fund, for example, when it has established a
segregated account of cash, cash equivalents or securities which can be
liquidated promptly to satisfy any obligation of a Fund to purchase the
underlying securities. A Fund also may write combinations of puts and calls on
the same underlying security.
A Fund will receive a premium from writing a put or call option, which
increases the gross income of a Fund in the event the option expires unexercised
or is closed out at a profit. The amount of the premium will reflect, among
other things, the relationship of the exercise price to the market price and
volatility of the underlying security, the remaining term of the option, supply
and demand and interest rates. By writing a call option, a Fund limits its
opportunity to
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profit from any increase in the market value of the underlying
security above the exercise price of the option. By writing a put
option, a Fund assumes the risk that it may be required to purchase
the underlying security for an exercise price higher than its then
current market value, resulting in a potential capital loss unless
the security subsequently appreciates in value.
A Fund may terminate an option that it has written prior to its expiration
by entering into a closing purchase transaction in which the Fund purchases an
option having the same terms as the option written. It is possible, however,
that illiquidity in the options markets may make it difficult from time to time
for a Fund to close out its written option positions.
A Fund also may purchase put or call options in anticipation of changes in
interest rates which may adversely affect the value of its portfolio or the
prices of securities that the Fund wants to purchase at a later date. The
premium paid for a put or call option plus any transaction costs will reduce the
benefit, if any, realized by a Fund upon exercise of the option and, unless the
price of the underlying security changes sufficiently, the option may expire
without value.
A Fund may write and purchase options on securities both for hedging
purposes and in an effort to increase current income. Options on securities that
are written or purchased by a Fund will be traded on U.S. and foreign exchanges
and over-the-counter.
The staff of the SEC has taken the position that purchased
over-the-counter options and assets used to cover written over-the-counter
options are illiquid and, therefore, together with other illiquid securities,
cannot exceed applicable limitations on the amount of a Fund's assets that may
be invested in illiquid securities. The Adviser intends to limit a Fund's
writing of over-the-counter options in accordance with the following procedure.
Each Fund intends to write over-the-counter options only with primary U.S.
Government securities dealers recognized by the Federal Reserve Bank of New
York. Also, the contracts which a Fund has in place with such primary dealers
will provide that the Fund has the absolute right to repurchase an option it
writes at any time at a price which represents the fair market value, as
determined in good faith through negotiation between the parties, but which in
no event will exceed a price determined pursuant to a formula in the contract.
Although the specific formula may vary between contracts with different primary
dealers, the formula will generally be based on a multiple of the premium
received by a Fund for writing the option, plus the amount, if any, of the
option's intrinsic value (i.e., the amount that the option is in-the-money). The
formula also may include a factor to account for the difference between the
price of the security and the strike price of the option if the option is
written out-of-the-money. A Fund will treat all or a part of the formula price
as illiquid for purposes of the applicable SEC test regarding illiquid
securities.
As stated in the related Prospectuses, each Fund may purchase put and call
options listed on a national securities exchange. This is a highly specialized
activity which entails greater than ordinary investment risks. Regardless of how
much the market price of the underlying security increases or decreases, the
option buyer's risk is limited to the amount of the original investment for the
purchase of the option. However, options may be more volatile than the
underlying securities, and therefore, on a percentage basis, an investment in
options may be subject to greater fluctuation than an investment in the
underlying securities. A listed call option gives the purchaser of the option
the right to buy from a clearing corporation, and a writer has the obligation to
sell to the clearing corporation, the underlying security at the stated exercise
price at
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any time prior to the expiration of the option, regardless of the
market price of the security. The premium paid to the writer is in
consideration for undertaking the obligations under the option
contract. A listed put option gives the purchaser the right to sell to
a clearing corporation the underlying security at the stated
exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. Put and call options
purchased by a Fund will be valued at the last sale price or, in the
absence of such a price, at the mean between bid and asked prices.
A Fund's obligation to sell a security subject to a covered call option
written by it, or to purchase a security subject to a secured put option written
by it, may be terminated prior to the expiration date of the option by the Fund
executing a closing purchase transaction, which is effected by purchasing on an
exchange an option of the same series (i.e., same underlying security, exercise
price, and expiration date) as the option previously written. Such a purchase
does not result in the ownership of an option. A closing purchase transaction
will ordinarily be effected to realize a profit on an outstanding option, to
prevent an underlying security from being called, to permit the sale of the
underlying security, or to permit the writing of a new option containing
different terms on such underlying security. The cost of such a liquidation
purchase plus transaction costs may be greater than the premium received upon
the original option, in which event the Fund will have incurred a loss in the
transaction. An option position may be closed out only on an exchange which
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option. A covered call option writer, unable to effect a closing
purchase transaction, will not be able to sell the underlying security until the
option expires or the underlying security is delivered upon exercise with the
result that the writer in such circumstances will be subject to the risk of
market decline in the underlying security during such period. A Fund will write
an option on a particular security only if the Adviser believes that a liquid
secondary market will exist on an exchange for options of the same series which
will permit the Fund to make a closing purchase transaction in order to close
out its position.
When a Fund writes a covered call option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of the deferred credit will be subsequently
marked-to-market to reflect the current value of the option written. The current
value of the traded option is the last sale price or, in the absence of a sale,
the average of the closing bid and asked prices. If an option expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold), and the
deferred credit related to such option will be eliminated. Any gain on a covered
call option may be offset by a decline in the market price of the underlying
security during the option period. If a covered call option is exercised, the
Fund may deliver the underlying security held by it or purchase the underlying
security in the open market. In either event, the proceeds of the sale will be
increased by the net premium originally received, and the Fund will realize a
gain or loss. If a secured put option is exercised, the amount paid by the Fund
involved for the underlying security will be partially offset by the amount of
the premium previously paid to the Fund. Premiums from expired options written
by a Fund and net gains from closing purchase transactions are treated as
short-term capital gains for Federal income tax purposes, and losses on closing
purchase transactions are short-term capital losses.
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Futures Contracts. A futures contract is a bilateral agreement providing
for the purchase and sale of a specified type and amount of a financial
instrument, or, in the case of futures contracts on indices of securities, for
the making and acceptance of a cash settlement, at a stated time in the future
for a fixed price. By its terms, a futures contract provides for a specified
settlement date on which, in the case of the majority of interest rate futures
contracts, the fixed income securities underlying a contract are delivered by
the seller and paid for by the purchaser, or on which, in the case of a stock
index futures contract, an amount equal to a dollar amount multiplied by the
difference between the value of a stock index at the close of the last trading
day of the contract and the value of such index at the time the futures contract
was originally entered into is settled between the purchaser and seller in cash.
The purchase or sale of a futures contract differs from the purchase or sale of
a security in that no purchase price is paid or received at the time the
contract is entered into. Instead, an amount of cash or cash equivalents, the
value of which may vary but is generally equal to 2% or less of the value of the
contract, must be deposited with the broker as initial deposit or "margin."
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index underlying the futures
contract fluctuates, making positions in the futures contract more or less
valuable, a process known as "marking to the market."
At any time prior to the expiration of a futures contract, a trader may
elect to close out a Fund's position by taking an opposite position, subject to
the availability of a secondary market, which will operate to terminate the
initial position. At that time, a final determination of variation margin is
made and any loss experienced by a party is required to be paid to the exchange
clearing corporation, while any profit due to a party must be delivered to it.
Futures contracts differ from options in that they are bilateral
agreements, with both the purchaser and the seller equally obligated to complete
the transaction. Futures contracts call for settlement only on the expiration
date, and cannot be "exercised" at any other time during their term.
Options on Futures Contracts. An option on a futures contract gives the
purchaser (the "holder") the right, but not the obligation, to enter into a
"long" position in the underlying futures contract (i.e., a purchase of such
futures contract) in the case of an option to purchase (a "call" option), or a
"short" position in the underlying futures contract (i.e., a sale of such
futures contract) in the case of an option to sell (a "put" option), at a fixed
price (the "strike price") up to a stated expiration date. The holder pays a
non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchase of the option assumes is equal to the
premium plus related transaction costs, although this entire amount may be lost.
Upon exercise of the option by the holder, the exchange clearing corporation
establishes a corresponding long position in the case of a put option. In the
event that an option is exercised, the parties will be subject to all the risks
associated with the trading of futures contracts, such as payment of variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
An option, whether based on a futures contract, a stock index or an equity
security, becomes worthless to the holder when it expires. A position in an
option may be terminated by the purchaser or seller prior to expiration by
effecting a closing purchase or sale transaction subject
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to the availability of a secondary market, which is the purchase or
sale of an option of the sameseries (i.e., the same exercise price
and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the
party's profit or loss on the transaction.
The use of futures contracts and options does involve certain transaction
costs and risks. A Fund's ability effectively to hedge all or a portion of its
portfolio through transactions in futures, options on futures or options on
stock indices depends on the degree to which movements in the value of the
securities or index underlying such hedging instrument correlate with movements
in the value of the relevant portion of the Fund's holdings. The trading of
futures and options on indices involves the additional risk of imperfect
correlation between movements in the futures or option price and the value of
the underlying index. While a Fund will establish a future or option position
only if there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular futures or option
contract at any specific time. In such event, it may not be possible to close
out a position held by a Fund, which could require such Fund to purchase or sell
the instrument underlying the position, make or receive a cash settlement, or
meet ongoing variation margin requirements. Investments in futures contracts on
fixed income securities and related indices involve the risk that if the
Adviser's investment judgment concerning the general direction of interest rates
is incorrect, a Fund's overall performance may be poorer than if it had not
entered into any such contract. Income earned from transactions in futures
contracts and options thereon would be treated in part as a short-term, and in
part as a long-term, capital gain and, if not offset by net realized capital
losses, generally would be subject to Federal income taxes.
When-Issued Purchases and Forward Commitments
A Fund may agree to purchase securities on a when-issued basis or enter
into a forward commitment to purchase securities. When a Fund engages in these
transactions, its custodian will set aside cash, U.S. government securities or
other high quality debt obligations equal to the amount of the commitment in a
separate account. Normally, the custodian will set aside portfolio securities to
satisfy a purchase commitment, and in such a case a Fund may be required
subsequently to place additional assets in the separate account in order to
ensure that the value of the account remains equal to the amount of the Fund's
commitment. Because a Fund will set aside cash or liquid assets to satisfy its
purchase commitments in the manner described, the Fund's liquidity and ability
to manage its portfolio might be adversely affected in the event its commitments
to purchase when-issued securities ever exceeded 25% of the value of its assets.
In the case of a forward commitment to sell portfolio securities, the Fund's
custodian will hold the portfolio securities themselves in a segregated account
while the commitment is outstanding.
A Fund will make commitments to purchase securities on a when-issued basis
or to purchase or sell securities on a forward commitment basis only with the
intention of completing the transaction and actually purchasing or selling the
securities. If deemed advisable as a matter of investment strategy, however, a
Fund may dispose of or renegotiate a commitment after it is entered into, and
may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a capital gain or loss.
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When a Fund engages in when-issued and forward commitment transactions, it
relies on the other party to consummate the trade. Failure of such party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.
The value of the securities underlying a when-issued purchase or a forward
commitment to purchase securities, and any subsequent fluctuations in their
value, is taken into account when determining the net asset value of a Fund
starting on the date the Fund agrees to purchase the securities. The Fund does
not earn dividends on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When the Fund makes a forward
commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets. Fluctuations in the value of the
underlying securities are not reflected in the Fund's net asset value as long as
the commitment remains in effect.
Municipal Securities
Generally. The two principal classifications of municipal securities are
"general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which created
the issuer.
Municipal securities may include variable or floating rate instruments
issued by industrial development authorities and other governmental entities.
While there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments
purchased by a Fund will be determined by the Adviser to be of comparable
quality at the time of purchase to instruments rated "high quality" by any major
rating service. Where necessary to ensure that an instrument is of comparable
"high quality," a Fund will require that an issuer's obligation to pay the
principal of the note may be backed by an unconditional bank letter or line of
credit, guarantee, or commitment to lend.
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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.
Although lease obligations do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate, and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide that
the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In addition to the "non-appropriation" risk, these securities
represent a relatively new type of financing that has not yet developed the
depth of marketability associated with more conventional bonds. In the case of a
"non-appropriation" lease, the Funds' ability to recover under the lease in the
event of non-appropriation or default will be limited solely to the repossession
of the leased property in the event foreclosure might prove difficult.
The Funds will not invest more than 5% of their total investment assets in
lease obligations that contain "non-appropriation" clauses where (1) the nature
of the leased equipment or property is such that its ownership or use is
essential to a governmental function of the municipality, (2) the lease payments
will commence amortization of principal at an early date resulting in an average
life of seven years or less for the lease obligation, (3) appropriate covenants
will be obtained from the municipal obligor prohibiting the substitution or
purchase of similar equipment if lease payments are not appropriated, (4) the
lease obligor has maintained good market acceptability in the past, (5) the
investment is of a size that will be attractive to institutional investors, and
(6) the underlying leased equipment has elements of probability and/or use that
enhance its marketability in the event foreclosure on the underlying equipment
were ever required. The Funds have not imposed any percentage limitations with
respect to their investment in lease obligations not subject to the
"non-appropriation" risk. To the extent municipal leases are illiquid, they will
be subject to each Fund's limitation on investments in illiquid securities.
Recovery of an investment in any such loan that is illiquid and payable on
demand may depend on the ability of the municipal borrower to meet an obligation
for full repayment of principal and payment of accrued interest within the
demand period, normally seven days or less (unless a Fund determines that a
particular loan issue, unlike most such loans, has a readily available market).
As it deems appropriate, the Adviser will establish procedures to monitor the
credit standing of each such municipal borrower, including its ability to meet
contractual payment obligations.
In evaluating the credit quality of a municipal lease obligation and
determining whether such lease obligation will be considered "liquid," the
Adviser for each Fund will consider:
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(1) whether the lease can be cancelled; (2) what assurance there is
that the assets represented by the lease can be sold; (3) the
strength of the lessee's general credit (e.g., its debt,
administrative, economic, and financial characteristics); (4) the
likelihood that the municipality will discontinue appropriating
funding for the leased property because the property is no longer deemed
essential to the operations of the municipality (e.g., the potential for
an "event of non-appropriation"); and (5) the legal recourse in the
event of failure to appropriate.
Municipal securities may include units of participation in trusts holding
pools of tax-exempt leases. Municipal participation interests may be purchased
from financial institutions, and give the purchaser an undivided interest in one
or more underlying municipal security. To the extent that municipal
participation interests are considered to be "illiquid securities," such
instruments are subject to each Fund's limitation on the purchase of illiquid
securities. Municipal leases and participating interests therein, which may take
the form of a lease or an installment sales contract, are issued by state and
local governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying leases are exempt from Federal
income taxes.
In addition, certain of the Funds may acquire "stand-by commitments" from
banks or broker/dealers with respect to municipal securities held in their
portfolios. Under a stand-by commitment, a dealer would agree to purchase at a
Fund's option specified Municipal Securities at a specified price. The Funds
will acquire stand-by commitments solely to facilitate portfolio liquidity and
do not intend to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis,
each may invest more than 25% of its total assets in municipal securities the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Adviser. To the extent that
more than 25% of a Fund's total assets are invested in Municipal Securities that
are payable from the revenues of similar projects, a Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if its assets were not so concentrated.
There are, of course, variations in the quality of Municipal Securities,
both within a particular classification and between classifications, and the
yields on Municipal Securities depend upon a variety of factors, including
general money market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation, and the rating of the issue. The ratings of
nationally recognized statistical rating organizations represent their opinions
as to the quality of Municipal Securities. It should be emphasized, however,
that these ratings are general and are not absolute standards of quality, and
Municipal Securities with the same maturity, interest rate, and rating may have
different yields while Municipal Securities of the same maturity and interest
rate with different ratings may have the same yield. Subsequent to its purchase
by a Fund, an issue of Municipal Securities may cease to be rated, or its rating
may be reduced below the minimum rating required for purchase by that Fund. The
Adviser will consider such an event in determining whether a Fund should
continue to hold the obligation.
Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from regular Federal income tax or state income
tax are rendered by counsel to the issuer or bond counsel at the time of
issuance. Neither the Funds nor the Adviser will review the
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proceedings relating to the issuance of Municipal Securities or the bases for
opinions relating to the validity of such issuance.
The payment of principal and interest on most securities purchased by a
Fund will depend upon the ability of the issuers to meet their obligations. Each
state, each of their political subdivisions, municipalities, and public
authorities, as well as the District of Columbia, Puerto Rico, Guam, and the
Virgin Islands are a separate "issuer" as that term is used in the Prospectuses
and this SAI. The non-governmental user of facilities financed by private
activity bonds is also considered to be an "issuer." An issuer's obligations
under its Municipal Securities are subject to the provisions of bankruptcy,
insolvency, and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Federal or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. The power or
ability of an issuer to meet its obligations for the payment of interest on and
principal of its Municipal Securities may be materially adversely affected by
litigation or other conditions.
Although the Municipal Income Fund and the State Municipal Bond Funds
invest primarily in Municipal Securities with long-term maturities, the
Intermediate Municipal Bond Fund and the State Intermediate Municipal Bond Funds
invest primarily in Municipal Securities with intermediate-term maturities, they
may also purchase short-term General Obligation Notes, Tax Anticipation Notes,
Bond Anticipation Notes, Revenue Anticipation Notes, Tax-Exempt Commercial
Paper, Construction Loan Notes, and other forms of short-term loans. Such
instruments are issued with a short-term maturity in anticipation of the receipt
of tax funds, the proceeds of bond placements, or other revenues. The State
Intermediate Municipal Bond Funds may also invest in long-term tax-exempt
instruments.
Certain types of Municipal Securities (private activity bonds) have been
or are issued to obtain funds to provide, among other things, privately operated
housing facilities, pollution control facilities, convention or trade show
facilities, mass transit, airport, port or parking facilities, and certain local
facilities for water supply, gas, electricity, or sewage or solid waste
disposal. Private activity bonds are also issued for privately held or publicly
owned corporations in the financing of commercial or industrial facilities. Most
governments are authorized to issue private activity bonds for such purposes in
order to encourage corporations to locate within their communities. The
principal and interest on these obligations may be payable from the general
revenues of the users of such facilities.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on Municipal Securities. Moreover, with respect to Municipal Securities
issued by Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee,
Texas, or Virginia issuers, the Trust cannot predict which legislation, if any,
may be proposed in the state legislatures or which proposals, if any, might be
enacted. Such proposals, while pending or if enacted, might materially and
adversely affect the availability of Municipal Securities generally, or Florida,
Georgia, Maryland, North Carolina, South Carolina, Tennessee, Texas, or Virginia
Municipal Securities specifically, for investment by one of these Funds and the
liquidity and value of such portfolios. In such an event, a Fund
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impacted would re-evaluate its investment objective and policies and consider
possible changes in its structure or possible dissolution.
The following information relating to the State Intermediate Municipal
Bond Funds and the State Municipal Bond Funds supplements information relevant
to each of those Funds in the related Prospectuses.
Florida. Florida's population has grown rapidly in the past forty years.
The attractiveness of the climate and natural amenities have made the state an
ideal location for tourism, retirement and agriculture. In recent decades,
economic diversification has made the state more attractive to younger working
households, particularly during the 1970s and 1980s. Military and defense
spending has fueled this diversification as well as the aerospace industry,
laser optics research, computer manufacture and international trade and
commerce. As a result, Florida is now the fourth most populous state with a
population as of April 1, 1992 of 13,608,627.
The 1993 defense base closure and realignment process impacted Florida.
This was the second of three realignment phases planned to occur. Over the next
five years 12,000 military and civilian defense jobs will be lost statewide. The
economic ripple effect will likely cause an additional 6,000 losses over the
same period. The third and final realignment phase will occur in 1995.
Nationally, the 1995 round is similar in size and scope to the 1993 round.
Because of the depth of the 1993 cuts and some positive realignments in 1995
Florida is expected to be less severely impacted in 1995, but not immune. Key
facilities in Pensacola and Jacksonville will be retained in 1995.
The health of the national economy plays an important role in Florida's
fiscal soundness and economic development. During periods of strong national
expansion Florida's population growth has exceeded 400,000 per year. In previous
recessions, population growth has slowed to 120,000 per year. However, in the
1991 recession, population growth slowed only to 258,000 annually.
Part of the appeal of Florida is the lack of a statewide personal income
tax. There is a corporate income tax, however, as well as state intangibles
taxes, ad valorem and sales and use taxes, though these tax rates are very
competitive with or lower than most other states. Under Florida law the state is
required to maintain a balanced budget. Since much of the State's revenue is
derived from sales taxes or is growth related, budgetary shortfalls can occur
during periods of economic recession. This occurred in 1991 in Florida. In fact,
State general revenue shortfalls reached $1.4 billion between fiscal years
1989-90 and 1990-91. Increasing services are continually required to keep up
with the increasing demand, caused by the state's rapid population growth. The
state legislature has ratified a new budget for fiscal year 1992-93 which has
been signed by the Governor. The new budget includes tax increases of $298
million. This amount is well below the $1.5 billion increase proposed by the
Governor as he deemed necessary to restore earlier shortfalls. In addition, the
end of the recession has brought strengthening state revenues temporarily easing
the budget predicament. The tension, however, between increasing population
growth based demand and budget constraints will continue through 1995 and is
exacerbated by health care reform costs. Federal cutbacks and disaster related
insurance costs have also increased.
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With increasing demands for services and comparatively low taxes, Florida
has experienced a rapid growth in the volume of bond debt. Much of this debt has
been incurred at the local level. As of the end of September 1992, outstanding
bond debt of local governments was just under $10.6 billion, approximately $781
per capita. As of 1992, there was approximately $912 per capita in state
long-term debt. This compares favorably with other states which average nearly
$1,461 per capita for state debt alone.
Part of the focus on needs and services at the state level comes from the
philosophy behind Florida's growth management legislation, passed in 1985. This
legislation recognized the need to preserve Florida's unique quality of life in
the face of rapid growth and development and expanding demands for physical
infrastructure and social services. One of the key components of this
legislation is a rule requiring infrastructure be in place concurrent with new
development. In addition, the growth management legislation gave rise to the
designation of developable urban areas through an update of all local land use
plans, a policy to discourage urban sprawl and a program to purchase
environmentally sensitive lands.
The Growth Management Act of 1985 and the concurrency rule has affected
Florida's economic growth and development in some regions of the state and could
continue to impact the economy in the future. In addition, the location of new
development will be more carefully scrutinized with respect to environmental
sensitivity and natural resource limitations. Growth management legislation will
affect all areas of the state with varying degrees of impact depending on the
specific local conditions such as, existing infrastructure capacity, local
environmental constraints, and limitations on natural resources such as potable
water and habitat preservation. Having now experienced ten years under growth
management rules, it appears that The Growth Management Act of 1985 has, on
balance, been beneficial. Growth management has helped improve quality of life,
ease infrastructure shortfalls and focused the State agenda on preserving
quality of life through growth management regulation and other state funded
environmental land preservation programs.
At the regional level, local economies within Florida perform differently
according to their urban or rural qualities and level of economic
diversification. The spectrum of local economies spans dense urban centers such
as Miami and Tampa to rural agricultural regions of citrus, cattle ranching and
sugar cane production.
Southeast Florida includes Miami, Fort Lauderdale, West Palm Beach and the
Florida Keys. This area is highly urban and economically diverse. Tourism,
retirement, high technology computer manufacture, medical industries,
international trade, winter vegetable crops and sugar cane production are the
prominent features of this regional economy. With just under one-third of the
state's population, this area bore the brunt of the 1991 recession, accounting
for nearly half of all job losses statewide. This vulnerability came about
because of the nature of the recession which disproportionately affected
airlines, banking, retail and construction industries, all of which are
over-represented in the Southeast Florida economy. Hurricane Andrew struck south
Dade County in fall 1992, on the heels of the recession. Some 80,000 homes were
destroyed along with local businesses. During the three years since the
hurricane approximately 70 to 80 percent of the homes have been restored or are
in the reconstruction process. The restoration and rebuilding process though has
now slowed and many of those homes damaged but not yet rebuilt may not be
restored or are being sold at low prices for future redevelopment potential.
Many of
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these residents have permanently left the area. Over the long term, the effects
of the hurricane may speed the suburbanization of the area as agriculture
diminishes due to environmental preservation constraints and redevelopment
opportunities are presented.
In Broward and Palm Beach Counties, in particular, growth management's
concurrency requirements have played a significant role in limiting economic
expansion as compared with other regions of the state because of the lack of
infrastructure capacity. Community consensus based long range planning efforts
recently have been undertaken in northern Palm Beach County. These efforts,
while unlikely to promote growth and development in the area, are a recognition
of the pause in growth that has occurred. More recently improved infrastructure
and access in Southwest Broward has fueled development there.
Southwest Florida has emerged as a strong growth market. Traditionally
very retirement oriented, the region's economy has begun to diversify through
increased employment opportunities and migration southward of citrus production.
Increased employment opportunity has occurred due to the overall size of the
market and improvements in infrastructure capacity, notably the completion of
Interstate 75 in Collier County and the Southwest Regional Airport located in
Fort Myers. The improved transportation access also has helped tourism and as a
result indirectly buoyed population growth rates by providing exposure and
increased awareness of the region as a retirement destination among visitors. An
important component to economic expansion and diversity has also been planned
and approved. The State of Florida has committed to building its tenth public
university in Lee County, nearby the Fort Myers airport. The university will
accommodate 10,000 students within a decade and provide opportunities for
synergy between industry and education. Finally, recent updates to the Lee
County comprehensive plan have been beneficial with respect to growth management
and policy revisions that are more accommodating of future growth and
development.
Central Florida is a premier world-class resort/vacation destination. The
presence of Disney World, studio theme parks and other tourist oriented
recreational parks drives the Central Florida economy. While the size of the
market has grown rapidly, the economy has not become more diverse and is
dependent on tourism and population growth. The tourism industry though has been
more stable over the past three decades than either the manufacturing or
services section. Two additional local industry concentrations, the
laser/optical research node and motion picture industries are helping to
diversify the local economy. Universal Studios has announced an expansion of its
motion picture and theme park facilities. Expansion will begin in 1995 and
employ an additional 14,000 workers when completed. Disney World has also
announced the construction of its fourth theme park covering 500 acres and an
opening is expected by 1999. Strong growth in the tourism industry and large
land areas available for expansion suggest this region will lead the State in
population growth through the mid-1990s. Significant improvements in
infrastructure capacity are also occurring. The completion in 1993 of the 26
mile Southern Connector expressway, a high speed airport connector and eastern
beltway extension all have major and positive local impacts. The Orlando
International Airport has planned the addition of a fourth runway and a fourth
terminal building. These improvements will offset the effects of the closure of
the Orlando Naval Training Center. Closure of the base represents the state's
largest negative impact from the 1993 defense realignment process with a loss of
10,000 military and civilian defense jobs over the next five years, plus an
estimated 5,000
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loss due to the economic ripple effect. A very strong base re-use
program has been put in place and has already successfully attracted new
permanent employment.
North Florida is rural in many areas. Jacksonville is the major North
Florida city. The local economy is dominated by the logging and paper
industries, defense and retirement. The insurance industry also has a strong
presence in Jacksonville. Growth in North Florida peaked in the mid-1980s,
coinciding with military defense buildup, prior to the full implementation of
growth management legislation. As the defense industry has shrunk, population
growth has slowed. With its rural nature, relatively small ad valorem tax base,
heavy dependence on defense and logging, this region is vulnerable to prolonged
economic sluggishness. The 1993 defense realignment process resulted primarily
in the closure of the Naval Air Station Cecil Field and an increase in force at
Naval Station Mayport. The net result is an anticipated loss of 5,800 jobs from
both direct and ripple effects. The 1995 realignment round has initially
recommended the net gain of 2,000 military and civilian positions.
The Florida Panhandle is quite rural with reliance on tourism, defense and
state government for employment opportunities. This area of the state has the
lowest per capita incomes and the smallest volume of population growth. With the
uncertainty of State budget funding in recent years and continuing defense
cutbacks, strong growth in this region of the state is not expected. Coastal
counties, however, remain attractive to continued economic development because
of the pristine beaches along the Gulf of Mexico. The 1993 defense base closure
process will result in a net economic gain for the region. Large scale
realignment at Naval Air Station Pensacola will offset the closure of the Naval
Aviation Depot then resulting in the net gain of 11,000 direct and indirect jobs
over the next five years. There will be little net effect on the region from the
1995 round of base closures.
In general, pursuant to the Florida Constitution and certain statutory
provisions, there are two basic types of obligations that may be issued in the
State of Florida: general obligation bonds and revenue bonds.
General obligation bonds are also known as full faith and credit bonds
because their repayment is based on the general credit and taxing power of the
borrowing government. The ad valorem tax is the most common source of revenue
pledged for the repayment of general obligation bonds. Being tax-supported,
general obligation bonds are typically used to finance the capital portion of
tax supported general purpose governmental projects, with public buildings,
roads, criminal justice facilities, and schools being the most common. Only
units of local government with taxing power can levy and collect ad valorem
taxes. The State of Florida has no ad valorem taxing power. General obligation
bonds payable from ad valorem taxes and maturing more than twelve months (other
than certain refunding bonds) after issuance may be issued to finance capital
projects authorized by law and only if the issuance of such bonds is approved by
the qualified electors.
Revenue bonds are obligations of a unit of government payable solely from
the revenues of a particular enterprise, such as a water and sewer system, or
from the revenues derived from a particular facility or user, or from non-ad
valorem revenues, such as the sales tax, or from other special funds authorized
to be pledged as additional security. Revenue bonds may also be payable from
non-specific revenues budgeted each year by the issuer. Unlike general
obligation
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bonds, revenue bonds do not constitute a debt of the issuing unit or
a pledge of its faith and credit, and they are not backed by the
issuer's taxing power.
A test was developed by the Florida Supreme Court for analyzing the
constitutional ability of an issuer to issue revenue bonds where a significant
portion of the proceeds would be used for private or non-governmental benefit.
Generally, these types of securities are referred to as industrial revenue bonds
or private activity bonds. Unless a particular use for the proceeds of a private
activity bond has been constitutionally or legislatively sanctioned (such as
multifamily and single family housing revenue bonds) or tested in the courts, a
determination must be made that the project to be financed with the proceeds of
the private activity bond will serve a paramount public purpose. The paramount
public purpose doctrine is designed to protect public funds from being exploited
in assisting or promoting private ventures when the public would be, at the
most, only incidentally benefited.
Generally, an issuer may pledge something less than all of its available
non-ad valorem revenues without voter approval, subject to the parameters
established by the Florida Supreme Court. The Florida Supreme Court, in Volusia
v. State, 417 So.2d 968 (Fla. 1982), refused to validate capital improvement
bonds which were to be used for the construction of a new jail and which were
secured by a pledge of all legally available, unencumbered revenues of the
county other than its ad valorem taxes, and by a further pledge to maintain the
programs and projects from which the unencumbered revenues were derived. The
Court held that the practical effect of such a pledge was to require increased
ad valorem taxes. The Court reasoned that a general pledge of all available
non-ad valorem revenues and the covenant by the issuer to maintain the source of
such non-ad valorem revenues was thought to have more than a mere incidental
affect on the ad valorem taxing power of an issuer, and therefore a bond
referendum would be required. The Florida Supreme Court, in State v. Brevard
County, 539 So.2d 461 (Fla. 1989), however, confirmed a lower court bond
validation where a county's obligations to make payments under a lease-purchase
arrangement were to be secured solely by non-ad valorem revenues budgeted for
such purpose during any fiscal year. The arrangement did not violate the State
Constitutional provision requiring voter approval in issuing the certificates of
indebtedness since the County did not also covenant to maintain the programs and
projects from which the non-ad valorem revenues were to be derived.
The Florida courts have validated debt obligations commonly referred to as
certificates of participation or "COPS." In a typical COPS transaction, the
issuer leases either real or personal property from a special purpose
corporation. The special purpose corporation assigns its rights to the lease
payments to a corporate trustee who in turn issues certificates evidencing an
undivided proportionate interest of the owners of such certificates to receive
the lease payments. The lease payments made by the issuer may be derived from
both ad valorem and non-ad valorem revenues of the issuer. Although ad valorem
taxes can be used to make the lease payments, the Florida Supreme Court has held
that a referendum is not required because the obligation to make lease payments
is an annual obligation subject to renewal each year. If the issuing body elects
not to renew its lease for the next succeeding year and therefore fails to
appropriate the necessary moneys to make lease payments, the holders of the COPS
would be limited to the remedies available under the lease. At least one Florida
court has upheld the right of a governmental unit to not exercise the annual
renewal option of its lease.
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When a mortgage, with a right of foreclosure, on real or personal property
(owned by a unit of government) is given to secure a bond, the Florida courts
have held that a pledge of such mortgage requires voter approval. In effect, ad
valorem taxes are indirectly pledged because, as the Florida Supreme Court
reasoned, the legislative body affected by such foreclosure might feel "morally
compelled" to levy taxes to prevent the loss of assets through foreclosure. As a
result, the majority of revenue bonds is sued in the State of Florida are not
additionally secured by a mortgage on the governmental property being financed.
This prohibition is applicable even if the issuer has no taxing power.
In Florida, the Division of Bond Finance has authority over the issuance
of State bonds pledging the full faith and credit of the State and the issuance
of revenue bonds payable solely from funds derived from sources other than State
tax revenues or rents or fees paid from State tax revenues.
Pursuant to the Florida Constitution, moneys sufficient to pay debt
service on State bonds must be appropriated as the same become due. Furthermore,
to the extent necessary, all State tax revenues, other than trust funds, must be
available for such appropriation purposes.
At the November 1994 general election, voters in the State approved an
amendment to the Florida Constitution limiting the amount of taxes, fees,
licenses and charges imposed by the State and collected during any fiscal year
to the amount of revenues allowed for the prior fiscal year, plus an adjustment
for growth. Growth is defined as the amount equal to the average annual rate of
growth in Florida personal income over the most recent twenty quarters times the
State revenues allowed for the prior fiscal year. The revenues allowed for any
fiscal year can be increased by a two-thirds vote of the State Legislature. The
limit is effective starting with fiscal year 1995-1996. Any excess revenues
generated will be deposited in the budget stabilization fund until it is fully
funded and then refunded to taxpayers. Included among the categories of revenues
which are exempt from the proposed revenue limitation, however, are revenues
pledged to state bonds and charges for services imposed by local, regional or
school district governing bodies.
The total outstanding principal of State bonds pledging the full faith and
credit of the State may not exceed fifty percent of the total tax revenues of
the State for the two preceding fiscal years, excluding any tax revenues held in
trust.
State bonds pledging the full faith and credit of the State, except
certain refunding bonds, generally may be issued only to finance or refinance
the cost of State fixed capital outlay projects subject to approval by a vote of
the electors. However, State bonds pledging the full faith and credit of the
State may be issued without a referendum to finance the construction of air and
water pollution control and abatement and solid waste disposal facilities to be
operated by a political subdivision of the State or by an agency of the State.
All forms of taxation other than ad valorem taxes are preempted to the
State, except as provided by general law. The State is prohibited from
collecting ad valorem taxes, which are taxes that are levied on real estate or
tangible personal property.
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Revenue bonds may be issued by the State of Florida or its agencies
without voter approval only to finance or refinance the cost of state capital
projects payable solely from funds derived from sources other than state tax
revenues or rents or fees paid from state tax revenues.
Bonds issued pursuant to the State Bond Act must be validated in
accordance with Florida Statutes. Once an issuer decides to finance a project
with bonds issued pursuant to the State Bond Act, a bond validation proceeding
is held in circuit court to determine whether the proposed bond issuance
complies with Florida law. The court makes findings on the questions of whether
the issuing body had the power to incur bonded debt and whether it exercised
that power in accordance with the law. The court may not weigh the fiscal
feasibility of the proposed bonds in the validation determination. The circuit
court judgment is final on all matters, other than constitutional issues, raised
at the validation hearing after time for appeal to the Supreme Court of Florida
has elapsed. Refunding bonds and bonds issued to finance or refinance capital
outlay projects for the system of public education are not required to be
validated.
The legislature has the power to confer on political subdivisions the
power to issue bonds, notes and other forms of indebtedness, except as otherwise
restricted by State and federal constitutional provisions, and such power is
conferred on municipal corporations, cities, counties and a variety of other
specially created districts and authorities. The bond validation process
described above is also available to such units of local government. In most
cases, bond validations are not statutorily mandated and many general obligation
and revenue bond issues have not been validated.
Generally, the Florida Constitution and Florida Statutes require that the
budget of the State and that of the units of local government in the State be
kept in balance from currently available revenues during each fiscal year. If
revenues collected during a fiscal year are less than anticipated, expenditures
must be reduced in order to comply with the balanced budget requirement.
Florida Statutes provide for a Statewide maximum bond interest rate which
is flexible with the bond market and from which are exempted bonds rated in one
of the three highest ratings by nationally recognized rating services.
Nevertheless, upon request of a governmental unit, the State Board of
Administration may authorize a rate of interest in excess of the maximum rate,
provided relevant financial data and information relating to the sale of the
bonds is submitted to the State Board.
The Florida Sunshine Law, among other things, precludes public officials
from meeting with respect to the issuance of bonds other than at duly noticed
public meetings of the governmental entity. These provisions apply to all
meetings of any board or commission of any State agency or authority, or of any
county, municipal corporation, or political subdivision. No resolution, rule, or
formal action is considered binding except as taken at such duly noticed public
meetings.
Georgia. On December 31, 1992, the state government of Georgia had the
46th lowest debt level per capita of all states in the United States, which is
reflective of a very conservative fiscal approach taken by elected state
officials, tempered during a three to four year economic slow-down. Typically,
general obligation bonds of the state are issued pursuant to the powers granted
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under Article VII, Section IV of the Constitution of the State of Georgia (the
"Georgia Constitution"), which provides that the bonds are the direct and
general obligations of the state. The key language is provided under Article
VII, Section IV, Paragraph VI of the Georgia Constitution which provides as
follows:
"The full faith, credit and taxing power of the state are hereby pledged
to the payment of all public debt incurred under this article and all
such debt and the interest on the debt shall be exempt from taxation
(emphasis added). Such debt may be validated by judicial proceedings in
the manner provided by law. Such validation shall be incontestable and
conclusive."
The Georgia Constitution further mandates that the General Assembly "shall raise
by taxation and appropriate each fiscal year . . . such amounts as are necessary
to pay debt service requirements in such fiscal year on all general obligation
debt." The Georgia Constitution further provides for the establishment of a
special trust fund which is designated the "State of Georgia General Obligation
Debt Sinking Fund" which is used for the payment of annual debt service
requirements on all general obligation debt.
There are debt limitations provided under Article VII, Section IV,
Paragraph II(b)-(e) of the Georgia Constitution which essentially provide that
the cumulative annual debt service for both general obligation debt and
guaranteed revenue debt shall not exceed 10% of the total revenue receipts, less
refunds paid to the state treasury in the fiscal year immediately preceding the
proposed issuance of any new debt. The Georgia Constitution prohibits state
departments and agencies from circumventing the debt limitation provisions by
not allowing such agencies to execute contracts which may be deemed to
constitute a security for bonds or other public obligations. (See Article VII,
Section IV, Paragraph IV of the Georgia Constitution.)
The State of Georgia may incur: "Public debt to supply a temporary deficit
in the state treasury in any fiscal year created by a delay in collecting the
taxes of that year. Such debt shall not exceed, in the aggregate, 5% of the
total revenue receipts, less refunds, of the state treasury in the fiscal year
immediately preceding the year in which such debt is incurred." (See Georgia
Constitution, Article VII, Section IV, Paragraph I(b).) Since this provision of
the Constitution was enacted, there has been no temporary debt incurred by the
state.
Virtually all debt obligations represented by bonds issued by the State of
Georgia, counties or municipalities or other public subdivisions, and public
authorities require validation by a judicial proceeding prior to the issuance of
such obligation. The judicial validation makes these obligations incontestable
and conclusive, as provided under the Georgia Constitution.
The State of Georgia operates on a fiscal year beginning on July 1 and
ending on June 30. Each year the State Economist, the Governor and the State
Revenue Commissioner jointly prepare a revenue forecast upon which is based the
state budget which is considered, amended and approved by the Georgia General
Assembly. Since 1975, the Governor and the General Assembly have attempted to
maintain a $100 million reserve fund. Total net revenue collections for the
fiscal year ending on June 30, 1994 were $8,444,864,060, which represented an 8%
increase over fiscal year 1993 collections of $7,826,860,073, and a 21% increase
over fiscal year 1992 collections of $6,992,517,064. Additionally, Georgia
received in fiscal year 1994
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$326,420,743 in revenue from the Georgia Lottery Corporation; all lottery
revenues are earmarked for educational expenditures.
For the next several years, Georgia has a very bright economic future
highlighted by a $2 billion stimulus to the economy which is expected from
Atlanta's hosting of the 1996 Summer Olympic Games. Manufacturing activity,
particularly in the textile, apparel and carpet sectors, has increased
dramatically as a result of increased home building. The real
estate/construction industry appears to be emerging from a recession that had
been caused by over-building of commercial office space and industrial parks in
the late 1980s. Military base closings may mildly impact its economy. In recent
years, Georgia has enjoyed the economic stimulus caused by a number of major
corporate relocations led by United Parcel Service of America, Inc., which moved
its World Headquarters from Greenwich, Connecticut, to Atlanta. This move was
followed shortly by Holiday Inn Worldwide, which moved its headquarters to
Atlanta from Memphis.
On December 6, 1994, the United States Supreme Court reversed the Georgia
Supreme Court's decision in Reich v. Collins, 263 Ga. 602 (1993) and held that
Georgia resident federal retirees were entitled to refunds of pre-1989 taxes on
federal retirement pension benefits. In response, the Governor signed H.B. 90 on
February 1, 1995, permitting federal retirees who file timely claims to receive
refunds for such taxes for tax years 1985-1988. The enactment of H.B. 90 is
expected to result in the dismissal of Reich. Total potential liability is
approximately $110,000,000 which would be paid in four roughly equal annual
installments, the first of which would take place on or before October 15, 1995.
The 1994 United States Supreme Court decision of Bacchus Imports, Ltd. v.
Dias, 468 U.S. 263 (1994), held that a Georgia statute assessing lower alcoholic
beverage taxes against domestic producers than out-of-state producers was
unconstitutional. In the wake of Bacchus, James B. Beam Distilling Company v.
State, 501 U.S. ____ (decided June 20, 1991) held that out-of-state producers
had a right to assert claims for refunds for the unlawful alcohol beverage taxes
levied against them, but that the enforceability of such claims would be subject
to state statutes of limitations and other procedural bars. On remand, the
Fulton County Superior Court held that statutes of limitations and other
procedural bars would preclude Beam's recovery for refunds, where applicable.
After having its writ of certiorari denied by the United States Supreme Court,
Beam has filed a petition for rehearing, which is currently pending. Currently,
Georgia's statute of limitations (O.C.G.A. ss. 48-2-85) has run on all
applicable pre-Bacchus claims for refund except for five claims currently
pending, which seek tax refunds in the amount of $31,700,000, plus interest.
Age International, Inc. v. State (two cases), and Age International, Inc.
v. Miller were filed by out-of-state producers of alcoholic beverages seeking
(i) refunds totaling $119,000,000.00 for alcohol import taxes imposed under
Georgia's post-Bacchus statute (O.C.G.A. ss. -3-4-60) and (ii) declaratory and
injunctive relief. These claims account for an estimated 99% of all such taxes
paid pursuant to the statute and which would not be barred by the statute of
limitations. The refund cases are still pending in the trial court. The
declaratory/injunctive relief case was dismissed by the District Court, such
dismissal being affirmed by the Eleventh Circuit Court of Appeals; a petition
for rehearing has been filed, which is currently pending.
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Local school boards have filed suit against Georgia in Board of Public
Education for Savannah/Chatham County v. State of Georgia and DeKalb County v.
State of Georgia. The local school boards have contested the manner in which
desegregation policies were implemented. In Savannah/Chatham County, the
Savannah Board originally sued for $30,000,000, challenging the application of
state desegregation funding formulae, but the District Court approved a formula
requiring a State payment of approximately $8,900,000 through and including June
30, 1994. The local school boards appealed the decision to the Eleventh Circuit
Court of Appeals. A proposed settlement has been reached, in which the state has
offered to pay $8,900,000 propose a formula for allocating student
transportation costs. In DeKalb County, the plaintiffs filed suit for
$67,500,000 on a related issue; the District Court held the funding formula was
contrary to state law. The Court reduced a potential state funding obligation of
$34,000,000 to approximately $28,000,000. Notices of appeal, however, have been
filed with the Eleventh Circuit Court of Appeals. As yet, approximately five
school districts may file similar claims.
Leslie K. Johnsen v. Collins, filed in Chatham County, involved
constitutional challenges to Georgia's transfer ("impact") fee (O.C.G.A. ss.
40-3-31.1) was challenged under the commerce clause. A similar lawsuit was filed
in the Superior Court of Fulton County (Mueller v. Collins) aggregate potential
liability of the state is estimated at $20,600,835 for May, 1992 to February 15,
1995. Monthly collections continue at the rate of $500,000 to $600,000.
In Daniel W. Tedder v. Marcus E. Collins, Sr., a class action was filed in
the Cobb County Superior Court challenging a revenue regulation authorizing the
collections on sales tax on sales of used transportation equipment where neither
the buyer nor the seller was engaged in the "regular business" of buying or
selling such tangible property. The trial court declared the regulation invalid.
Accordingly, $21,900,000 in refunds have been paid, with a possible aggregate
exposure of $30,000,000, plus interest.
The above-referenced information is based on available public documents
and oral representations made by officials at the State Attorney General's
Office, the Georgia Department of Revenue and contained in the Significant
Contingent Liability representation made in a recent Preliminary Official
Statement accompanying a March 1, 1995 State of Georgia General Obligation Bond
issue.
Maryland. The public indebtedness of the State of Maryland and its
instrumentalities is divided into three basic categories. The State issues
general obligation bonds, to the payment of which the State ad valorem property
tax is exclusively pledged, for capital improvements and for various
State-sponsored projects. The Maryland Department of Transportation issues
limited, special obligation bonds for transportation purposes payable primarily
from specific, fixed-rate excise taxes and other revenues related mainly to
highway use. Certain authorities issue obligations payable solely from specific
non-tax, enterprise fund revenues, and for which the State has no liability and
has given no moral obligation assurance. The State and certain of its agencies
also have entered into a variety of lease purchase agreements to finance the
acquisition of capital assets. These lease agreements specify that payments
thereunder are subject to annual appropriation by the General Assembly.
At least since the end of the Civil War, the State has paid the principal
of and interest on its general obligation bonds when due. Neither the Maryland
Constitution nor the public general
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laws of Maryland impose any general debt limit. Although the State has the
authority to make short-term borrowings in anticipation of taxes and other
receipts up to a maximum of $100 million, the State in the past has not issued
short-term tax anticipation and bond anticipation notes or made any other
similar short-term borrowings for cash flow purposes. The State has not issued
bond anticipation notes except in connection with a State program to ameliorate
the impact of the failure of certain State-chartered savings and loan
associations in 1985; all such notes were redeemed without the issuance of debt.
The State Constitution prohibits the contracting of State debt unless
authorized by a law providing for the collection of an annual tax or taxes
sufficient to pay the interest when due and to discharge the principal within 15
years of the date of debt issuance. The Constitution also provides that the
taxes levied for this purpose may not be repealed or applied to any other
purpose until the debt is fully discharged. As a matter of practice, general
obligation bonds, other than small denomination bonds and refunding bonds, are
issued to mature in serial installments designed to provide payment of interest
only during the first two years and an approximately level annual amortization
of principal and interest over the remaining years.
The State has financed and expects to continue to finance the construction
and acquisition of various facilities and equipment through conditional
purchase, sale-leaseback, and similar transactions. All of the lease payments
under these arrangements are subject to annual appropriation by the General
Assembly. In the event that appropriations are not made, the State may not be
held contractually liable for the payments. These transactions are subject to
approval by the Board of Public Works.
1992 Budget -- As with fiscal year 1991, collections of State revenues
were below the levels estimated in the 1992 Budget. In addition, unanticipated
growth in the caseload for the public assistance and Medicaid programs exceeded
appropriated levels.
It is estimated that, if certain actions described below had not been
taken, overall 1992 General Fund operations would have been approximately $790
million less favorable than the amounts in the 1992 Budget. This shortfall
reflects $542 million in lower collections of revenue than originally estimated
and $248 million in expenditure requirements in excess of amounts originally
appropriated. The shortfall in revenue collections principally reflects lower
collections in individual income taxes ($344 million), sales and use taxes ($133
million), and lottery receipts ($37 million). The principal area of higher
expenditure requirements was the Medicaid program ($240 million, including $34
million to pay greater than anticipated Medicaid provider taxes).
To address this $790 million shortfall, the State implemented a cost
containment program through administrative actions and legislation enacted by
the General Assembly at regular and special sessions during fiscal year 1992.
The cost containment program included $411 million in spending reductions; $98
million in new revenues; $92 million in new transfers to the General Fund of
balances in various reserve and program accounts; a $70 million deferral of
certain Medicaid expenses; and $63 million in revenues that were expected, at
the time of the enactment of the 1992 Budget, to be distributed to local
governments.
1993 Budget -- On September 21, 1992, the Board of Revenue Estimates
projected that general fund revenues for fiscal year 1993 would be $423 million
below the levels estimated in
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the 1993 Budget Program. The projected shortfall in revenue collections
principally reflected anticipated lower collections of individual
income taxes ($252 million), sales and use taxes ($84 million),
corporation income taxes ($32 million), and lottery receipts ($25
million).
To address this revenue shortfall and provide reserves to finance
potential deficiency appropriations, the Governor proposed a $450 million cost
containment plan. This plan included $168 million in reductions to the State
agencies' 1993 General Fund appropriations, $41 million in transfers from
various special funds to the General Fund, $150 million in reductions to State
assistance to local governments, $32 million in increased General Fund
reversions, $50 million in additional lottery revenues, and $9 million for
miscellaneous actions.
1994 Budget -- On April 5, 1993 the General Assembly approved the Budget
for fiscal year 1994. The 1994 Budget Program of $12.5 billion is 3.4% above the
spending level for 1993. The 1994 Budget does not include any funds for employee
cost-of-living increases or selective salary adjustments, but does include funds
for employee in-grade salary increments. The Budget does not include any
proposed expenditures dependent upon additional revenue from new or broad-based
taxes; the only additional revenues are to be derived from fees in the health
care and insurance regulation areas.
The operating budget for fiscal year 1994 is to be funded with $6,499
million in general funds, $3,221 million in special and higher education funds,
and $2,752 million in federal funds. The 1994 Budget, according to the
Department of Fiscal Services, is within the spending level recommended by the
Spending Affordability Committee.
1995 Budget -- On April 5, 1994, the General Assembly approved the budget
for fiscal year 1995. The Budget includes, among other things: (i) sufficient
funds to meet all specific statutory funding requirements; (ii) sufficient funds
to meet the actuarily recommended contributions for the seven retirement
systems, determined on a basis consistent with prior years' practice; (iii)
sufficient general funds for the Annuity Bond Fund to maintain the State
property tax rate at 21(cent) per $100 of assessed valuation; (iv) $2.6 billion
in aid to local governments (reflecting a $102.4 million increase over 1994 that
provides for substantial increases in education, health, and police aid); (v) a
$20 million general fund appropriation to the Dedicated Purpose Account of the
State Reserve Fund to reduce the liabilities for the State Employee Health
Insurance program; and (vi) $104.8 million in general fund deficiency
appropriations for fiscal year 1994, of which $60.5 million is an appropriation
to the Revenue Stabilization Account of the State Reserve Fund as previously
mandated by the General Assembly. The Budget includes $59.6 million in general
funds for a 3% employee cost-of-living adjustment with a minimum increase of
$800 per employee.
The operating budget is to be funded with $6,886 million in general funds,
$2,396 million in special funds, $1,154 in higher education funds, and $2,935
million in federal funds.
The State's fiscal year 1995 capital program is to be funded with $380
million in general obligation bonds, $54.6 million in general funds appropriated
in the operating budget, $943.9 million in special and federal funds (of which
$774.6 million is appropriated to the Department of Transportation), $201.7
million in revenue bonds, and $23.5 million in reappropriated prior years'
capital appropriations. The general obligation bond financed program
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includes $170 million for State facilities, $82 million for the construction and
renovation of local elementary and secondary schools, and $128 million for
various other grants and loan projects.
When the 1995 budget was enacted, it was estimated that the general fund
surplus on a budgetary basis at June 30, 1995, would be approximately $9.7
million; the current estimate is $49.5 million, which reflects the actual
general fund surplus on a budgetary basis at June 30, 1994, of $60.0 million. In
addition, it is currently estimated that the balance in the Revenue
Stabilization Account of the State Reserve fund at June 30, 1995, will be $223.6
million. Current statute requires the Governor to include as part of the budget
submitted at the 1995 Session of the General Assembly an appropriation in an
amount equivalent to the general fund surplus at June 30, 1994. The estimates of
the general fund surplus and balance in the Revenue Stabilization Account at
June 30, 1995, assume that the required appropriation will be effective July 1,
1995.
As of June 30, 1994, the State had approximately $3.8 billion in State tax
supported debt outstanding. For the fiscal year ending on the same date, the
State received approximately $7.9 billion in revenues.
The Adviser believes that the information summarized above describes some
of the more significant matters relating to the Maryland Intermediate Municipal
Bond Fund and Maryland Municipal Bond Fund. The sources of the information are
the official statements of issuers located in Maryland, other publicly available
documents, and oral statements from various state agencies. The Adviser has not
independently verified any of the information contained in the official
statements, other publicly available documents, or oral statements from various
state agencies.
North Carolina. The North Carolina Constitution requires that the total
expenditures of the State for the fiscal period covered by the budget not exceed
the total receipts during the fiscal period plus any surplus remaining in the
State Treasury at the beginning of the period. The State operates on a fiscal
year ending June 30th.
The budgets for the 1991-93 biennium projected a balance for the fiscal
years ended June 30, 1992 and 1993. During the 1991-93 biennium, the actual
receipts and expenditures resulted in an unreserved fund balance of $123.6
million at June 30, 1992, and $346.0 million at June 30, 1993. At June 30, 1994,
the unreserved fund balance totaled $407.0 million. For the 1994-95 year, the
authorized budget projects an unreserved fund balance at June 30, 1995 of $210.9
million. In planning the 1994-95 budget, the State's General Assembly reduced
departmental operating requirements by $357.6 million and authorized funding for
expansion of existing programs and for new initiatives for children, economic
development, education, human services and environmental programs. In addition,
the General Assembly authorized the restoration of all payroll deferrals that
were made to balance the budget in prior years. With capital projects for the
1994-95 year being financed with bond proceeds and fund balances, the expanded
level of operational appropriations has been supported by certain new taxes and
fees enacted by the 1991 General Assembly.
The following are cases pending in which the State faces the risk of
either a loss of revenue or an unanticipated expenditure. In the Opinion of the
Department of State Treasurer, however,
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any such loss of revenue or expenditure would not materially adversely affect
the State's ability to meet its financial obligations.
Leandro, et al. v. State of North Carolina and State Board of Education.
On May 25, 1994, students and Boards of Education in five counties filed suit
requesting a declaration that the public education system of North Carolina
violates the State Constitution by failing to provide adequate or substantially
equal education opportunities, and such other equitable relief as the Court
deems proper. The defendants' motion to dismiss was denied and the ruling has
been appealed.
Francisco case. On August 10, 1994, a class action lawsuit was filed
against the Superintendent of Public Instruction and the State Board of
Education on behalf of a class of parents and their children who are
characterized as limited English proficient. The complaint alleges that the
State has failed to provide funding for the education of these students and has
failed to supervise local school systems in administering programs for them. The
complaint asks the Court to order the defendants to fund a comprehensive program
to ensure equal educational opportunities for limited English proficient
children. No response has been filed by the State.
Swanson case. In Davis v. Michigan (1989), the U.S. Supreme Court ruled
that a Michigan income tax statute which taxed federal retirement benefits while
exempting those paid by state and local governments violated the constitutional
doctrine of intergovernmental tax immunity. At the time of the Davis decision,
North Carolina law contained similar exemptions in favor of state and local
retirees. Those exemptions were repealed prospectively beginning with the 1989
tax year. Following Davis, federal retirees filed a class action suit in federal
court in 1989 seeking damages equal to the North Carolina income tax paid on
federal retirement income by the class members. A companion suit was filed in
state court in 1990. The North Carolina Department of Revenue's estimate of
refunds and interest liability is $280.89 million as of June 30, 1994. In 1991
the North Carolina Supreme Court ruled in favor of the State in the state court
action. In 1993 the U.S. Supreme Court vacated that decision and remanded the
case back to the North Carolina Supreme Court. The North Carolina Supreme Court
then ruled in favor of the State on the grounds that the federal retirees had
failed to comply with state procedures for challenging unconstitutional taxes.
Plaintiffs petitioned the U.S. Supreme Court for review of that decision, but
the U.S. Supreme Court denied their petition. The U.S. District Court has ruled
in favor of the defendants in the federal case, and a petition for
reconsideration was denied. Plaintiffs have appealed to the U.S. Court of
Appeals.
Bailey case. State and local government retirees filed a class action suit
in 1990 as a result of the repeal of the income tax exemptions for state and
local government retirement benefits. The original suit was dismissed after the
North Carolina Supreme Court ruled in 1991 that the plaintiffs had failed to
comply with state law requirements for challenging unconstitutional taxes and
the U.S. Supreme Court denied review. In the 1992 many of the same plaintiffs
filed a new lawsuit alleging essentially the same claims. The case went to trial
in March of 1995. The North Carolina Attorney General's Office estimates that
the amount in controversy is approximately $40-45 million annually for the tax
years 1989 through 1992.
Faulkenbury v. Teachers' and State Employees' Retirement System, Peele v.
Teachers' and State Employees' Retirement System, and Woodard v. Local
Governmental Employees'
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Retirement System. Plaintiffs are disability retirees who brought class
actions in state court challenging changes in the formula for payment of
disability retirement benefits and claiming impairment of contract
rights, breach of fiduciary duty, violation of other federal
constitutional rights and violation of state constitutional and
statutory rights. The State estimates that the cost in damages and
higher prospective benefit payments to plaintiffs and class members may
amount to $50 million or more in Faulkenbury, $50 million in Peele and
$15 million or more in Woodard. Upon review in Faulkenbury, the North
Carolina Court of Appeals and the North Carolina Supreme Court have
held that the claims made in Faulkenbury, which are substantially
similar to those in Peele and Woodard, for breach of fiduciary duty and
violation of federal constitutional rights brought under the Federal
Civil Rights Act, either do not state a cause of action or are otherwise
barred by the statute of limitations. In 1994 plaintiffs took
voluntary dismissals of their claims for impairment of contract rights
in violation of the U.S. Constitution and filed new actions in federal
court asserting the same claims along with claims for violation of
constitutional rights in the taxation of retirement benefits. The
remaining State court claims in all of the cases are scheduled to be
heard in May, 1995. The parties have agreed to a stay in the federal
action pending resolution of the State claims.
Fulton Case. The State's intangible personal property tax levied on
certain shares of stock has been challenged by the plaintiff on the grounds that
it violates the U.S. Constitution's commerce clause by discriminating against
stock issued by corporations that do all or part of their business outside the
State. The plaintiff in the action is a North Carolina corporation that does all
or part of its business outside the State. Plaintiff seeks to invalidate the tax
in its entirety and to recover tax paid on the value of its shares in other
corporations. The North Carolina Court of Appeals invalidated the taxable
percentage deduction and excised it from the statute beginning with the 1994 tax
year; however, the North Carolina Supreme Court reversed the Court of Appeals
and reinstated the trial court's ruling, which had upheld the tax as
constitutional, including the taxable percentage deduction. In January 1995,
plaintiffs filed a petition for certiorari to the U.S. Supreme Court; the
defendants have filed a brief in opposition to the petition. No ruling has been
made on the petition. New collections from the tax for the fiscal year ended
June 30, 1993 amounted to $120.6 million.
The Adviser believes that the information summarized above describes some
of the more significant matters relating to the North Carolina Intermediate
Municipal Bond Fund and North Carolina Municipal Bond Fund. The sources of the
information are the official statements of the Department of State Treasurer of
North Carolina, other publicly available documents and oral statements from
various State agencies. The Adviser has not independently verified any of the
information contained in the official statements, other publicly available
documents, or oral statements from various State agencies.
South Carolina. The South Carolina Constitution mandates a balanced
budget. If a deficit occurs, the General Assembly must account for it in the
succeeding fiscal year. In addition, if a deficit appears likely, the State
Budget and Control Board may reduce appropriations during the current fiscal
year as necessary to prevent the deficit. The State Constitution limits annual
increases in State appropriations to the average growth rate of the economy of
the State and annual increases in the number of State employees to the average
growth of the population of the State; provided, however, that these two
limitations are subject to suspension by a special vote in each House of the
General Assembly.
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The State Constitution requires a General Reserve Fund that equals three
percent of General Fund Revenue for the latest completed fiscal year. When
deficits have occurred, the State has funded them out of the General Reserve
Fund. The State Constitution also requires a Capital Reserve Fund equal to two
percent of General Fund Revenue for the latest completed fiscal year. The State
Constitution requires that the General Assembly provide that, if revenue
forecasts before March 1st project that revenues for the current fiscal year
will be less than expenditures authorized by appropriation for the current
fiscal year, the current fiscal year's appropriation to the Capital Reserve Fund
shall be reduced to the extent necessary before any reduction is made in
operating appropriations. If it is determined that a fiscal year has ended with
an operating deficit, the State Constitution requires that funds in the Capital
Reserve Fund shall be applied, to the extend necessary, to such fiscal year's
end operating deficit before withdrawing monies from the General Reserve Fund
for such purpose.
After March 1st, the Capital Reserve Fund may be appropriated by a special
vote of the General Assembly to finance previously authorized capital
improvement bond projects, to retire bond principal or pay interest on bonds
previously issued, and to pay for capital improvements or other nonrecurring
purposes. Monies in the Capital Reserve Fund not appropriated or any
appropriation for a particular project or item that has been reduced due to
application of the monies to a year-end deficit must go back to the General
Fund.
The State operates on a fiscal year beginning July 1st and ending June
30th. For the fiscal year ended June 30, 1994, the State had a budgetary surplus
of $273,480,000, and the Capital Reserve Fund and General Reserve Fund were
fully funded at the combined 5% level. The South Carolina General Assembly
recently passed the Fiscal Year 1994-95 Appropriations Act that enacted a
balanced budget where most of the new revenue was allocated to education,
health, and corrections.
A class action lawsuit, Bass v. State of South Carolina, questioning the
State's tax treatment of federal retirement benefits for the tax years 1985,
1986, 1987 and 1988, has been settled by agreement of the parties and approved
by the Circuit Court of the State. The time for appeal has expired. The General
Assembly authorized the payment of up to $85,000,000 to the members of the class
and approximately $77,000,000 has been paid. The State is unable to predict
whether the remaining $8,000,000 will be paid.
The General Assembly, during the 1994 Session, enacted legislation which
extended the time for filing claims until August 8, 1994. The State estimates
approximately $25,000,000 in claims were filed during this period. One-half of
the claims filed during this period will be paid on October 10, 1995 and the
remaining one-half will be paid on October 10, 1996.
The Adviser believes that the information summarized above described some
of the more significant matters relating to the South Carolina Intermediate
Municipal Bond Fund and South Carolina Municipal Bond fund. The sources of the
information are the official statements of issuers located in South Carolina,
other publicly available documents, or oral statements from various State
agencies. The Adviser has not independently verified any of the information
contained in the official statement, other publicly available documents, or oral
statements from various State agencies.
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Tennessee. The Constitution of the State of Tennessee forbids the
expenditure of the proceeds of any debt obligation for a purpose other than the
purpose for which it was authorized by statute. The Constitution also forbids
the authorization of any debt obligation, except as shall be repaid within the
fiscal year of issuance, for current operation of any state service or program.
Under Tennessee law, the term of the State's bonds cannot exceed the life of the
projects being financed. Furthermore, the amount of debt obligations of the
State of Tennessee cannot exceed the amount authorized by the Tennessee General
Assembly. The procedure for funding State of Tennessee debt is provided by
Chapter 9 of Title 9, Tennessee Code Annotated. The Funding Board of the State
of Tennessee is the entity authorized to issue general obligation indebtedness
of the State of Tennessee. Pursuant to Section 9-9-106, Tennessee Code
Annotated, the Funding Board of the State of Tennessee has a lien on the taxes,
fees and revenues from certain designated revenue sources for the full amount
required to service the State's general obligation indebtedness. Certain other
agencies and authorities in Tennessee issue obligations, payable solely from
specific non-tax enterprise fund revenues and which are not debts or liabilities
of the State of Tennessee nor is the full faith and credit pledged to the
payment thereof.
Under current state statutes, the State of Tennessee's general obligation
bonded debt issuances are subject to an annual legal debt service limitation
based on a pledged portion of certain current year revenues. As of June 30,
1994, the State of Tennessee's annual legal debt service limit of $351 million
was well above the debt service required of $102 million, with a legal debt
service margin of $249 million. Debt per capita equaled $123, and the ratio of
net general long-term bonded debt to assessed property valuation was 1.32
percent.
The Constitution of the State of Tennessee requires a balanced budget. As
required by law, the legislature enacted a balanced budget for fiscal year
1993-94. Beginning January 1, 1994 the State of Tennessee received a waiver from
the federal government to replace Medicaid with the new program, TennCare.
TennCare was implemented to help control the sky-rocketing cost of health care
and to provide insurance coverage not only to previous Medicaid eligible
individuals but also to uninsured Tennesseans. Due principally to inaccurate
funding assumptions with respect to the TennCare program, the budget for the
year ending June 30, 1995 projected a shortfall of $126 million. Newly elected
Governor Don Sundquist has proposed legislation to balance the fiscal 1995
budget.
Despite the budgetary concerns caused by the costs associated with
implementing TennCare, the economic outlook for Tennessee remains favorable. The
State's economic diversity has improved substantially over the last eleven
years. Investments announced in new and expanding business exceeded one billion
dollars in each of those years and exceeded two billion in the last two years.
The $3.2 billion in announced capital investments in 1989 was the single largest
year and exceeded the $2.78 billion in 1985 when Saturn Corporation chose
Tennessee for its plant site. This growth created 23,800 new jobs in Tennessee
for the year ended June 1994. As of November 1994, the State's unemployment rate
has approached record lows at 3.6%, well below the national average of 5.6%. The
decision by Columbia/HCA Corporation to relocate its headquarters in Tennessee
is also expected to have a significant positive impact on future growth in
Tennessee. Based on current projections, the State's overall growth is expected
to exceed the national average into the next century according to the
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Comprehensive Annual Financial Report for the State of Tennessee for the
year ended June 1994.
Texas. The State has long been identified with the oil and gas industry,
but the Texas economy has 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.
Service-producing 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 be significant to
Texas' future growth. The State Comptroller of Public Accounts has
predicted that the overall Texas economy will slightly out pace national
economic growth in the long term.
The State generally can be divided into six geo-economic regions. The east
region is a largely non-metropolitan region, in which the economy is dependent
on agricultural activities and the production and processing of coal, petroleum
and wood. The Dallas-Ft. Worth metroplex region is almost totally metropolitan,
with diversified manufacturing, defense, financial and commercial sectors. The
panhandle, Permian basin and Concho Valley regions are the largest and most
sparsely populated areas of the State, with an economy based on petroleum
production and agriculture. The border region stretching from El Paso to
Brownsville is characterized by its dependence on international trade (almost
entirely with Mexico) and agriculture. The gulf coast region is the most
populous region in the State and has an economy centered around petroleum and
petro-chemical industries and commercial activities resulting from agriculture
and seaport trade. The economy of the central corridor is based upon the public
and private service sector, defense, recreation and manufacturing. Because the
economic base is different from region to region, economic developments, such as
the strength of the U.S. economy, declining oil prices, the devaluation of the
peso and changes in defense spending, can be expected to affect the economy of
each region differently.
Employment in the State increased steadily through the 70's and early
80's. However, in 1986, the Texas economy was battered by a recession induced by
declining oil prices and a collapse in its real estate industry. The
unemployment rate in Texas peaked at 8.9% in 1986. By the summer of 1988, the
State had replaced jobs lost during this recession, although many were in
lower-paying occupations. By now, the State has nearly tripled the jobs lost
during its 1986-87 recession. Although the Texas economy was slowed by the
nation's 1990-91 recession, it did not fall into recession itself. The
employment rate in Texas rose from about 6% in the middle of 1990 to peak at 7.5
to 8 percent at the beginning of 1993. By October 1993, it was down to about 6.8
percent and fairly stable. During the period ending in April 1994, the Texas
Employment Commission reported total nonfarm employment growth of 3.2%.
Most new jobs over the past year have been in services with most of the
growth in the health, business and miscellaneous services sectors. Employment
during the past year also increased in the finance, insurance, real estate,
government, manufacturing and construction industries. Oil and gas mining
experienced a slight job decline during the past year. The State's per capita
personal income compared to the national average peaked in 1981 at approximately
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102% of the national average but steadily fell to a low of 88% of the national
average in 1988-87 and has since increased to approximately 92% as of 1993.
The State's general revenue fund, which in the fiscal year 1993 accounted
for approximately 63% of State revenue receipts, provides an indication of the
State's financial condition. Due to the state's expansion in Medicaid spending
and other Health and Human Services programs requiring federal matching
revenues, federal receipts became the state's number one source of income in
fiscal 1993, accounting for 29.2% of total revenues. Sales tax, which had been
the main source of revenue for the previous 12 years, dropped to second. Sales
tax accounted for 27% of total revenues in fiscal 1993. For each of the fiscal
years ended 1989, 1990, 1991, 1992 and 1993 the general revenue fund contained a
cash surplus of approximately $297 million, $767 million, $1.005 billion, $609
million and $1.623 billion respectively. These cash surpluses, however, have
approximately $300 million in dedicated oil overcharge funds which can be spent
only for specific energy conservation projects. In the past few years, the State
has had to adopt new revenue measures, including a major overhaul of the State
franchise tax system, a State lottery, increased taxes and fees and changes in
certain fiscal management and investment strategies and has increased its
receipts from the federal medicaid disproportionate share programs in order to
provide sufficient revenue to cover increasing expenditures.
Virginia. The Constitution of Virginia, in Section 9 of Article X provides
for the issuance of debt by or on behalf of the Commonwealth. Sections 9(a), (b)
and (c) provide for the issuance of debt to which the Commonwealth's full faith
and credit is pledged and Section 9(d) provides for the issuance of debt not
secured by the full faith and credit of the Commonwealth, but which may be
supported by and paid from Commonwealth tax collections. The Commonwealth may
also enter into leases and contracts that are classified on its financial
statements as long-term indebtedness. Debt may also be issued by certain
authorities and institutions of the Commonwealth.
Section 9(a) of Article X authorizes general obligation debt to meet
certain types of emergencies, to meet casual deficits in the revenue or in
anticipation of the collection of revenues of the Commonwealth (subject to
limits on the amount and duration of the debt), and to redeem a previous debt
obligation of the Commonwealth. Total indebtedness issued to meet casual
deficits may not exceed thirty percent of an amount equal to 1.15 times the
annual tax revenues "derived from taxes on income and retail sales, as certified
by the Auditor of Public Accounts, for the preceding fiscal year."
Section 9(b) of Article X authorizes general obligation debt for capital
projects. The outstanding amount of Section 9(b) debt is limited in the
aggregate to an amount equal to 1.15 times the average annual tax revenues
"derived from taxes on income and retail sales, as certified by the Auditor of
Public Accounts," for the three immediately preceding fiscal years less the
total amounts of bonds outstanding. The amount of Section 9(b) debt that the
General Assembly may authorize for the current fiscal year is further limited to
25% of the aggregate Section 9(b) debt limit less Section 9(b) debt authorized
in the current and prior three fiscal years. Also, the debt must be authorized
by a vote of a majority of the members of each house of the General Assembly and
approved in a state-wide election.
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Section 9(c) of Article X authorizes general obligation debt for
revenue-producing capital projects. The outstanding amount of Section 9(c) debt
is limited in the aggregate to an amount equal to 1.15 times the average annual
tax revenues "derived from taxes on income and retail sales, as certified by the
Auditor of Public Accounts," for the three immediately preceding fiscal
years. This debt must be approved by a vote of two-thirds of the members of each
house of the General Assembly and approved by the Governor. The Governor must
certify before the enactment of the bond legislation and again before the
issuance of the bonds that the net revenues pledged are expected to be
sufficient to pay principal and interest on the bonds issued to finance the
projects.
The phase "taxes on income and retail sales" is not defined in the
Constitution or by statute. The record made in the process of adopting the
Constitution, however, suggests an intention to include only income taxes
payable by individuals, fiduciaries and corporations and the state sales and use
tax.
Section 9(d) of Article X provides that the restrictions of Section 9 are
not applicable to any obligation increased by the Commonwealth or any of its
institutions, agencies or authorities if the full faith and Credit of the
Commonwealth is not pledged or committed to the payment of such obligation.
Various types of Section 9(d) revenue bonds are issued for which the
Commonwealth's full faith and credit is not pledged. Certain of these bonds,
however, are paid in whole or in part from revenues received as appropriations
by the General Assembly from general tax revenues, while others are paid solely
from the revenues derived from enterprises related to the operation of financed
capital projects.
The Commonwealth is involved in numerous agreements to lease buildings and
equipment. These lease agreements are for various terms, and each lease contains
a nonappropriation clause indicting that continuation of the lease is subject to
funding by the General Assembly. The principal of all capital leases outstanding
was $21.1 million as of June 30, 1993.
The Commonwealth also finances the acquisition of certain personal
property and equipment through installment purchase agreements. The length of
the agreements and the interest rates charged vary. In most cases, the
agreements are collateralized by the personal property and equipment acquired.
Installment purchase agreements contain nonappropriation clauses indicating that
continuation of the installment purchase is subject to funding by the General
Assembly. The principal balance of installment purchase obligations outstanding
was $48.3 million as of June 30, 1993.
Virginia operates on a two-year budget. The 1990-92 biennial budget was
constructed against a backdrop of declining revenue estimates due to an economic
slow down, the enactment of pension tax reform, increased cost of Federal
mandates in Medicaid and welfare programs, and dramatic growth in the prison
population. The economic downturn and a decrease in tax revenues resulted in a
predicted budget shortfall of $2.2 billion dollars for the two years ending June
30, 1992. Due to the projected revenue shortfall for fiscal year 1990, the
Governor and the General Assembly took certain steps to balance the budget
including: (1) reductions in the budgets of most Commonwealth agencies, based on
agency size, to generate $237 million in savings; (2) use of lottery revenues
for capital projects and certain programs previously funded in the operating
budget, to produce $266 million in savings; (3) delayed implementation of tax
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policy changes and pre-funding of the state employee retirement system
cost-of-living in creases, to produce $172 million in savings; and (4) amended
tax policy related to individual income taxes and tax relief for retirees, to
produce $173 million in savings.
The Governor presented his proposed budget for the 1992-94 biennium to the
General Assembly on January 8, 1992. The budget anticipated a 3.8 percent
increase in general fund tax revenues in fiscal year 1993 and a 5.9 percent
growth in fiscal year 1994. The General Assembly amended the proposed budget and
passed the resulting Budget Bill on March 7, 1992. The Governor submitted to the
General Assembly certain technical amendments, which were approved at a
reconvened session on April 15, 1992. The 1992-94 Appropriation Act calls for
total revenues of $28.385 billion and total appropriations of $28.033 billion.
On December 18, 1992, the Governor presented to the General Assembly the
1993 Budget Bill, a bill for all proposed amendments to the 1992-94
Appropriation Act. The 1993 Budget Bill became effective on April 7, 1993. As
amended, the 1992-94 Appropriation Act calls for total revenue of $29.405
billion and total appropriations of $28.094 billion.
On December 20, 1993, Governor Wilder presented the Budget Bill for the
1994-96 Biennium. A new governor, George Allen, was elected on November 7, 1993
and took office on January 15, 1994. On January 21, 1994, Governor Allen
submitted amendments to the budget with a financial impact totaling $89 million.
Major amendments proposed by Governor Allen included provisions for a $30
million reserve fund for the anticipated settlement of the Harper v. Virginia
Department of Taxation court case involving a dispute over taxation of federal
retirees. Also, consistent with his plans to limit tuition increases to the rate
of inflation, Governor Allen provided $23 million over the biennium to the
institutions of higher education.
The General Assembly amended the proposed budget and passed the resulting
Budget Bill on March 12, 1994. The adopted Budget Bill did not include the
Governor's proposed reserve fund to settle the Harper case.
On April 11, 1994, Governor Allen submitted 38 amendments to the adopted
Budget Bill for consideration by the General Assembly. Among other things, the
amendments proposed to set aside a $40 million reserve fund for the Harper case.
At the Veto Session held on April 20, 1994, the General Assembly approved most
of the amendments submitted by the Governor, but did not agree to the reserve
fund for the Harper settlement. However, at a Special Session commended on July
6, 1994, the General Assembly took action to enact a settlement package and set
aside a $60 million reserve fund to settle the Harper case.
The Budget Bill became effective as Chapter 966 of the 1994 Acts of
Assembly (the 1994-96 Appropriations Act) on July 1, 1994. The 1994-1996
Appropriation Act calls for total revenues of approximately $32.577 billion and
total expenditures of approximately $32.367 billion.
At a Special Session concluded September 30, 1994, the General Assembly
passed, and sent to the Governor, legislation that would in effect lengthen the
period certain convicted felons would be incarcerated and would incidentally
increase the capital and operating costs to the Commonwealth of its prison
system. It is anticipated that the General Assembly will consider, at
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its regular session commencing in January 1995, legislation that would
address such additional capital and operating costs. It is not
possible to predict the outcome of this matter.
The Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond
Fund also invest in debt obligations issued by local governments. Local
government in the Commonwealth is comprised of 95 counties, 41 incorporated
cities, and 190 incorporated towns. The Commonwealth is unique in that cities
and counties are independent and their land areas do not overlap. Cities and
counties each levy and collect their own taxes and provide their own services.
Towns, which are units of local government and which continue to be part of
the counties in which they are located, levy and collect taxes for town
purposes but their residents are also subject to county taxes. The largest
expenditure by local governments in the Commonwealth is for public education.
Each county and city in the Commonwealth, with few exceptions, constitutes
a separate school district. Counties, cities and towns typically also provide
such services such as water and sewer services, police
and fire protection, and recreational facilities.
According to figures prepared by the Auditor of Public Accounts of
Virginia, the total outstanding debt of counties in the Commonwealth was
approximately $4.1 billion as of June 30, 1993, most of which was borrowed for
public school construction. The outstanding debt for cities at that date was
computed by the Auditor of Public Accounts to be approximately $3.6 billion. The
outstanding debt for towns, as of June 30, 1993, was calculated by the Auditor
of Public Accounts to be approximately $233 million. Over $1 billion of the
outstanding debt for Virginia's counties, cities and towns is held by various
Commonwealth authorities including the Literary Fund, the Virginia Public School
Authority and the Virginia Resources Authority.
Several lawsuits have been filed against the Commonwealth asserting that
the decision in Davis v. Michigan Department of Treasury, 489 U.S. 803 (1989),
invalidates the Commonwealth's tax treatment of Federal retirement benefits for
years before 1989. On February 12, 1990, the Circuit Court of the City of
Alexandria ruled in favor of the Commonwealth and denied refunds to plaintiffs
in five suits for refunds. On March l, 1991, the Virginia Supreme Court affirmed
the Circuit Court ruling. The U.S. Supreme Court remanded the case to the
Virginia Supreme Court in light of James B. Beam Distilling, Co. v. Georgia, 111
S. Ct. 2439 (1991). In November, 1991, the Virginia Supreme Court affirmed its
earlier ruling denying refunds to the plaintiffs. On June 18, 1993, the U.S.
Supreme court reversed the Virginia Supreme Court's ruling and remanded the case
for proceedings consistent with its opinion. The syllabus for the Supreme
Court's opinion states "Virginia is free to choose the form of relief it will
provide, so long as that relief is consistent with federal due process
principles. A State retains flexibility in responding to the determination that
it has imposed an impermissibly discriminatory tax. The availability of a
predeprivation hearing constitutes a procedural safeguard sufficient to satisfy
due process, but if no such relief exists, the State must provide meaningful
backward-looking relief either by awarding full refunds or by issuing some other
order that creates in hindsight a nondiscriminatory scheme."
In a Special Session, the Virginia General Assembly on July 9, 1994,
passed emergency legislation to provide payments to federal retirees in
settlement of the retirees' claims as a result of Davis. The settlement payments
are to be made over a five-year period, commencing on March 31, 1995. The total
amount of the proposed settlement is $340 million plus earnings on the
investment of appropriations (payable to participating retirees in installments
of $60 million
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on March 31, 1995, and $70 million on each succeeding March 31
through March 31, 1999, subject to appropriation by the General
Assembly). The settlement amount will be reduced by a percentage of the
dollar amount of claims of taxpayers opting out of the settlement or
waiving payments.
Retirees who choose to accept the legislative settlement must respond
to notice of the proposed settlement by November 1, 1994 and must sign
and return to the Tax commission by February 1, 1995 the settlement
agreement releasing the Commonwealth from any further liability for
claims arising out of taxes paid on federal retirement income during
the 1985-1988 taxable years and dismissing any litigation as to such
claims to which the taxpayer is a party.
In addition, the legislation provides that in the event that the total
principal amount of the claims of the taxpayers opting out of the settlement
exceeds $20 million, the entire settlement shall be null and void unless
reauthorized by the General Assembly on or before March 1, 1995.
If the legislative settlement is void and not reauthorized and the courts
ultimately rule that the Commonwealth must make full refunds of taxes imposed
prior to Davis v. Michigan, the Department of Taxation has reviewed the
potential cost of making such full refunds to federal government pensioners of
all Virginia income taxes paid on federal government pensions for taxable years
1985, 1986, 1987, and 1988. The estimated maximum potential financial impact on
the Commonwealth based on this review of claims for refunds by federal
pensioners (including interest payable calculated as of December 31, 1993) is
approximately $707.5 million.
NationsBank believes that the information summarized above describes some
of the more significant matters relating to the Virginia Intermediate Municipal
Bond Fund and Virginia Municipal Bond Fund. The sources of the information are
the official statements of issuers located in the Commonwealth, other publicly
available documents, and oral statements from various state agencies.
NationsBank has not independently verified any of the information contained in
the official statements, other publicly available documents, or oral statements
from various state agencies.
Insured Municipal Securities
Certain of the Municipal Securities held by the Funds may be insured at
the time of issuance as to the timely payment of principal and interest. The
insurance policies will usually be obtained by the issuer of the Municipal
Securities at the time of its original issuance. In the event that the issuer
defaults with respect to interest or principal payments, the insurer will be
notified and will be required to make payment to the bondholders. There is,
however, no guarantee that the insurer will meet its obligations. In addition,
such insurance will not protect against market fluctuations caused by changes in
interest rates and other factors.
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.
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REITs may be affected by changes in the value of the underlying property
owned or financed by the REIT, while Mortgage REITs also may be
affected by the quality of credit extended. Both Equity and Mortgage
REITs are dependent upon management skill and may not be diversified.
REITs also may be subject to heavy cash flow dependency, defaults by
borrowers, self-liquidation, and the possibility of failing to
qualify for tax-free pass-through of income under the Internal
Revenue Code of 1986, as amended.
Guaranteed Investment Contracts
Guaranteed Investment Contracts ("GICs") are issued by highly rated U.S.
insurance companies. Pursuant to such contracts, a Fund makes cash contributions
to a deposit fund of the insurance company's general or separate accounts. The
insurance company then credits to a Fund on a monthly basis 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 the Adviser.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance companies, and an active secondary market in GICs does not
currently exist. Also, a Fund may not receive the principal amount of a GIC from
the insurance company on seven days' notice or less.
Therefore, GICs are considered to be illiquid investments.
A Money Market Fund will acquire GICs so that they, together with other
instruments in such Fund's portfolio which are not readily marketable, will not
exceed applicable limitations on such Fund's investments in illiquid securities.
A Money Market Fund will restrict its investments in GICs to those having a term
of 397 days or less. In determining average weighted portfolio maturity equal to
the period of time remaining until the next readjustment of the guaranteed
interest rate.
Variable and Floating Rate Instruments
The Funds may purchase variable rate and floating rate obligations as
described in the Prospectuses. If such instrument is not rated, the Adviser will
consider the earning power, cash flows, and other liquidity ratios of the
issuers and guarantors of such obligations and, if the obligation is subject to
a demand feature, will monitor their financial status to meet payment on demand.
In determining average weighted portfolio maturity, a variable rate demand
instrument issued or guaranteed by the U.S. Government or an agency or
instrumentality thereof will be deemed to have a maturity equal to the period
remaining until the obligations next interest rate adjustment. Other variable
rate obligations will be deemed to have a maturity equal to the longer of the
period remaining to the next interest rate adjustment or the time a Fund can
recover payment of principal as specified in the instrument.
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Variable rate demand notes held by a Money Market Fund may have maturities
of more than 397 days, provided (i) the Fund is entitled to payment principal on
not more than 30 days' notice, or at specified intervals not exceeding 397 days
(upon not more than 30 days' notice), and (ii) the rate of interest on such note
is adjusted automatically at periodic intervals which may extend up to 397 days.
The variable and floating rate demand instruments that the Funds may
purchase include participations in Municipal Securities purchased from and owned
by financial institutions, primarily banks. Participation interests provide a
Fund with a specified undivided interest (up to 100%) in the underlying
obligation and the right to demand payment of the unpaid principal balance plus
accrued interest on the participation interest from the institution upon a
specified number of days' notice, not to exceed 30 days. Each participation
interest is backed by an irrevocable letter of credit or guarantee of a bank
that the Adviser has determined meets the prescribed quality standards for the
Funds. The bank typically retains fees out of the interest paid on the
obligation for servicing the obligation, providing the letter of credit, and
issuing the repurchase commitment.
Stand-By Commitments
The Funds may acquire "stand-by commitments" with respect to Municipal
Securities held in their portfolios. Under a "stand-by commitment," a dealer
agrees to purchase from a Fund, at a Fund's option, specified Municipal
Securities at a specified price. Stand-by commitments are exercisable by a Fund
at any time before the maturity of the underlying Municipal Securities, and may
be sold, transferred, or assigned by a Fund only with the underlying
instruments.
The amount payable to a Tax-Free Bond Fund upon its exercise of a stand-by
commitment will normally be (i) the Fund's acquisition cost of the Municipal
Securities (excluding any accrued interest which a Tax-Free Bond Fund paid on
their acquisition), less any amortized market premium or plus any amortized
market or original issue discount during the period a Tax-Free Bond Fund owned
the securities, plus (ii) all interest accrued on the securities since the last
interest payment date during that period. Under normal market conditions, in
determining net asset value a Tax-Free Bond Fund values the underlying Municipal
Securities on an amortized cost basis. Accordingly, the amount payable by a
dealer upon exercise of a stand-by commitment will normally be substantially the
same as the portfolio value of the underlying Municipal Securities.
A Fund's right to exercise stand-by commitments will be unconditional and
unqualified. A stand-by commitment will not be transferable by a Fund, although
the Fund could sell the underlying Municipal Securities to a third party at any
time. Until a Fund exercises its stand-by commitment, it owns the securities in
its portfolio which are subject to the stand-by commitment.
The Funds expect that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, a Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for the security being acquired
which will be subject to the commitment (thus reducing the yield to maturity
otherwise available for the same security). When a Fund pays any consideration
directly or indirectly for a stand-by commitment, its cost will be reflected as
unrealized depreciation for
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the period during which the commitment is held by that Fund. The
Tax-Free Bond Funds will not acquire a stand-by commitment unless
immediately after the acquisition not more than 5% of the Funds'
total assets will be subject to a demand feature, or in stand-by
commitments, with the same institution.
Each Fund intends to enter into stand-by commitments only with banks
and broker/dealers which, in the Adviser's opinion, present minimal
credit risks. In evaluating the credit worthiness of the issuer of a
stand-by commitment, the Adviser will review periodically the
issuer's assets, liabilities, contingent claims, and other relevant
financial information.
The Funds would acquire stand-by commitments solely to facilitate
portfolio liquidity and do not intend to exercise their rights thereunder for
trading purposes. Stand-by commitments acquired by a Fund will be valued at zero
in determining net asset value. A Fund's reliance upon the credit of these
dealers, banks, and broker/dealers will be secured by the value of the
underlying Municipal Securities that are subject to the commitment. Thus, the
risk of loss to the Fund in connection with a "stand-by commitment" will not be
qualitatively different from the risk of loss faced by a person that is holding
securities pending settlement after having agreed to sell the securities in the
ordinary course of business.
Variable and Floating Rate Government Securities
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 a Fund's average weighted
maturity. The remaining maturities of such obligations will be determined as
follows: (i) a government security with a variable or floating rate of interest
will be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (ii) a government security with a demand or
put feature that entitles the holder to receive the principal amount of the
underlying security at the time of or sometime after the holder gives notice of
demand or exercise of the put will be deemed to have a maturity equal to the
period remaining until the principal amount can be recovered through demand or
exercise of the put; and (iii) a government security with both a variable or
floating rate of interest as described in clause (i) and a demand or put feature
as described in clause (ii) will be deemed to have a maturity equal to the
shorter of the period remaining until the next readjustment of the interest rate
or the period remaining until the principal amount can be recovered through
demand.
Lower Rated Debt Securities
The yields on lower rated debt and comparable unrated fixed-income
securities generally are higher than the yields available on higher-rated
securities. However, investments in lower rated debt and comparable unrated
securities generally involve greater volatility of price and risk of loss of
income and principal, including the probability of default by or bankruptcy of
the issuers of such securities. Lower rated debt and comparable unrated
securities (a) will likely have some quality and protective characteristics
that, in the judgment of the rating organization, are outweighed by large
uncertainties or major risk exposures to adverse conditions and (b) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. Accordingly,
it is possible that these types of
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factors could, in certain instances, reduce
the value of securities held in a Fund's portfolio, with a commensurate effect
on the value of the Fund's shares. Therefore, an investment in the Fund should
not be considered as a complete investment program and may not be appropriate
for all investors.
While the market values of lower rated debt and comparable unrated
securities tend to react less to fluctuations in interest rate levels than the
market values of higher-rated securities, the market values of certain lower
rated debt and comparable unrated securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
higher-rated securities. In addition, lower rated debt securities and comparable
unrated securities generally present a higher degree of credit risk. Issuers of
lower rated debt and comparable unrated securities often are highly leveraged
and may not have more traditional methods of financing available to them so that
their ability to service their debt obligations during an economic downturn or
during sustained periods of rising interest rates may be impaired. The risk of
loss due to default by such issuers is significantly greater because lower rated
debt and comparable unrated securities generally are unsecured and frequently
are subordinated to the prior payment of senior indebtedness. A Fund may incur
additional expenses to the extent that it is required to seek recovery upon a
default in the payment of principal or interest on its portfolio holdings. The
existence of limited markets for lower rated debt and comparable unrated
securities may diminish a Fund's ability to (a) obtain accurate market
quotations for purposes of valuing such securities and calculating its net asset
value and (b) sell the securities at fair value either to meet redemption
requests or to respond to changes in the economy or in financial markets.
Fixed-income securities, including lower rated debt securities and
comparable unrated securities, frequently have call or buy-back features that
permit their issuers to call or repurchase the securities from their holders,
such as a Fund. If an issuer exercises these rights during periods of declining
interest rates, a Fund may have to replace the security with a lower yielding
security, thus resulting in a decreased return to a Fund.
The market for certain lower rated debt and comparable unrated securities
is relatively new and has not weathered a major economic recession. The effect
that such a recession might have on such securities is not known. Any such
recession, however, could disrupt severely the market for such securities and
adversely affect the value of such securities. Any such economic downturn also
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon.
Dollar Roll Transactions
Certain Funds may enter into "dollar roll" transactions, which consist of
the sale by a Fund to a bank or broker/dealer (the "counterparty") of GNMA
certificates or other mortgage-backed securities together with a commitment to
purchase from the counterparty similar, but not identical, securities at a
future date, at the same price. The counterparty receives all principal and
interest payments, including prepayments, made on the security while it is the
holder. A Fund receives a fee from the counterparty as consideration for
entering into the commitment to purchase. Dollar rolls may be renewed over a
period of several months with a different repurchase price and a cash settlement
made at each renewal without physical delivery of
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securities. Moreover, the transaction may be preceded by a firm
commitment agreement pursuant to which the Fund agrees to buy a security
on a future date.
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 entry into dollar rolls involves potential risks of loss that are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Fund's right to purchase
from the counterparty might be restricted. Additionally, the value of such
securities may change adversely before the Fund is able to purchase them.
Similarly, the Fund may be required to purchase securities in connection with a
dollar roll at a higher price than may otherwise be available on the open
market. Since, as noted above, the counterparty is required to deliver a
similar, but not identical security to the Fund, the security that the Fund is
required to buy under the dollar roll may be worth less than an identical
security. Finally, there can be no assurance that the Fund's use of the cash
that it receives from a dollar roll will provide a return that exceeds borrowing
costs.
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. Forward foreign currency exchange
contracts establish an exchange rate at a future date. These contracts are
transferable in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward foreign currency
exchange contract generally has no deposit requirement, and is traded at a net
price without commission. A Fund maintains with its custodian a segregated
account of high grade liquid assets in an amount at least equal to its
obligations under each forward foreign currency exchange contract. Neither spot
transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of a Fund's portfolio securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.
Certain of the Funds also may purchase and write options on such futures
contracts. These investments will be used only to hedge against anticipated
future changes in interest rates which otherwise might either adversely affect
the value of the portfolio securities of a Fund or adversely affect the prices
of securities which a Fund intends to purchase at a later date. Should interest
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rates move in an unexpected manner, a Fund may not achieve the anticipated
benefits of futures contracts or options on futures contracts or may realize a
loss.
Foreign currency hedging transactions are an attempt to protect a Fund
against changes in foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. The precise matching of the forward
contract amount and the value of the securities involved will not generally be
possible because the future value of these securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and date it matures.
Interest Rate Transactions
Among the strategic transactions into which the Non-Money Market Funds may
enter are interest rate swaps and the purchase or sale of related caps and
floors. Each Fund expects to enter into these transactions primarily to preserve
a return or spread on a particular investment or portion of its portfolio, to
protect against currency fluctuations, as a duration management technique or to
protect against any increase in the price of securities the Funds anticipate
purchasing at a later date. Each Fund intends to use these transactions as
hedges and not as speculative investments and will not sell interest rate caps
or floors where it does not own securities or other instruments providing the
income stream the Fund may be obligated to pay. Interest rate swaps involve the
exchange by the Fund with another party of their respective commitments to pay
or receive interest, e.g., an exchange of floating rate payments for fixed rate
payments with respect to a notional amount of principal. A currency swap is an
agreement to exchange cash flows on a notional amount of two or more currencies
based on the relative value differential among them and an index swap is an
agreement to swap cash flows on a notional amount based on changes in the values
of the reference indices. The purchase of a cap entitles the purchaser to
receive payments on a notional principal amount from the party selling such
floor to the extent that a specified index falls below a predetermined interest
rate or amount.
A Fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps, and
floors are entered into for good faith hedging purposes, the Adviser and the
Funds believe such obligations do not constitute senior securities under the
1940 Act and, accordingly, will not treat them as being subject to its borrowing
restrictions. The Funds will not enter into any swap, cap, or floor transaction
unless, at the time of entering into such transaction, the unsecured long-term
debt of the counterparty, combined with any credit enhancements, is rated at
least "A" by S&P or Moody's or has an equivalent rating from an NRSRO or is
determined to be of equivalent credit quality by the Adviser. If there is a
default by the counterparty, the Fund may have contractual remedies pursuant to
the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors
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are more recent innovations for which standardized documentation
has not yet been fully developed and, accordingly, they are less liquid than
swaps.
With respect to swaps, a Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade securities
having a value equal to the accrued excess. Caps and floors require segregation
of assets with a value equal to a Fund's net obligation, if any.
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Illiquid Securities
Certain of the Non-Money Market Funds may invest up to 15% of their net
assets, and certain of the Money Market Funds may invest up to 10% of their net
assets, in securities that are considered illiquid because of the absence of a
readily available market or due to legal or contractual restrictions. Certain
restricted securities that are not registered for sale to the general public but
that can be resold to institutional investors may not be considered illiquid,
provided that a dealer or institutional trading market exists. The institutional
trading market is relatively new, and liquidity of a Fund's investments could be
impaired if trading does not develop or declines.
Other Securities
For additional information regarding options and futures, see "Schedule
B." For additional information regarding mortgage-backed securities, see
"Schedule C."
Additional Investment Limitations
In addition to the investment limitations disclosed in the related
Prospectuses, the Funds are subject to the investment limitations enumerated in
this subsection which may be changed with respect to one of these Funds only by
a vote of the holders of a majority of such Fund's outstanding shares (as
defined in this SAI).
None of these Funds may:
1. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money from banks for temporary
purposes in amounts up to one-third of the value of such Fund's
total assets at the time of borrowing, provided that borrowings in
excess of 5% of the value of such Fund's total assets will be
repaid prior to the purchase of portfolio securities by such Fund,
(b) a Fund may enter into commitments to purchase securities in
accordance with the Fund's investment program, including delayed
delivery and when-issued securities, which commitments may be
considered the issuance of senior securities, and (c) a Fund may
issue multiple classes of shares in accordance with SEC
regulations or exemptions under the 1940 Act. The purchase or sale
of futures contracts and related options shall not be considered
to involve the borrowing of money or issuance of senior
securities.
2. Purchase any securities on margin (except for such short-term
credits as are necessary for the clearance of purchases and sales
of portfolio securities) or sell any securities
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short (except against the box). (For purposes of this
restriction, the deposit or payment by the Fund of
initial or maintenance margin in connection with
futures contracts and related options and options on
securities is not considered to be the purchase of a
security on margin.)
3. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition
of such securities in accordance with the Fund's investment
program may be deemed an underwriting. This restriction shall
not limit a Fund's ability to invest in securities issued by other
registered investment companies.
4. Invest in real estate or real estate limited partnership interests
(the Fund may, however, purchase and sell securities secured by
real estate or interests therein or issued by issuers which invest
in real estate or interests therein). This restriction does not
apply to real estate limited partnerships listed on a national
stock exchange (e.g. the New York Stock Exchange).
5. Purchase or sell commodity contracts except that each Fund may, to
the extent appropriate under its investment policies, purchase
publicly traded securities of companies engaging in whole or in
part in such activities, may enter into futures contracts and
related options, may engage in transactions on a when issued or
forward commitment basis, and may enter into forward currency
contracts in accordance with its investment policies.
In addition, certain non-fundamental investment restrictions are
applicable to various investment portfolios, including the following:
1. The Trust will not purchase or retain the securities of any issuer
if the officers, directors or Trustees of the Trust, its advisers,
or managers owning beneficially more than one half of one percent
of the securities of each issuer together own beneficially more
than five percent of such securities.
2. No Fund of the Trust will purchase securities of unseasoned
issuers, including their predecessors, that have been in operation
for less than three years, if by reason thereof the value of such
Fund's investment in such classes of securities would exceed 5% of
such Fund's total assets. For purposes of the above-described
investment limitation, issuers include predecessors, sponsors,
controlling persons, general partners, guarantors and originators
of underlying assets which have less than three years of
continuous operations of relevant business experience.
3. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its
aggregate investment in such classes of securities will exceed 5%
of its total assets except that: (a) this restriction shall not
apply to standby commitments, (b) this restriction shall not apply
to a Fund's transactions in futures contracts and related options,
and (c) a Fund may obtain short-term credit as may be necessary
for the clearance of purchases and sales of portfolio securities.
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4. No Fund will invest in warrants, valued at the lower of cost or
market, in excess of 5% of the value of such Fund's assets, and no
more than 2% of the value of the Fund's net assets may be invested
in warrants that are not listed on the New York or American Stock
Exchange (for purposes of this undertaking, warrants acquired by a
Fund in units or attached to securities will be deemed to have no
value).
5. The Government Money Market Fund may not purchase securities of
any one issuer (other than obligations issued or
guaranteed by the U.S. government, its agencies,
authorities or instrumentalities and repurchase
agreements fully collateralized by such obligations) if,
immediately after such purchase, more than 5% of the
value of the Fund's assets would be invested in the
securities of such issuer. Notwithstanding the
foregoing, up to 25% of the Fund's total assets may be
invested for a period of three business days in the
securities of a single issuer without regard to such 5%
limitation.
6. No Fund of the Trust will purchase securities of companies for the
purpose of exercising control.
7. No Money Market Fund of the Trust will invest more than 10% of the
value of its net assets in illiquid securities, including
repurchase agreements, with remaining maturities in excess of
seven days, time deposits with maturities in excess of seven days,
restricted securities, and other securities which are not readily
marketable. For purposes of this restriction, illiquid securities
shall not include securities which may be resold under Rule 144A
under the Securities Act of 1933 that the Board of Trustees, or
its delegate, determines to be liquid, based upon the trading
markets for the specific security.
8. No Non-Money Market Fund of the Trust will invest more than 15% of
the value of its net assets in illiquid securities, including
repurchase agreements with remaining maturities in excess of seven
days, time deposits with maturities in excess of seven days,
restricted securities, and other securities which are not readily
marketable. For purposes of this restriction, illiquid securities
shall not include securities which may be resold under Rule 144A
under the Securities Act of 1933 that the Board of Trustees, or
its delegate, determines to be liquid, based upon the trading
markets for the specific security.
9. No Fund of the Trust will mortgage, pledge or hypothecate any
assets except to secure permitted borrowings and then only in an
amount up to one-third of the value of the Fund's total assets at
the time of borrowing. For purposes of this limitation, collateral
arrangements with respect to the writing of options, futures
contracts, options on futures contracts, and collateral
arrangements with respect to initial and variation margin are not
considered to be a mortgage, pledge or hypothecation of assets.
10. No Fund of the Trust will invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets and except to the extent
otherwise permitted by the 1940 Act.
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11. No Fund of the Trust will purchase oil, gas or mineral leases or
other interests (a Fund may, however, purchase and sell the
securities of companies engaged in exploration, development,
production, refining, transporting and marketing of oil, gas or
minerals).
In order to permit the sale of shares of the Trust in certain states, the
Trust may make commitments more restrictive than the investment policies and
limitations described above and in the Prospectuses. Should the Trust determine
that any such commitment is no longer in its best interest, it will revoke the
commitment by terminating sales of its shares to investors residing in the state
involved.
NET ASSET VALUE
Money Market Funds
The Money Market Funds use the amortized cost method of valuation to value
shares in such Funds. Pursuant to this method, a security is valued at its cost
initially and thereafter a constant amortization to maturity of any discount or
premium is assumed, regardless of the impact of fluctuating interest rates on
the market value of the security. Where it is not appropriate to value a
security by the amortized cost method, the security will be valued either by
market quotations or by fair value as determined by the Board of Trustees. This
method may result in periods during which value, as determined by amortized
cost, is higher or lower than the price the Trust would receive if it sold the
security.
Each of the Money Market Funds invest only in high quality instruments and
maintain a dollar-weighted average portfolio maturity appropriate to its
objective of maintaining a stable net asset value per share, provided that a
Fund will neither purchase any security deemed to have a remaining maturity of
more than 397 days within the meaning of the 1940 Act nor maintain a
dollar-weighted average portfolio maturity which exceeds 90 days. The Trust's
Board of Trustees has established procedures reasonably designed, taking into
account current market conditions and each Money Market Fund's investment
objective, to stabilize the net asset value per share of each Money Market Fund
for purposes of sales and redemptions at $1.00. These procedures include review
by the Board of Trustees, at such intervals as it deems appropriate, to
determine the extent, if any, to which the net asset value per share of each
Money Market Fund calculated by using available market quotations deviates from
$1.00 per share. In the event such deviation exceeds one-half of one percent,
the Board of Trustees will promptly consider what action, if any, should be
initiated. If the Board of Trustees believes that the extent of any deviation
from a Fund's $1.00 amortized cost price per share may result in material
dilution or other unfair results to new or existing investors, it has agreed to
take such steps as it considers appropriate to eliminate or reduce, to the
extent reasonably practicable, any such dilution or unfair results. These steps
may include selling portfolio instruments prior to maturity; shortening the
average portfolio maturity; withholding or reducing dividends; redeeming shares
in kind; reducing the number of a Fund's outstanding shares without monetary
consideration; or utilizing a net asset value per share determined by using
available market quotations.
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Non-Money Market Funds
With respect to the Equity Funds and Balanced Fund, a security listed or
traded on an exchange is valued at its last sales price on the exchange where
the security is principally traded or, lacking any sales on a particular day,
the security is valued at the mean between the closing bid and asked prices on
that day. Each security traded in the over-the-counter market (but not including
securities reported on the NASDAQ National Market System) is valued at the mean
between the last bid and asked prices based upon quotes furnished by market
makers for such securities. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date. With respect to
the Bond Funds, securities will be valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate
maturity and seasoning differential. Securities for which prices
are not provided by the pricing service are valued at the mean
between the last bid and asked prices based upon quotes furnished by
market makers for such securities.
With respect to each Non-Money Market Fund, securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations having
60 days or less to maturity are valued at amortized cost, which approximates
market value.
Generally, trading in foreign securities, as well as U.S. Government
securities, money market instruments and repurchase agreements, is substantially
completed each day at various times prior to the close of the New York Stock
Exchange (the "Exchange"). The values of such securities used in computing the
net asset value of the shares of the Funds are determined as of such times.
Foreign currency exchange rates are also generally determined prior to the close
of the Exchange. Occasionally, events affecting the value of such securities and
such exchange rates may occur between the times at which they are determined and
the close of the Exchange, which will not be reflected in the computation of net
asset value. If during such periods events occur which materially affect the
value of such securities, the securities will be valued at their fair market
value as determined in good faith by the Trustees.
-----------------------------
The Trust may redeem shares involuntarily to reimburse the Funds for any
loss sustained by reason of the failure of a shareholder to make full payment
for Investor Shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to Investor Shares as provided in the related Prospectuses from time
to time. The Trust also may make payment for redemptions in readily marketable
securities or other property if it is appropriate to do so in light of Nations
Fund Trust's responsibilities under the 1940 Act.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment for Investor Shares or Trust Shares during any
period when (a) trading on the Exchange is restricted by applicable rules and
regulations of the SEC; (b) the Exchange is closed for other
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than customary weekend and holiday closings; (c) the SEC has by
order permitted such suspension; or (d) an emergency exists as
determined by the SEC. (The Funds may also suspend or postpone the
recordation of the transfer of their shares upon the occurrence of any
of the foregoing conditions.)
Exchange Privilege
By use of the exchange privilege, the holder of Investor Shares and/or
Trust B Shares authorizes the transfer agent or the shareholder's financial
institution to rely on telephonic instructions from any person representing
himself to be the investor and reasonably believed to be genuine. The transfer
agent's or a financial institution's records of such instructions are binding.
Exchanges are taxable transactions for Federal income tax purposes; therefore, a
shareholder will realize a capital gain or loss depending on whether the
Investor Shares and/or Trust B Shares being exchanged have a value which is
more or less than their adjusted cost basis.
The Funds and each of the other funds of Nations Fund may limit the number
of times the exchange privilege may be exercised by a shareholder within a
specified period of time. Also, the exchange privilege may be terminated or
revised at any time by the Trust upon such notice as may be required by
applicable regulatory agencies (presently sixty days for termination or material
revision), provided that the exchange privilege may be terminated or materially
revised without notice under certain unusual circumstances.
The current prospectuses for the Investor Shares and Trust B Shares of
each Fund describes the exchange privileges available to investors in such
Investor Shares and Trust B Shares, respectively.
Trust Shares of the Funds are offered and sold on a continuous basis by
the Distributor acting as agent. As stated in the Prospectuses for the Trust
Shares, Trust Shares are sold to bank trust departments and other financial
institutions (primarily to NationsBank and its affiliated and correspondent
banks) (collectively, "Institutions") acting on behalf of customers maintaining
a qualified trust account or relationship at the Institution.
DESCRIPTION OF SHARES
Nations Fund Trust is a Massachusetts business trust. The Trust's
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of units of beneficial interest ("shares") and to classify or reclassify
any unissued shares of the Trust into one or more additional classes or series
by setting or changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption. Pursuant to
such authority, the Board of Trustees has authorized the issuance of thirty-two
series of shares (each a "Fund"). Each Money Market Fund is divided into six
classes of shares: Investor A Shares, Investor B Shares, Investor C Shares,
Investor D Shares, Trust A Shares and Trust B Shares. Each Non-Money Market Fund
generally is divided into five classes of shares: Investor A Shares, Investor C
(formerly Investor B) Shares, Investor N (formerly Investor C) Shares, Trust A
Shares and Trust B Shares. However, the Managed Index Fund and the Equity Index
Fund only issue Trust A Shares, Trust B Shares and Investor A Shares.
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Shares have no preemptive rights and only such conversion or exchange
rights as the Board of Trustees may grant in its discretion. When issued for
payment as described in the Prospectuses, the Trust's shares will be fully paid
and non-assessable. In the event of a liquidation or dissolution of the Trust or
an individual Fund, shareholders of a Fund are entitled to receive the assets
available for distribution belonging to the particular Fund, and a proportionate
distribution, based upon the relative asset values of the Trust's respective
investment portfolios, of any general assets of the Trust not belonging to any
particular investment portfolio which are available for distribution.
Shareholders of a Fund are entitled to participate, in proportion to the net
asset value of the class or series of shares held, in the net distributable
assets of a particular Fund involved in liquidation, based on the number of
shares of the Fund that are held by such shareholders.
As stated in the Prospectuses, shareholders of each of the Funds will vote
in the aggregate and not by class or series, except as otherwise expressly
required by law or when the Board of Trustees determines that the matter to be
voted upon affects only the interests of the holders of a particular class or
series of shares. In addition, shareholders of each investment portfolio of the
Trust will vote in the aggregate and not by portfolio, except as otherwise
expressly required by law or when the Board of Trustees determines that the
matter to be voted upon affects only the interests of shareholders of a
particular portfolio. Rule 18f-2 (the "Rule") under the 1940 Act provides that
any matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Trust shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each investment portfolio affected by the matter. An
investment portfolio is affected by a matter unless it is clear that the
interests of each investment portfolio in the matter are substantially identical
or that the matter does not affect any interest of the investment portfolio.
Under the Rule, the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to an investment portfolio only if approved by a majority of the outstanding
shares of such investment portfolio. However, the Rule also provides that the
ratification of the appointment of independent public accountants, the approval
of principal underwriting contracts, and the election of Trustees may be
effectively acted upon by shareholders of the Trust voting together in the
aggregate without regard to a particular investment portfolio. Under the Trust's
Declaration of Trust, when the Board of Trustees determines that a matter to be
voted upon affects only the interests of the shareholders of one or more but not
all the Funds, only the shareholders of the Fund or Funds so affected will be
entitled to vote on the matter.
The Trust's Declaration of Trust authorizes the Board of Trustees, without
shareholder approval (unless otherwise required by applicable law), to (a) sell
and convey the assets of a Fund to another management investment company for
consideration which may include securities issued by the purchaser and, in
connection therewith, to cause all outstanding shares of the Fund involved to be
redeemed at a price which is equal to their net asset value and which may be
paid in cash or by distribution of the securities or other consideration
received from the sale and conveyance; (b) sell and convert a Fund's assets into
money and, in connection therewith, to cause all outstanding shares of the Fund
involved to be redeemed at their net asset value; or (c) combine the assets
belonging to a Fund with the assets belonging to another investment portfolio of
the Trust, if the Board of Trustees reasonably determines that such
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combination will not have a material adverse effect on shareholders of
any investment portfolio participating in such combination, and, in
connection therewith, to cause all outstanding shares of any such Fund
to be redeemed at their net asset value or converted into shares of
another class or series of the Trust's shares at net asset value. In
the event that shares are redeemed in cash at their net asset value, a
shareholder may receive in payment for such shares an amount that is
more or less than his original investment due to changes in the market
prices of the Fund's portfolio securities. The exercise of such
authority by the Board of Trustees will be subject to the provisions of
the 1940 Act.
Dividends and Distributions
Money Market Funds. Net income for dividend purposes consists of (i)
interest accrued and original issue discount earned on the Fund's
assets, (ii) plus the amortization of market discount (including, in
the case of the Tax Exempt Fund, market discount on tax-exempt
obligations purchased after April 30, 1993) and minus the amortization
of market premium on such assets, (iii) less accrued expenses directly
attributable to the Fund and the general expenses of Nations Fund
prorated to a Fund on the basis of its relative net assets. Shares
of the Money Market Funds 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).
Non-Money Market Funds. With respect to the Non-Money Market Funds, net
investment income for dividend purposes consist of items (i), (ii) and (iii)
discussed above with respect to the Money Market Funds and dividend or
distribution income on such assets.
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. 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.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting the Funds and their shareholders that are not described in the
Prospectuses. No attempt is made to present a detailed explanation of the tax
treatment of the Trust or its shareholders or possible legislative changes, and
the discussion here and in the Prospectuses is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisors with
specific reference to their own tax situation.
The Trust has received a private letter ruling from the Internal Revenue
Service to the effect that: (i) the differing fees imposed on Trust A, Trust B,
Investor A, Investor B, Investor C (formerly Investor B) and Investor N
(formerly Investor C Shares) Shares with respect to servicing, distribution and
administrative support services, and transfer agency arrangements; the
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differing sales charges on purchases and redemptions of such shares;
and the conversion feature of Investor C Shares of the Non-Money Market
Funds does not result in the Trust's dividends or distributions
constituting "preferential dividends" under the Internal Revenue Code
of 1986, as amended (the "Code").
Federal Taxes - In General
Each Fund of the Trust will be treated as a separate corporate entity
under the Code and intends to qualify as a regulated investment
company. As a regulated investment company, each Fund is not subject
to federal income tax on the portion of its net investment income (i.e.,
taxable interest, dividends and other taxable ordinary income, net
of expenses) and capital gain net income (i.e., the excess of capital
gains over capital losses) that it distributes to shareholders,
provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the
excess of its short-term capital gains over net long-term capital
losses) and at least 90% of its tax-exempt income (net of expenses
allocable thereto) for the taxable year (the "Distribution
Requirement"), and satisfies certain other requirements of the Code
that are described below. Distributions by a Fund made during the
taxable year or, under specified circumstances, within twelve months
after the close of the taxable year, will be considered distributions
of income and gains of the taxable year and can therefore satisfy
the Distribution Requirement.
In addition to satisfying the Distribution Requirement; a regulated
investment company must (i) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (ii) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not be
characterized as Short-Short Gain if they are directly related to the regulated
investment company's investments in stock or securities (or options or futures
thereon). Because of the Short-Short Gain Test, a Fund may have to limit the
sale of appreciated securities that it has held for less than three months.
However, the Short-Short Gain Test will not prevent a Fund from disposing of
investments at a loss, since the recognition of a loss before the expiration of
the three-month holding period is disregarded. Interest (including original
issue discount) received by a Fund at maturity or upon the disposition of a
security held for less than three months will not be treated as gross income
derived from the sale or other disposition of such security within the meaning
of the Short-Short Gain Test. However, income that is attributable to realized
market appreciation will be treated as gross income from the sale or other
disposition of securities for this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation (including tax-
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exempt obligations purchased after April 30, 1993) purchased by a Fund
at a market discount (generally, at a price less than its principal
amount) will be treated as ordinary income to the extent of the portion
of the market discount which accrued during the period of time the Fund
held the debt obligation. In addition, under the rules of Code
Section 988, gain or loss recognized on the disposition of a debt
obligation denominated in a foreign currency or an option with respect
thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition
of a foreign currency forward contract, futures contract, option or
similar financial instrument, or of foreign currency itself, will
generally be treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (i) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (ii) the
asset is otherwise held by the Fund as part of a "straddle" (which term
generally excludes a situation where the asset is stock and the Fund grants a
qualified covered call option (which, among other
things, must not be deep-in-the-money) with respect thereto) or (iii) the asset
is stock and the Fund grants an in-the-money qualified covered call option with
respect thereto. However, for purposes of the Short-Short Gain Test, the holding
period of the asset disposed of may be reduced only in the case of clause (i)
above. In addition, a Fund may be required to defer the recognition of a loss on
the disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by a Fund will commence on the date it is written and end on the date it lapses
or the date a closing transaction is entered into. Accordingly, a Fund may be
limited in its ability to write options which expire within three months and to
enter into closing transactions at a gain within three months of the writing of
options.
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if they had been incurred in the succeeding year.
In addition to satisfying the requirement described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of each Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
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companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses.
If for any taxable year a Fund does not qualify for Federal tax treatment
as a regulated investment company, all of its taxable income (including its net
capital gain) will be subject to Federal income tax at regular corporate rates
without any deduction for distributions to its shareholders. In such event,
dividend distributions (including amounts derived from interest on Municipal
Securities in the case of the Municipal Income Fund, Short-Term Municipal Income
Fund, Intermediate Municipal Bond Fund, the State Intermediate Municipal Bond
Funds and the State Municipal Bond Funds) would be taxable as ordinary income to
the Fund's shareholders to the extent of the Fund's current and accumulated
earnings and profits.
Depending upon the extent of a Fund's activities in states and localities
in which its offices are maintained, in which its agents or independent
contractors are located, or in which it is otherwise deemed to be conducting
business, such Fund may be subject to the tax laws of such states or localities.
In addition, in those states and localities which have income tax laws, the
treatment of a Fund and its shareholders under such laws may differ from their
treatment under Federal income tax laws.
Federal Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")).
(Tax-exempt interest on Municipal Obligations is not subject to the excise tax.)
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company may (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income to avoid liability
for the excise tax. However, investors should note that a Fund may in certain
circumstances be required to liquidate Fund investments to make sufficient
distributions to avoid excise tax liability.
Distributions
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary
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income and treated as dividends for federal income
tax purposes but they will qualify for the 70% dividends-received deduction for
corporate shareholders only to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. Each Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his/her shares or
whether such gain was recognized by the Fund prior to the date on which the
shareholder acquired his/her shares. Conversely, if a Fund elects to retain its
net capital gain, the Fund will be taxed thereon (except to the extent of any
available capital loss carryovers) at the applicable corporate tax rate. If a
Fund elects to retain its net capital gain, it is expected that the Fund also
will elect to have shareholders treated as if each received a distribution of
its pro rata share of such gain, with the result that each shareholder will be
required to report its pro rata share of such gain on its tax return as
long-term capital gain, will receive a refundable tax credit for its share of
tax paid by the Fund on the gain, and will increase the basis for its shares by
an amount equal to the deemed distribution less the tax credit.
Ordinary income dividends derived from a Fund's investment in the stock of
domestic corporations with respect to a taxable year will qualify for the 70%
dividends received deduction generally available to corporations (other than
corporations, such as "S" corporations, which are not eligible for the deduction
because of their special characteristics and other than for purposes of special
taxes such as the accumulated earnings tax and the personal holding company tax)
to the extent of the amount of qualifying dividends received by the Fund from
domestic corporations for the taxable year. A dividend received by a Fund
investing in the stock of domestic corporations will not be treated as a
qualifying dividend (1) if it has been received with respect to any share of
stock that the Fund has held for less than 46 days (91 days in the case of
certain preferred stock), excluding for this purpose under the rules of Code
Section 246(c)(3) and (4)(A) any day more than 45 days (or 90 days in the case
of certain preferred stock) after the date on which the stock becomes
ex-dividend and (ii) any period during which the Fund has an option to sell, is
under a contractual obligation to sell, has made and not closed a short sale of,
is the grantor of a deep-in-the money or otherwise nonqualified option to buy or
has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (2) to the extent that the
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property; or (3) to the extent the stock on which the dividend is paid is
treated as debt financed under the rules of Code Section 246A. Moreover, the
dividends-received deduction for a corporate shareholder may be disallowed or
reduced (i) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Fund or (ii) by application of
Code Section 246(b) which in general limits the dividends-received deduction to
70% of the shareholder's taxable income (determined without regard to the
dividends-received deduction and certain other items).
For purposes of the corporate alternative minimum tax (the "AMT") and the
environmental superfund tax the corporate dividends received deduction is not
itself an item of tax preference that must be added back to taxable income or is
otherwise disallowed in determining a corporation's alternative minimum taxable
income ("AMTI"). However, corporate shareholders
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will generally be required to take the full amount of any dividend
received into account (without a dividends-received deduction) in
determining its adjusted current earnings.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle any such Fund to a reduced rate of, or exemption from,
taxes on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of any such Fund's assets to be invested
in various countries is not known. If more than 50% of the value of the Fund's
total assets at the close of its taxable year consists of the stock or
securities of foreign corporations, the Fund may elect to "pass through" to the
Fund's shareholders the amount of foreign taxes paid by the Fund. If the Fund so
elects, each shareholder would be required to include in gross income, even
though not actually received, its pro rata share of the foreign taxes paid by
the Fund, but would be treated as having paid its pro rata share of such foreign
taxes and would, therefore, be allowed to either deduct such amount in computing
taxable income or use such amount (subject to various Code limitations) as a
foreign tax credit against federal income tax (but not both). For purposes of
the foreign tax credit limitation rules of the Code, each
shareholder would treat as foreign source income its pro rata share of
such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. No deduction
for foreign taxes could be claimed by an individual shareholder who
does not itemize deductions.
Distributions by a Fund that do not constitute ordinary income dividends,
exempt-interest dividends or capital gain dividends will be treated as a return
of capital to the extent of (and in reduction of) the shareholder's tax basis in
his/her shares; any excess will be treated as gain from the sale of his/her
shares, as discussed below.
Prior to purchasing shares in one of the Non-Money Market Funds, the
impact of dividends or distributions which are expected to be or have been,
declared, but not paid, should be carefully considered. Any dividend or
distribution declared shortly after a purchase of such shares prior to the
record date will have the effect of reducing the per share net asset value by
the per share amount of the dividend or distribution. All or a portion of such
dividend or distribution, although in effect a return of capital, may be subject
to tax.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of a Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, distributions
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on
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December 31 of such calendar year if such distributions are actually
paid in January of the following year. Shareholders will be advised
annually as to the U.S. federal income tax consequences of
distributions made (or deemed made) during the year.
The Funds will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect Taxpayer Identification Number or no Taxpayer
Identification Number at all, (2) who is subject to backup withholding by the
Internal Revenue Service for failure to report the receipt of interest or
dividend income properly, or (3) who has failed to certify to a Fund that it is
not subject to backup withholding or that it is a corporation or other "exempt
recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or
redemption of shares of a Fund in an amount equal to the difference
between the proceeds of the sale or redemption and the shareholder's
adjusted tax basis in the shares. All or a portion of any loss so
recognized may be disallowed if the shareholder purchases other shares
of the Fund within 30 days before or after the sale or redemption. In
general, any gain or loss arising from (or treated as arising from)
the sale or redemption of shares of a Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares
were held for longer than one year. However, any capital loss arising
from the sale or redemption of shares held for six months or less will
be disallowed to the extent of the amount of exempt-interest dividends
received on such shares and (to the extent not disallowed) will be
treated as a long-term capital loss to the extent of the amount of
capital gain dividends received on such shares. For this purpose, the
special holding period rules of Code Section 246(c)(3) and (4)
(discussed above in connection with the dividends-received deduction
for corporations) generally will apply in determining the holding
period of shares. None of the Money market Funds expect to realize
long-term capital gains, and therefore, do not foresee payment of any
capital gain.
If a shareholder (i) incurs a sales load in acquiring shares of a Fund,
(ii) disposes of such shares less than 91 days after they are acquired and (iii)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of, but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from a Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from a Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends will
be subject to U.S. withholding tax at
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the rate of 30% (or lower applicable treaty rate) upon the gross
amount of the dividend. Furthermore, such a foreign shareholder may be
subject to U.S. withholding tax at the rate of 30% (or lower applicable
treaty rate) on the gross income resulting from the Fund's election to
treat any foreign taxes paid by its shareholders, but may not be
allowed a deduction against this gross income or a credit against this
U.S. withholding tax for the foreign shareholder's pro rata share of
such foreign taxes which it is treated as having paid. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on
gains realized on the sale of shares of a Fund, capital gain dividends
and exempt-interest dividends and amounts retained by a Fund that are
designated as undistributed capital gains.
If the income from a Fund is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then ordinary
income dividends, capital gain dividends and any gains realized upon
the sale of shares of the Fund will be subject to U.S. federal income
tax at the rates applicable to U.S. citizens, U.S. residents or domestic
corporations.
In the case of foreign noncorporate shareholders, a Fund may be
required to withhold U.S. federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding tax (or
taxable at a reduced treaty rate) unless such shareholders furnish the
Fund with proper notification of their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
SPECIAL TAX CONSIDERATIONS PERTAINING TO THE VALUE FUND, CAPITAL GROWTH FUND,
EMERGING GROWTH FUND, EQUITY INDEX FUND, MANAGED INDEX FUND, DISCIPLINED EQUITY
FUND, BALANCED ASSETS FUND, SHORT INTERMEDIATE GOVERNMENT FUND, SHORT-TERM
INCOME FUND, DIVERSIFIED INCOME FUND AND STRATEGIC FIXED INCOME FUND
With respect to the Value Fund, Capital Growth Fund, Emerging Growth Fund,
Equity Index Fund, Managed Index Fund, Disciplined Equity Fund, Balanced Assets
Fund, Short-Intermediate Government Fund, Short-Term Income Fund, Diversified
Income Fund and Strategic Fixed Income Fund some investments may be subject to
special rules which govern the Federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules include the
following: (1) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (2) the accruing of certain trade receivables and
payables; and (3) the entering into or acquisition of any forward contract,
futures contract, option, and similar financial instrument. The disposition of a
currency other than the U.S. dollar by a U.S. taxpayer is also treated as a
transaction subject to the special currency rules. With respect to transactions
covered by the special rules, foreign currency gain or loss is calculated
separately from any gain or loss on the underlying transaction and is normally
taxable as ordinary gain or loss. The amount of any realized gain or loss on
closing out a forward contract will generally result in a realized capital gain
or loss for tax purposes.
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Under Code Section 1256, forward currency contracts held by a Fund at the
end of each fiscal year will be required to be "marked-to-market" for Federal
income tax purposes, that is, deemed to have been sold at market value. Sixty
percent (60%) of any net realized gain or loss from any actual sales will be
treated as long-term gain or loss, and the remainder will be treated as
short-term capital gain or loss. Code Section 988 may also apply to forward
contracts. In accordance with Treasury regulations, certain transactions subject
to the special currency rules that are part of a "section 988 hedging
transaction" may be integrated and treated as a single transaction for purposes
of the Code and are not subject to the marked-to-market or loss deferral rules
under the Code. Gain or loss attributable to the foreign currency component of
transactions engaged in by a Fund which are not subject to the special currency
rules (such as foreign equity investments other than certain preferred stocks)
will be treated as capital gain or loss and will not be segregated from the gain
or loss on the underlying transaction.
In the case of an overlap between Sections 1256 and 988, special
provisions determine the character and timing of any income, gain or loss. The
Funds will attempt to monitor Section 988 transactions to avoid an adverse tax
impact.
Investment returns received by the Fund may give rise to withholding and
other taxes imposed by foreign countries, generally at rates from 10% to 40%.
Tax conventions between certain countries and the U.S. may reduce or eliminate
such taxes. Foreign countries generally do not impose taxes on capital gains
with respect to investments by nonresident investors. To the extent a Fund does
pay foreign withholding or other foreign taxes on certain of its investments,
investors will be unable to take a deduction or receive a tax credit with
respect to such foreign taxes in computing their U.S. tax liability, since
investment by the Funds in foreign investments is limited.
SPECIAL TAX CONSIDERATIONS PERTAINING TO THE MUNICIPAL INCOME FUND, SHORT-TERM
MUNICIPAL INCOME FUND, INTERMEDIATE MUNICIPAL BOND FUND, THE STATE INTERMEDIATE
MUNICIPAL BOND FUNDS AND THE STATE MUNICIPAL BOND FUNDS
As described above and in the Prospectuses, the Tax-Free Bond Funds are
designed to provide investors with current tax-exempt interest income. Each Fund
is not intended to constitute a balanced investment program and is not designed
for investors seeking capital appreciation or maximum tax-exempt income
irrespective of fluctuations in principal. Shares of a Fund would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Code, H.R. 10 plans, and individual
retirement accounts since such plans and accounts are generally tax-exempt and,
therefore, would not gain any additional benefit from the Fund's dividends being
tax-exempt.
The Municipal Income Fund, Short-Term Municipal Income Fund, Intermediate
Municipal Bond Fund, the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds are designed to provide investors with a high level of
income exempt from Federal and, with respect to the Florida Intermediate
Municipal Bond Fund and Florida Municipal Bond Fund, Georgia Intermediate
Municipal Bond Fund and Georgia Municipal Bond Fund, Maryland Intermediate
Municipal Bond Fund and Maryland Municipal Bond Fund, North Carolina
Intermediate Municipal Bond Fund and North Carolina Municipal Bond Fund, South
Carolina Intermediate Municipal Bond Fund and South Carolina Municipal Bond
Fund, Tennessee
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Intermediate Municipal Bond Fund and Tennessee Municipal Bond Fund, and
Virginia Intermediate Municipal Bond Fund and Virginia Municipal Bond
Fund, Florida state intangibles tax, and the Georgia, Maryland, North
Carolina, South Carolina, Tennessee, or Virginia state income tax,
respectively. Florida and Texas do not presently impose any income tax
but Florida, Georgia and North Carolina currently impose a state
intangibles tax on intangible personal property. Exempt-interest
dividends may be treated by the shareholders as items of interest
excludable from their gross income under Section 103(a) of the Code. An
exempt-interest dividend is any dividend or part thereof (other
than a capital gain dividend) paid by a Fund and designated as an
exempt-interest dividend in a written notice mailed to shareholders
not later than sixty days after the close of the Funds' taxable year.
However, the aggregate amount of dividends so designated by a Fund
cannot exceed the excess of the amount of interest exempt from tax
under Section 103 of the Code received by a Fund during the taxable year
over any amounts disallowed as deductions under Sections 265 and
171(a)(2) of the Code. The percentage of the total dividends paid for
any taxable year which qualifies as exempt-interest dividends will be
the same for all shareholders receiving dividends from the same Fund
with respect to such year, regardless of the period for which the
shares were held. In order for a Fund to pay exempt-
interest dividends for any taxable year, at the close of each quarter of its
taxable year at least 50% of the aggregate value of the Fund's assets must
consist of exempt-interest obligations.
Shareholders are advised to consult their tax advisers with respect to
whether exempt-interest dividends would retain the exclusion under Section
103(a) if the shareholder would be treated as a "substantial user" or a "related
person" to such user with respect to facilities financed through any of the
tax-exempt obligations held by a Fund. A "substantial user" is defined under
U.S. Treasury Regulations to include a non-exempt person who regularly uses a
part of such facilities in his trade or business and whose gross revenues
derived with respect to the facilities financed by the issuance of bonds are
more than 5% of the total revenues derived by all users of such facilities, or
who occupies more than 5% of the usable area of such facilities or for whom such
facilities or a part thereof were specifically constructed, reconstructed, or
acquired. A "related person" includes certain related natural persons,
affiliated corporations, partners and partnerships, and S corporations and their
shareholders.
The Code treats interest on private activity bonds, as defined therein, as
an item of tax preference subject to the federal alternative minimum tax (the
"AMT") on individuals and corporations at the applicable tax rates. As of the
printing of this SAI, individuals are subject to AMT at a maximum marginal rate
of 28% and corporations at a rate of 20%. Shareholders are advised to consult
their tax advisers with respect to other "tax preference items" and
"adjustments" which must be considered when calculating the shareholders' AMT.
Corporate shareholders will generally be required to include all interest on
municipal bonds and other tax-exempt obligations (including exempt-interest
dividends paid by a Fund) in adjusted current earnings in calculating federal
alternative minimum taxable income. The receipt of tax-exempt amounts may also
affect corporate federal environmental tax liability.
Interest on indebtedness incurred by a shareholder to purchase or carry
Fund shares is not deductible for Federal income tax purposes if that Fund
distributes exempt-interest dividends during the shareholder's taxable year. In
addition, if a shareholder holds Fund shares for six months or less, any loss on
the sale or exchange of those shares will be disallowed to the extent of the
amount of exempt-interest dividends received with respect to the shares. The
Treasury
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Department, however, is authorized to issue regulations reducing the
six months holding requirement to a period of not less than the greater of 31
days or the period between regular dividend distributions where the investment
company regularly distributes at least 90% of its net tax-exempt interest. No
such regulations had been issued as of the date of this SAI.
Although each Fund expects to qualify as a "regulated investment company"
and to be relieved of substantially all Federal and, in the case of the Florida
Intermediate Municipal Bond Fund and Florida Municipal Bond Fund, Georgia
Intermediate Municipal Bond Fund and Georgia Municipal Bond Fund, Maryland
Intermediate Municipal Bond Fund and Maryland Municipal Bond Fund, North
Carolina Intermediate Municipal Bond Fund and North Carolina Municipal Bond
Fund, South Carolina Intermediate Municipal Bond Fund and South Carolina
Municipal Bond Fund, Tennessee Intermediate Municipal Bond Fund and Tennessee
Municipal Bond Fund, and Virginia Intermediate Municipal Bond Fund and Virginia
Municipal Bond Fund, Florida State intangible tax, and the Georgia, Maryland,
North Carolina, South Carolina, Tennessee or Virginia state income taxes,
respectively, depending upon the extent of its activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located, or in which it is otherwise
deemed to be conducting business, the Funds may be subject to the tax
laws of such states or localities.
Distributions other than exempt-interest dividends, including
distributions of interest in Municipal Securities issued by other issuers and
all long-term and short-term capital gains will be subject to state income tax
(other than Florida and Texas) unless specifically exempted by statute
including, in the case of Virginia, statutory provisions creating the agency or
political subdivision.
Florida does not impose a personal income tax, but does impose an annual
intangible personal property tax on intangible personal property (including but
not limited to stocks or shares of business trusts or mutual funds) held by
persons domiciled in the State of Florida, regardless of where such property is
kept. Florida counsel has, however, advised the Fund that shares in the Nations
Florida Intermediate Municipal Bond Fund and the Nations Florida Municipal Bond
Fund shall not be subject to Florida's intangible personal property tax if on
January 1 of each tax year the portfolio of such Fund consists exclusively of
obligations of the government of the United States of America, its agencies,
instrumentalities, the Commonwealth of Puerto Rico, the government of Guam, the
government of American Samoa, the government of the Northern Mariana Islands,
the State of Florida, its political subdivisions, municipalities or other taxing
districts. Nations Fund has received a Technical Assistance Advisement from the
Florida Department of Revenue confirming the foregoing.
Although the Nations Florida Intermediate Municipal Bond Fund and Nations
Florida Municipal Bond Fund anticipate that the portfolio will exclusively
contain assets that are exempt from Florida's intangible personal property tax
on January 1 of each tax year, it may be possible that the portfolio will have a
small portion of its assets invested temporarily in assets on such date which
are not exempt from Florida's annual intangible personal property tax. In this
situation, only the portion of the net asset value of the portfolio which is
made up of direct obligations of the United States of America, its agencies,
territories and possessions (as described above) may be removed from the net
asset value for purposes of computing the intangible personal property tax. The
remaining net asset value of the portfolio and hence a portion of the
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net asset value of the shares in the Nations Florida Intermediate
Municipal Bond Fund and Nations Florida Municipal Bond Fund would be
subject to the intangible personal property tax. Notice as to the tax
status of your shares will be mailed to you annually. Owners of shares
in the Nations Florida Intermediate Municipal Bond Fund or Nations
Florida Municipal Bond Fund should consult their tax advisers with
specific reference to their own tax situation if advised that a portion
of the portfolio of such Funds consisted on January 1 of any year of
assets which are not exempt from Florida's annual intangible personal
property tax. Such annual intangible personal property tax, if any, is
due and payable on June 30 of such year in which the tax liability
arises.
Nations Georgia Intermediate Municipal Bond Fund's and Nations Georgia
Municipal Bond Fund's shareholders residing in Georgia will be subject to the
Georgia state intangibles tax with respect to their shares, notwithstanding that
such Funds' underlying assets contain direct obligations of the government of
the United States of America, Puerto Rico, and the State of Georgia, which, in
held directly, would be exempt from the Georgia state intangibles tax. This
result may change once the Attorney General for the State of Georgia has issued
an opinion on this issue, but it is unlikely that any definitive ruling will be
reached in the immediate future, as the Attorney General's office will
await the adjudication of a related lawsuit that was filed around March
1, 1995.
Nations Maryland Intermediate Municipal Bond Fund's and Nations Maryland
Municipal Bond Fund's shareholders who are residents of Maryland must add to
their federal adjusted gross income 50% of their federal tax preference items
(which include interest amounts from private activity bonds) the sum total of
which is in excess of $10,000 for an individual return (or $20,000 for a joint
return) when determining their Maryland adjusted gross income. Shareholders who
are nonresidents of Maryland are required to include only those tax preference
items that are based on income taxable in Maryland.
Nations North Carolina Intermediate Municipal Bond Fund's and Nations
North Carolina Municipal Bond Fund's shareholders who are residents of North
Carolina may be subject to the North Carolina intangible personal property tax
with respect to their shares. North Carolina does not impose its intangible
personal property tax on that percentage of a shareholder's shares equivalent to
the percentage of the Fund's assets represented by direct obligations of the
government of the United States of America, Puerto Rico, and the State of North
Carolina.
For tax years beginning after 1991, the deduction for net long-term
capital gains for South Carolina taxable income purposes was to have been
increased from 29% to 44%. However, in three amendments in successive years, the
South Carolina General Assembly has delayed the implementation of the increase
in the deduction for net long-term capital gains for South Carolina taxable
income purposes. Although the statute currently provides for the deduction to
increase to 44% for taxable years beginning after 1994, as of the date of this
SAI, NationsBank cannot predict whether the South Carolina General Assembly will
delay the increase in the deduction for net long-term capital gains for an
addition period of time.
The Tennessee Hall Income Tax imposes a tax on income received by way of
dividends from stock or interest on bonds. Dividends from a qualified regulated
investment company are exempt from the Hall Income Tax, but only to the extent
attributable to interest on bonds or
68
<PAGE>
securities of the U.S. Government or
any agency or instrumentality thereof or on bonds of the State of Tennessee
or any county or any municipality or political subdivision thereof, including
any agency, board, authority or commission of any of the above.
According to the Tax Foundation in Washington, D.C., it is estimated that
"tax freedom day" usually falls around May 3rd across the country. On average,
the money earned by an individual prior to that date goes to the payment of
taxes. In addition, The Tax Foundation estimates that the average taxpayer needs
to work 2 hours and 41 minutes during an eight-hour day to cover federal, state
and local taxes. In contrast, it takes only 57 minutes to cover the average cost
of housing and household expenses. In recent years, tax-free bonds have been in
high demand due to high tax rates and fewer available tax deductions. Insured
certificates of deposit and money market funds have traditionally offered a
solid way to preserve capital and enjoy competitive yields. But yields on these
investments have declined considerably. Because of that, more and more investors
have found it beneficial to look for conservative higher-yielding alternatives,
especially those that also offer tax relief.
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the date
of this SAI. Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
Rules of state and local taxation for ordinary income dividends,
exempt-interest dividends and capital gain dividends from regulated investment
companies often differ from the rules for U.S. federal income taxation described
above. Distributions of net investment income may be taxable to shareholders as
dividend income under state or local law even though a substantial portion of
such distributions may be derived from interest on U.S. Government obligations,
which, if realized directly, would be exempt from such taxes. Shareholders are
urged to consult their tax advisers as to the consequences of these and other
state and local tax rules affecting investment in the Funds.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Trust, their addresses,
principal occupations during the past five years, and other affiliations are as
set forth below. The address of each, unless otherwise indicated, is 111 Center
Street, Little Rock, Arkansas 72201. Those Trustees who are "interested persons"
of the Trust (as defined in the 1940 Act) are indicated by an asterisk (*).
<TABLE>
<CAPTION>
Position With Principal Occupation During
Name, Address and Age the Trust Past 5 Years and Current Directorships
- --------------------- -------------- --------------------------------------
<S> <C> <C>
Edmund L. Benson, III, 58 Trustee Director, President and Treasurer, Saunders &
Saunders & Benson, Inc. Benson, Inc. (insurance); Director, The Capital
728 East Main Street Mutual Funds; Director, Nations Fund, Inc.;
Suite 400 Trustee, Nations Fund Trust, Director, Nations
Richmond, VA 23219 Fund Portfolios, Inc.
69
<PAGE>
James Ermer, 53 Trustee Since October 1985, Senior Vice President --
CSX Corporation Finance, CSX Corporation (transportation and
One James Center natural resources); Director, The Capital
901 East Cary Street Mutual Funds; Director, National Mine Service;
Richmond, VA 23219 Director, Lawyers Title Corporation; Director,
Nations Fund, Inc.; Trustee, Nations Fund
Trust, Director, Nations Fund Portfolios, Inc.
William H. Grigg, 63 Trustee Since April 1994, Duke Power Co.
Chairman and Chief Executive
422 South Church Street Officer; November 1991 to April 1994,
PB04G Vice Chairman, Duke Power Co.; from
Charlotte, NC 28242-0001 April 1988 to November 1991, Executive Vice
President -- Customer
Group, Duke Power Co., Director, The Capital
Mutual Funds; Director, Hatteras Income
Securities, Inc., Nations Government Income Term
Trust 2003, Inc., Nations Government Income Term
Trust 2004,
Inc., Nations Balanced Target Maturity
Fund, Inc. (investment companies); Director
Nations Fund, Inc.; Trustee, Nations Fund Trust,
Director, Nations Fund Portfolios, Inc.
Thomas F. Keller, 64 Trustee R.J. Reynolds Industries Professor of Business
Fuqua School of Business Administration and Dean, Fuqua School of
Duke University Business, Duke University; Director LADD
Durham, NC 27706 Furniture, Inc., Director, The Capital Mutual
Funds; Director, Hatteras Income Securities, Inc.,
Nations Government Income Term Trust 2003, Inc.,
Nations Term Trust 2004, Inc., Nations Balanced
Target Maturity Fund, Inc. (investment companies);
Director Wendy's International Mentor Growth Fund,
and Cambridge Trust; Director, Nations Fund, Inc.;
Trustee, Nations Fund Trust, Director, Nations Fund
Portfolios, Inc.
Carl E. Mundy, Jr., 60 Trustee Commandant, United States Marine Corps, from
9308 Ludgate Drive July 1991 to July 1995, Commanding General,
Alexandria, VA 23309 Marine Forces Atlantic, from June 1990 to June
1991.
A. Max Walker*, 73 President, Trustee Financial consultant, Director and Chairman of
6215 Riverwood Drive, N.W. and Chairman of the the Board, Hatteras Income Securities, Inc.,
Atlanta, GA 30328 Board Nations Government Income Term Trust 2003,
Inc., Nations Government Income Term Trust 2004,
Inc., Nations Balanced Target Maturity Fund, Inc.
(investment companies); Formerly President, A. Max
Walker, Inc.; Director, The Capital Mutual Funds;
Director and Chairman of the Board, Nations Fund,
Inc.; Trustee and Chairman of the Board, Nations
Fund Trust, Director, Nations Fund Portfolios, Inc.
Charles B. Walker, 57 Trustee Since 1989, Executive Vice President, Chief
70
<PAGE>
Ethyl Corporation Financial Officer and Treasurer, Ethyl
P.O. Box 2189 Corporation (chemicals, plastics and aluminum
330 South Fourth Street manufacturing); since 1994, Vice Chairman,
Richmond, VA 23217 Ethyl Corporation and Vice Chairman, Chief
Financial Officer and Treasurer, Albemarle
Corporation; Director, Nations Fund, Inc.; Trustee,
Nations Fund Trust, Director, Nations Fund
Portfolios, Inc.
Thomas S. Word, Jr.*, 57 Trustee Partner, McGuire Woods Battle & Boothe (law);
McGuire, Woods, Battle & Boothe Director, The Capital Mutual Funds, Director,
One James Center Vaughan Bassett Furniture Company, Director
Richmond, VA 23219 V-B/Williams Furniture Company Inc.; Director,
Nations Fund, Inc.; Trustee, Nations Fund
Trust, Director, Nations Fund Portfolios, Inc.
Richard H. Blank, Jr., 39 Secretary Since 1994, Vice President of Mutual Funds
Stephens Inc. Services, Stephens Inc. 1990 to 1994, Manager
Mutual Fund Services, Stephens Inc. 1983 to
1990, Associate in Corporate Finance
Department, Stephens Inc.
Michael W. Nolte, 34 Assistant Secretary Associate, Financial Services Group of Stephens
Stephens Inc. Inc.
Louise P. Newcomb, 43 Assistant Secretary Corporation Syndicate Associate, Stephens Inc.
Stephens Inc.
James E. Banks, 39 Assistant Secretary Since 1993 Attorney, Stephens Inc.; Associate
Stephens Inc. Corporate Counsel, Federated Investors; from
1991 to 1993, Staff Attorney, Securities and
Exchange Commission from 1988 to 1991.
Richard H. Rose, 40 Treasurer Since 1994, Vice President, Division Manager,
the Shareholder Services Group, Inc. The Shareholder Services Group, since 1988,
One Exchange Place Senior Vice President, The Boston Company
Boston, MA 02109 Advisors, Inc.
Joseph C. Viselli, 31 Assistant Treasurer Assistant Vice President, The Boston Company
The Shareholder Services Group, Inc. Advisors, Inc since April 1992.
One Exchange Place
Boston, MA 02109
</TABLE>
Remuneration of Trustees
<TABLE>
<CAPTION>
Total Compensation Nations Fund
Aggregate from Registrant and Nations Fund Deferred
Name of Person Compensation from Fund Complex Paid Retirement Compensation
Position (1) Registrant (2) to Directors Plan Plan
- ----------------- -------------------- --------------------- -------------- -------------
<S> <C> <C> <C> <C>
Edmund L. Benson, $22,000 $36,500 N/A N/A
III, Trustee
71
<PAGE>
James Ermer $22,000 $36,500 N/A N/A
Trustee
William H. Grigg $22,000 $45,500 N/A N/A
Trustee
Thomas F. Keller $22,000 $45,500 N/A N/A
Trustee
A. Max Walker $24,000 $51,500 N/A N/A
Chairman of the Board
Charles B. Walker $22,000 $36,500 N/A N/A
Trustee
Thomas S. Word $22,000 $36,500 N/A N/A
Trustee
Carl E. Mundy, Jr., $7,000 N/A N/A N/A
Trustee
</TABLE>
(1) All trustees receive reimbursements for expenses related to their
attendance at meetings of the Board of Trustees. Officers of the Trust
receive no direct remuneration in such capacity from the Trust.
(2) For current fiscal year and includes estimated future payments. Each
Trustee receives (i) an annual retainer of $1,000 ($3,000 for the Chairman
of the Board) plus $500 for each Fund of the Trust, plus (ii) a fee of
$1,000 for attendance at each "in-person" meeting of the Board of Trustees
(or committee thereof) and $500 for attendance at each other meeting of the
Board of Trustees (or Committee thereof).
(3) Messrs. Grigg, Keller and A.M. Walker receive compensation from eight
investment companies, including the Trust, that are deemed to be part of
the Nations Fund "fund complex," as that term is defined under Rule 14a-101
of the Securities Exchange Act of 1934, as amended. Messrs. Benson, Ermer,
C. Walker, Mundy and Word receive compensation from four investment
companies, including the Trust, deemed to be part of the Nations Fund fund
complex.
Mr. Rose serves as Treasurer to certain other investment companies for
which The Shareholder Services Group, Inc. (the "Co-Administrator") or its
affiliates serve as sponsor, distributor, administrator and/or investment
adviser.
Each Trustee of the Trust is also a Director of Nations Fund, Inc. and
Nations Fund Portfolios, Inc. and a trustee of Nations Institutional Reserves,
each, a registered investment company that is part of the Nations Fund family of
funds. Richard H. Blank, Jr., Richard H. Rose, Joseph C. Viselli, Michael W.
Nolte, Louise P. Newcomb and James E. Banks, Jr. also are officers of Nations
Fund, Inc., Nations Fund Portfolios, Inc. and Nations Institutional Reserves.
72
<PAGE>
Each Trustee receives (i) an annual retainer of $1,000 ($3,000 for the
Chairman of the Board) plus $500 for each Fund of the Trust, plus (ii) a fee of
$1,000 for attendance at each "in-person" meeting of the Board of Trustees (or
committee thereof) and $500 for attendance at each other meeting of the Board of
Trustees (or committee thereof). All Trustees receive reimbursements for
expenses related to their attendance at meetings of the Board of Trustees. Mr.
Mundy was not a Trustee of the Trust during the fiscal year ended April 30, 1995
and therefore received no compensation. Officers receive no direct remuneration
in such capacity from the Trust.
For the fiscal year ended November 30, 1994, such fees and expenses
totalled $210,096. No person who is an officer, director, or employee of
NationsBank or its affiliates serves as an officer, Trustee, or employee of the
Trust. The Trustees and officers of Nations Fund own less than 1% of the shares
of the Trust.
The Trust has adopted a Code of Ethics which, among other things,
prohibits each access person of the Trust from purchasing or selling securities
when such person knows or should have known that, at the time of the
transaction, the security (i) was being considered for purchase or
sale by a Fund, or (ii) was being purchased or sold by a Fund. For purposes of
the Code of Ethics, an access person means (i) a Trustee or officer of the
Trust, (ii) any employee of the Trust (or any company in a control relationship
with the Trust) who, in the course of his/her regular duties, obtains
information about, or makes recommendations with respect to, the purchase or
sale of securities by the Trust, and (iii) any natural person in a control
relationship with the Trust who obtains information concerning recommendations
made to the Trust regarding the purchase or sale of securities. Portfolio
managers and other persons who assist in the investment process are subject to
additional restrictions, including a requirement that they disgorge to the Trust
any profits realized on short-term trading (i.e., the purchase/sale or
sale/purchase of securities within any 60-day period). The above restrictions do
not apply to purchases or sales of certain types of securities, including money
market instruments and certain U.S. Government securities. To facilitate
enforcement, the Code of Ethics generally requires that the Trust's access
persons, other than its "disinterested" Trustees, submit reports to the Trust's
designated compliance person regarding transactions involving securities which
are eligible for purchase by a Fund.
Nations Funds Retirement Plan
Under the terms of the Nations Funds Retirement Plan for Eligible Trustees
(the "Retirement Plan"), each trustee may be entitled to certain benefits upon
retirement from the Board of Trustees. Pursuant to the Retirement Plan, the
normal retirement date is the date on which the eligible trustee has attained
age 65 and has completed at least five years of continuous service with one or
more of the open-end investment companies ("Funds") advised by the Adviser. If a
trustee retires before reaching age 65, no benefits are payable. Each eligible
trustee is entitled to receive an annual benefit from the Funds commencing on
the first day of the calendar quarter coincident with or next following his date
of retirement equal to 5% of the aggregate trustee's fees payable by the Funds
during the calendar year in which the trustee's retirement occurs multiplied by
the number of years of service (not in excess of ten years of service) completed
with respect to any of the Funds. Such benefit is payable to each eligible
trustee in quarterly installments for a period of no more than five years. If an
eligible trustee dies after attaining age 65, the trustee's surviving spouse (if
any) will be entitled to receive 50% of the
73
<PAGE>
benefits that would have been paid (or would have continued to have
been paid) to the trustee if he had not died. The Retirement Plan is
unfunded. The benefits owed to each trustee are unsecured and subject to
the general creditors of the Funds. At present the Plan is not in effect
and therefore there are no fees to disclose.
Nations Funds Deferred Compensation Plan
Under the terms of the Nations Funds Deferred Compensation Plan for
Eligible Trustees (the "Deferred Compensation Plan"), each trustee may elect, on
an annual basis, to defer all or any portion of the annual board fees (including
the annual retainer and all attendance fees) payable to the trustee for that
calendar year. An application will be submitted to the SEC to permit deferring
trustees to elect to tie the rate of return on fees deferred pursuant to the
Deferred Compensation Plan to one or more of certain investment portfolios of
certain Funds. Until approval is received from the SEC, the rate of return on
any fees deferred by a trustee will be tied to the yield on 90-day U.S. Treasury
Bills. Distributions from the deferring trustees' deferral accounts will be paid
in cash, in generally equal quarterly installments over a period of five years
beginning on the date the deferring trustee's retirement benefits commence under
the Retirement Plan. The Board of Trustees, in its sole discretion,
may accelerate or extend such payments after a trustee's termination of
service. If a deferring trustee dies prior to the commencement of the
distribution of amounts in his deferral account, the balance of the
deferral account will be distributed to his designated beneficiary in
a lump sum as soon as practicable after the trustee's death. If a
deferring trustee dies after the commencement of such distribution,
but prior to the complete distribution of his deferral account, the
balance of the amounts credited to his deferral account will be
distributed to his designated beneficiary over the remaining
period during which such amounts were distributable to the
trustee. Amounts payable under the Deferred Compensation Plan are not
funded or secured in any way and deferring trustees have the status of
unsecured creditors of the Funds from which they are deferring compensation.
Shareholder and Trustee Liability
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. However, the Trust's Declaration of Trust provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust, and that every note, bond, contract, order, or other
undertaking made by the Trust shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property of any shareholder held
personally liable solely by reason of his being or having been a shareholder and
not because of his acts or omissions or some other reason. The Declaration of
Trust also provides that the Trust shall, upon request, assume the defense of
any claim made against any shareholder for any act or obligation of the Trust
and shall satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its obligations.
The Declaration of Trust states further that no Trustee, officer, or agent
of the Trust shall be personally liable for or on account of any contract, debt,
tort, claim, damage, judgment, or decree arising out of or connected with the
administration or preservation of the trust estate or the
74
<PAGE>
conduct of any business of the Trust; nor shall any Trustee be
personally liable to any person for any action or failure to act except
by reason of his own bad faith, willful misfeasance, gross negligence,
or reckless disregard of his duties as Trustee. The Declaration of Trust
also provides that all persons having any claim against the Trustees or
the Trust shall look solely to the trust property for payment.
With the exceptions stated, the Declaration of Trust provides that a
Trustee is entitled to be indemnified against all liabilities and expenses
reasonably incurred by him in connection with the defense or disposition of any
proceeding in which he may be involved or with which he may be threatened by
reason of his being or having been a Trustee, and that the Trustees have the
power, but not the duty, to indemnify officers and employees of the Trust unless
any such person would not be entitled to indemnification had he or she been a
Trustee.
INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY,
TRANSFER AGENCY, SHAREHOLDER
SERVICING AND DISTRIBUTION SERVICES AGREEMENTS
Investment Adviser
Effective January 1, 1996, NBAI began serving as investment adviser to the
Funds of the Trust, pursuant to an Investment Advisory Agreement dated January
1, 1996. Effective January 1, 1996, TradeStreet began serving as sub-investment
adviser to the Funds of the Trust, pursuant to a Sub-Advisory Agreement dated
January 1, 1996.
NBAI also serves as the investment adviser to Nations Fund, Inc., Nations
Institutional Reserves and Nations Fund Portfolios, Inc., each a registered
investment company that is part of the Nations Fund Family. In addition, NBAI
serves as the investment advisor to Hatteras Income Securities, Inc., Nations
Government Income Term Trust 2003, Inc., Nations Government Income Term Trust
2004, Inc. and Managed Balanced Target Maturity Fund, Inc., each a closed-end
diversified management investment company traded on the New York Stock Exchange.
TradeStreet also serves as the sub-investment adviser to all of the funds of
Nations Fund, Inc., except the International Equity Fund, and to Nations
Institutional Reserves, Hatteras Income Securities, Inc., Nations Government
Income Term Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc.
and Managed Balanced Target Maturity Fund, Inc.
NBAI and TradeStreet are each wholly owned banking subsidiaries of
NationsBank, which in turn is a wholly owned banking subsidiary of NationsBank
Corporation, a bank holding company organized as a North Carolina corporation.
Prior to January 1, 1996, NationsBank, through its investment management
division, served as investment adviser to the Funds. NationsBank is successor to
NationsBank of North Carolina, N.A. which was merged with and into NationsBank
of South Carolina, N.A., effective January 3, 1995. The resulting entity was
renamed NationsBank, N.A. (Carolinas). NationsBank is a wholly owned subsidiary
of NationsBank Corporation, a bank holding company. Prior to June 30, 1992,
NationsBank of Georgia, N.A. served as the Investment Adviser to the Trust. On
December 31, 1991 an Agreement and Plan of Consolidation between NCNB
Corporation
75
<PAGE>
("NCNB") and C&S Sovran Corporation ("C&S/Sovran") was consummated
whereby C&S/Sovran was merged into and became a wholly owned subsidiary of NCNB
and NCNB changed its name to NationsBank Corporation. In anticipation of this
transaction, the prior investment adviser for the Trust was changed from Sovran
Bank, N.A., to C&S/Sovran Trust Company (Georgia), N.A. After the merger of
C&S/Sovran and NCNB was completed, C&S Sovran Trust Company (Georgia), N.A.,
changed its name to NationsBank Trust Company (Georgia), N.A., and subsequently
merged into NationsBank of Georgia, N.A. which continued to serve as the
investment adviser to Nations Fund Trust until June 30, 1992. Prior to the
merger of NCNB and C&S/Sovran, NationsBank (formerly NCNB National Bank of North
Carolina) served and continues to serve as investment adviser to all of the
Funds of the Trust pursuant to an amendment to its investment advisory
agreements. NationsBank and NationsBank of Georgia, N.A. are wholly owned
subsidiaries of NationsBank Corporation.
Since 1874, NationsBank and its predecessors have been managing money for
foundations, universities, corporations, institutions and individuals.
NationsBank and its affiliates manage over $50 billion, including over $9
billion in Nations Fund assets, $1.2 billion in tax-free assets, and $35 billion
in fixed income assets for individuals, institutions and corporations in both
the United States and abroad. It is a company dedicated to a goal of providing
responsible investment management and superior service. NationsBank is
recognized for its sound investment approaches, which place it among the
nation's foremost financial institutions. NationsBank and its affiliates
organization makes available a wide range of financial services to its over 6
million customers through over 1700 banking and investment centers.
Approximately 12 of NationsBank personnel are involved in stock and bond
research.
NationsBank restructured its investment management division as of January
1, 1996 by reorganizing the division into two separate, wholly owned advisory
subsidiaries, NBAI and TradeStreet. The restructuring resulted in the transfer
of the division's investment management and advisory functions to NBAI, and its
day to day investment company portfolio management functions to TradeStreet. The
investment professionals who performed investment company management functions
and who managed the companies portfolios as employees of NationsBank continue to
perform such services as employees of NBAI and TradeStreet, respectively. The
restructuring did not change the scope and nature of investment advisory
services provided to the relevant Funds. The restructuring, and related
Investment Advisory Agreement and Sub-Advisory Agreement, were approved by the
Board of Trustees of the Trust at the October 12-13, 1995 Board Meeting.
The Investment Advisory Agreement for NBAI and Sub-Advisory Agreement for
TradeStreet each provides that in the absence of willful misfeasance, bad faith,
negligence or reckless disregard of obligations or duties thereunder on the part
of NBAI or Trade Street, respectively, or any of their respective officers,
directors, employees or agents, NBAI or TradeStreet shall not be subject to
liability to the Trust or to any shareholder of the Trust for any act or
omission in the course of, or connected with, rendering services thereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
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<PAGE>
The Investment Advisory Agreement shall become effective with respect to a
Fund if and when approved by the Trustees of the Trust, and if so approved,
shall thereafter continue from year to year, provided that such continuation of
the Agreement is specifically approved at least annually by (a) (i) the Trust's
Board of Trustees or (ii) the vote of "a majority of the outstanding voting
securities" of a Fund (as defined in Section 2(a)(42) of the 1940 Act), and (b)
the affirmative vote of a majority of the Trust's Trustees who are not parties
to such Agreement or "interested persons" (as defined in the 1940 Act) of a
party to such Agreement (other than as Trustees of the Trust), by votes cast in
person at a meeting specifically called for such purpose.
The Investment Advisory Agreement will terminate automatically
in the event of its assignment, and is terminable with respect to a
Fund at any time without penalty by the Trust (by vote of the Board of
Trustees or by vote of a majority of the outstanding voting securities
of the Fund) or by NBAI on 60 days' written notice.
The Sub-Advisory Agreement shall become effective with respect to each
Fund as of its execution date and, unless sooner terminated, shall continue in
full force and effect for one year, and may be continued with respect to each
Fund thereafter, provided that the continuation of the Agreement is specifically
approved at least annually by (a) (i) the Trust's Board of Trustees or (ii) the
vote of "a majority of the outstanding voting securities" of a Fund (as defined
in Section 2(a)(42) of the 1940 Act), and (b) the affirmative vote of a majority
of the Trust's Trustees who are not parties to such Agreement or "interested
persons" (as defined in the 1940 Act) of a party to such Agreement (other than
as Trustees of the Trust), by votes cast in person at a meeting specifically
called for such purpose.
The Sub-Advisory Agreement will terminate automatically in the event of
its assignment, and is terminable with respect to a Fund at any time without
penalty by the Trust (by vote of the Board of Trustees or by vote of a majority
of the outstanding voting securities of the Fund), or by NBAI, or by TradeStreet
on 60 days' written notice.
As discussed above, NationsBank was the investment adviser to the Funds
prior to January 1, 1996. The tables set forth on the following page state the
net advisory fees paid to NationsBank, the advisory fees waived and expense
reimbursements where applicable for the fiscal years ended November 30, 1994,
1993 and 1992 where applicable.
77
<PAGE>
<TABLE>
<CAPTION>
ADVISORY FEES
FY 1994 FY 1993 FY 1992
Net Amt. Amount Reimbsd. Net Amt. Amount Reimbsd. Net Amt. Amount Reimbsd.
Paid Waived by Advsr. Paid Waived by Advsr. Paid Waived by Advr.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nations Government 724,416 1,235,880 0 $ 797,650 $1,270,805 0 $1,000,931 $ 600,559 0
Money Market
Nations Tax Exempt
Fund 874,309 2,912,954 0 398,071 2,427,800 76,707 403,490 242,094 0
Nations Value Fund 6,534,662 53,149 0 3,817,988 0 0 1,423,005 67,195 0
Nations Capital
Growth Fund 5,381,628 0 0 4,753,787 582,109 0 0 883,990 0
Nations
Disciplined
Equity Fund 8,160 0 0 N/A N/A N/A N/A N/A N/A
Nations Managed
Index Fund
Nations Equity
Index Fund 102,464 433,345 0 N/A N/A N/A N/A N/A N/A
Nations Emerging
Growth Fund 1,288,934 0 0 540,729 201,217 0 0 0
0
Nations Balanced
Assets Fund 1,805,446 0 0 1,155,563 103,411 0 0 135,807
0
Nations
Short-Inter-
mediate Gov't 2,556,715 1,278,358 0 2,276,577 1,435,110 0 958,833 1,230,663
Fund 0
Nations Short-Term
Income Fund 696,393 730,564 34,171 444,309 969,336 0 0 210,316
0
Nations
Diversified
Income Fund 329,285 170,640 0 129,313 133,926 38,638 0 11,403
0
Nations Strategic
Fixed Income Fund 2,902,823 427,781 0 2,442,399 872,384 0 0 273,531
0
Nations Municipal
Income Fund 398,300 279,021 66,736 358,056 358,057 18,303 129,529 213,204 42,669
Nations Short-Term
Municipal Income
Fund 42,559 167,405 362 0 4,870 910 N/A N/A N/A
Nations
Intermediate
Municipal Bond
Fund (8,684) 151,227 40,762 0 47,909 8,883 N/A N/A
N/A
Nations Florida
Intermediate
Municipal
Bond Fund 154,249 102,832 0 50,562 82,656 11,860 N/A N/A N/A
Nations Georgia
Intermediate
Municipal
Bond Fund 166,565 111,043 0 92,237 122,527 7,479 0 60,676 14,387
Nations Maryland
Intermediate
Municipal Bond
Fund 287,326 191,550 0 248,121 175,736 18,430 102,817 176,616 33,498
</TABLE>
81
<PAGE>
ADVISORY FEES
<TABLE>
<CAPTION>
FY 1994 FY 1993 FY 1992
Net Amt. Amount Reimbsd. Net Amt. Amount Reimbsd. Net Amt. Amount Reimbsd.
Paid Waived by Advsr. Paid Waived by Advsr. Paid Waived by Advr.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Nations North
Carolina
Intermediate
Municipal
ond Fund 73,680 61,099 17,968 36,957 68,549 19,755 N/A N/A N/A
Nations South
Carolina
Intermediate
Municipal
Bond Fund 271,482 180,988 0 160,676 219,611 0 0 125,897 23,949
Nations Tennessee
Intermediate
Municipal
Bond Fund 27,480 35,606 25,930 4,900 51,124 22,182 N/A N/A N/A
Nations Texas
Intermediate
Municipal Bond 99,658 70,684 6,366 33,746 55,354 10,099 N/A N/A N/A
Fund
Nations Virginia
Intermediate
Municipal
Bond Fund 1,138,783 346,587 0 1,122,086 280,479 35,120 743,301 283,020 80,652
Nations Florida
Municipal
Bond Fund (3,925) 127,352 6,635 5,672 5,672 2,796 N/A N/A N/A
Nations Georgia
Municipal
Bond Fund (57,827) 111,043 0 2,610 2,610 1,738 N/A N/A N/A
Nations Maryland
Municipal
Bond Fund (12,208) 23,155 12,701 1,628 1,628 1,009 N/A N/A N/A
Nations North
Carolina
Municipal Bond
Fund (6,440) 126,235 9,504 5,912 5,912 2,546 N/A N/A N/A
Nations South
Carolina
Municipal Bond N/A N/A N/A
Fund (14,381) 44,830 15,335 2,167 2,167 1,617
Nations Tennessee
Municipal
Bond Fund (10,922) 26,558 13,336 1,736 1,736 1,412 N/A N/A N/A
Nations Texas
Municipal
Bond Fund (13,243) 70,358 14,740 3,181 3,181 1,860 N/A N/A N/A
Nations Virginia
Municipal
Bond Fund (9,176) 71,728 10,702 3,466 3,466 1,387 N/A N/A N/A
</TABLE>
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<PAGE>
Investment Styles
The Adviser uses various investment strategies during the process of
constructing and managing the Nations Fund Trust portfolios. These strategies
have been categorized into investment styles which consist of (i) the
NationsBank Fixed Income Style, (ii) the NationsBank Growth Equity Style, (iii)
the NationsBank Value Equity Style and (iv) the NationsBank Balanced Assets
Style. Investment Styles described below relate to the Diversified Income,
Government Securities, Short-Intermediate Government, Short-Term Income,
Strategic Fixed Income, Intermediate Municipal Bond, Municipal Income,
Short-Term Municipal Income, Capital Growth, Emerging Growth, Value and Balanced
Assets Funds and the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds.
NationsBank Fixed Income Style. The Nations Diversified Income, Government
Securities, Short-Intermediate Government, Short-Term Income, Strategic Fixed
Income, Intermediate Municipal Bond, Municipal Income, Florida Intermediate
Municipal Bond, Georgia Intermediate Municipal Bond, Maryland Intermediate
Municipal Bond, North Carolina Intermediate Municipal Bond, South Carolina
Intermediate Municipal Bond, Tennessee Intermediate Municipal Bond, Texas
Intermediate Municipal Bond, Virginia Intermediate Municipal Bond Fund,
Short-Term Municipal Income Fund and the State Municipal Bond Funds are managed
by the Adviser using the NationsBank Fixed Income Style. The NationsBank Fixed
Income Style investment philosophy is premised on the belief that a well
diversified portfolio of fixed income securities that emphasizes a combination
of investments strategies will capture relative value in the bond market.
In order to pursue this goal, the Fixed Income Style includes certain
biases. The Adviser reduces the risk by investing in many different issuers.
This is done by setting a maximum percentage permitted of any single issuer in
any portfolio. Focus on high credit quality is the second bias. Holdings are
concentrated in the upper end of the quality spectrum. Securities of less than
the highest quality are used only when the team of credit analysts support the
conclusion that the quality will remain stable or improve, and that it offers
attractive potential in expected return. The third bias is to de-emphasize
interest rate forecasts. The performance of a portfolio therefore is not held
hostage to the accuracy of a rate forecast.
This philosophy attempts to achieve consistent results while minimizing
risk. Five strategies are also utilized by the Fixed Income Style Group
Portfolio Managers to meet this objective.
Sector Spread Anomalies: When sectors of the bond market are over or under
valued, the allocation in the portfolios is adjusted accordingly. Such decisions
are made based on a sound analysis of historical bond values as well as a review
of current market conditions and its impact on future values.
Yield Curve Anomalies: Unusual shapes in the yield curve or the degree of
steepness in the yield curve provide opportunities to outperform fixed income
indices. Such opportunities are reviewed by our specialists for return
enhancement under a variety of possible interest rate shifts before they are
implemented.
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<PAGE>
Coupon/Quality Opportunities: High or low coupon securities may represent
investment value based on supply and demand conditions for bonds. There
are also times when upgrading or downgrading of the credit quality of
a bond can enhance a portfolio's return. Funds hold lower quality
bonds only when the expected reward is substantial compared to the
potential risks, and credit analysis supports the conclusion that
the credit quality is stable or improving.
Security Analysis: A full staff of credit analysts is dedicated to
supporting fixed income credit decisions. This staff gains additional support
from a substantial equity research team when analyzing bonds from corporate
issuers.
Duration Management: The duration (price volatility of a bond in relation
to interest rate movements) of the portfolios may be altered by 10% shorter or
longer than the portfolios normal benchmark. Changes in duration are made
infrequently and only when they are supported by economic expectations and an
assessment of value.
A final portfolio consists of securities that have been selected by the
Fixed Income Style Group Portfolio Managers, in-house industry specialists and
expert Wall Street sources all working together.
NationsBank Growth Equity Style. The Capital Growth and Emerging Growth
Funds are managed by the Adviser using the NationsBank Growth Equity style. The
NationsBank Growth Equity Style investment philosophy seeks companies with
superior growth prospects selling at reasonable prices that, over time, should
outperform the market.
Emphasis is placed on a "value adjusted for growth" stock selection
process. Essential to this style is the Adviser's belief that absolute valuation
does not capture the powerful effects of inflation. Therefore, relative
price/earnings ranges of stocks going back 5 years are examined rather than
static absolute price/earnings ratio.
Inflation causes the market price/earnings ratio of a stock to expand or
contract. Investors are willing to pay a higher price for stock in a company in
periods of low inflation. The inverse is also true. The premium paid for growth
will increase as inflation declines and decreases as inflation rises.
The stock selection process begins with a universe of financially strong
companies. The selection process selects companies with a market capitalization
greater than $500 million (large, established companies) and a strong price
momentum (growth in share price over the last 18 months). This results in a
universe of approximately 750 companies.
These 750 companies are the universe from which the Adviser's industry
specialists make their final decision for inclusion in an investment portfolio.
In accordance with the Growth Equity Style, portfolio managers focus on those
stocks among the universe with the lowest price/earnings ratio and are in
industries with above average earnings growth potential. The final portfolio of
stocks is then constructed by our Growth Equity Group Senior Portfolio Managers
who work closely with the in-house industry specialists, as well as expert Wall
Street sources.
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<PAGE>
In summary, the Growth Equity Style seeks to produce a diverse portfolio
of large capitalization growth stocks, that over time, should outperform the
market.
NationsBank Value Equity Style. The Value Fund is managed by the Adviser
using the NationsBank Value Equity Style. The Value Equity Style investment
philosophy is premised on the belief that a well diversified portfolio of
undervalued companies exhibiting low price/earnings ratios will over time
outperform the market while incurring lower than market risk.
This style utilizes a "bottom-up" approach to stock selection, focusing on
well proven factors of fundamental valuation. A low price/earnings ratio and
above market dividend yield are two of the biases which reduce market risk. A
catalyst for earnings improvement is also one of this Style's requirements as it
assists with the "timing" of the purchase of a particular company.
Stock selection process begins with a team of 10 in-house research
specialists aided by a computerized screening model. Starting with approximately
a 2,000 company universe, stocks must first pass a rigorous screening process
that selects only those companies that possess strong financial quality and a
market capitalization greater than $500 million. This results in a universe of
approximately 900 companies, representing all of the 54 major U.S. industries
and approximately 10 economic sectors.
A more sophisticated screening process is then applied to the 900 company
universe. The companies are then ranked based on the following factor
weightings:
The top one-third, or approximately 300 companies, result in the final
universe from which the industry specialists make initial selections for a Fund.
To insure adherence to the discipline, price objectives (buy and sell prices)
are set for each company purchased, based on sound fundamental analysis. A final
diversified portfolio of approximately 65 issues is constructed by the Value
Equity Style Group Senior Portfolio Managers working closely with in-house
industry specialists, as well as expert Wall Street sources.
In summary, the low price/earnings ratio, value discipline seeks to
produce a well diversified portfolio of high quality companies, that over time,
should outperform the market, thereby adding value while incurring below-market
risk.
NationsBank Balanced Asset Style. The Nations Balanced Assets Fund is
managed by the Adviser using the NationsBank Balanced Assets Style. The
NationsBank Balanced Asset Style investment philosophy is premised on the belief
that a diversified portfolio of stocks, fixed income, and money market
securities will provide total investment return through a combination of growth
of capital and current income consistent with preservation of capital.
In order to pursue this goal, the Balanced Asset Style utilizes an asset
allocation approach. Asset allocation is a process of allocating a portfolio's
market value among major asset classes (equities, fixed income, and cash
equivalents). Different asset classes have unique return and risk
characteristics. The principle behind asset allocations is that a diversified
portfolio of equities, fixed income, and cash equivalents with different
return/risk characteristics will reduce overall portfolio risk in both up and
down markets.
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<PAGE>
The asset allocation process begins by making projections for stock, bond
and cash returns and risk profiles. A computer data analysis
identifies the highest expected return and measures it against the
minimum return requirements for the balanced strategy.
Recommendations are made to an Investment Policy Committee who
reviews and approves asset class allocations.
The stock, bond and asset allocation recommendations are then passed onto
the Balanced Asset Group Senior Portfolio Managers who make the final investment
decisions. The Portfolio Managers have the ability to change the portfolio's
holdings to take advantage of changing market conditions, while seeking an
optimal balance of income, stability, and growth. Most stock investments will be
made in companies with above average earnings and dividend prospects and overall
financial market stability. All bond purchases will be investment grade or
above. Cash instruments will provide liquidity.
In summary, the Balanced Asset Style should provide total investment
return through a combination of growth of capital and current income consistent
with preservation of capital.
NationsBank Disciplined Equity Style. The Nations Disciplined Equity Fund
is managed by the Adviser using the NationsBank Disciplined Equity Style. The
NationsBank Disciplined Equity Style investment philosophy seeks to identify
companies which offer future near-term earnings momentum.
The Adviser pursues this investment philosophy through the use of a
proprietary computerized tracking system which monitors the earnings per share
estimates of approximately 3,000 Wall Street analysts, and through conventional
security analysis. In utilizing the computerized tracking system, the Adviser
identifies companies with respect to which there has been a change in the
consensus analyst estimate of earnings per share. The Adviser believes that such
a change often signifies the beginning of a trend for the company, rather than
an isolated occurrence, and that such trend ultimately will be reflected in the
share price of the company. The Adviser then buys or sells stocks for the Fund
based on the results of this analysis.
In selecting stocks pursuant to the NationsBank Disciplined Equity Style,
the Adviser also uses conventional security analysis techniques. Starting with a
universe of approximately 2,000 companies with large market capitalizations, the
Adviser eliminates stocks that have relatively low trading activity, as well as
stocks of companies of poor credit quality and those which, in the opinion of
the Adviser, are overpriced. From the available pool of stocks that meet all of
the criteria, approximately 40 to 50 are selected for inclusion in the Fund's
portfolio.
The Adviser strives to keep the assets of the Fund fully invested at all
times, except as required to meet expected liquidity needs.
Administrator and Co-Administrator
Effective September 1, 1993 (the "Transition Date"), Stephens Inc. (the
"Administrator) began serving as administrator of the Trust and The Shareholder
Services, Inc. (formerly The Boston Company Advisors, Inc.), began serving as
the co-administrator of the Trust (the "Co-Administrator"). From February 19,
1992 to the Transition Date, The Boston Company
86
<PAGE>
Advisors, Inc. served as the sole administrator of the Trust. Prior
to February 19, 1992, The Boston Company Advisors, Inc. and Provident
Financial Processing Corporation served as co-administrators for the
Trust.
The Administrator and Co-Administrator serve under an administration
agreement ("Administration Agreement") and co-administration agreement
("Co-Administration Agreement"), respectively, each of which was approved by the
Board of Trustees on August 4, 1993. The Administrator receives, as compensation
for its services rendered under the Administration Agreement and as agent for
the Co-Administrator for the services it provides under the Co-Administration
Agreement, an administrative fee, computed daily and paid monthly, at the annual
rate of 0.10% of the average daily net assets of each Fund.
Pursuant to the Administration Agreement, the Administrator has agreed to,
among other things, (i) maintain office facilities for the Funds, (ii) furnish
statistical and research data, data processing, clerical, and internal executive
and administrative services to the Trust, (iii) furnish corporate secretarial
services to the Trust, including coordinating the preparation and distribution
of materials for Board of Trustees meetings, (iv) coordinate the provision of
legal advice to the Trust with respect to regulatory matters, (v) coordinate the
preparation of reports to the Trust's shareholders and the SEC, including annual
and semi-annual reports, (vi) coordinate the provision of services to the Trust
by the Co-Administrator, the Transfer Agents and the Custodian, and (vii)
generally assist in all aspects of the Trust's operations. Additionally, the
Administrator is authorized to receive, as agent for the Co-Administrator, the
fees payable to the Co-Administrator by the Trust for its services rendered
under the Co-Administration Agreement. The Administrator bears all expenses
incurred in connection with the performance of its services.
Pursuant to the Co-Administration Agreement, the Co-Administrator has
agreed to, among other things, (i) provide accounting and bookkeeping services
for the Funds, (ii) compute each Fund's net asset value and net income, (iii)
accumulate information required for the Trust's reports to shareholders and the
SEC, (iv) prepare and file the Trust's federal and state tax returns, (v)
perform monthly compliance testing for the Trust, and (vi) prepare and furnish
the Trust monthly broker security transaction summaries and transaction listings
and performance information. The Co-Administrator bears all expenses incurred in
connection with the performance of its services.
The Administration Agreement and the Co-Administration Agreement may be
terminated by a vote of a majority of the Board of Trustees, or by the
Administrator or Co-Administrator, respectively, on 60 days' written notice
without penalty. The Administration Agreement and Co-Administration Agreement
are not assignable without the written consent of the other party. Furthermore,
the Administration Agreement and the Co-Administration Agreement provide that
the Administrator and Co-Administrator, respectively, shall not be liable to the
Funds or to their shareholders except in the case of the
Administrator's or Co-Administrator's, respectively, willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
The table set forth on the following page states the net administration
fees paid and the administration fees waived for the fiscal years ended November
30, 1994, 1993 and 1992 (where applicable).
87
<PAGE>
<TABLE>
<CAPTION>
Administration Fees
FY 1994 FY 1993 FY 1992
---------------------- --------------------- ---------------------
Net Fees Fees Net Fees Fees Net Fees Fees
Paid Waived Paid Waived Paid Waived
<S> <C> <C> <C> <C> <C> <C>
Nations Government Money Market $119,102 $70,972 $467,652 $ 49,462 $374,069 $ 59,101
Nations Tax Exempt Fund 864,933 81,883 640,529 65,939 151,000 26,535
Nations Value Fund 866,305 12,070 462,457 46,608 174,184 29,495
Nations Capital Growth Fund 664,272 53,278 643,393 68,060 94,292
0
Nations Emerging Growth Fund 159,098 12,760 89,840 N/A N/A
9,086
Nations Disciplined Equity Fund 5,026 414 N/A N/A N/A
N/A
Nations Equity Index Fund 94,857 12,305 N/A N/A N/A
N/A
Nations Balanced Assets Fund 222,852 17,874 152,127 15,736 14,486 0
Nations Short-Intermediate
Government Fund 591,720 47,459 560,032 58,583 229,661 280,271
Nations Short-Term Income Fund 225,440 18,081 212,247 23,361 28,042
0
Nations Diversified Income Fund 77,134 6,187 39,864 4,009 1,520
0
Nations Strategic Fixed Income Fund 513,885 411,216 498,2790 54,185 36,471
0
Nations Municipal Income Fund 114,802 9,208 108,157 11,195 47,087 11,847
Nations Short-Term Municipal
Income Fund 26,208 15,857 0 N/A N/A
974
Nations Intermediate Municipal
Bond Fund 14,603 22,058 7,488 497 N/A N/A
Nations Florida Intermediate
Municipal Bond Fund 47,598 3,818 24,253 2,391 N/A N/A
Nations Georgia Intermediate
Municipal Bond Fund 51,400 4,122 38,930 4,023 10,918 1,417
Nations Maryland Intermediate
Municipal Bond Fund 88,663 7,112 76,764 8,007 49,636 9,043
Nations North Carolina
Intermediate Municipal Bond
Fund 28,281 2,268 19,146 1,955 N/A N/A
Nations South Carolina
Intermediate Municipal Bond
Fund 83,775 6,719 68,874 7,183 25,470 2,418
Nations Tennessee Intermediate
Municipal Bond Fund 16,481 1,322 10,279 926 N/A N/A
Nations Texas Intermediate
Municipal Bond Fund 32,717 2,624 16,266 1,554 N/A N/A
Nations Virginia Intermediate
Municipal Bond Fund 275,016 22,058 254,140 26,373 205,170 12,684
Nations Florida Municipal
Bond Fund 14,712 9,995 0 945 N/A N/A
Nations Georgia Municipal
Bond Fund 4,780 4,089 0 435 N/A N/A
Nations Maryland Municipal
Bond Fund 2,124 1,817 0 271 N/A N/A
Nations North Carolina Municipal
Bond Fund 13,262 8,288 0 985 N/A N/A
Nations South Carolina Municipal
Bond Fund 4,113 3,518 0 361 N/A N/A
Nations Tennessee Municipal
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<PAGE>
Bond Fund 3,001 1,828 0 289 N/A N/A
Nations Texas Municipal Bond
Fund 6,454 5,522 0 530 N/A N/A
Nations Virginia Municipal
Bond Fund 6,580 5,629 0 578 N/A N/A
</TABLE>
89
<PAGE>
As discussed under the caption "Expenses," the Administrator will be
required to reduce its fee from the Trust, in direct proportion to the fees
payable to the Adviser and the Administrator by the Trust, if the expenses of
the Trust exceed the applicable expense limitation of any state in which the
Funds' shares are registered or qualified for sale.
Custodian and Transfer Agent
NationsBank of Texas, N.A., serves as custodian for the fund securities
and cash of each Fund. As custodian, NationsBank of Texas, N.A., maintains
custody of such Funds' securities, cash and other property, delivers securities
against payment upon sale and pays for securities against delivery upon
purchase, makes payments on behalf of such Funds for payments of dividends,
distributions and redemptions, endorses and collects on behalf of such Funds all
checks, and receives all dividends and other distributions made on securities
owned by such Funds. For such services, NationsBank of Texas, N.A., 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 amortized cost value of the Money Market Funds'
investments and the average daily net assets of each Non-Money Market Fund, (ii)
$10.00 per repurchase collateral transaction by each Fund, and (iii) $15.00 per
purchase, sale and maturity transaction involving each Fund. NationsBank of
Texas, N.A. is a wholly owned subsidiary of NationsBank Corp.
The Shareholder Services Group, Inc. ("TSSG"), which is located at One
Exchange Place, Boston, Massachusetts 02109, acts as transfer agent for the
Trust's Shares. Under the transfer agency agreements, the transfer agent
maintains the shareholder account records for the Trust, handles certain
communications between shareholders and the Trust, and distributes dividends and
distributions payable by the Trust to shareholders, and produces statements with
respect to account activity for the Trust and its shareholders for these
services. The transfer agent receives a monthly fee computed on the basis of the
number of shareholder accounts that it maintains for the Trust during the month
and is reimbursed for out-of-pocket expenses. NationsBank of Texas, N.A., 901
Main Street, Dallas, Texas 75201, serves as sub-transfer agent for each Fund's
Trust A and Trust B Shares.
Shareholder Servicing Agreements (Trust B Shares Only)
As stated in the Prospectuses for the Trust Shares, the Trust has a
Shareholder Servicing Plan with respect to the Trust B Shares for
each of the Funds except the Value Fund, Capital Growth Fund,
Emerging Growth Fund, Disciplined Equity Fund, Equity Index Fund,
Balanced Assets Fund, Short-Intermediate Government Fund, Short-Term
Income Fund, Diversified Income Fund, Strategic Fixed Income Fund
and Managed Index Fund. Pursuant to the Shareholder Servicing Plan,
the Trust has entered into agreements with certain banks pertaining to
the provision of administrative services to their customers who
may from time to time own of record or beneficially Trust B Shares
("Customers") in consideration for the payment of up to 0.25% (on an
annualized basis) of the average daily net asset value of such shares.
Such services may include: (i) aggregating and processing purchase,
exchange and redemption requests for shares from Customers and
transmitting promptly net purchase and redemption orders with the
Distributor or the transfer agents; (ii) providing Customers with a
service that invests the assets of their accounts in shares pursuant to
specific or pre-authorized instructions; (iii) processing
90
<PAGE>
dividend and distribution payments from the Funds on behalf of Customers;
(iv) providing information periodically to Customers including
information showing their position in shares; (v) responding to
Customer inquiries concerning their investment in shares; (vi)
providing sub-accounting with respect to shares beneficially owned
by Customers or the information necessary for sub-accounting; (vii)
if required by law, forwarding shareholder communications (such as
proxies, shareholder reports annual and semi-annual financial
statements and dividend, distribution and tax notices) to Customers;
(viii) forwarding to Customers proxy statements and proxies
containing any proposals regarding the Shareholder Servicing Agreements
or Shareholder Services Plan; (ix) arranging for bank wires; (x)
providing general shareholder liaison services; and (xi) providing
such other similar services as may reasonably be requested to the
extent permitted under applicable statutes, rules or
regulations.
Shareholder Administration Plan (Trust B Shares Only)
As stated in the Prospectus describing the Trust B Shares of the Value
Fund, Capital Growth Fund, Emerging Growth Fund, Disciplined Equity Fund, Equity
Index Fund, Balanced Assets Fund, Short-Intermediate Government Fund, Short-Term
Income Fund, Diversified Income Fund, Strategic Fixed Income Fund and Managed
Index Fund, the Trust has a separate Shareholder Administration Plan (the
"Administration Plan") with respect to such shares. Pursuant to the
Administration Plan, the Trust may enter into agreements ("Administration
Agreements") with broker/dealers, banks and other financial institutions that
are dealers of record or holders of record or which have a servicing
relationship with the beneficial owners of Non-Money Market Fund Trust B Shares
("Servicing Agents"). The Administration Plan provides that pursuant to the
Administration Agreements, Servicing Agents shall provide the shareholder
support services as set forth therein to their customers who may from time to
time own of record or beneficially Trust B Shares in consideration for the
payment of up to 0.60% (on an annualized basis) of the net asset value of such
shares. Such services may include: (i) aggregating and processing purchase,
exchange and redemption requests for Trust B Shares from Customers and
transmitting promptly net purchase and redemption orders with the Distributor or
the transfer agents; (ii) providing Customers with a service that invests the
assets of their accounts in Trust B Shares pursuant to specific or
pre-authorized instructions; (iii) processing dividend and distribution payments
from the Trust on behalf of Customers; (iv) providing information periodically
to Customers showing their positions in Trust B Shares; (v) arranging for bank
wires; (vi) responding to Customer inquiries concerning their investment in
Trust B Shares; (vii) providing sub-accounting with respect to Trust B Shares
beneficially owned by Customers or the information necessary for sub-accounting;
(viii) if required by law, forwarding shareholder
communications (such as proxies, shareholder reports annual and semi-annual
financial statements and dividend, distribution and tax notices) to Customers;
(ix) forwarding to Customers proxy statements and proxies containing any
proposals regarding an Administration Agreement; (x) employee benefit plan
recordkeeping, administration, custody and trustee services; (xi) general
shareholder liaison services and (xii) providing such other similar services as
may reasonably be requested to the extent permitted under applicable statutes,
rules, or regulations.
The Administration Plan also provides that in no event may the portion of
the shareholder administration fee that constitutes a "service fee," as the term
is defined in NASD Service Plan Rule, exceed 0.25% of the average daily net
asset value of the Trust B Shares of the relevant
91
<PAGE>
Funds. In addition, to the extent any portion of the fees payable
under the Plan is deemed to be for services primarily intended to
result in the sale of Fund shares, such fees are deemed approved and
may be paid under the Administration Plan. Accordingly, the
Administration Plan has been approved and will be operated pursuant
to Rule 12b-1 under the 1940 Act. Such plan shall continue in
effect as long as the Board of Trustees, including a majority of the
Qualified Trustees, specifically approves the plan at least annually.
Distribution Plans and Shareholder Servicing Arrangements for
Investor Shares
Previous Plans. Prior to September 28, 1992, the Investor A Shares of the
Government Money Market Fund, Tax Exempt Fund, Value Fund, Short-Intermediate
Government Fund, Municipal Income Fund, Georgia Intermediate Municipal Bond
Fund, Maryland Intermediate Municipal Bond Fund, South Carolina Intermediate
Municipal Bond Fund and Virginia Intermediate Municipal Bond Fund, were subject
to a Shareholder Servicing Plan substantially similar to the plan described
above. The Shareholder Servicing Plan was terminated on September 27, 1992 with
regard to each such Fund.
Under a superseded shareholder servicing plan which related only to
certain non-fiduciary shares in the Tax Exempt Fund, Sovran received certain
fees. For the fiscal years ended November 30, 1990, and 1989, the Trust paid
Sovran (after waivers) $204,919, and $176,411, respectively, for services
provided by Sovran pursuant to that terminated plan.
Investor A Shares. The Trust has adopted a revised Amended and Restated
Shareholder Servicing and Distribution Plan (the "Investor A Plan") pursuant to
Rule 12b-1 under the 1940 Act with respect to the Investor A Shares of the
Funds. The Investor A Plan provides that each Fund may pay the Distributor or
banks, broker/dealers or other financial institutions that offer shares of the
Fund and that have entered into a Sales Support Agreement with the Distributor
("Selling Agents") or a Shareholder Servicing Agreement with Nations Fund Trust
("Servicing Agents"), up to 0.10% (on an annualized basis) of the average daily
net asset value of Investor A Shares of the Money Market Funds and up to 0.25%
(on an annualized basis) of the average daily net asset value of the Non-Money
Market Funds.
Such payments may be made to (i) the Distributor for reimbursements of
distribution-related expenses actually incurred by the Distributor, including,
but not limited to, expenses of organizing and conducting sales seminars,
printing of prospectuses and statements of additional information (and
supplements thereto) and reports for other than existing shareholders,
preparation and distribution of advertising material and sales literature and
costs of administering the Investor A Plan, or (ii) Selling Agents that have
entered into a Sales Support Agreement with the Distributor for providing sales
support assistance in connection with the sale of Investor A Shares. The sales
support assistance provided by a Selling Agent under a Sales Support Agreement
may include forwarding sales literature and advertising provided by Nations Fund
Trust or the Distributor to their customers and providing such other sales
support assistance as may be requested by the Distributor from time to time.
Currently, substantially all fees paid by the Money Market Funds pursuant to the
Investor A Plan are paid to compensate Selling Agents
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<PAGE>
for providing sales support services, with any remaining amounts
being used by the Distributor to partially defray other expenses
incurred by the Distributor in distributing Investor A Shares.
Payments under the Investor A Plan by each Non-Money Market Fund (except
the Short-Term Income Fund and the Short-Term Municipal Income Fund) also may be
made to Servicing Agents that have entered into a Shareholder Servicing
Agreement with Nations Fund Trust for providing shareholder support services to
their Customers which hold of record or beneficially Investor A Shares of a
Non-Money Market Fund. Such shareholder support services provided by Servicing
Agents to holders of Investor A Shares of such Funds may include (i) aggregating
and processing purchase and redemption requests for Investor A Shares from their
Customers and transmitting promptly net purchase and redemption orders to our
distributor or transfer agent; (ii) providing their Customers with a service
that invests the assets of their accounts in Investor A Shares pursuant to
specific or pre-authorized instructions; (iii) processing dividend and
distribution payments from Nations Fund Trust on behalf of their Customers; (iv)
providing information periodically to their Customers showing their positions in
Investor A Shares; (v) arranging for bank wires; (vi) responding to their
Customers' inquiries concerning their investment in Investor A Shares; (vii)
providing subaccounting with respect to Investor A Shares beneficially owned by
their Customers or the information to us necessary for subaccounting; (viii) if
required by law, forwarding shareholder communications from Nations Fund Trust
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to their Customers; (ix)
forwarding to their Customers proxy statements and proxies containing any
proposals regarding the Shareholder Servicing Agreement; (x) providing general
shareholder liaison services; and (xi) providing such other similar services as
Nations Fund Trust may reasonably request to the extent the Selling Agent is
permitted to do so under applicable statutes, rules or regulations. The Money
Market Funds, the Short-Term Income Fund and the Short-Term Municipal Income
Fund may not pay for personal services and/or the maintenance of shareholder
accounts, as such terms are interpreted by the NASD, under the Investor A Plan.
Expenses incurred by the Distributor pursuant to the Investor A Plan in
any given year may exceed the sum of the fees received under the
Investor A Plan. Any such excess may be recovered by the Distributor
in future years so long as the Investor A Plan is in effect. If the
Investor A Plan were terminated or not continued, a Fund would not
be contractually obligated to pay the Distributor for any expenses
not previously reimbursed by the Fund. Fees received by the
Distributor pursuant to the Investor A Plan will not be used to pay any
interest expenses, carrying charges or other financing costs (except to
the extent permitted by the SEC) and will not be used to pay any
general and administrative expenses of the Distributor.
In addition, the Trust has adopted an Amended and Restated Shareholder
Servicing Plan for the Investor A Shares of the Money Market Funds, the
Short-Term Income Fund and the Short-Term Municipal Income Fund (the "Investor A
Servicing Plan"). Pursuant to the Investor A Servicing Plan, each such Fund may
pay banks, broker/dealers or other financial institutions that have entered into
a Shareholder Servicing Agreement with the Trust ("Servicing Agents") up to
0.25% (on an annualized basis) of the average daily net asset value of the
Investor A Shares of each Fund for providing shareholder support services. Such
shareholder support services provided by Servicing Agents may include those
shareholder support services discussed above
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with respect to the Investor A Plan. Fees paid pursuant to the
Investor A Servicing Plan are calculated daily and paid monthly.
Investor C Shares of the Non-Money Market Funds and Investor B Shares of
the Money Market Funds. As stated in the Prospectuses, the Trustees of the Trust
have approved an Amended and Restated Distribution Plan (the "Investor C/B
Plan") in accordance with Rule 12b-1 under the 1940 Act for the Investor C
Shares of the Non-Money Market Funds and Investor B Shares of Money Market
Funds. Pursuant to the Investor C/B Plan, a Fund may pay the Distributor for
certain expenses that are incurred in connection with sales support services.
Payments under the Investor C/B Plan will be calculated daily and paid monthly
at a rate set from time to time by the Board of Trustees provided that the
annual rate may not exceed 0.75% of the average daily net asset value of
Investor C Shares of a Non-Money Market Fund and 0.10% of the average daily net
asset value of Investor B Shares of a Money Market Fund. Payments to the
Distributor pursuant to the Investor C/B Plan will be used (i) to compensate
banks, other financial institutions or a securities broker/dealer that have
entered into a Sales Support Agreement with the Distributor ("Selling Agents")
for providing sales support assistance relating to Investor Shares covered by
the Plan, (ii) for promotional activities intended to result in the sale of
Investor Shares covered by the Plan 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 Shares covered by the Plan. Currently, substantially all fees paid
pursuant to the Investor C/B Plan are paid to compensate Selling Agents for
providing the services described in (i) and (iii) above, with any remaining
amounts being used by the Distributor to partially defray other expenses
incurred by the Distributor in distributing Investor C Shares of a Non-Money
Market Fund and Investor B Shares of a Money Market Fund. Fees received by the
Distributor pursuant to the Investor C/B Plan will not be used to pay any
interest expenses, carrying charges or other financing costs (except to the
extent permitted by the SEC) and will not be used to pay any general and
administrative expenses of the Distributor.
Pursuant to the Investor C/B Plan, the Distributor may enter into Sales
Support Agreements with Selling Agents for providing sales support
services to their Customers who are the record or beneficial owners of
Investor C/B Shares of a Non-Money Market Fund and Investor B Shares of
a Money Market Fund. Such Selling Agents will be compensated at
the annual rate of up to 0.75% of the average daily net asset value of
the Investor C Shares of the Non-Money Market Funds, and up to 0.10%
of the average daily net asset value of the Investor B Shares of the
Money Market Funds held of record or beneficially by such
Customers. The sales support services provided by Selling Agents
may include providing distribution assistance and promotional
activities intended to result in the sales of shares such as paying for
the preparation, printing and distribution of prospectuses to other than
current shareholders. Fees paid pursuant to the Investor C/B Plan are
accrued daily and paid monthly, and are charged as expenses of Shares
of a Fund as accrued. Expenses incurred by the Distributor pursuant
to the Investor C/B Plan in any given year may exceed the sum of the
fees received under the Investor C/B Plan and payments received
pursuant to contingent deferred sales charges. Any such excess may be
recovered by the Distributor in future years so long as the Investor
C/B Plan is in effect. If the Investor C/B Plan were terminated or
not continued, a Fund would not be contractually obligated
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<PAGE>
to pay the Distributor for any expenses not previously reimbursed
by the Fund or recovered through contingent deferred sales charges.
In addition, the Trustees have approved an Amended and Restated
Shareholder Servicing Plan with respect to Investor C Shares of the Non-Money
Market Funds and Investor B Shares of the Money Market Funds (the "Investor C/B
Servicing Plan"). Pursuant to its Investor C/B Servicing Plan, each Fund may pay
banks, broker/dealers or other financial institutions that have entered into a
Shareholder Servicing Agreement with the Trust ("Servicing Agents") for certain
expenses that are incurred by the Servicing Agents in connection with
shareholder support services that are provided by the Servicing Agents. Payments
under a Fund's Investor C/B Servicing Plan will be calculated daily and paid
monthly at a rate set from time to time by the Board of Trustees, provided that
the annual rate may not exceed 0.25% of the average daily net asset value of
each Fund's Investor C or Investor B Shares, as appropriate. The shareholder
services provided by the Servicing Agents may include (i) aggregating and
processing purchase and redemption requests for Investor Shares covered by the
Plan from Customers and transmitting promptly net purchase and redemption orders
to our distributor or transfer agent; (ii) providing Customers with a service
that invests the assets of their accounts in Investor Shares covered by the Plan
pursuant to specific or pre-authorized instructions; (iii) processing dividend
and distribution payments from the Trust on behalf of Customers; (iv) providing
information periodically to Customers showing their positions in Investor Shares
covered by the Plan; (v) arranging for bank wires; (vi) responding to Customers'
inquiries concerning their investment in Investor Shares covered by the Plan;
(vii) providing subaccounting with respect to Investor Shares covered by the
Plan beneficially owned by Customers or providing the information to us
necessary for subaccounting; (viii) if required by law, forwarding shareholder
communications from the Trust (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
Customers; (ix) forwarding to Customers proxy statements and proxies containing
any proposals regarding the Shareholder Servicing Agreement; (x) providing
general shareholder liaison services; and (xi) providing such other similar
services as the Trust may reasonably request to the extent the Servicing Agent
is permitted to do so under applicable statutes, rules or regulations.
Investor D Shares of the Money Market Funds. The Trustees have approved a
Distribution Plan (the "Investor D Distribution Plan") with respect to
Investor D Shares of the Money Market Funds. Pursuant to the Investor
D Distribution Plan, a Money Market Fund may compensate or reimburse
the Distributor for any activities or expenses primarily intended
to result in the sale of a Fund's Investor D Shares, including for
sales related services provided by banks, broker/dealers or other
financial institutions that have entered into a Sales Support
Agreement relating to the Investor D Shares with the Distributor
("Selling Agents"). Payments under a Fund's Investor D Distribution Plan
will be calculated daily and paid monthly at a rate or rates set from
time to time by the Board of Trustees provided that the annual rate may
not exceed 0.45% of the average daily net asset value of each Money
Market Fund's Investor D Shares.
The fees payable under the Investor D Distribution Plan are used primarily
to compensate or reimburse the Distributor for distribution services provided by
it, and related expenses incurred, including payments by the Distributor to
compensate or reimburse Selling Agents, for sales support services provided, and
related expenses incurred, by such Selling Agents. Payments under the Investor D
Distribution Plan may be made with respect to preparation, printing and
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<PAGE>
distribution of prospectuses, sales literature and advertising materials by the
Distributor or, as applicable, Selling Agents, attributable to distribution or
sales support activities, respectively, commissions, incentive compensation or
other compensation to, and expenses of, account executives or other employees of
the Distributor or Selling Agents, attributable to distribution or sales support
activities, respectively; overhead and other office expenses of the Distributor
relating to the foregoing (which may be calculated as a carrying charge in the
Distributor's or Selling Agents' unreimbursed expenses), incurred in connection
with distribution or sales support activities. The overhead and other office
expenses referenced above may include, without limitation, (i) the expenses of
operating the Distributor's or Selling Agents' offices in connection with the
sale of Fund shares, including lease costs, the salaries and employee benefit
costs of administrative, operations and support personnel, utility costs,
communication costs and the costs of stationery and supplies, (ii) the costs of
client sales seminars and travel related to distribution and sales support
activities, and (iii) other expenses relating to distribution and sales support
activities.
In addition, the Trustees have approved a Shareholder Servicing Plan with
respect to Investor D Shares of the Money Market Funds (the "Investor D
Servicing Plan"). Pursuant to the Investor D Servicing Plan, a Fund may
compensate or reimburse banks, broker/dealers or other financial institutions
that have entered into a Shareholder Servicing Agreement with the Trust
("Servicing Agents") for certain activities or expenses of the Servicing Agents
in connection with shareholder services that are provided by the Servicing
Agents. Payments under the Investor D Servicing Plan will be calculated daily
and paid monthly at a rate or rates set from time to time by the Board of
Trustees, provided that the annual rate may not exceed 0.25% of the average
daily net asset value of the Investor D Shares of the Money Market Funds.
The fees payable under the Investor D 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 such Investor D Shares from Customers and
transmitting promptly net purchase and redemption orders to the Distributor or
Transfer Agent; (ii) providing Customers with a service that invests the assets
of their accounts in such Investor D Shares pursuant to specific or
pre-authorized instructions; (iii) processing dividend and distribution payments
from the Trust on behalf of Customers; (iv) providing information periodically
to Customers showing their positions in such Investor D Shares; (v) arranging
for bank wires; (vi) responding to Customers' inquiries concerning their
investment in such Investor D Shares; (vii) providing sub-accounting with
respect to such Investor D Shares beneficially owned by Customers or providing
the information to us necessary for sub-accounting; (viii) if required by law,
forwarding shareholder communications from the Trust (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; (ix) forwarding to Customers proxy
statements and proxies containing any proposals regarding the Investor D
Servicing Plan or related agreements; (x) providing general shareholder liaison
services; and (xi) providing such other similar services as the Trust may
reasonably request to the extent such Servicing Agent is permitted to do so
under applicable statutes, rules or regulations.
The fees payable under the Investor D Distribution Plan and Investor D
Servicing Plan (together, the "Investor D Plans") are treated by the Funds as an
expense in the year they are
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<PAGE>
accrued. At any given time, a Selling Agent and/or
Servicing Agent may incur expenses in connection with services provided pursuant
to its agreements with the Distributor under the Investor D Plans which exceed
the total of (i) the payments made to the Selling Agents and Servicing Agents by
the Distributor or Nations Fund and reimbursed by the Fund pursuant to the
Investor D Plans, and (ii) the proceeds of contingent deferred sales charges
paid to the Distributor and reallowed to the Selling Agent, upon the redemption
of their Customers' Investor D Shares. Any such excess expenses may be recovered
in future years, so long as the Investor D Plans are in effect. Because there is
no requirement under the Investor D Plans that the Distributor be paid or the
Selling Agents and Servicing Agents be compensated or reimbursed for all their
expenses or any requirement that the Investor D Plans be continued from year to
year, such excess amount, if any, does not constitute a liability to a Fund or
the Distributor. Although there is no legal obligation for the Fund to pay
expenses incurred by the Distributor, a Selling Agent or a Servicing Agent in
excess of payments previously made to the Distributor under the Investor D Plans
or in connection with contingent deferred sales charges, if for any reason the
Investor D Plans are terminated, the Trustees will consider at that time the
manner in which to treat such expenses.
Investor N Shares of the Non-Money Market Funds. As stated in the
Prospectuses for the Investor N Shares of the Non-Money Market Funds, the
Trustees have approved a Distribution Plan (the "Investor N Distribution Plan")
with respect to Investor N Shares of the Non-Money Market Funds (except the
Managed Index Fund which does not offer Investor N Shares). Pursuant to the
Investor N Distribution Plan, a Fund may compensate or reimburse the Distributor
for any activities or expenses primarily intended to result in the sale of the
Fund's Investor N Shares, including for sales related services provided by
banks, broker/dealers or other financial institutions that have entered into a
Sales Support Agreement relating to the Investor N Shares with the Distributor
("Selling Agents"). Payments under a Fund's Investor N Distribution Plan will be
calculated daily and paid monthly at a rate or rates set from time to time by
the Board of Trustees provided that the annual rate may not exceed 0.75% of the
average daily net asset value of each Non-Money Market Fund's Investor N Shares.
The fees payable under the Investor N Distribution Plan are used primarily
to compensate or reimburse the Distributor for distribution services provided by
it, and related expenses incurred, including payments by the Distributor to
compensate or reimburse Selling Agents, for sales support services provided, and
related expenses incurred, by such Selling Agents. Payments under the Investor N
Distribution Plan may be made with respect to preparation, printing and
distribution of prospectuses, sales literature and advertising materials by the
Distributor or, as applicable, Selling Agents, attributable to distribution or
sales support activities, respectively, commissions, incentive compensation or
other compensation to, and expenses of, account executives or other employees of
the Distributor or Selling Agents, attributable to distribution or sales support
activities, respectively; overhead and other office expenses of the Distributor
relating to the foregoing (which may be calculated as a carrying charge in the
Distributor's or Selling Agents' unreimbursed expenses), incurred in connection
with distribution or sales support activities. The overhead and other office
expenses referenced above may include, without limitation, (i) the expenses of
operating the Distributor's or Selling Agents' offices in connection with the
sale of Fund shares, including lease costs, the salaries and employee benefit
costs of administrative, operations and support personnel, utility costs,
communication costs and the costs of stationery and supplies, (ii) the costs of
client sales seminars and travel related to
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<PAGE>
distribution and sales support activities, and (iii) other expenses
relating to distribution and sales support activities.
In addition, the Trustees have approved a Shareholder Servicing Plan with
respect to Investor N Shares of the Non-Money Market Funds (except the Managed
Index Fund which does not offer Investor N Shares) and Investor C Shares of the
Money Market Funds) the "Investor N/C Servicing Plan"). Pursuant to its Investor
N/C Servicing Plan, a Fund may compensate or reimburse banks, broker/dealers or
other financial institutions that have entered into a Shareholder Servicing
Agreement with the Trust ("Servicing Agents") for certain activities or expenses
of the Servicing Agents in connection with shareholder services that are
provided by the Servicing Agents. Payments under a Fund's Investor N/C Servicing
Plan will be calculated daily and paid monthly at a rate or rates set from time
to time by the Board of Trustees, provided that the annual rate may not exceed
0.25% of the average daily net asset value of the Fund's Investor N or C Shares,
as appropriate.
The fees payable under the Investor N/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 N and C Shares from
Customers and transmitting promptly net purchase and redemption orders to the
Distributor or Transfer Agent; (ii) providing Customers with a service that
invests the assets of their accounts in Investor N or C Shares pursuant to
specific or pre-authorized instructions; (iii) processing dividend and
distribution payments from the Trust on behalf of Customers; (iv) providing
information periodically to Customers showing their positions in Investor N or C
Shares; (v) arranging for bank wires; (vi) responding to Customers' inquiries
concerning their investment in Investor N or C Shares; (vii) providing
sub-accounting with respect to Investor C Shares beneficially owned by Customers
or providing the information to us necessary for sub-accounting; (viii) if
required by law, forwarding shareholder communications from the Trust (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers; (ix) forwarding to
Customers proxy statements and proxies containing any proposals regarding the
Investor N or C Servicing Plan or related agreements; (x) providing general
shareholder liaison services; and (xi) providing such other similar services as
the Trust may reasonably request to the extent such Servicing Agent is permitted
to do so under applicable statutes, rules or regulations.
The fees payable under the Investor C Distribution Plan and Investor N/C
Servicing Plan (together, the "Investor N/C Plans") are treated by the
Funds as an expense in the year they are accrued. At any given time,
a Selling Agent and/or Servicing Agent may incur expenses in
connection with services provided pursuant to its agreements with the
Distributor under the Investor N/C Plans which exceed the total of
(i) the payments made to the Selling Agents and Servicing Agents by
the Distributor or Nations Fund and reimbursed by the Fund pursuant
to the Investor N/C Plans, and (ii) the proceeds of contingent deferred
sales charges paid to the Distributor and reallowed to the Selling
Agent, upon the redemption of their Customers' Investor N Shares. Any
such excess expenses may be recovered in future years, so long as
the Investor N/C Plans are in effect.
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Because there is no requirement under the Investor N/C Plans that the
Distributor be paid or the Selling Agents and Servicing Agents be compensated or
reimbursed for all their expenses or any requirement that the Investor N/C Plans
be continued from year to year, such excess amount, if any, does not constitute
a liability to a Fund or the Distributor. Although there is no legal obligation
for the Fund to pay expenses incurred by the Distributor, a Selling Agent or a
Servicing Agent in excess of payments previously made to the Distributor under
the Investor N/C Plans or in connection with contingent deferred sales charges,
if for any reason the Investor N/C Plans are terminated, the Trustees will
consider at that time and manner in which to treat such expenses.
Information Applicable to Investor A, Investor B, Investor C Shares,
Investor D and Investor N Shares. The Investor A Plan, the Investor A Servicing
Plan, the Investor C/B Plan, the Investor C/B Servicing Plan, the Investor C
Plan and the Investor N/C Servicing Plan (each a "Plan" and collectively the
"Plans") may only be used for the purposes specified above and as stated in each
such Plan. Compensation payable to Selling Agents or Servicing Agents for
shareholder support services under the Investor A Plan, the Investor A Servicing
Plan, the Investor C/B Servicing Plan and the Investor N/C Servicing Plan is
subject to, among other things, the National Association of Securities Dealers,
Inc. ("NASD") Rules of Fair Practice governing receipt by NASD members of
servicing fees from registered investment companies (the "NASD Service Fee
Rule"), which became effective on July 7, 1993. Such compensation shall only be
paid for services determined to be permissible under the NASD Service Fee Rule.
Each Plan requires the officers of the Trust to provide the Board of
Trustees at least quarterly with a written report of the amounts expended
pursuant to the Plan and the purposes for which such expenditures were made. The
Board of Trustees reviews these reports in connection with their decisions with
respect to the Plans.
As required by Rule 12b-1 under the 1940 Act, each Plan was approved by
the Board of Trustees, including a majority of the trustees who
are not "interested persons" (as defined in the 1940 Act) of the Trust
and who have no direct or indirect financial interest in the operation
of the Plan or in any agreements related to the Plan ("Qualified
Trustees") on June 24, 1992, with respect to the Investor A Shares of
each Fund except the Managed Index Fund, the Intermediate Municipal
Bond Fund and the Tennessee Intermediate Municipal Bond Fund; on March
19, 1992 with respect to the Investor C Shares (formerly Investor B
Shares) of the Value Fund, Short-Intermediate Government Fund,
Municipal Income Fund, Georgia Intermediate Municipal Bond Fund,
Maryland Intermediate Municipal Bond Fund, South Carolina
Intermediate Municipal Bond Fund and Virginia Intermediate Municipal
Bond Fund; on June 24, 1992 with respect to the Investor C Shares
(formerly Investor B Shares) of the Capital Growth Fund, Emerging
Growth Fund, Balanced Assets Fund, Short-Term Income Fund, Diversified
Income Fund, Strategic Fixed Income Fund, Florida Intermediate
Municipal Bond Fund, and North Carolina Intermediate Municipal Bond Fund
and Texas Intermediate Municipal Bond Fund; on February 3, 1993, with
respect to the Investor A and Investor C Shares (formerly Investor B
Shares) of the Intermediate Municipal Bond Fund and the Tennessee
Intermediate Municipal Bond Fund; on February 3, 1993, with respect
to the Investor B Shares of the Government Money Market Fund and the
Tax Exempt Fund; and on February 3, 1993, with respect to the
Investor N Shares (formerly Investor C Shares) of each Non-Money
Market Fund except the Managed Index Fund which do not offer Investor N
Shares. On August 4, 1993, the Board of
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Trustees approved the Investor N/C Servicing Plan with respect to the
Money Market Funds. On February 2, 1994, the Board of Trustees approved
the Trust B Servicing Plan, Investor A Plan, Investor C/B Plan,
Investor C/B Servicing Plan, Investor C Plan and Investor N/C
Servicing Plan with respect to the Disciplined Equity Fund. On January
18, 1996, the Board of Trustees approved the Trust B Administration
Plan and Investor A Plan with respect to the Managed Index Fund.
In approving the Plans in accordance with the requirements of Rule 12b-1,
the Trustees considered various factors and determined that there is a
reasonable likelihood that each Plan will benefit the respective Investor A,
Investor B, Investor C Shares or Investor N Shares and the holders of such
shares. The Plans were approved by the Investor A Shares of the Government Money
Market Fund, Tax Exempt Fund, Value Fund, Short-Intermediate Government Fund,
Municipal Income Fund, Georgia Intermediate Municipal Bond Fund, South Carolina
Intermediate Municipal Bond Fund and Virginia Intermediate Municipal Bond Fund
on September 22, 1992. The Plans applicable to Investor A and Investor C Shares
(formerly Investor B Shares) of the Capital Growth Fund, Emerging Growth Fund,
Balanced Assets Fund, Short-Term Income Fund, Diversified Income Fund, Strategic
Fixed Income Fund, North Carolina Intermediate Municipal Bond Fund, and Florida
Intermediate Municipal Bond Fund were approved by the initial shareholders of
each such Fund's Investor A Shares and Investor C Shares and will be submitted
to each Fund's relevant shareholders for approval at a later date. The Plans
applicable to the Investor C Shares (formerly Investor B Shares) of the Value
Fund, Short-Intermediate Government Fund, Municipal Income Fund, Georgia
Intermediate Municipal Bond Fund, Maryland Intermediate Municipal Bond Fund,
South Carolina Intermediate Municipal Bond Fund and Virginia Intermediate
Municipal Bond Fund were approved by each such Fund's initial shareholder of
Investor C Shares and by each Fund's shareholders on September 22, 1992. The
Plans applicable to the Investor A Shares of the Intermediate Municipal Bond
Fund, the Texas Intermediate Municipal Bond Fund and the Tennessee Intermediate
Municipal Bond Fund were approved by such Funds' initial shareholder of Investor
A Shares. The Plans applicable to the Investor N Shares (formerly Investor C
Shares) of each Non-Money Market Fund except the Managed Index Fund were
approved by each Fund's initial shareholder of Investor N Shares.
All Plans shall continue in effect as long as such continuance is
specifically approved at least annually by the Board of Trustees, including a
majority of qualified Trustees. On November 6, 1993, the Board of Trustees
considered the Plans for all Funds (except the Special Equity Fund) and voted to
continue such Plans for an additional one-year period.
The Investor A Plan, the Investor C/B Plan and the Investor C Plan may be
terminated with respect to Investor A, Investor C/B or Investor C Shares
by vote of a majority of the Qualified Trustees, or by vote of a
majority of the holders of a Fund's outstanding voting securities of
the Investor A, Investor C/B or Investor C Shares. Any change in such a
Plan that would increase materially the distribution expenses paid by
the Investor A, Investor B, Investor C Shares or Investor N Shares, as
appropriate, requires shareholder approval; otherwise, each Plan may
be amended by the trustees, including a majority of the Qualified
Trustees, by vote cast in person at a meeting called for the
purpose of voting upon such amendment. The Investor A Servicing
Plan, the Investor C/B Servicing Plan and the Investor N/C Servicing
Plan may be terminated by
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a vote of a majority of the Qualified Trustees. As long as a Plan is in
effect, the selection or nomination of the Qualified Trustees is
committed to the discretion of the Qualified Trustees.
Conflict of interest restrictions may apply to the receipt by Selling
and/or Servicing Agents of compensation from Nations Fund in connection with the
investment of fiduciary assets in Investor Shares. Selling and/or Servicing
Agents, including banks regulated by the Comptroller of the Currency, the
Federal Reserve Board, or the Federal Deposit Insurance Corporation, and
investment advisers and other money managers subject to the jurisdiction of the
SEC, the Department of Labor, or state securities commissions, are urged to
consult their legal advisers before investing such assets in Investor Shares.
Fees Paid Pursuant to Shareholder Servicing/Distribution Plans
Investor A Shares
<TABLE>
<CAPTION>
Fees Period Period
Waived Ended Ended
FYE FYE FYE 9/28/92- 12/1/91-
Fund 11/30/94 11/30/94 11/30/93 11/30/92 9/27/92*
<S> <C> <C>
Gov't Money Market Fund $10,562 N/A $ 35,044 N/A N/A
Tax Exempt Fund 149,629 N/A 228,168 N/A $ 8,124
Value Fund 88,816 N/A 75,280 $ 19,997 9,008
Emerging Growth Fund 6,769 N/A 3,353 N/A N/A
Capital Growth Fund 28,095 N/A 21,043 396 N/A
Disciplined Equity Fund 123 N/A N/A N/A N/A
Equity Index Fund N/A N/A N/A N/A N/A
Managed Index Fund
Balanced Assets Fund 12,835 N/A 9,192 60 N/A
Short-Intermed. Gov't Fund 218,173 N/A 283,928 111,664 46,050
Short-Term Income Fund N/A N/A 25,327 22 N/A
Diversified Income Fund 25,810 N/A 11,610 0 N/A
Strategic Fixed Income Fund 2,079 N/A 1,590 4 N/A
Municipal Income Fund 48,893 N/A 41,013 8,316 5,429
Short-Term Municipal Income Fund N/A N/A 78 N/A N/A
Intermediate Municipal Bond Fund 353 N/A 4 N/A N/A
Florida Intermediate Municipal Bond Fund 4,051 N/A 2,483 N/A N/A
Georgia Intermediate Municipal Bond Fund 25,193 N/A 18,702 1,049 855
Maryland Intermediate Municipal Bond Fund 43,538 N/A 34,405 9,254 4,707
North Carolina Intermediate Municipal Bond Fund19,437 N/A 13,344 N/A N/A
South Carolina Municipal Bond Fund 36,196 N/A 23,859 1,857 1,742
Texas Intermediate Municipal Bond Fund 2,512 N/A 981 N/A N/A
Virginia Intermediate Municipal Bond Fund 170,902 N/A 139,813 $44,141 70,485
Tennessee Intermediate Bond Fund 21,398 N/A 15,137 N/A N/A
Florida Municipal Bond Fund 1,300 N/A N/A N/A N/A
Georgia Municipal Bond Fund 13 N/A N/A N/A N/A
Maryland Municipal Bond Fund 17 N/A N/A N/A N/A
North Carolina Municipal Bond Fund 2,108 N/A 55 N/A N/A
South Carolina Municipal Bond Fund 214 N/A 1 N/A N/A
Tennessee Municipal Bond Fund 62 N/A 4 N/A N/A
Virginia Municipal Bond Fund 212 N/A 2 N/A N/A
Texas Municipal Bond Fund 84 N/A N/A N/A N/A
</TABLE>
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*The Shareholder Servicing Plan was changed to a 12b-1 Distribution Plan on
September 28, 1992. See "Distribution Plans and Shareholder Servicing
Arrangements for Investor Shares" in this SAI. Fees are not listed for the
period 12/1/91-9/27/92 for some funds because those funds were not effective
during parts of fiscal year 1992 or because the fees paid by those funds at the
end of the fiscal year was otherwise unaffected by the change to a 12b-1 plan.
NOTE: The Investor A Shares of Equity Index Fund, Disciplined Equity Fund,
Florida Municipal Bond Fund, Georgia Municipal Bond Fund, Maryland
Municipal Bond Fund, and Texas Municipal Bond Fund had not commenced
operations as of 11/30/93. The Managed Index Fund had not commenced
operations as of 11/30/94.
102
<PAGE>
Fees Paid Pursuant to Distribution Plans
Investor C Shares - Non-Money Market Funds
Investor B Shares - Money Market Funds
<TABLE>
<CAPTION>
Fees Waived Fees Waived
FYE FYE FYE FYI FYI
Fund 11/30/94 11/30/94 11/30/93 11/30/93 11/30/92
<S> <C> <C> <C> <C> <C>
Gov't Money Market Fund $ 0 N/A N/A N/A N/A
Tax Exempt Fund 0 N/A N/A N/A N/A
Value Fund 25,508 N/A $25,399 N/A $3,597
Capital Growth Fund 19,275 N/A 23,739 N/A 199
Emerging Growth Fund 3,634 N/A 3,492 N/A N/A
Disciplined Equity Fund N/A N/A N/A N/A N/A
Balanced Assets Fund 8,392 N/A 8,372 N/A 56
Short-Intermediate Gov't Fund 115,791 N/A 247,370 N/A 45,606
Short-Term Income Fund 42,306 N/A 93,960 N/A 2,652
Diversified Income Fund 21,106 N/A 19,113 N/A 54
Strategic Fixed Income Fund 251 N/A 729 N/A 19
Municipal Income Fund 29,630 N/A 43,929 N/A 6,843
Short-Term Municipal Income Fund N/A N/A N/A N/A N/A
Intermediate Municipal Bond Fund 1 N/A N/A N/A N/A
Florida Intermediate Municipal Bond Fund 3,673 N/A 2,932 N/A N/A
Georgia Intermediate Municipal Bond Fund 14,493 N/A 20,120 N/A 1,900
Maryland Intermediate Municipal Bond Fund 17,752 N/A 27,079 N/A 3,211
North Carolina Intermediate Bond Fund 7,878 N/A 8,875 N/A N/A
South Carolina Intermediate Municipal
Bond Fund 38,715 N/A 53,828 N/A 8,731
Tennessee Intermediate Municipal Bond Fund 1 N/A N/A N/A N/A
Texas Intermediate Municipal Bond Fund 1 N/A N/A N/A N/A
Virginia Intermediate Municipal Bond Fund 49,497 N/A 71,114 N/A 7,417
Florida Municipal Bond Fund 1 N/A N/A N/A N/A
Georgia Municipal Bond Fund 1 N/A N/A N/A N/A
Maryland Municipal Bond Fund 1 N/A N/A N/A N/A
North Carolina Municipal Bond Fund 1 N/A N/A N/A N/A
South Carolina Municipal Bond Fund 1 N/A N/A N/A N/A
Tennessee Municipal Bond Fund 1 N/A N/A N/A N/A
Texas Municipal Bond Fund 1 N/A N/A N/A N/A
Virginia Municipal Bond Fund 1 N/A N/A N/A N/A
</TABLE>
NOTE:The Government Money Market Fund, Tax Exempt Fund, Special Equity Fund,
Short-Term Municipal Income Fund, Intermediate Municipal Bond Fund,
Tennessee Intermediate Municipal Bond Fund, Texas Intermediate Municipal
Bond Fund and the State Municipal Bond Funds did not offer Investor C or B
Shares, as appropriate, in the period ended 11/30/93.
All fees paid under the Investor A and Investor C/B Shares Distribution Plans
were accrued as payments to broker/dealers and financial institutions offering
such shares to their customers.
103
<PAGE>
Fees Paid Pursuant to Distribution Plans
Investor C Shares - Money Market Funds
Investor N Shares - Non-Money Market Funds
<TABLE>
<CAPTION>
Fees Waived Fees Waived
FYE FYE FYE FYE
Fund 11/30/94 11/30/94 11/30/93 11/30/93
<S> <C> <C> <C> <C>
Gov't Money Market Fund $ 0 N/A N/A N/A
Tax Exempt Fund 0 N/A N/A N/A
Value Fund 139,041 N/A $17,693 N/A
Emerging Growth Fund 74,658 N/A 6,594 N/A
Capital Growth Fund 133,986 N/A 24,619 N/A
Disciplined Equity Fund 294 N/A N/A N/A
Balanced Assets Fund 235,855 N/A 46,113 N/A
Short-Intermed. Gov't Fund 39,781 N/A 13,094 N/A
Short-Term Income Fund 28,899 N/A 38,719 N/A
Diversified Income Fund 208,797 N/A 48,800 N/A
Strategic Fixed Income Fund 7,830 N/A 3,280 N/A
Municipal Income Fund 89,603 N/A 35,993 N/A
Short-Term Municipal Income Fund 15,447 N/A 1,805 N/A
Intermediate Municipal Bond Fund 1,491 N/A N/A N/A
Florida Intermediate Municipal Bond Fund 11,212 N/A 5,122 N/A
Georgia Intermediate Municipal Bond Fund 15,872 N/A 4,920 N/A
Maryland Intermediate Municipal Bond Fund 10,159 N/A 4,556 N/A
North Carolina Intermediate Municipal Bond Fund13,064 N/A 6,000 N/A
South Carolina Intermediate Municipal Bond Fund13,604 N/A 5,490 N/A
Tennessee Intermediate Municipal Bond Fund 7,431 N/A 2,520 N/A
Texas Intermediate Municipal Bond Fund 5,867 N/A 1,308 N/A
Virginia Intermediate Municipal Bond Fund 21,517 N/A 6,936 N/A
Florida Municipal Bond Fund 94,835 N/A 7,090 N/A
Georgia Municipal Bond Fund 43,779 N/A 3,263 N/A
Maryland Municipal Bond Fund 19,537 N/A 2,034 N/A
North Carolina Municipal Bond Fund 101,228 N/A 7,115 N/A
South Carolina Municipal Bond Fund 36,373 N/A 2,703 N/A
Tennessee Municipal Bond Fund 23,221 N/A 2,151 N/A
Texas Municipal Bond Fund 49,545 N/A 3,977 N/A
Virginia Municipal Bond Fund 58,483 N/A 4,322 N/A
</TABLE>
104
<PAGE>
DISTRIBUTOR
On the Transition Date, Stephens Inc. (the "Distributor"), began serving
as the principal underwriter and distributor of the shares of the Funds,
replacing Funds Distributor, Inc. in this capacity. At a meeting held on August
4, 1993, the Board of Trustees selected Stephens Inc. as Distributor, effective
on the Transition Date, and approved a distribution agreement ("Distribution
Agreement") with the Distributor. Pursuant to the Distribution Agreement, the
Distributor, as agent, sells shares of the Funds on a continuous basis and
transmits purchase and redemption orders that its receives to the Trust or the
Transfer Agent. Additionally, the Distributor has agreed to use appropriate
efforts to solicit orders for the sale of shares and to undertake such
advertising and promotion as it believes appropriate in connection with such
solicitation. Pursuant to the Distribution Agreement, the Distributor, at its
own expense, finances those activities which are primarily intended to result in
the sale of shares of the Funds, including, but not limited to, advertising,
compensation of underwriters, dealers and sales personnel, the printing of
prospectuses to other than existing shareholders, and the printing and mailing
of sales literature. The Distributor, however, may be reimbursed for all or a
portion of such expenses to the extent permitted by a distribution plan adopted
by the Trust pursuant to Rule 12b-1 under the 1940 Act.
The Distribution Agreement will continue year to year as long as such
continuance is approved at least annually by (i) the Board of Trustees or a vote
of the majority (as defined in the 1940 Act) of the outstanding voting
securities of a Fund and (ii) a majority of the trustees who are not parties to
the Distribution Agreement or "interested persons" of any such party by a vote
cast in person at a meeting called for such purpose. The Distribution Agreement
is not assignable and is terminable with respect to a Fund, without penalty, on
60 days' notice by the Board of Trustees, the vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of a Fund, or by the
Distributor.
For the fiscal years ended November 30, 1992, 1993, and 1994, the Trust's
distributors received $1,527,451, $2,384,184 and $253,596, respectively, in
sales loads in connection with purchases of shares in the Non-Money Market
Funds. The distributors retained $159,906, $12,037.09 and $25,931.38 of the
amount received during the fiscal years ended November 30, 1992, 1993 and 1994
respectively, and paid the balance to selling dealers.
In connection with Investor A Shares, the distributors received
$1,510,051, $2,326,597 and $251,382 in front end sales loads, and $298,433,
$548,118 and $962,260 in 12b-1 fees for the fiscal years ended November 30,
1992, 1993 and 1994 respectively. Of those amounts, the distributors retained
$158,439, $12,037.09 and $25,931.38 of the front end sales loads, and $0 and $0
of the 12b-1 fees, and paid the balance to selling dealers. In connection with
the Contingent Deferred Sales Charges, the Distributors received $197,617 for
the fiscal year ended November 30, 1994 and retained $0.
In connection with Investor C Shares, the distributors received $17,400,
$57,587 and $2,214 in front end sales loads, $80,908, $495,249 and $412,364 in
12b-1 fees, and $331,356, $447,144 and $27,296 in contingent deferred sales
charge fees for the fiscal years ended November 30, 1992, 1993 and 1994,
respectively. Of those amounts, the distributors retained $1,467, $0 and $0
105
<PAGE>
of the front end sales loads, $0, $117,307.76 and $116,787.86 of the 12b-1 fees
and $10, $0 and $17,460.67 of the contingent deferred sales charge fees, and
paid the balance to selling dealers.
In connection with Investor N Shares the distributors received for the
fiscal years ended November 30, 1993 and 1994, $187,631 and $1,518,961 in 12b-1
fees and $7,148,395 and $1,522,633 in contingent deferred sales fees. No fees
were retained by the Distributor.
INDEPENDENT ACCOUNTANTS AND REPORTS
On November 28, 1992, the Board of Trustees selected Price Waterhouse LLP,
with offices at 160 Federal Street, Boston, MA 02110, to serve as independent
accountant to Nations Fund Trust for the fiscal years beginning December 1,
1992. Certain financial information which appears in the Prospectuses and the
financial statements has been audited by the accountants.
The audited financial statements and portfolio of investments contained in
the Annual Report for the fiscal year ended November 30, 1995, are hereby
incorporated by reference in this SAI. The Annual Reports will be sent free of
charge with this SAI to any shareholder who requests this SAI.
COUNSEL
Morrison & Foerster LLP, 2000 Pennsylvania Avenue, N.W., Suite 5500,
Washington, D.C. 20006-1812, is counsel to the Trust.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the yield and total return of a Fund's Investor Shares
and Trust Shares may be quoted in advertisements, shareholder reports, and other
communications to shareholders. Performance information is available by calling
1-800-321-7854 with respect to Investor Shares and 1-800-621-2192 with respect
to Trust Shares.
Yield Calculations
Money Market Funds. The "yield" and "effective yield" of Trust A, Trust B,
Investor A, Investor B, Investor C and Investor D Shares of each Money Market
Fund are computed separately as described in the Prospectuses according to
formulas prescribed by the SEC. The standardized seven-day yield is computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account in the particular Fund involved having a
balance of one share of the class or series involved at the beginning of the
period, dividing the net change in account value by the value of the account at
the beginning of the base period to obtain the base period return, and
multiplying the base period return by (365/7). The net change in the value of an
account in each Fund includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both the original
share and any such additional shares; and all fees, other than nonrecurring
account or sales charges, that are charged to shareholder accounts in proportion
to the length of the base period
106
<PAGE>
and the Fund's average account size. The capital changes to be
excluded from the calculation of the net change in account value are
realized gains and losses from the sale of securities and
unrealized appreciation and depreciation. The effective
annualized yield for a class or series of shares in a Fund is
computed by compounding the unannualized base period return (calculated
as above) by adding 1 to the base period return, raising the sum to a
power equal to 365 divided by 7, and subtracting 1 from the result.
In addition, the "tax-equivalent yield" of the Trust A, Trust B, Investor
A, Investor B, Investor C and Investor D Shares of the Tax Exempt Fund is
computed by: (a) dividing the portion of the yield that is exempt from Federal
income tax by one minus a stated Federal income tax rate; and (b) adding the
figure resulting from (a) above to that portion, if any, of the yield that is
not exempt from Federal income tax.
The current yield for each class or series of shares may be obtained by
calling the Trust at the telephone number provided on the cover page.
Seven Day Yield For the Period Ended 11/30/94
<TABLE>
<CAPTION>
Effective Tax
Yield Yield Tax Equivalent
Nations Government Without Effective Without Equivalent Yield Without
Money Market Fund Yield Fee Waivers Yield Fee Waivers Yield Fee Waivers
----- ------------ --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Trust A Shares 5.11% 4.86% 5.23% 4.98% N/A N/A
Trust B Shares 4.85% 4.60% 4.96% 4.35% N/A N/A
Investor A Shares 4.74% 4.49% 4.84% 4.24% N/A N/A
Investor B Shares 4.84% 4.59% 4.95% 4.34% N/A N/A
Investor C Shares 4.85% 4.60% 4.96% 4.35% N/A N/A
Nations Tax Exempt
Fund
Trust A Shares 3.32% 3.07% 3.37% 3.13% 14.88% 4.64%
Trust B Shares 3.03% 2.79% 3.08% 2.84% 4.46% 4.22%
Investor A Shares 3.05% 2.81% 3.09% 2.85% 4.48% 4.24%
Investor B Shares 3.14% 2.90% 3.18% 2.94% 4.61% 4.37%
Investor C Shares 3.16% 2.92% 3.20% 2.96% 4.64% 4.40%
</TABLE>
Non-Money Market Funds. Yield is calculated separately for the Investor A,
Investor C, Investor N, Trust A and Trust B Shares of a Non-Money Market Fund by
dividing the net investment income per share for a particular class or series of
shares (as described below) earned during a 30-day period by the maximum
offering price per share on the last day of the period (for Trust A and Trust B
Shares, maximum offering price per share is the same as the net asset value per
share) and annualizing the result on a semi-annual basis by adding one to the
quotient, raising the sum to the power of six, subtracting one from the result
and then doubling the difference. For a class or series of shares in a Fund, net
investment income per share earned during the period is based on the average
daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements. This calculation can be
expressed as follows:
107
<PAGE>
Yield = 2 [(a-b+ 1)6 - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = maximum offering price per share on the last day of
the period (again, for Trust A and Trust B Shares,
this is equivalent to net asset value per share).
For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the portfolio. Each Fund calculates
interest earned on any debt obligations held in its portfolio by computing the
yield to maturity of each obligation held by it based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and dividing
the result by 360 and multiplying the quotient by the market value of the
obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is in the portfolio. For purposes of this calculation, it is assumed
that each month contains 30 days. The maturity of an obligation with a call
provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market values of such debt
obligations. The Municipal Income Fund, Short-Term Municipal Income Fund,
Intermediate Municipal Bond Fund, the State Intermediate Municipal Bond Funds
and the State Municipal Bond Funds calculate interest gained on tax-exempt
obligations issued without original issue discount and having a current market
discount by using the coupon rate of interest instead of the yield to maturity.
In the case of tax-exempt obligations that are issued with original issue
discount, where the discount based on the current market value exceeds the
then-remaining portion of original issue discount, the yield to maturity is the
imputed rate based on the original issue discount calculation. Conversely, where
the discount based on the current market value is less than the remaining
portion of the original issue discount, the yield to maturity is based on the
market value.
Expenses accrued for the period (variable "b" in the formula) include
recurring fees charged by Nations Fund to shareholder accounts in proportion to
the length of the base period. Undeclared earned income will be subtracted from
the maximum offering price per share (which for Trust A and Trust B Shares is
net asset value per share) (variable "d" in the formula). Undeclared earned
income is the net investment income which, at the end of the base period, has
not been declared as a dividend, but is reasonably expected to be and is
declared as a dividend shortly thereafter. A Fund's maximum offering price per
share for purposes of the formula
108
<PAGE>
includes the maximum sales charge, if any, imposed by the Fund, as reflected in
the Fund's prospectus.
The Funds may provide additional yield calculations in communications
(other than advertisements) to the holders of Investor A, Investor C or Investor
N Shares. These may be calculated based on the Investor A, Investor C or
Investor N Shares' net asset values per share (rather than their maximum
offering prices) on the last day of the period covered by the yield
computations. That is, some communications provided to the holders of Investor
A, Investor C or Investor N Shares may also include additional yield
calculations prepared for the holders of Trust A or Trust B Shares. Such
additional quotations, therefore, will not reflect the effect of the sales
charges mentioned above.
Investor A Shares Only. Based on the foregoing calculations, the yield,
taking into account fee waivers and/or expense reimbursements, and the yield
without fee waivers and/or expense reimbursements for the 30-day period ended
November 30, 1994 were as follows:
Thirty Day Yield For The Period Ended 11/30/94
<TABLE>
<CAPTION>
Tax
Yield Tax Equivalent
Without Equivalent Yield Without
Yield Fee Waivers Yield Fee Waivers
<S> <C> <C> <C> <C>
Short-Intermediate
Government Fund
Trust A Shares 6.35% 6.14% N/A N/A
Investor A Shares 5.95% 5.69% N/A N/A
Investor C Shares 5.85% 5.14% N/A N/A
Investor N Shares 5.75% 5.14% N/A N/A
Short-Term Income Fund
Trust A Shares 6.95% 6.65% N/A N/A
Investor A Shares 6.65% 6.30% N/A N/A
Investor C Shares 6.59% 5.64% N/A N/A
Investor N Shares 6.60% 5.65% N/A N/A
Diversified Income Fund
Trust A Shares 8.49% 8.38% N/A N/A
Investor A Shares 7.84% 7.73% N/A N/A
Investor C Shares 7.72% 7.36% N/A N/A
Investor N Shares 7.72% 7.36% N/A N/A
Strategic Fixed Income Fund
Trust A Shares 6.55% 6.44% N/A N/A
Investor A Shares 6.14% 5.98% N/A N/A
Investor C Shares 6.05% 5.44% N/A N/A
Investor N Shares 5.90% 5.44% N/A N/A
Nations Municipal Income Fund
Trust A Shares 6.27% 6.07% 9.09% 8.80%
Investor A Shares 5.80% 5.55% 8.41% 8.04%
109
<PAGE>
Investor C Shares 5.51% 5.06% 7.99% 7.33%
Investor N Shares 5.51% 5.06% 7.99% 7.33%
Nations Short-Term Municipal
Income Fund
Trust A Shares 4.60% 4.24% 6.66% 6.14%
Investor A Shares 4.33% 3.92% 6.28% 5.68%
Investor C Shares 4.34% 3.23% 6.29% 4.68%
Investor N Shares 4.24% 3.23% 6.14% 4.68%
Nations Intermediate
Municipal Bond Fund
Trust A Shares 5.47% 5.11% 7.92% 7.41%
Investor A Shares 5.09% 4.68% 7.38% 6.78%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 4.96% 4.10% 7.18% 5.94%
Nations Florida Intermediate
Municipal Bond Fund
Trust A Shares 5.09% 4.88% 7.38% 7.07%
Investor A Shares 4.73% 4.47% 6.85% 6.48%
Investor C Shares 4.59% 3.88% 6.65% 5.62%
Investor N Shares 4.59% 3.88% 6.65% 5.62%
Nations Georgia Intermediate
Municipal Bond Fund
Trust A Shares 5.23% 5.02% 8.30% 7.97%
Investor A Shares 4.87% 4.61% 7.73% 7.32%
Investor C Shares 4.73% 4.02% 7.51% 6.38%
Investor N Shares 4.73% 4.02% 7.51% 6.38%
Nations Maryland Intermediate
Municipal Bond Fund
Trust A Shares 5.07% 4.90% 7.92% 7.66%
Investor A Shares 4.71% 4.49% 7.36% 7.02%
Investor C Shares 4.57% 3.90% 7.14% 6.09%
Investor N Shares 4.57% 3.90% 7.14% 6.09%
Nations North Carolina
Intermediate Municipal Bond Fund
Trust A Shares 5.16% 4.95% 8.32% 7.98%
Investor A Shares 4.80% 4.54% 7.74% 7.32%
Investor C Shares 4.66% 3.95% 7.52% 6.37%
Investor N Shares 4.66% 3.95% 7.52% 6.37%
Nations South Carolina
Intermediate Municipal Bond Fund
Trust A Shares 5.46% 5.26% 8.81% 8.48%
Investor A Shares 5.08% 4.83% 8.19% 7.79%
Investor C Shares 4.95% 4.25% 7.98% 6.85%
Investor N Shares 4.95% 4.25% 7.98% 6.85%
Nations Tennessee Intermediate
Municipal Bond Fund
Trust A Shares 5.26% 5.05% 8.35% 8.02%
110
<PAGE>
Investor A Shares 4.89% 4.63% 7.76% 7.35%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 4.76% 4.05% 7.56% 6.43%
Nations Texas Intermediate
Municipal Bond Fund
Trust A Shares 5.40% 5.19% 7.83% 7.52%
Investor A Shares 5.02% 4.76% 7.28% 6.90%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 4.89% 4.18% 7.09% 6.06%
Nations Virginia Intermediate
Municipal Bond Fund
Trust A Shares 4.97% 4.82% 7.86% 7.62%
Investor A Shares 4.62% 4.42% 7.30% 6.99%
Investor C Shares 4.47% 3.82% 7.07% 6.04%
Investor N Shares 4.47% 3.82% 7.07% 6.04%
Nations Florida Municipal
Bond Fund
Trust A Shares 6.41% 5.85% 9.29% 8.48%
Investor A Shares 5.94% 5.33% 8.61% 7.72%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 5.66% 4.85% 8.20% 7.03%
Nations Georgia Municipal
Bond Fund
Trust A Shares 6.41% 5.85% 10.17% 9.29%
Investor A Shares 5.93% 5.32% 9.41% 8.44%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 5.66% 4.85% 8.98% 7.70%
Nations Maryland Municipal
Bond Fund
Trust A Shares 6.23% 5.67% 9.73% 8.86%
Investor A Shares 5.76% 5.15% 9.00% 8.05%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 5.47% 4.66% 8.55% 7.28%
Nations North Carolina
Municipal Bond Fund
Trust A Shares 6.49% 5.93% 10.47% 9.56%
Investor A Shares 6.02% 5.41% 9.71% 8.73%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 5.74% 4.93% 9.26% 7.95%
Nations South Carolina
Municipal Bond Fund
Trust A Shares 6.49% 5.93% 10.47% 9.56%
Investor A Shares 6.02% 5.41% 9.71% 8.73%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 5.74% 4.93% 9.26% 7.95%
111
<PAGE>
Nations Tennessee
Municipal Bond Fund
Trust A Shares 6.37% 5.81% 10.11% 9.22%
Investor A Shares 5.91% 5.30% 9.38% 8.41%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 5.62% 4.81% 8.92% 7.63%
Nations Texas
Municipal Bond Fund
Trust A Shares 6.41% 5.85% 9.29% 8.48%
Investor A Shares 5.94% 5.33% 8.61% 7.72%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 5.65% 4.84% 8.18% 7.01%
Nations Virginia
Municipal Bond Fund
Trust A Shares 6.55% 5.99% 10.36% 9.47%
Investor A Shares 6.08% 5.47% 9.61% 8.65%
Investor C Shares N/A N/A N/A N/A
Investor N Shares 5.81% 5.00% 9.19% 7.91%
</TABLE>
The "tax-equivalent" yield is computed by: (a) dividing the portion of the yield
(calculated as above) that is exempt from Federal income tax by one minus a
stated Federal income tax rate; and adding that future to that portion, if any,
of the yield that is not exempt from Federal income tax. The Federal income tax
rate used in calculating the "tax-equivalent" yield was 31%. The state income
tax rate used in calculating the "tax-equivalent" yield of the State
Intermediate Municipal Bond Funds was as follows: Florida --0%;; Georgia --6%;
Maryland --5%; North Carolina --7%; Tennessee 6%; Texas --0%; and Virginia
- --5.75%.
Hypothetical examples showing the level of taxable yield needed to produce
on after-tax equivalent to an assumed tax-free yield may be provided to
shareholders. Provided below are such illustrations:
For the Georgia Intermediate Municipal Bond fund and Georgia
Municipal Bond Fund:
<TABLE>
<S> <C> <C> <C>
Single Return $22,100-$53,500 $53,500-$115,000 $115,000-$250,000
Joint Return $36,900-$89,150 $89,150-$140,000 $140,000-$150,000
</TABLE>
To match a tax-free yield of: A taxable investment would have to pay you:
<TABLE>
<S> <C> <C> <C> <C>
4% 6.06% 6.35% 6.90%
5% 7.58% 7.94% 8.62%
6% 9.09% 9.52% 10.34%
7% 10.60% 11.11% 12.07%
8% 12.12% 12.70% 13.79%
</TABLE>
112
<PAGE>
The tax-free yields used here are hypothetical and no assurance can be
made that the Funds will obtain any particular yield. A fund's yield
fluctuates as market conditions change. The tax brackets and the related
yield calculations are based on the 1993 Federal (28%, 31%, 36%) and
Georgia (6%) tax rates and assume a Federal tax benefit for the
state and local taxes. Note the highest 1993 effective Federal tax
rate may be higher than 36% due to the phase-out of allowable
itemized deductions and personal exemptions for certain taxpayers.
This schedule does not take into account the 39.6% Federal surtax
imposed on certain high-income taxpayers.
For the Maryland Intermediate Municipal Bond Fund and Maryland
Municipal Bond Fund:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Single Return $22,100-$53,500 $53,500-$100,000 $100,000-$115,000 N/A $115,000-$250,000
(28%, 5%, 2.5%) (31%, 5%, 2.5%) (31%, 6%, 2.5%) (36%, 6%, 2.5%)
Joint Return $36,900-$89,150 $89, 150-$140,000 N/A $140,000-$150,000 $150,000-$250,000
(28%, 5%, 2.5%) (31%, 5%, 2.5%) (36%, 5%, 2.5%) (36%, 6%, 2.5%)
</TABLE>
To match a
tax-free yield of: A taxable investment would have to pay you:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
4% 6.20% 6.50% 6.61% 7.08% 7.21%
5% 7.75% 8.13% 8.26% 8.85% 9.01%
6% 9.30% 9.76% 9.92% 10.62% 10.81%
7% 10.85% 11.38% 11.57% 12.39% 12.61%
8% 12.40% 13.01% 13.22% 14.16% 14.41%
</TABLE>
The tax-free yields used here are hypothetical and no assurance can be
made that the Funds will obtain any particular yield. A fund's yield
fluctuates as market conditions change. The tax brackets and the related
yield calculations are based on the 1993 Federal (28%, 31%, 36%),
Maryland (5%, 6%) and local county (2.5%) tax rates and assume a Federal
tax benefit for the state and local taxes. Note the highest 1993
effective Federal tax rate may be higher than 36% due to the phase-out
of allowable itemized deductions and personal exemptions for certain
taxpayers. This schedule does not take into account the 39.6% Federal
surtax imposed on certain high-income taxpayers.
For the North Carolina Intermediate Municipal Bond Fund and North
Carolina Municipal Bond Fund:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Single Return $22,100-$53,500 $53,500-$60,000 $60,000-$115,000 $115,000-$250,000
(28%, 7%) (31%, 7%) (31%, 7.75%) (36%, 7.75%)
Joint Return $36,900-$89,150 $89, 150-$100,000 $100,000-$140,000 $140,000-$250,000
113
<PAGE>
(28%, 7%) (31%,7%) (31%, 7.75%) (36%, 7.75%
</TABLE>
To match a
tax-free yield of: A taxable investment would have to pay you:
4% 6.15% 6.45% 6.53% 7.11%
5% 7.69% 8.06% 8.16% 8.99%
6% 9.23% 9.68% 9.80% 10.67%
7% 10.77% 11.29% 11.43% 12.44%
8% 12.31% 12.90% 13.06% 14.22%
The tax-free yields used here are hypothetical and no assurance can be
made that the Funds will obtain any particular yield. A fund's yield
fluctuates as market conditions change. The tax brackets and the related
yield calculations are based on the 1993 Federal (28%, 31% 36%) and
North Carolina (7%, 7.75%) tax rates and assume a Federal tax benefit
for the state and local taxes. Note that the highest 1993 effective
Federal tax rate may be higher than 36% due to the phase-out of
allowable itemized deductions and personal exemptions for certain
taxpayers. This schedule does not take into account the 39.6% Federal
surtax imposed on certain high-income taxpayers.
For the South Carolina Intermediate Municipal Bond Fund and South
Carolina Municipal Bond Fund:
Single Return $22,100-$53,500 $53,500-$115,000 $115,000-$250,000
(28%, 7%) (31%, 7%) (36%, 7.%)
Joint Return $36,900-$89,150 $89, 150-$140,000 $140,000-$250,000
(28%, 7%) (31%,7%) (36%, 7%
To match a
tax-free yield of: A taxable investment would have to pay you:
114
<PAGE>
4% 6.15% 6.45% 7.02%
5% 7.69% 8.06% 8.77%
6% 9.23% 9.68% 10.53%
7% 10.77% 11.29% 12.28%
8% 12.31% 12.90% 14.04%
The tax-free yields used here are hypothetical and no assurance can be
made that the Funds will obtain any particular yield. A fund's yield
fluctuates as market conditions change. The tax brackets and the related
yield calculations are based on the 1993 Federal (28%, 31%, 36%) and
South Carolina (7%) tax rates and assume a Federal tax benefit for the
state and local taxes. Note that the highest 1993 effective Federal
tax rate may be higher than 36% due to the phase-out of allowable
itemized deductions and personal exemptions for certain taxpayers.
This schedule does not take into account the 39.6% Federal surtax
imposed on certain high-income taxpayers.
For the Tennessee Intermediate Municipal Bond Fund and Tennessee
Municipal Bond Fund:
Single Return $22,100-$53,500 $53,500-$115,000 $115,000-$250,000
(28%, 6%) (31%, 6%) (36%, 6%)
Joint Return $36,900-$89,150 $89, 150-$140,000 $140,000-$250,000
(28%, 6%) (31%,6%) (36%, 6%
To match a
tax-free yield of: A taxable investment would have to pay you:
4% 6.06% 6.35% 6.90%
5% 7.58% 7.94% 8.62%
6% 9.09% 9.52% 10.34%
7% 10.61% 11.11% 12.07%
8% 12.12% 12.70% 13.79%
The tax-free yields used here are hypothetical and no assurance can be
made that the Funds will obtain any particular yield. A fund's yield
fluctuates as market conditions change. The tax brackets and the related
yield calculations are based on the 1993 Federal (28%, 31%, 36%) and
115
<PAGE>
Tennessee (6%) tax rates and assume a Federal tax benefit for the state
and local taxes. Note that the highest 1993 effective Federal tax
rate may be higher than 36% due to the phase-out of allowable
itemized deductions and personal exemptions for certain taxpayers.
This schedule does not take into account the 39.6% Federal surtax
imposed on certain high-income taxpayers.
For the Virginia Intermediate Municipal Bond Fund and Virginia Municipal
Bond Fund:
Single Return $22,100-$53,500 $53,500-$115,000 $115,000-$250,000
(28%, 5.75%) (31%, 5.75%) (36%, 5.75%)
Joint Return $36,900-$89,150 $89, 150-$140,000 $140,000-$250,000
(28%, 5.75%) (31%,5.75%) (36%, 5.75%
To match a
tax-free yield of: A taxable investment would have to pay you:
4% 6.04% 6.32% 6.87%
5% 7.55% 7.91% 8.58%
6% 9.06% 9.49% 10.30%
7% 10.57% 11.07% 12.02%
8% 12.08% 12.65% 13.73%
The tax-free yields used here are hypothetical and no assurance can be
made that the Funds will obtain any particular yield. A fund's yield
fluctuates as market conditions change. The tax brackets and the related
yield calculations are based on the 1993 Federal (28%, 31%, 36%) and
Virginia (5.75%) tax rates and assume a Federal tax benefit for the
state and local taxes. Note that the highest 1993 effective Federal
tax rate may be higher than 36% due to the phase-out of allowable
itemized deductions and personal exemptions for certain taxpayers.
This schedule does not take into account the 39.6% Federal surtax
imposed on certain high-income taxpayers.
For the Municipal Income Fund, Short-Term Municipal Income
Fund, the Intermediate Municipal Bond Fund, the Florida Intermediate
Municipal Bond Fund, Florida Municipal Bond Fund, the Texas
Intermediate Municipal Bond Fund and Texas Municipal Bond Fund:
Single Return $22,100-$53,500 $53,500-$115,000 $115,000-$250,000
(28%) (31%) (36%)
Joint Return $36,900-$89,150 $89, 150-$140,000 $140,000-$250,000
(28%) (31%) (36%)
To match a tax-free yield of: A taxable investment would have to pay you:
116
<PAGE>
4% 5.56% 5.80% 6.25%
5% 6.94% 7.25% 7.81%
6% 8.33% 8.70% 9.38%
7% 9.72% 10.14% 10.94%
8% 11.11% 11.59% 12.50%
The tax-free yields used here are hypothetical and no assurance can be
made that the Funds will obtain any particular yield. A fund's yield
fluctuates as market conditions change. The tax brackets and the related
yield calculations are based on the 1993 Federal (28%, 31%, 36%) tax
rates. This analysis does not take into account any state or local
taxes imposed, although, with respect to the Florida Intermediate
Municipal Bond Fund, the Florida Municipal Bond Fund, the Texas
Intermediate Municipal Bond Fund and the Texas Municipal Bond Fund,
neither Florida nor Texas impose a personal income tax. Note that
the highest 1993 effective Federal tax rate may be higher than 36%
due to the phase-out of allowable itemized deductions and personal
exemptions for certain taxpayers. This schedule does not take into
account the 39.6% Federal surtax imposed on certain high-income
taxpayers.
There can be no assurance that all of a yield quoted by one of
these Funds will be tax-free since these Funds may invest in short-term
taxable obligations for temporary defensive periods as described in
the Prospectuses. Also, the above hypothetical examples are for
illustration only. Tax laws and regulations may be changed at any time
by legislative or administrative actions and such changes may make
the information contained in such examples obsolete.
Total Return Calculations
Each Non-Money Market Fund computes its average annual total
return for Investor A, Investor C, Investor N, Trust A and Trust B
Shares separately by determining the average annual compounded
rates of return during specified periods that equate the initial
amount invested to the ending redeemable value of such investment.
This is done by dividing the ending redeemable value of a hypothetical
$1,000 initial payment by $1,000 and raising the quotient to a power
equal to one divided by the number of years (or fractional
portion thereof) covered by the computation and subtracting one from
the result. This calculation can be expressed as follows:
T = [(ERV)1/n - 1]
P
Where: T = average annual total return.
ERV = ending redeemable value at
the end of the period covered
by the computation of a
hypothetical $1,000 payment
made at the beginning of the
period.
117
<PAGE>
P = hypothetical initial payment of
$1,000.
n = period covered by the computation,
expressed in terms of years.
The Funds compute their aggregate total returns for Investor A, Investor
C, Investor N, Trust A and Trust B Shares separately by
determining the aggregate rates of return during specified periods
that likewise equate the initial amount invested to the ending
redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
T = [(ERV) - 1]
P
The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period. The ending
redeemable value (variable "ERV" in each formula) is determined by
assuming complete redemption of the hypothetical investment and the
deduction of all nonrecurring charges at the end of the period covered
by the computations. The Funds' average annual total return and
aggregate total return quotations for Trust A, Investor A, Investor C
and Investor N Shares reflect the deduction of the maximum sales charge
charged (if applicable) with respect to the applicable class of
shares in connection with the purchase of these shares. The Funds may
also provide, in conjunction with such quotations for Trust A,
Investor A, Investor C and Investor N Shares, additional quotations
that do not reflect the maximum sales charge when the quotations are
being provided to investors who are subject to waiver of or
reduction in the sales charges described in the Investor Shares
Prospectuses.
Based on the foregoing calculations, the Fund's average
annual total return for all classes of shares were as follows for the
periods indicated:
<TABLE>
<CAPTION>
Average Annual Total Return
Inception Inception
FYE through FYE through
11/30/94 11/30/94 11/30/93 11/30/93
<S> <C> <C> <C> <C>
Nations Value Fund
Trust A Shares (.08)% 9.14% 13.19% 11.46%
Investor A Shares (5.91)% 8.07% 7.72% 10.61%
Investor C Shares (1.86)% 7.33% 9.74% 12.62%
Investor N Shares (5.41)% .65% N/A N/A
Nations Capital Growth Fund
Trust A Shares 2.14% 6.39% 4.84% 10.18%
Investor A Shares (3.93)% 3.26% (0.15)% 5.61%
Investor C Shares .22% 5.34% 1.58% 8.08%
118
<PAGE>
Investor N Shares (3.88)% 1.43% N/A N/A
Nations Emerging Growth Fund
Trust A Shares 6.26% 7.57% N/A 8.81%
Investor A Shares (.19)% 4.84% N/A 5.04%
Investor C Shares 4.19% 7.26% N/A 6.92%
Investor N Shares .17% 7.42% N/A N/A
Nations Disciplined Equity
Trust A Shares (2.96)% 24.36% N/A N/A
Invest A Shares (9.54)% .35% N/A N/A
Investor C Shares N/A N/A N/A N/A
Investor N Shares (2.98)% (2.98)% N/A N/A
Nations Equity Index Fund
Trust A Shares .29% .29% N/A N/A
Nations Managed Index Fund
Trust A Shares N/A N/A N/A N/A
Trust B Shares N/A N/A N/A N/A
Investor A Shares N/A N/A N/A N/A
Nations Balanced Assets Fund
Trust A Shares (1.73)% 4.46% 9.22% 10.07%
Investor A Shares (7.66)% 1.38% 4.03% 5.59%
Investor C Shares (3.68)% 3.42% 5.99% 8.08%
Investor N Shares (7.30)% (2.08)% N/A N/A
Nations Short-Intermediate
Government Fund
Trust A Shares (2.23)% 6.02% 9.03% 9.77%
Investor A Shares (5.58)% 4.85% 6.13% 8.51%
Investor C Shares (3.71)% 2.76% 7.20% 6.76%
Investor N Shares (6.49)% 2.04% N/A N/A
<PAGE>
Nations Short-Term Income Fund
Trust A Shares (.11)% 2.92% 8.26% 5.59%
Investor A Shares (1.83)% 1.89% 6.41% 3.85%
Investor C Shares (.51)% 2.39% 7.73% 4.95%
Investor N Shares (.46)% 1.67% N/A N/A
Nations Diversified Income Fund
Trust A Shares (3.05)% 6.56% 17.40% 16.25%
Investor A Shares (7.85)% 3.69% 14.38% 13.62%
Investor C Shares (4.66)% 6.05% 15.65% 16.26%
Investor N Shares (8.21)% (1.39)% N/A N/A
Nations Strategic Fixed
119
<PAGE>
Income Fund
Trust A Shares (3.58)% 3.72% 12.05% 10.94%
Investor A Shares (6.89)% 1.79% 9.08% 8.29%
Investor C Shares (5.03)% 3.07% 10.20% 10.53%
Investor N Shares (8.62)% (2.93)% N/A N/A
Nations Municipal Income Fund
Trust A Shares (8.17)% 5.46% 12.54% 10.74%
Investor A Shares (12.24)% 4.16% 9.56% 9.67%
Investor C Shares (9.71)% 2.20% 10.69% 10.59%
Investor N Shares (13.12)% (6.02)% N/A N/A
Nations Short-Term Municipal
Income Fund
Trust A Shares 1.09% 1.00% N/A N/A
Investor A Shares (.61)% (.51)% N/A N/A
Investor C Shares .45% .45% N/A N/A
Investor N Shares .73% .63% N/A N/A
Nations Intermediate Municipal
Bond Fund
Trust A Shares (4.25)% (1.42)% N/A N/A
Investor A Shares (7.59)% (5.01)% N/A N/A
Investor C Shares N/A N/A N/A N/A
Investor N Shares (8.65)% (8.65)% N/A N/A
Nations Florida Intermediate
Municipal Bond Fund
Trust A Shares (4.26)% 2.43% N/A 9.50%
Investor A Shares (7.54)% .60% N/A 6.70%
Investor C Shares (5.73)% 1.81% N/A 7.80%
Investor N Shares (8.39)% (2.84)%
Nations Georgia Intermediate
Municipal Bond Fund
Trust A Shares (4.70)% 4.44% 10.43% 10.06%
Investor A Shares (7.96)% 2.96% 7.61% 8.80%
Investor C Shares (6.16)% 3.12% 8.61% 9.31%
Investor N Shares (8.81)% (2.92)% N/A N/A
Nations Maryland Intermediate
Bond Fund
Trust A Shares (4.64)% 5.77% 9.11% 9.20%
Investor A Shares (7.91)% 4.85% 6.23% 8.27%
Investor C Shares (6.10)% 2.36% 7.30% 7.91%
Investor N Shares (8.73)% 3.07% N/A N/A
Nations North Carolina
120
<PAGE>
Intermediate Municipal
Bond Fund
Trust A Shares (4.34)% 2.16% N/A 9.03%
Investor A Shares (7.62)% .24% N/A 6.04%
Investor C Shares (5.81)% 1.50% N/A 7.26%
Investor N Shares (8.46)% (3.08)% N/A N/A
Nations South Carolina
Intermediate Municipal
Bond Fund
Trust A Shares (3.37)% 4.19% 9.32% 8.40%
Investor A Shares (6.68)% 2.67% 6.43% 7.36%
Investor C Shares (4.86)% 3.05% 7.51% 8.15%
Investor N Shares (7.53)% (2.40)% N/A N/A
Nations Tennessee
Intermediate Municipal
Bond Fund
Trust A Shares (4.24)% (.20)% N/A 4.09%
Investor A Shares (7.51)% (1.93)% N/A 2.06%
Investor C Shares N/A N/A N/A N/A
Investor N Shares (8.37)% (2.97)% N/A N/A
Nations Texas Intermediate
Municipal Bond Fund
Trust A Shares (3.48)% 2.09% N/A 7.72%
Investor A Shares (6.79)% (.84)% N/A 3.00%
Investor C Shares N/A N/A N/A N/A
Investor N Shares (7.64)% (2.97)% N/A N/A
Nations Virginia Intermediate
Municipal Bond Fund
Trust A Shares (4.35)% 5.64% 9.08% 8.18%
Investor A Shares (7.62)% 4.80% 6.19% 7.48%
Investor C Shares (5.80)% 2.57% 7.25% 8.04%
Investor N Shares (8.44)% (2.90)% N/A N/A
Nations Florida Municipal
Bond Fund
Trust A Shares (10.70)% (10.70)% N/A N/A
Investor A Shares (15.12)% (15.12)% N/A N/A
Investor N Shares (13.69)% (13.52)% N/A N/A
Nations Georgia Municipal
Bond Fund
Investor A Shares (12.07)% (12.07)% N/A N/A
Investor A Shares (15.46)% (15.46)% N/A N/A
121
<PAGE>
Investor C Shares N/A N/A N/A N/A
Investor N Shares (14.55)% (13.59)% N/A N/A
Nations Maryland Municipal
Bond Fund
Trust A Shares N/A N/A N/A N/A
Investor A Shares (13.43)% 12.55% N/A N/A
Investor C Shares N/A N/A N/A N/A
Investor N Shares (14.39)% (13.80)% N/A N/A
Nations North Carolina
Municipal Bond Fund
Trust A Shares (12.65)% (12.65)% N/A N/A
Investor A Shares (14.22)% (13.88)% N/A N/A
Investor C Shares N/A N/A N/A N/A
Investor N Shares (15.17)% (13.85)% N/A N/A
Nations South Carolina
Municipal Bond Fund
Trust A Shares (9.12)% (9.12)% N/A N/A
Investor A Shares (11.38)% (10.58)% N/A N/A
Investor C Shares N/A N/A N/A N/A
Investor N Shares (12.36)% (11.20)% N/A N/A
Nations Tennessee Municipal
Bond Fund
Trust A Shares (6.66)% (6.66)% N/A N/A
Investor A Shares (11.51)% (11.09)% N/A N/A
Investor C Shares N/A N/A N/A N/A
Investor N Shares (12.48)% (11.80)% N/A N/A
Nations Texas Municipal
Bond Fund
Trust A Shares (12.21)% (12.21)% N/A N/A
Investor A Shares (14.77)% (14.77)% N/A N/A
Investor C Shares N/A N/A N/A N/A
Investor N Shares (14.27)% (13.60)% N/A N/A
Nations Virginia Municipal
Bond Fund
Trust A Shares (12.86)% (12.86)% N/A N/A
Investor A Shares (14.24)% (13.82)% N/A N/A
Investor C Shares N/A N/A N/A N/A
Investor N Shares (15.19)% (14.52)% N/A N/A
</TABLE>
122
<PAGE>
Based on the foregoing calculations, the Funds' aggregate total
returns for all classes of shares were as follows for the periods
indicated:
<TABLE>
<CAPTION>
Aggregate Annual Total Return
Inception Inception
FYE FYE FYE FYE through through
11/30/94 11/30/94 11/30/93 11/30/93 11/30/94 11/30/94
Without Including Without Including Without Including
Sales Sales Sales Sales Sales Sales
Charges Charges Charges Charges Charges Charges
<S> <C> <C> <C> <C> <C> <C>
Nations Value Fund
Trust A Shares (0.08)% N/A 13.19 N/A 57.56 N/A
Investor A Shares (0.17)% (5.91)% 12.80% 7.72% 56.22% 47.23%
Investor C Shares (0.92)% (1.86)% 11.85% 9.74% 18.94% 18.94%
Investor N Shares (0.69)% (5.41)% N/A N/A 4.92% .96%
Nations Capital Growth
Fund
Trust A Shares 2.14% N/A 4.84% N/A 14.37% N/A
Investor A Shares 1.93% (3.93)% 4.56% (0.15%) 13.72% 7.18%
Investor C Shares 1.22% .22% 3.61% 1.58% 11.89% 11.89%
Investor N Shares 1.12% (3.88)% N/A N/A 6.13% 2.13%
Nations Emerging Growth
Fund
Trust A Shares 6.26% N/A N/A N/A 15.63% N/A
Investor A Shares 5.90% (.19)% N/A N/A 16.48% 9.78%
Investor C Shares 5.19% 4.19% N/A N/A 14.66% 14.66%
Investor N Shares 5.17% .17% N/A N/A 15.18% 11.18%
Nations Balanced Assets
Fund
Trust A Shares (1.73)% N/A 9.22% N/A 9.91% N/A
Investor A Shares (2.02)% (7.66)% 8.93% 4.03% 9.29% 3.00%
Investor C Shares (2.72)% (3.68)% 8.06% 5.99% 7.54% 7.54%
Investor N Shares (2.51)% (7.30)% N/A N/A .86% (3.07)%
Nations Short-Intermediate
Government Fund
Trust A Shares (2.23)% N/A 9.03% N/A 21.49% N/A
Investor A Shares (2.41)% (5.58)% 8.85% 6.13% 20.97% 17.04%
Investor C Shares (2.80)% (3.71)% 8.20% 7.20% 6.90% 6.90%
Investor N Shares (2.81)% (6.49)% N/A N/A (.24)% (3.00)%
Nations Disciplined Equity Fund
Trust A Shares (2.96)% N/A N/A N/A 60.27% N/A
Investor A Shares (3.05)% (9.54)% N/A N/A 6.61% .48%
Investor C Shares N/A N/A N/A N/A N/A N/A
Investor N Shares N/A N/A N/A N/A 2.02% (2.98)%
123
<PAGE>
Equity Index Fund
Trust A Shares N/A N/A N/A N/A 0.29% N/A
Nations Managed Index Fund
Trust A Shares N/A N/A N/A N/A N/A N/A
Trust B Shares N/A N/A N/A N/A N/A N/A
Investor A Shares N/A N/A N/A N/A N/A N/A
</TABLE>
124
<PAGE>
<TABLE>
<CAPTION>
Aggregate Annual Total Return
Inception Inception
FYE FYE FYE FYE through through
11/30/94 11/30/94 11/30/93 11/30/93 11/30/94 11/30/94
Without Including Without Including Without Including
Sales Sales Sales Sales Sales Sales
Charges Charges Charges Charges Charges Charges
<S> <C> <C> <C> <C> <C>
Nations Short-Term Income
Fund
Trust A Shares (.11)% N/A 8.26% N/A 6.43% N/A
Investor A Shares (.33)% (1.83)% 8.03% 6.41% 5.72% 4.13%
Investor C Shares (.51)% N/A 7.73% N/A 5.23% N/A
Investor N Shares (.46)% N/A N/A N/A 2.48% N/A
Nations Diversified
Income Fund
Trust A Shares (3.05)% N/A 17.40% N/A 14.18% N/A
Investor A Shares (3.26)% (7.85)% 17.32% 14.38% 12.94% 7.57%
Investor C Shares (3.77)% (4.66)% 16.65% 15.65% 12.86% 12.86%
Investor N Shares (3.77)% (8.21)% N/A N/A 1.60% (2.05)%
Nations Strategic Fixed
Income Fund
Trust A Shares (3.58)% N/A 12.05% N/A 7.92% N/A
Investor A Shares (3.76)% (6.89)% 11.88% 9.08% 7.14% 3.66%
Investor C Shares (4.14)% (5.03)% 11.20% 10.20% 6.36% 6.36%
Investor N Shares (4.21)% (8.62)% N/A N/A (.72)% (4.31)%
Nations Municipal
Income Fund
Trust A Shares (8.17)% N/A 12.54% N/A 22.58% N/A
Investor A Shares (8.34)% (12.24)% 12.37% 9.56% 22.07% 16.88%
Investor C Shares (8.86)% (9.71)% 11.69% 10.69% 5.49% 5.49%
Investor N Shares (8.86)% (13.12)% N/A N/A (5.32)% (8.78)%
Nations Short-Term
Municipal Income Fund
Trust A Shares 1.09% N/A N/A N/A 1.15% N/A
Investor A Shares .90% (.61)% N/A N/A .97% (.55)%
Investor C Shares N/A N/A N/A N/A .45% N/A
Investor N Shares .73% N/A N/A N/A .71% N/A
125
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aggregate Annual Total Return
Inception Inception
FYE FYE FYE FYE through through
11/30/94 11/30/94 11/30/93 11/30/93 11/30/94 11/30/94
Without Including Without Including Without Including
Sales Sales Sales Sales Sales Sales
Charges Charges Charges Charges Charges Charges
<S> <C> <C> <C> <C> <C> <C>
Nations Intermediate
Municipal Bond Fund
Trust A Shares (4.25)% N/A N/A N/A (1.89%) N/A
Investor A Shares (4.48)% (7.59)% N/A N/A (3.25)% (6.40)%
Investor C Shares N/A N/A N/A N/A .52% (1.83)%
Investor N Shares (5.00)% (8.65)% N/A N/A (5.00)% (8.65)%
Nations Florida
Intermediate Municipal
Bond Fund
Trust A Shares (4.26)% N/A N/A N/A 4.84% N/A
Investor A Shares (4.43)% (7.54)% N/A N/A 4.59% 1.19%
Investor C Shares (4.81)% (5.73)% N/A N/A 3.56% 3.56%
Investor N Shares (4.73)% (8.39)% N/A N/A (1.37)% (4.17)%
Nations Georgia Intermediate
Municipal Bond Fund
Trust A Shares (4.70)% N/A 10.43% N/A 12.68% N/A
Investor A Shares (4.87)% (7.96)% 10.37% 7.61% 11.41% 7.79%
Investor C Shares (5.25)% (6.16)% 9.61% 8.61% 7.82% 7.82%
Investor N Shares (5.17)% (8.81)% N/A N/A (1.52)% (4.29)%
Nations Maryland Intermediate
Municipal Bond Fund
Trust A Shares (4.64)% N/A 9.11% N/A 26.89% N/A
Investor A Shares (4.82)% (7.91)% 8.96% 6.23% 26.37% 22.27%
Investor C Shares (5.20)% (6.10)% 8.30% 7.30% 5.89% 5.89%
Investor N Shares (5.12)% (8.73)% N/A N/A (1.77)% (4.51)%
Nations North Carolina
Intermediate Municipal
Bond Fund
Trust A Shares (4.34)% N/A N/A N/A 4.30% N/A
Investor A Shares (4.51)% (7.62)% N/A N/A 3.85% .47%
Investor C Shares (4.89)% (5.81)% N/A N/A 2.96% 2.96%
Investor N Shares (4.82)% (8.46)% N/A N/A (1.74)% (4.52)%
Nations South Carolina
Intermediate Municipal
Bond Fund
Trust A Shares (3.37)% N/A 9.32% N/A 12.63% N/A
Investor A Shares (3.54)% (6.68)% 9.16% 6.43% 10.60% 7.00%
Investor C Shares (3.94)% (4.86)% 8.51% 7.51% 7.64% 7.64%
Investor N Shares (3.85)% (7.53)% N/A N/A (.74)% (3.53)%
</TABLE>
126
<PAGE>
<TABLE>
<CAPTION>
Aggregate Annual Total Return
Inception Inception
FYE FYE FYE FYE through through
11/30/94 11/30/94 11/30/93 11/30/93 11/30/94 11/30/94
Without Including Without Including Without Including
Sales Sales Sales Sales Sales Sales
Charges Charges Charges Charges Charges Charges
<S> <C> <C> <C> <C> <C> <C>
Nations Tennessee
Intermediate Municipal
Bond Fund
Trust A Shares (4.24)% N/A N/A N/A (.32)% N/A
Investor A Shares (4.41)% (7.51)% N/A N/A .07% (3.19)%
Investor C Shares N/A N/A N/A N/A (.53)% (1.52)%
Investor N Shares (4.72)% (8.37)% N/A N/A (1.56)% (4.34)%
Nations Texas Intermediate
Municipal Bond Fund
Trust A Shares (3.48)% N/A N/A N/A 3.97% N/A
Investor A Shares (3.66)% (6.79)% N/A N/A 1.78% (1.53)%
Investor C Shares N/A N/A N/A N/A 0.08% (.92)%
Investor N Shares (3.96)% (7.64)% N/A N/A (1.46)% (4.25)%
Nations Virginia
Intermediate Municipal
Bond Fund
Trust A Shares (4.35)% N/A 9.08% N/A 33.00% N/A
Investor A Shares (4.52)% (7.62)% 8.91% 6.19% 30.56% 26.31%
Investor C Shares (4.90)% (5.80)% 8.25% 7.25% 6.41% 6.41%
Investor N Shares (4.82)% (8.44)% N/A N/A (1.50)% (4.26)%
Nations Florida Municipal
Bond Fund
Trust A Shares N/A N/A N/A N/A (10.70)% N/A
Investor A Shares N/A N/A N/A N/A (11.35)% (15.12)%
Investor C Shares N/A N/A N/A N/A (.43)% (1.43)%
Investor N Shares (9.37)% (13.69)% N/A N/A (11.50)% (14.86)%
Nations Georgia Municipal
Bond Fund
Trust A Shares N/A N/A N/A N/A 12.07% N/A
Investor A Shares N/A N/A N/A N/A (11.71)% (15.46)%
Investor C Shares N/A N/A N/A N/A (.44)% (1.43)%
Investor N Shares (10.28)% (14.55)% N/A N/A (11.62)% (14.97)%
Nations Maryland Municipal
Bond Fund
Trust A Shares N/A N/A N/A N/A (4.39)% N/A
Investor A Shares (9.59) (13.43)% N/A N/A (9.54)% (13.39)%
Investor C Shares N/A N/A N/A N/A (.45)% (1.44)%
Investor N Shares (10.11)% (14.39)% N/A N/A (11.85)% (15.20)%
</TABLE>
127
<PAGE>
<TABLE>
<CAPTION>
Aggregate Annual Total Return
Inception Inception
FYE FYE FYE FYE through through
11/30/94 11/30/94 11/30/93 11/30/93 11/30/94 11/30/94
Without Including Without Including Without Including
Sales Sales Sales Sales Sales Sales
Charges Charges Charges Charges Charges Charges
<S> <C> <C> <C> <C> <C> <C>
Nations North Carolina
Municipal Bond Fund
Trust A Shares N/A N/A N/A N/A (12.65)% N/A
Investor A Shares (10.41)% (14.22)% N/A N/A (11.13)% (14.91)%
Investor C Shares N/A N/A N/A N/A (.67)% (1.66)%
Investor N Shares (10.92)% (15.17)% N/A N/A (11.91)% (15.25)%
Nations South Carolina
Municipal Bond Fund
Trust A Shares N/A N/A N/A N/A (9.12)% N/A
Investor A Shares (7.45)% (11.38)% N/A N/A (7.25)% (11.19)%
Investor C Shares N/A N/A N/A N/A (.52)% (1.51)%
Investor N Shares (7.97)% (12.36)% N/A N/A (8.89)% (12.35)%
Nations Tennessee Municipal
Bond Fund
Trust A Shares N/A N/A N/A N/A (6.66)% N/A
Investor A Shares (7.58)% (11.51)% N/A N/A (7.97)% (11.89)%
Investor C Shares N/A N/A N/A N/A (0.07)% (1.06)%
Investor N Shares (8.10)% (12.48)% N/A N/A (9.58)% (13.01)%
Nations Texas Municipal
Bond Fund
Trust A Shares N/A N/A N/A N/A (12.21)% N/A
Investor A Shares N/A N/A N/A N/A (10.98)% (14.77)%
Investor C Shares N/A N/A N/A N/A (0.43)% (1.42)%
Investor N Shares (9.98)% (14.27)% N/A N/A (11.62)% (14.98)%
Nations Virginia Municipal
Bond Fund
Trust A Shares N/A N/A N/A N/A (12.86)% N/A
Investor A Shares (10.44)% (14.24)% N/A N/A (10.81)% (14.60)%
Investor C Shares N/A N/A N/A N/A (.67)% (1.66)%
Investor N Shares (10.95)% (15.19)% N/A N/A (12.66)% (15.98)%
</TABLE>
Fee waivers and/or expense reimbursements were in effect for the
periods presented. Trust B Shares were not offered during the period
described above.
From time to time, the yields of each class of shares of a Money
Market Fund may be compared to the respective averages compiled by
Donoghue's Money Fund Report, a widely recognized independent
publication that monitors the performance of money market funds, or to
the average yields reported by the Bank Rate Monitor for money market
deposit accounts offered by the 50 leading banks and thrift
institutions in the top five metropolitan statistical areas.
128
<PAGE>
In addition, the Funds may compare the performance and yield of a
class or series of shares to those of other mutual funds with
similar investment objectives and to other relevant indices or to
rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual
funds. For example, the performance and yield of a class of shares in
a Fund may be compared to data prepared by Lipper Analytical
Services, Inc. The performance and yield of a class of shares in the
Value Fund, Capital Growth Fund, Balanced Assets Fund, Equity Index
Fund, Managed Index Fund and Emerging Growth Fund may be compared to
the Standard & Poor's 500 Stock Index, an unmanaged index of a group of
common stocks, the Consumer Price Index, or the Dow Jones Industrial
Average, a recognized unmanaged index of common stocks of 30
industrial companies listed on the Exchange. The performance and
yield of a class of shares in the Short-Intermediate Government
Fund may be compared to the Shearson Lehman Intermediate Government Bond
Index, an unmanaged index of intermediate government securities.
Performance and yield data as reported in national financial
publications such as Money Magazine, Forbes, Barron's, The Wall
Street Journal, and The New York Times, or in publications of a local or
regional nature, also may be used in comparing the performance of a
class of shares in a Fund.
The Short-Intermediate Government Fund seeks to provide higher
current yields than money market funds and short-term treasury
obligations. The Short-Intermediate Government Fund also seeks to
maintain greater price stability than higher yielding long-term
bond funds. Therefore, in its advertisements and sales materials,
the Short-Intermediate Government Fund may compare performance of the
Short-Intermediate Government Fund to money market indices, such as
those compiled by IBC/Donoghue, Inc. and Bank Rate Monitor. In such
advertising and sales materials, the Short-Intermediate Government Fund
may also compare the price stability of the Short-Intermediate
Government Fund, or indices of funds with similar investment
objectives, to indices of long term government bond funds such as
those compiled by Salomon Brothers and Shearson Lehman Brothers Inc.
The Short-Intermediate Government Fund is not meant to be a substitute
for a money market fund which seeks to maintain a fixed net asset
value of $1.00 per share.
Each Fund may quote information obtained from the Investment
Company Institute in its advertising materials and sales literature.
Ibbotson Data. Ibbotson Associates of Chicago, Illinois,
("Ibbotson") provides historical returns of the capital markets in
the United States. The Funds may compare the performance of their
share classes or series to the long-term performance of the U.S.
capital markets in order to demonstrate general long-term risk
versus reward investment scenarios. Performance comparisons could
also include the value of a hypothetical investment in common stocks,
long-term bonds or treasuries.
The capital markets tracked by Ibbotson are common stocks,
small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds,
Treasury Bills, and the U.S. rate of inflation. These capital
markets are based on the returns of several different indices. For
common stocks, the S&P is used. For small capitalization stocks,
return is based on the return achieved by Dimensional Fund Advisors
(DFA) Small Company Fund. This fund is a market-value-weighted index of
the ninth and tenth deciles of the Exchange, plus stocks listed on
the American Stock Exchange (AMEX) and over-the-counter
129
<PAGE>
(OTC) with the same or less capitalization as the upperbound of the
Exchange ninth decile. At year-end 1992, the DFA Small Company Fund
contained approximately 1793 stocks, with a weighted average market
capitalization of $69.5 million. The unweighted average market
capitalization was $40.7 million, while the median was $29.0 million.
Unlike an investment in a common stock mutual fund, an investment
in bonds that are held to maturity provides a fixed and stated rate of
return. Bonds have a senior priority in liquidation or bankruptcy to
common stocks, and interest on bonds is generally paid from assets of
the corporation before any distributions to common shareholders. Bonds
rated in the two highest rating categories are considered high quality
and to present minimal risks of default. See Schedule A for a more
complete explanation of these ratings of corporate bonds. An
advantage of investing in government bonds is that, in many cases,
they are backed by the credit and taxing power of the United States
government, and therefore, such securities may present little or no
risk of default. Although government securities fluctuate in price,
they are highly liquid and may be purchased and sold with relatively
small transaction costs (direct purchase of Treasury securities can be
made with no transaction costs).
Long-term corporate bond returns are based on the performance
of the Salomon Brothers Long-Term-High-Grade Corporate Bond Index and
include nearly all "Aaa-" and "Aa-" rated bonds. Returns on
intermediate-term government bonds are based on a one-bond portfolio
constructed each year, containing a bond which is the shortest
noncallable bond available with a maturity not less than 5 years.
This bond is held for the calendar year and returns are recorded.
Returns on long-term government bonds are based on a one-bond portfolio
constructed each year, containing a bond that meets several criteria,
including having a term of approximately 20 years. The bond is held
for the calendar year and returns are recorded. Returns on U.S.
Treasury Bills are based on a one-bill portfolio constructed each
month, containing the shortest-term bill having not less than one
month to maturity. The total return on the bill is the month end
price divided by the previous month-end price, minus one. Data up to
1976 is from the U.S. Government Bond file at the University of
Chicago's Center for Research in Security Prices; the Wall Street
Journal is the source thereafter. Inflation rates are based on the
CPI. Ibbotson calculates total returns in the same method as the Funds.
MISCELLANEOUS
Certain Record Holders
The following indicates those persons who owned 5% or more
of the indicated class of shares. Information provided is as of
January 24, 1996. Unless otherwise indicated, the address for each
recordholder of Trust Shares is 1401 Elm Street, 11th Floor, Dallas,
Texas 75202.
130
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Shares held of
Name and Address Record Only
<S> <C>
Nations Equity Index Fund
Trust A Shares
Wendy's Int. Inc. Pension Plan 8.60%
Ms. Diane E. Greathouse
Wendy's International Inc.
P.O. Box 256
4288 W. Dublin-Granville Road
Dublin, OH 43017
Anheuser-Busch Prod. & Opr. Pen.Plan 11.30%
David C. Sauerhoff
Anheuser Busch Co.
One Busch Place
St. Louis, MO 63118
Gardner Denver M/T 7.00%
Helen Cornell
Corporate Secretary
Gardner Denver Machinery Inc.
1800 Gardner Expressway
Quincy, IL 62301
Nations Fund/401K Holding Account 28.20%
NationsBank
NCI-007-21-02
101 South Tryon Street
Charlotte, NC 28255
Albemarle Corporation 9.10%
Ms. Nancy Pivik
451 Florida Street
6th Floor
Baton Rouge, LA 70801
131
<PAGE>
Nations Tax-Exempt Fund
Investor C Shares
James S. Summer and 27.10%
Edith E. Summer JTTEN
8231 Stafford Mill Road
Oak Ridge, NC 27310
Diane Pearman 13.55%
Route 1, Box 277-D
Oscar Frye Road
Pinnacle, NC 27043
J. Steven Summer 13.23%
103 Saura Lane
Winston-Salem, NC 27107
Richard G. Summer 13.08%
103 Saura Lane
Winston-Salem, NC 27107
J. Douglas Perry 9.62%
1413 North Bayshore
Virginia Beach, VA 23451-3718
Patricia W. Perry 9.39%
1413 North Bayshore
Virginia Beach, VA 23451-3718
Nations Government Money Market Fund
Investor C Shares
George Charles Zutes & 37.36%
Lucinda Zutes JTTEN
975 Bayshore Drive
Tarpon Springs, FL 34689-2403
John M. Meister and 9.34%
Cheryl L. Meister JTTEN
406 Silvercreek Road
Greer, SC 29650
George Charles Zutes 9.32%
975 Bayshore Drive
Tarpon Springs, FL 34689-2403
Jacquelyn A. Sears - Trustee 5.78%
U/A DTD 1/6/89
Jacquelyn A. Sears - Grantor
205 Kenmore Drive
Flat Rock, NC 28731-9578
132
<PAGE>
Nations Value Fund
Investor C Shares
George H. Lumsden and 7.67%
Erika J. Lumsden JTTEN
16 Full Sweep Drive
Savannah, GA 31419-9330
Nations Capital Growth Fund
Investor C Shares
Dean Witter Reynolds Cust. for 7.91%
Herbert Halperin
IRA Standard 6/14/93
6905 Nevis Road
Bethesda, MD 20817-4642
Dean Witter Reynolds Cust. for 6.02%
Dale Morris
IRA Standard 6/14/93
818 19th Avenue South
Nashville, TN 37203-3202
Patricia L. DeLorenzo 5.86%
1204 Newport
Hilton Head, SC 29928
Janet Howard & 5.25%
Dr. Mark Clark TTEE
For The Tidewater Heart Specialists
Profit Sharing Plan
2112-B Hartford Road
Hampton, VA 23666
Nations Emerging Growth Fund
Trust A Shares
NationsBank Dallas (C) 96.76%
Attn: Deborah Goldman
902 Main Street
Dallas, TX 75202
Investor A Shares
BSDT Rollover IRA FBO 7.63%
Mitchel Wong
1700 Stoneridge Terrace
Austin, TX 78746
133
<PAGE>
Investor C Shares
Janet C. Howard & 16.60%
Dr. Mark Clark TTEE
For The Tide Water Heart Specialists
Profit Sharing Plan
2112-B Hartford Road
Hampton, VA 23666
Dean Witter Reynolds Cust for 7.06%
William O. Kirker MD
6130 Moss Spring Road
Columbia, SC 29209
Dean Witter Reynolds Cust. for 5.89%
Bernard D. Bouvier
IRA Rollover 6/14/93
633 Dolphin Road
Fripp Island
St. Helena Island, SC 29920
Marian Brodsky 5.60%
7104 Millwood Drive
Bethesda, MD 20817-6145
Dean Witter Reynolds Cust. For 5.43%
William B. McGuire, Jr.
IRA Standard Dated 06/14/93
212 South Tryon Street, Suite 800
Charlotte, NC 28281-8174
Nations Disciplined Equity Fund
Trust A Shares
PT NationsBank Corp. Equity 14.14%
Susan Waldkirch
NCI-007-21-02
101 South Tryon Street
Charlotte, NC 28255
Flagstar Pension Plan 6.30%
Lee Holliday
Flagstar Corp.
203 East Main Street
Spartanburg, SC 29319
TR U/A EDUC FDN ENDOW 8.40%
Mr. WR Cherry, Treasurer
The Educational Foundation, Inc.
P.O. Box 2446
Chapel Hill, NC 27514
134
<PAGE>
TR U/A Memorial Mission Hospital 9.00%
Mr. Daniel B. Kittrell, CFO
Memorial Mission Hospital, Inc.
509 Biltmore Ave.
Asheville, NC 28801
Clampitt DES PSP-Nations MGD 6.00%
Gary Martin, VP Finance
Clampitt Paper Co.
9207 Ambasador
Dallas, TX 75247
Investor A Shares
Jack B. Chadsey 15.01%
9050 Hammock Lake Drive
Miami, FA 33156
Zachary Taylor TTEE FBO 8.29%
Kleen Tex Industries Inc.
PSP & 401K Savings Plan and Trust
P.O. Bo KTI
La Grange, GA 30241
Stephens Inc. for the Exclusive 5.40%
Benefit of our Customers
111 Center Street
Little Rock, AR 72201
Investor C Shares
Daniel A. Levinas and 34.34%
Mirella Levinas JTWROS
6401 Hillmead Road
Bethesda, MD 20617
Frank L. Scofield, Trustee 11.68%
Dated January 4, 1976
FLSAB Trust
1411 West Avenue, Suite 200
Austin, TX 78701
135
<PAGE>
Dean Witter Reynolds Cust. For 7.14%
Jean M. De Ru
IRA Standard DTD 06/14/93
2664 Sharondale Drive
Atlanta, GA 30305-3858
Dean Witter Reynolds Cust. For 6.88%
Sidney W. Boone
IRA Rollover Dated 05/04/95
1411 E. 51st Street
Savannah, GA 31404-4037
Mila K. Kennedy Cust. 5.45%
FBO Haydn Kennedy Collard UTMA TX
8 Rue De Lac
Dallas, TX 75230
John A. Hardin 5.22%
P.O. Box 751
Rock Hill, SC 29731-6751
Nations Balanced Assets Fund
Trust A Shares
Glitsch Non-Barg EE RET Plan 6.30%
Mr. Richard J. Norton
Glitsch, Inc.
P.O. Box 66052
Dallas, TX 75266
NationsBank 52.40%
NCI-007-21-02
101 South Tryon Street
Charlotte, NC 28255
Investor C Shares
Carmine L. Dorio & Carmen Dorio JTTEN 18.34%
2580 Blythe Lane
Snellville, GA 30278
Turner Pinecrest Groves 6.03%
P. O. Box 1885
Plant City, FL 33564
Patricia Earle Lipscomb PER REP 5.82%
Estate of Patricia N. Earle
622 McDaniel Ave.
Greenville, SC 29005
136
<PAGE>
Nations Intermediate
Municipal Income Fund
Investor N Shares
Ellen Aston Paull 11.733%
1407 N. Weston Lane
Austin, TX 78733
Joanne B. Stegall 10.91%
517 Cameo Terrace
Chesapeake, VA 23320
Eleanor B. Calkins and 7.33%
W. D. Calkins JTTEN
9602 Baseline
Dallas, TX 75243
Mary Louise Foster 7.19%
700 Mease Plaza
Apt 232
Dunedin, FL 34698-6619
Jerry Ann Bell 7.73%
213 Lucille Lane
Toccoa, GA 30577
Samuel D. Turner 5.97%
Fox, Bennet & Turner
750 17th St., NW, Ste-1100
Washington, D.C. 20006
Jane L. Winer and 5.42%
Monty J. Strauss JTTEN
4209 88th Street
Lubbock, TX 79423
Nations Municipal Income Fund
Investor A Shares
Lloyd E. Raport 22.74%
5600 Wisconsin Ave.
Apt. - 17E
Chevy Chase, MD 20815
137
<PAGE>
Mitchel Wong & 9.64%
Rose T. Wong JTWROS
1700 Stoneridge Terrace
Austin, TX 78746
Cynthia S. Synnott 5.56%
Separate Property
18115 Shire Oak
Houston, TX 77084
Irwin Grossman 5.25%
540 Preston Commons
8117 Preston Road
Dallas, TX 75225
Investor C Shares
Sunrise OK Tires 5.63%
c/o Vernon Hunter
1013 W. Sunrise Boulevard
Fort Lauderdale, FL 33311
Nations Short-Term Income Fund
Investor A Shares
Graward General 19.60%
Attn: Kellye Norcross-Controller
P.O. Box 290909
Nashville, TN 37229-0909
Potomac Productions Incorporated 5.91%
Money Purchase Plan
FBO Lynda C. Altman
c/o Hans Jesperson EA
1511 K Street, N.W., Suite 419
Washington, D.C. 20005
Dean Witter Reynolds Cust For 5.90%
Charles T. Bell
IRA Rollover Dated 6/14/93
503 Geiger Circle
Key Largo, FL 33037
Nations Diversified Income Fund
Trust A Shares
Nations Funds Fixed Income 79.00%
Susan Waldkirch
NCI-007-21-02
Nations Bank N.A.
101 South Tryon Street
Charlotte, NC 28255
138
<PAGE>
Investor A Shares
Howard M. Arnold 6.32%
9825 Conestoga Way
Potomac, MD 20854-4713
Dean Witter Reynolds Cust. for 6.18%
James T. Pearce IRA SEP
P.O. Box 1986
Greenville, SC 29602-1986
Investor C Shares
Falcon Food Service Co. Inc. 5.62%
Attn: J. B. Kraft, President
12753 Pineacre Lane
West Palm Beach, FL 33414
Nations Strategic Fixed Income Fund
Trust A Shares
NationsBank Dallas - (C) 95.32%
Attn: Deborah Goldman
901 Main Street
Dallas, TX 75202
Investor A Shares
Rental Uniform of Florence 6.84%
P.O. Box 12410
Florence, SC 29504-0410
Investor C Shares
Patricia Earle Lipscomb Per Rep. 28.21%
Estate of Patricia N. Earle
622 McDaniel Ave.
Greenville, SC 29605
BSDT Cust. IRA FBO 26.11%
James A. Blanchard
9 Las Brisas
Austin, TX 78746
Alton J. Turley & 14.37%
Christine Turley JTTEN
55 Swan Lake Road
Stockbridge, GA 30281
Mary Jane Bakery Salesman Assoc. 6.81%
ATTN: Frank Rollins
1948 Country Manor Lane
Virginia Beach, VA 23456
NationsBank of NC Cust. IRA 6.57%
FBO Walter St. George Gladding
102A Northridge Drive
139
<PAGE>
Ashville, NC 28804-2237
NationsBank of Florida NA Succ. TTEE 6.55%
FBO William E. Clark
TUA DTD 8-8-95
ATTN SAS/06050230066100
PO Box 831575
Dallas, TX 75283-1575
Investor N Shares
Dean Witter Reynolds Cust. for 8.06%
Robert A. Pierce
IRA Rollover 6/14/93
10 Lavington Court
Columbia, SC 29209-1944
Nations Florida Intermediate
Municipal Bond Fund
Trust A Shares
I/A Helen L. Faulkner CO TTEE 5.30%
2151 Forrest Lane
Naples, FL 33940
Investor A Shares
Arthur W. Ihle Trustee 12.12%
Arthur W. Ihle REVOC LIV TRUST
910 Dogwood Drive, Apt. 447
Delray Beach, FL 33483
Joseph L. Perry 8.17%
1045 Cellana Court
Shell Point Village
Fort Myers, FL 33908
Charlotte G. Bowen 8.14%
5000 N. Ocean Blvd.
Bldg. B Apt. 1001
Ft. Lauderdale, FL 33308
P. McNeil 7.72%
2310 Del Mar Island
Fort Lauderdale, FL 33301
140
<PAGE>
Lillian J. Clayman and 6.68%
Charles E. Clayman JTWROS
6161 NW 2nd Ave #625
Boca Raton, FL 33487
Investor C Shares
Bertram C. Ellison and 29.83%
Joline M. Ellison JTTEN
651 NW Hiatus Road
Plantation, FL 33325-2010
Louise D. Lee 29.12%
408 SE 9 Court
Fort Lauderdale, FL 33316
A. M. Alexander and 23.20%
Betty W. Alexander JTTEN
1510 S. Trask Street
Tampa, FL 33629
Investor N Shares
Owen T. Quigley 5.47%
P.O. Box 3073
Delray Beach, FL 33447-3073
Joseph A. Howell, Jr. 5.43%
Irrevocable Trust
U/A/D 10/10/83 Joan G. Howell TTEE
5420 North Ocean Drive, Apt. 1203
Singer Island, FL 33404-2526
Fagl L. Oxman 5.04%
5241 61st Ave. South
St. Petersburg, FL 33715-2402
Nations Florida Municipal Bond Fund
Trust A Shares
I/A Helen L. Faulkner Co TTEE 16.90%
2151 Forest Lane
Naples, FL 33940
Investor A Shares
Jacqueline Bailes, Charles E. Bailes, Jr., 57.04%
Charles E. Bailes III and J.D. Bailes
Bailes Investment Account
6212 Dartmoor Ct.
Orlando, FL 32819
Robert P. Cornelssen, Trustee 24.46%
Robert P. Cornelssen Trust
1868 Shore Drive South
Apartment 401
St. Petersburg, FL 33707
141
<PAGE>
Harold A. Dargel and 5.75%
Phyllis A. Dargel Co-TTEES
Harold A. Dargel REV TR DTD 10-20-89
5721 SW 16th Court
Plantation, FL 33317-5901
Arthur W. Ihle, Trustee 5.25%
Arthur W. Ihle REVOC LIV Trust
DTD 11-21-94
910 Dogwood Dr., Apt. 447
Delray Beach, FL 33483
Investor C Shares
John Trueman Jr. and 93.67%
Lenora H. Trueman JTTEN
1658 N.E. 33 Street
Oakland Park, FL 33334
Stephens Inc. 6.31%
111 Center Street
Little Rock, AR 72201
Nations Georgia Intermediate
Municipal Bond Fund
Investor A Shares
Lyles W. Sanders and 15.03%
Mary C. Sanders, JTTEN
2305 Welton Place
Dunwoody, GA 30338
Investor C Shares
Letty C. Cagle and 17.63%
Douglas Cagle, JTTEN
8592 Roswell Road, Apt. 318
Atlanta, GA 30350
Ruth D. Lautz TTEE 8.38%
Ruth D. Lautz Revocable Trust
3046 Shinnecock Hills
Duluth, GA 30136
Arthur R. Lautz TTEE 6.55%
Arthur R. Lautz Revocable Trust
3046 Shinnecock Hills
Duluth, GA 30136
142
<PAGE>
Charles D. Davidson and 5.97%
Judith L. Davidson JTTEN
370 Rosalie Ct.
Alpharetta, GA 30202
Investor N Shares
Edward J. Derst, Jr. Trustee 33.30%
U/A of Edward J. Derst, Jr.
Trust Agreement DTD 11/15/88
P.O. Box 22849
Savannah, GA 31403
Nations Georgia Municipal Bond Fund
Trust A Shares
CUST U/A Joseph H. Altfater 6.10%
8592 Roswell Road
Apt. 422
Atlanta, GA 30350
CUST U/A Gertrude P. Altfater 5.80%
8592 Roswell Road
Apt. 422
Atlanta, GA 30350
143
<PAGE>
TR U/W Byron H. Mathews, Jr. 12.80%
Mary Freeman Matthews
Deceased 10/30/95
Jaquelin Byron Davidson
7705 Middleville Drive
Springfield, VA 22153
CO TR U/I III Will E.B. Claxton 5.50%
EB Claxton , Jr.
P.O. Box 519
Atlanta, GA 31040
AGT U/A Macon Medical Bldg. Inc. 13.50%
Pam Cole
Ga8-300-02-01
c/o Mrs Charlotte atson
2800 South University Boulevard # 62
Denver, CO 80210-6056
CO TR U/W J.M. Eaton (Residual) 10.70%
Mrs. Suella Eaton
P.O. Box 455
Blue Ridge, GA 30513
AGT U/A Fey C. Hardee, Trustee 12.10%
3006 Langford Dr.
Augusta, GA 30909
Investor A Shares
Lowell A. Young and 63.69%
Maryann E. Young JTTEN
4031 Oakridge Bend
Valdosta, GA 31602
Enzor Leroy Beckham 24.04%
2314 Golfcourse Dr.
Albany, GA 31707
Monte L. Poole & 12.08%
Venetia C. Poole JTWROS
1344 Hidden Hills Pkwy.
Stone Mountain, GA 30088
Investor C Shares
F. Wayne Weaver and 96.49%
Edith T. McWaters JTTEN
1576 Bethesda Road
Riverdale, GA 30296
144
<PAGE>
Nations Maryland Intermediate
Municipal Bond Fund
Investor A Shares
Robert Gladstone & 14.05%
Leslie Gladstone JTTEN
2468 Belmont Road, N.W.
Washington, D.C. 20008-1610
Stephens Inc. for the Exclusive 11.69%
Benefit of Our Customers
111 Center Street
Little Rock, AR 72201
Investor C Shares
Margot H. Hahn 8.70%
815 Connecticut Avenue, N.W.
Suite 601
Washington, D.C. 20006-4004
Douglas D. Van Riper & 5.27%
Mary E. Van Riper JTTEN
10513 Patuxent Ridgeway
Laurel, MD 20723
Investor N Shares
Laurel R.G. Moreno, Trustee 5.29%
U/Deed DTD 10/14/91
FBO Miro Gudelsky
10808 Riverwood Drive
Potomac, MD 20854-1334
Nations Maryland Municipal Bond Fund
Trust A
Investor A Shares
Carol C. House & 41.58%
Peter W. House JTRWDS
4210 Leeward Place
Bethesda, MD 20816
145
<PAGE>
Raymond A. Turetsky and 22.84%
Bess H. Turetsky JTTEN
11220 Woodson Avenue
Kensington, MD 20895-1427
Charles E. Chlan 20.83%
Sole Proprietorship
7200 Bel Air Road
Baltimore, MD 21206
Dona L. Lechliter and 11.00%
Stephen C. Lechliter JTTEN
2921 N. Leisure World Blvd., Apt. 427
Silver Spring, MD 20906
Investor C Shares
Stephens Inc. 99.6%
ATTN Accounting
111 Center Street
Little Rock, AR 72201
Nations North Carolina
Intermediate Municipal Bond Fund
Trust A Shares
I/M Howard W. Covington 10.60%
P.O. Box 9418
Greensboro, NC 27408
I/M Jean B. Brooks 5.40%
409 Sunset Drive
Greensboro, NC 27408
Investor A Shares
Jerry Wordsworth 21.27%
P.O. Box 800
Rocky Mount, NC 27802
W. Frank Dowd, Jr. 7.67%
P.O. Box 35430
Charlotte, NC 28235-5430
Wayne Joyce and 7.61%
Julia Y. Joyce JTTN
2694 Merry Oaks Trail
Winston-Salem, NC 27103
Elizabeth H. Miller 7.20%
P.O. Box 68
Tuxedo, NC 28784
146
<PAGE>
Investor C Shares
Barbara B. Coyner 18.53%
513 Lake Boone Trail
Raleigh, NC 27608-1027
J. Robert Stout & 13.31%
Maggie Smith Stout JTTEN
P.O. Box 35343
Greensboro, NC 27425-5343
W. Joseph Selvia and 8.58%
Jay P. Selvia JTTEN
5730 Phillips Bridge Road
Winston-Salem, NC 27104-3323
Anna B. Steele 8.27%
2041 Georgia Avenue
Winston-Salem, NC 27104
William F. Cox 8.24%
3225 Bermuda Village
Advance, NC 27006-9478
Jean Parker Moore 6.25%
2721 Spring Garden Road
Winston-Salem, NC 27106
Roger W. Simmons and 5.05%
Mary R. Simmons JTTEN
150 River Hill Drive
Advance, NC 27006
Investor N Shares
James E. Smith and 5.14%
Bettie T. Smith JTTEN
18227 Capstan Greens Road
Huntersville, NC 28078
Nations North Carolina
Municipal Bond Fund
Trust A Shares
I/M O. Gene Gabbard 15.20%
102 Marseille Pl.
Cary, NC 27511
I/M Mr. Robert P. Nutter 6.10%
3111 Darryland Road
Hillsborough, NC 27278
I/M Steven G. Lane 10.00%
116 West Church Street
Edenton, NC 27932
147
<PAGE>
TR U/A Renee Molko 10.90%
311 West 9th Street
Charlotte, NC 28202-1707
I/M Allen D. Watson 11.50%
19033 Penninsula Point Drive
Huntersville, NC 28078
I/M Lisa Renstrom 10.10%
3817 Bonwood Drive
Charlotte, NC 28211
Investor A Shares
Barbara Bartow Church 27.40%
1535 Providence Road
Charlotte, NC 28207-2627
Harlan O. Greene and 21.82%
Raydell S. Greene JTTEN
384 Hayes Wellborn Road
Deep Gap, NC 28618-9738
Byron E. Gross & 8.40%
Pauline S. Gross JTWROS
3768 Osceola Road
Elon College, NC 27244-9784
Susan E. Bales and 8.14%
Audrey D. Bales JTTEN
Box 712
Wingate, NC 28174
Andrew M. Silton and 7.93%
Margaret Kanze Silton JTWROS
5314 Germaine Terrace
Charlotte, NC 28226
Stephens Inc. For the Exclusive 5.24%
Benefit of our Customers
P.O. Box 34127
Little Rock, AR 72203
Investor C Shares
Stephens Inc. 99.60%
ATTN Accounting
111 Center Street
Little Rock, AR 72201
148
<PAGE>
Nations South Carolina
Intermediate Municipal Bond Fund
Trust A Shares
Joe T. Allen 7.60%
P.O. Box 6844
Greenville, SC 29606
Jake R. Rasor, Jr., Trustee 5.80%
For TUW Jake R. Rasor Sr. Trust C
P.O. Box 278
Crosshill, SC 29332
CUST Wayland H. Cato, Jr. 8.73%
17 Legare Stree
Charleston, SC 29401
Investor C Shares
Helena B. Clark 5.67%
324 Broad River Drive
Santee, SC 29142-9301
Investor N Shares
William M. Kost and 7.33%
Janet R. Kost JTTEN
5 Birkdale Ct.
Hilton Head, SC 29926-1348
Nations South Carolina
Municipal Bond Fund
Private Estate of A. Gordon Oliver 5.2%
Zonna Oliver
#7 Ruddy Turnstone
Hilton Head, SC 29938
I/M George S. Marlowe 12.6%
P.O. Box 12234
Greenville, SC 29612
I/M For TUW Patricia White Poole 7.4%
John Poole
Personal and Confidential
Carolina Southern Bank
P.O. Box 5029
Spartanburg, SC 29304
IRR Co TUA FBO R. Collett 5.3%
Richard E. Collett
212 Butternut Circle
Myrtle Trace
Conway, SC 29526
149
<PAGE>
TJW Mary McBee-Bill McBee 14.0%
Willaim D. McBee
119 Highland Drive
Union, SC 29379
TJA Nancy M. Grinder 5.9%
1510 Citation Drive
Aiken, SC 29803
Charles D. Erb 6.4%
105 White Oak Ridge Road
Short Hills, NJ 07078
Investor A Shares
Donna R. Cart 51.73%
1140 Partridge Road
Spartanburg, SC 29302-3328
Jerome C. Cuppia Jr. Trustee 25.87%
Dated October 28, 1987
Jerome C. Cuppia Jr. Trust
8 Outerbridge Circle
Hilton Head Island, SC 29926
Doris White Cuppia TTEE FBO 8.31%
Doris White Cuppia TR DTD
10-28-87 by Doris White Cuppia
8 Outerbridge Circle
Hilton Head Island, SC 29926
Investor C Shares
Wanda Shearer 96.54%
Acct #2
1065 Pine Top Road
Belton, SC 29627
150
<PAGE>
Nations Tennessee
Intermediate Municipal Bond Fund
Trust A Shares
Mr. B Andrew Landers 18.2%
Nuclear Fuel Services, Inc.
1205 Banner Hill Road
Erwin, TN 37650
CO-TR M.O. Mills 5.1%
For Mr. Quincey M. Jones
P.O. Box 496
Sweetwater, TN 37874
U/U/W H.R. Douglas QTIP 8.4%
Betty Douglas
560 Windsor Green Blvd.
Goodlettsville, TN 37202
TR U/W Thomas J. Sworski 10.2%
Edgar V. Jones
P.O. Box 11605
Nashville, TN 37222
Investor A Shares
Bob G. Long 15.33%
P.O. Box 266
Hermitage, TN 37076
Marshall T. Polk, III 13.65%
P.O. Box 90148
Nashville, TN 37209
Joseph L. DiLorenzo 6.98%
4400 Belmont Park Ter. #249
Nashville, TN 37215
Inman Construction Corp. 5.64%
Attn: Frank Inman Jr.
5100 Poplar Ave., Suite 1210
Memphis, TN 38137
Investor C Shares
Stephens Inc. 99.55%
Attn: Accounting
111 Center Street
Little Rock, AR 72201
Investor N Shares
John O. Colton 11.55%
62211 Jocelyn Hollow Road
Nashville, TN 37205-3213
151
<PAGE>
Robert R. Hayes and 10.11%
Vira E. Hayes JTTEN
400 Bryants Lane
Woodbury, TN 37190-1641
Nations Tennessee
Municipal Bond Fund
Trust A Shares
TUW William D. Houston 27.5%
Ruth E. Houston
307 Robinhood Road
Brentwood, TN 37027
NationsBank Tennessee 10.60%
Private Client Group
One NationsBank Plaza
TN1-100-07-11
Nashville, TN 37239
I/M Malcolm L. Randolph 13.60%
358 East Drive
Oak Ridge, TN 37830
I/M Jane S. Randolph 34.00%
358 East Drive
Oak Ridge, TN 37830
TR U/W Thomas J. Sworski 5.80%
Mary Ellen Baumann
4708 Heritage Hills Drive
Bloomington, MN 55437
Patricia H. Stokes 5.00%
1165 Cross Creek Drive
Franklin, TN 37064
Investor A Shares
Allene Ellis & 50.32%
Joyce Rose JTTEN
2544 Bearwallow Rd
Ashland City, TN 37015-4506
Billie L. Martin and 24.38%
Edward H. Martin TENCOM
227 Deer Park Circle
Nashville, TN 37205-3599
Margaret S. Farley 12.07%
1512 Sun Valley Rd
Johnson City, TN 37604-3439
152
<PAGE>
Theodore J. Novak 7.69%
3860 West Trace Creek Road
Waverly, TN 37185
Barbara G. Chazen 5.54%
156 Carnavon
Nashville, TN 37205-3941
Investor C Shares
Frank W. Condurelis and 53.84%
Jane E. Condurelis JTTEN
806 Brentview Drive
Nashville, TN 37220
Robert D. Nash and 42.37%
Sharon A. Nash JTTEN
3733 Waterford Way
Anitoch, TN 37013
Investor N Shares
Miriam F. Hildebrand 9.13%
884 Edmondson Pike
Brentwood, TN 37027
Nations Texas Intermediate
Municipal Bond Fund
Trust A Shares
Mrs. Gwyn Mason 7.70%
3852 Turtle Creek Drive
Dallas, TX 75219
Investor A Shares
MOTCO 21.09%
P.O. Box 17001-Trust
San Antonio, TX 78217
Harriet G. Wolf 19.32%
2520 Old Gate Road
San Antonio, TX 78230
James Bradley Curlee Trustee 18.05%
For the Homer Hill Shaw Trust
6428 Tulip Lane
Dallas, TX 75230
Steven F. Beard Jr. 11.53%
P.O. Box 428
Spicewood, TX 78669
Mary Brandfield Briggs 5.51%
4410 Three Oaks Drive
Arlington, TX 76016-2351
153
<PAGE>
Investor C Shares
Orsinger Investments Ltd. 99.60%
2206 Camelback Drive
San Antonio, TX 78209
Investor N Shares
Montine T. Wisdom 7.97%
6335 W. Northwest Hwy. #1318
Dallas, TX 75225-3588
James R. Mallory and 7.37%
Faith K. Mallory JTTEN
2400 Winton Terrace East
Ft. Worth, TX 76109
Nations Texas Municipal Bond Fund
Trust A Shares
George M & Phyllis Charmichael 9.60%
1571 Ramillo
Long Beach, CA 90815
TR U/A Jason Florez Section 867 16.90%
Jason Florez
3113 Briar Drive
Pasadena, TX 77503
Jewel Lee 7.10%
c/o James C. Brown
165 Fawn Valley Lane
Kerrville, TX 78028
Investor A Shares
Broadway National Bank 64.02%
Hal B. Jennings and
Flora Gene Jennings Trust
DTD 8/20/87
P.O. Box 17001 Trust
San Antonio, TX 78217
Jeanette Dorman and 7.67%
Taylor Dorman JTWROS
Route 13, Box 6089
Lufkin, TX 75901
Carolyn A. Lee and 7.20%
Philip A. Lee
4900 Benton Brook Drive
Fairfax, VA 22030
154
<PAGE>
Shirley A. Wagner 6.00%
3002 San Paula
Dallas, TX 75228
Investor C Shares
Jay L. Willman and 96.56%
Catherine B. Willman JTTEN
2918 Kasserine Pass
Austin, TX 78704-4655
Nations Virginia Intermediate Municipal
Bond Fund
Investor A Shares
Albert F. Rosecan and 7.48%
Linda M. Rosecan JTWROS
1501 Farm Credit Drive
McLean, VA 22102
Retail Merchants Assoc. 5.43%
Attn: Robert Peck
5755 Poplar Hall Drive
Norfolk, VA 23502
Nations Virginia Municipal Bond Fund
Trust A Shares
Martin A. Palmer TR U/A 5.90%
Box 45
Ivy, VA 22945
John Risher TR U/A 12.10%
3877 Peakland Place
Lynchburg, VA 24503
Howell LTD Taylor 6.80%
Meadowfarm
16823 Monrovia Road
Orange, VA 22960
Arthur W. Hilton, III 20.60%
P.O. Box 4133
Woodbridge, VA 22194
Investor A Shares
William P. Moore & 35.00%
Vera W. Moore JTTN
P.O. Box 1270
Hopewell, VA 23860
155
<PAGE>
Rodney M. Carlson and 10.52%
Joyce L. Carlson JTTEN
3608 South Creek Ct.
Chesapeake, VA 23325
Rebecca C. Bell 8.60%
1092 Oaklawn Drive
Culpepper, VA 22701
Lester W. Morris
c/o Mitchell Wiggins & Co. 7.18%
7201 Glenforrest Dr.
Richmond, VA 23226
Jessie E. Spells
14927 Boydell Dr. 7.64%
Centreville, VA 22020-1534
Creola N. Shearin
2205 Parkside Ave. 7.38%
Richmond, VA 23228
Investor C Shares
Russell E. Herring
P.O. Box 568 94.42%
Crozet, VA 22932
Stephens Inc. 5.56%
Attn: Accounting
111 Center Street
Little Rock, AR 72201
Nations Intermediate Municipal Bond Fund
Investor A Shares
Laverne A. Nebel TTEE
Laverne A. Nebel Trust 25.85%
DTD 11/04/92
2248 Kingfisher Lane
Clearwater, FL 34622-3322
Lonnie K. Ledbetter and
Saundra Ledbetter JTWROS 15.67%
P.O. Box 5687
Arlington, TX 76005
Leslie T. Oliver & James B. Oliver
Co-TTEES Margaret Terrell Oliver 8.17%
Rev. Trust DTD 08-24-95
1836 N. Alanton Dr.
Virginia Beach, VA 23454
156
<PAGE>
James R. Tuerff and
Julie K. Tuerff JTWROS 7.08%
8710 Stable Crest Blvd.
Houston, TX 77024
Stephanie A. Calliott
607 Mowbray Arch 5.75%
Norfolk, VA 23507
Centura Bank TTEE
FBO Nancy J. Coulton TUA 5.27%
Attn. Bob Marsh
P.O. Box 1220
Rocky Mount, NC 27802
Investor C Shares
Charles W. Doolin 41.53%
6723 Forest Lane
Dallas, TX 75230
Neal S. Platzer and
Jack W. Crosby JTTEN 35.51%
Special Account
1410 Lost Ridge Cir.
Seabrook, TX 77586-4514
Paul J. Rangel and
Kimberly K. Rangel JTTEN 14.02%
915 Kipp Ave.
Kemah, TX 77565
Nations Short-Term Municipal Income Fund
Investor A Shares
Carl W. Cheek 50.24%
120 North Charles Street
Red Lion, PA 17356
Ralph Jerry Parker, Jr. 28.86%
500 Forest Avenue
Richmond, VA 23229-6808
The Thomas R. Waring Trust 9.90%
DTD601 Anson Court
Plano, TX 75024
Nations Short-Intermediate Government Fund
Investor A Shares
Burgess Pigment Co.
P.O. Box 349 Deck Blvd. 5.08%
Sandersville, GA 31082
</TABLE>
157
<PAGE>
As of January 24, 1996, NationsBank Corporation and its
affiliates owned of record more than 25% of the outstanding shares of
the Trust acting as agent, fiduciary, or custodian for its customers and
may be deemed a controlling person of the Trust under the 1940 Act.
158
<PAGE>
SCHEDULE A
DESCRIPTION OF RATINGS
The following summarizes the highest six ratings used by Standard
& Poor's Corporation ("S&P") for corporate and municipal bonds. The
first four ratings denote investment grade securities.
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest
and repay principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in
a small degree.
A- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than debt in higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt
in this category than for those in higher-rated categories.
BB, B - Bonds rated BB and B are regarded, on balance as predominantly
speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB
represents the lowest degree of speculation and B a higher
degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposure to adverse
conditions.
To provide more detailed indications of credit quality, the AA, A
and BBB ratings may be modified by the addition of a plus or minus sign
to show relative standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's
Investors Service, Inc. ("Moody's") for corporate and municipal
bonds. The first four denote investment grade securities.
Aaa - Bonds that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise
what are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not
be as large as in Aaa
A-1
<PAGE>
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 as well assured. Often the
protection of interest and principal payments may be very
moderate and thereby not as well safeguarded during both good
times and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bond which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa through B. The modifier 1 indicates that
the bond being rated ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the bond ranks in the lower end of its
generic rating category. With regard to municipal bonds, those bonds in
the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aa1, A1
or Baa1, respectively.
The following summarizes the highest four ratings used by Duff
& Phelps Credit Rating Co. ("D&P") for bonds, each of which denotes
that the securities are investment grade.
AAA - Bonds that are rated AAA are of the highest credit quality.
The risk factors are considered to be negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality.
Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions.
A- Bonds that are rated A have protection factors which are
average but adequate. However risk factors are more variable
and greater in periods of economic stress.
BBB - Bonds that are rated BBB have below average protection
factors but still are considered sufficient for prudent
investment. Considerable variability in risk during economic
cycles.
A-2
<PAGE>
To provide more detailed indications of credit quality, the AA, A
and BBB ratings may modified by the addition of a plus or minus sign
to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch
Investors Service, Inc. ("Fitch") for bonds, each of which denotes that
the securities are investment grade:
AAA - Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
AA - Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally
rated F-1+.
A- Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.
BBB - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes
in economic conditions and circumstances, however, are more
likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than
for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A
and BBB ratings may be modified by the addition of a plus or minus sign
to show relative standing within these major rating categories.
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:
A-3
<PAGE>
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 that the
securities are investment grade:
F-1+ securities possess exceptionally strong credit quality.
Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
F-1 securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying
this rating have a satisfactory degree of assurance for timely payment,
but the margin of safety is not as great as for issues assigned the F-1+
and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree
of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted A-1+.
Capacity for timely payment on commercial paper rated A-2 is
satisfactory, but the relative degree of safety is not as high as for
issues designated A-1.
The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers rated Prime-1 (or related supporting
institutions) are considered to have a superior capacity for
repayment of senior short-term promissory obligations. Issuers
rated Prime-2 (or related supporting institutions) are considered
to have a strong capacity for repayment of senior short-term promissory
obligations. This will normally be evidenced by many of the
characteristics of issuers rated Prime-1 but, to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
A-4
<PAGE>
D&P uses the short-term ratings described above for commercial paper.
Fitch uses the short-term ratings described above for commercial paper.
Thomson BankWatch, Inc. ("BankWatch") ratings are based upon a
qualitative and quantitative analysis of all segments of the
organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a
recommendation to buy or sell securities of any of these companies.
Further, BankWatch does not suggest specific investment criteria for
individual clients.
BankWatch long-term ratings apply to specific issues of long-term
debt and preferred stock. The long-term ratings specifically assess
the likelihood of untimely payment of principal or interest over the
term to maturity of the rated instrument. The following 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.
A-5
<PAGE>
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 debt ratings
used by IBCA Limited and its affiliate, IBCA Inc. (collectively "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 future.
A1 -- Obligations supported by the highest capacity for timely
repayment.
A2 -- Obligations supported by a good capacity for timely repayment.
A-6
<PAGE>
SCHEDULE B
ADDITIONAL INFORMATION CONCERNING
OPTIONS & FUTURES
As stated in the Prospectus, each Non-Money Market Fund, may
enter into futures contracts and options for hedging purposes. Such
transactions are described in this Schedule. During the current fiscal
year, each of the Funds intends to limit its transactions in futures
contracts and options so that not more than 5% of the Fund's net assets
are at risk. Furthermore, in no event would any Fund purchase or sell
futures contracts, or related options thereon, for hedging purposes
if, immediately thereafter, the aggregate initial margin that is
required to be posted by the Fund under the rules of the exchange on
which the futures contract (or futures option) is traded, plus any
premiums paid by the Fund on its open futures options positions,
exceeds 5% of the Fund's total assets, after taking into account any
unrealized profits and unrealized losses on the Fund's open contracts
and excluding the amount that a futures option is "in-the-money" at
the time of purchase. (An option to buy a futures contract is
"in-the-money" if the value of the contract that is subject to the
option exceeds the exercise price; an option to sell a futures
contract is "in-the-money" if the exercise price exceeds the value of
the contract that is subject of the option.)
I. Interest Rate Futures Contracts.
Use of Interest Rate Futures Contracts. Bond prices are
established in both the cash market and the futures market. In the
cash market, bonds are purchased and sold with payment for the full
purchase price of the bond being made in cash, generally within five
business days after the trade. In the futures market, only a contract
is made to purchase or sell a bond in the future for a set price on
a certain date. Historically, the prices for bonds established in
the futures market have tended to move generally in the aggregate in
concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, a Fund may use interest rate
futures as a defense, or hedge, against anticipated interest rate
changes and not for speculation. As described below, this would include
the use of futures contract sales to protect against expected increases
in interest rates and futures contract purchases to offset the impact
of interest rate declines.
A Fund presently could accomplish a similar result to that which
it hopes to achieve through the use of futures contracts by selling
bonds with long maturities and investing in bonds with short maturities
when interest rates are expected to increase, or conversely, selling
short-term bonds and investing in long-term bonds when interest rates
are expected to decline. However, because of the liquidity that is
often available in the futures market the protection is more likely to
be achieved, perhaps at a lower cost and without changing the rate
of interest being earned by the Fund, through using futures contracts.
Description of Interest Rates Futures Contracts. An interest rate
futures contract sale would create an obligation by a Fund, as seller,
to deliver the specific type of financial instrument called for in the
contract at a specific future time for a specified price. A futures
contract purchase would create an obligation by the Fund, as
purchaser, to take delivery of the specific type of financial
instrument at a specific future time at a specific price. The specific
securities delivered
B-1
<PAGE>
or taken, respectively, at settlement date, would not be determined
until at or near that date. The determination would be in accordance
with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call
for actual delivery or acceptance of securities, in most cases the
contracts are closed out before the settlement date without the
making or taking of delivery of securities. Closing out a futures
contract sale is effected by the Fund's entering into a futures
contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price in the
sale exceeds the price in the offsetting purchase, the Fund is paid
the difference and thus realizes a gain. If the offsetting purchase
price exceeds the sale price, the Fund pays the difference and realizes
a loss. Similarly, the closing out of a futures contract purchase is
effected by the Fund's entering into a futures contract sale. If the
offsetting sale price exceeds the purchase price, the Fund realizes a
gain, and if the purchase price exceeds the offsetting sale price,
the Fund realizes a loss.
Interest rate futures contracts are traded in an auction
environment on the floors of several exchanges - principally, the
Chicago Board of Trade, the Chicago Mercantile Exchange and the New York
Futures Exchange. A Fund would deal only in standardized contracts on
recognized changes. Each exchange guarantees performance under
contract provisions through a clearing corporation, a nonprofit
organization managed by the exchange membership.
A public market now exists in futures contracts covering various
financial instruments including long-term United States Treasury
Bonds and Notes; Government National Mortgage Association (GNMA)
modified pass-through mortgage-backed securities; three-month United
States Treasury Bills; and ninety-day commercial paper. The Funds
may trade in any futures contract for which there exists a public
market, including, without limitation, the foregoing instruments.
Examples of Futures Contract Sale. A Fund would engage in an
interest rate futures contract sale to maintain the income advantage
from continued holding of a long-term bond while endeavoring to avoid
part or all of the loss in market value that would otherwise accompany
a decline in long-term securities prices. Assume that the market value
of a certain security in a Fund tends to move in concert with the
futures market prices of long-term United States Treasury bonds
("Treasury Bonds"). The investment adviser ("Adviser") wishes to fix the
current market value of this portfolio security until some point in the
future. Assume the portfolio security has a market value of 100, and
the Adviser believes that, because of an anticipated rise in interest
rates, the value will decline to 95. The Fund might enter into futures
contract sales of Treasury bonds for an equivalent of 98. If the
market value of the portfolio securities does indeed decline from 100
to 95, the equivalent futures market price for the Treasury bonds
might also decline from 98 to 93.
In that case, the five-point loss in the market value of the
portfolio security would be offset by the five-point gain realized
by closing out the futures contract sale. Of course, the futures
market price of Treasury bonds might well decline to more than 93 or to
less than 93 because of the imperfect correlation between cash and
futures prices mentioned below.
B-2
<PAGE>
The Adviser could be wrong in its forecast of interest rates
and the equivalent futures market price could rise above 98. In this
case, the market value of the portfolio securities, including the
portfolio security being protected, would increase. The benefit of
this increase would be reduced by the loss realized on closing out the
futures contract sale.
If interest rate levels did not change, the Fund in the above
example might incur a loss of 2 points (which might be reduced by
an offsetting transaction prior to the settlement date). In each
transaction, transaction expenses would also be incurred.
Examples of Future Contract Purchase. A Fund would engage in an
interest rate futures contract purchase when it is not fully invested
in long-term bonds but wishes to defer for a time the purchase of
long-term bonds in light of the availability of advantageous interim
investments, e.g., shorter-term securities whose yields are greater
than those available on long-term bonds. The Fund's basic motivation
would be to maintain for a time the income advantage from investing
in the short-term securities; the Fund would be endeavoring at the
same time to eliminate the effect of all or part of an expected
increase in market price of the long-term bonds that the Fund may
purchase.
For example, assume that the market price of a long-term bond
that the Fund may purchase, currently yielding 10%, tends to move in
concert with futures market prices of Treasury bonds. The Adviser
wishes to fix the current market price (and thus 10% yield) of the
long-term bond until the time (four months away in this example) when
it may purchase the bond. Assume the long-term bond has a market
price of 100, and the Adviser believes that, because of an
anticipated fall in interest rates, the price will have risen to 105
(and the yield will have dropped to about 9-1/2%) in four months. The
Fund might enter into futures contracts purchases of Treasury bonds
for an equivalent price of 98. At the same time, the Fund would assign
a pool of investments in short-term securities that are either maturing
in four months or earmarked for sale in four months, for purchase of
the long-term bond at an assumed market price of 100. Assume these
short-term securities are yielding 15%. If the market price of the
long-term bond does indeed rise from 100 to 105, the equivalent
futures market price for Treasury bonds might also rise from 98 to
103. In that case, the 5-point increase in the price that the Fund
pays for the long-term bond would be offset by the 5-point gain
realized by closing out the futures contract purchase.
The Adviser could be wrong in its forecast of interest rates;
long-term interest rates might rise to above 10%; and the equivalent
futures market price could fall below 98. If short-term rates at the
same time fall to 10% or below, it is possible that the Fund would
continue with its purchase program for long-term bonds. The market
price of available long-term bonds would have decreased. The
benefit of this price decrease, and thus yield increase, will be reduced
by the loss realized on closing out the futures contract purchase.
If, however, short-term rates remained above available long-term
rates, it is possible that the Fund would discontinue its purchase
program for long-term bonds. The yield on short-term securities in the
portfolio, including those originally in the pool assigned to the
particular long-term bond, would remain higher than yields on
long-term bonds. The benefit of this continued incremental income will
be reduced by the loss realized on closing out the futures contract
purchase.
B-3
<PAGE>
In each transaction, expenses also would be incurred.
II. Index Futures Contracts.
A stock or bond index assigns relative values to the stocks
or bonds included in the index, and the index fluctuates with
changes in the market values of the stocks or bonds included. Some
stock index futures contracts are based on broad market indices, such
as the Standard & Poor's 500 or the Exchange Composite Index. In
contract, certain exchanges offer futures contracts on narrower
market indices, such as the Standard & Poor's 100, the Bond Buyer
Municipal Bond Index, an index composed of 40 term revenue and
general obligation bonds, or indices based on an industry or market
segment, such as oil and gas stocks. Futures contracts are traded on
organized exchanges regulated by the Commodity Futures Trading
Commission. Transactions on such exchanges are cleared through a
clearing corporation, which guarantees the performance of the parties
to each contract.
A Fund will sell index futures contracts in order to offset a
decrease in market value of its portfolio securities that might
otherwise result from a market decline. The Fund may do so either to
hedge the value of its portfolio as a whole, or to protect against
declines, occurring prior to sales of securities, in the value of the
securities to be sold. Conversely, a Fund will purchase index
futures contracts in anticipation of purchases of securities. In
a substantial majority of these transactions, the Fund will
purchase such securities upon termination of the long futures
position, but a long futures position may be terminated without a
corresponding purchase of securities.
In addition, a Fund may utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings.
For example, in the event that a Fund expects to narrow the range of
industry groups represented in its holdings it may, prior to making
purchases of the actual securities, establish a long futures position
based on a more restricted index, such as an index comprised of
securities of a particular industry group. A Fund also may sell
futures contracts in connection with this strategy, in order to protect
against the possibility that the value of the securities to be
sold as part of the restructuring of the portfolio will decline prior to
the time of sale.
The following are examples of transactions in stock index futures
(net of commissions and premiums, if any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objection: Protect Against Increasing Price
Portfolio Futures
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/Contract
B-4
<PAGE>
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/Contract
Increase in Purchase Price =$2,500 Gain on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index - 1.0
Portfolio Futures
-Day Hedge is Placed --
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted --
Equity Portfolio-Own Buy 16 Index Futures at 120
Stock with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
If, however, the market moved in the opposite direction, that
is, market value decreased and the Fund had entered into an anticipatory
purchase hedge, or market value increased and the Fund had hedged its
stock portfolio, the results of the Fund's transactions in stock index
futures would be as set forth below.
ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
<TABLE>
<CAPTION>
Portfolio Futures
<S> <C>
-Day Hedge is Placed--
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/Contract
-Day Hedge is Lifted--
B-5
<PAGE>
Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost - $60,000 Value of Futures = $60,000/Contract
Decrease in Purchase Price = $2,500 Loss on Futures = $2,500/Contract
</TABLE>
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
-Day Hedge is Placed --
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted --
Equity Portfolio-Own Buy 16 Index Futures at 130
Stock with Value = $1,040,000 Value of Futures = $1,040,000
Gain in Portfolio = $40,000 Loss of Futures = $40,000
III. Margin Payments.
Unlike when a Fund purchases or sells a security, no price is
paid or received by the Fund upon the purchase or sale of a futures
contract. Initially, the Fund will be required to deposit with the
broker or in a segregated account with the Fund's Custodian an amount
of cash or cash equivalents, the value, of which may vary but is
generally equal to 10% or less of the value of the contract. This
amount is known as initial margin. The nature of initial margin in
futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve
the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract assuming all contractual
obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily
basis as the price of the underlying security or index fluctuates
making the long and short positions in the futures contract more or
less valuable, a process known as marking to the market. For example,
when a Fund has purchased a futures contract and the price of the
contract has risen in response to a rise in the underlying instruments,
that position will have increased in value and the Fund will be
entitled to receive from the broker a variation margin payment equal
to that increase in value. Conversely, where a Fund has purchased a
futures contract and the price of the futures contract has declined in
response to a
B-6
<PAGE>
decrease in the underlying instruments, the position would be less
valuable, and the Fund would be required to make a variation margin
payment to the broker. At any time prior to expiration of the futures
contract, the Adviser may elect to close the position by taking an
opposite position, subject to the availability of a secondary
market, which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is then
made, additional cash is required to be paid by or released to the
Fund, and the Fund realizes a loss or gain.
IV. Risks of Transactions in Futures Contracts.
There are several risks in connection with the use of futures by a
Fund as a hedging device. One risk arises because of the imperfect
correlation between movements in the price of the future and
movements in the price of the securities which are the subject of
the hedge. The price of the future may move more than or less than the
price of the securities being hedged. If the price of the future moves
less than the price of the securities which are the subject of the
hedge, the hedge will not be fully effective but, if the price of
the securities being hedged has moved in an unfavorable direction, the
Fund would be in a better position than if it had not hedged at all.
If the price of the securities being hedged has moved in a favorable
direction, this advance will be partially offset by the loss on the
future. If the price of the future moves more than the price of the
hedged securities, the Fund involved will experience either a loss or
gain on the future which will not be completely offset by
movements in the price of the securities which are the subject of the
hedge.
To compensate for the imperfect correlation of movements in the
price of securities being hedged and movements in the price of futures
contracts, a Fund may buy or sell futures contracts in a greater
dollar amount than the dollar amount of securities being hedged if
the volatility over a particular time period of the prices of such
securities has been greater than the volatility over such time period
of the future, or if otherwise deemed to be appropriate by the Adviser.
Conversely, a Fund may buy or sell fewer futures contracts if the
volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such time
period of the futures contract being used, or if otherwise deemed to be
appropriate by the Adviser. It also is possible that, where a Fund
has sold futures to hedge its portfolio against a decline in the
market, the market may advance, and the value of securities held by the
Fund may decline. If this occurred, the Fund would lose money on
the future and also experience a decline in value in its portfolio
securities.
Where futures are purchased to hedge against a possible
increase in the price of securities before a Fund is able to
invest its cash (or cash equivalents) in securities (or options) in
an orderly fashion, it is possible that the market may decline
instead; if the Fund then concludes not to invest in securities or
options at that time because of concern as to possible further market
decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of
securities purchased.
In instances involving the purchase of futures contracts by a
Fund, an amount of cash and cash equivalents, equal to the market
value of the futures contracts, will be deposited in a segregated
account with the Fund's Custodian and/or in a margin account with a
broker to collateralize the position and thereby insure that the use
of such futures is unleveraged.
B-7
<PAGE>
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the
futures and the securities being hedged, the price of futures may not
correlate perfectly with movement in the cash market due to certain
market distortions. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through off-setting
transactions which could distort the normal relationship between the
cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants
entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced thus producing
distortions. Third, from the point of view of speculators, the
deposit requirements in the futures market are less onerous than
margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect
correlation between the movements in the cash market and movements in
the price of futures, a correct forecast of general market trends or
interest rate movements by the Adviser still may not result in a
successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or
board of trade which provides a secondary market for such futures.
Although the Funds intend to purchase or sell futures only on
exchanges or boards of trade where there appear to be active secondary
markets, there is no assurance that a liquid secondary market on any
exchange or board of trade will exist for any particular contract or at
any particular time. In such event, it may not be possible to close
a futures investment position, and in the event of adverse
price movements, a Fund would continue to be required to make daily
cash payments of variation margin. However, in the event futures
contracts have been used to hedge portfolio securities, such
securities will not be sold until the futures contract can be
terminated. In such circumstances, an increase in the price of the
securities, if any, may partially or completely offset losses on the
futures contract. However, as described above, there is no guarantee
that the price of the securities will in fact correlate with the price
movements in the futures contract and thus provide an offset on a
futures contract.
Further, it should be noted that the liquidity of a secondary
market in a futures contract may be adversely affected by "daily price
fluctuation limits" established by commodity exchanges which limit
the amount of fluctuation in a futures contract price during a single
trading day. Once the daily limit has been reached in the contract,
no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions.
Successful use of futures by a Fund also is subject to the
Adviser's ability to predict correctly movements in the direction of
the market. For example, if a Fund has hedged against the possibility
of a decline in the market adversely affecting securities held in its
portfolio and securities prices increase instead, the Fund will lose
part or all of the benefit to the increased value of its securities
which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but
will not necessarily be, at increased prices which reflect the rising
market. A Fund may have to sell securities at a time when it may be
disadvantageous to do so.
B-8
<PAGE>
V. Options on Futures Contracts.
The Funds may purchase options on the futures contracts described
above. A futures option gives the holder, in return for the premium
paid, the right to buy (call) from or sell (put) to the writer of the
option a futures contract at a specified price at any time during the
period of the option. Upon exercise, the writer of the option is
obligated to pay the difference between the cash value of the futures
contract and the exercise price. Like the buyer or seller of a futures
contract, the holder, or writer, of an option has the right to
terminate its position prior to the scheduled expiration of the
option by selling, or purchasing, an option of the same series, at
which time the person entering into the closing transaction will realize
a gain or loss.
Investments in futures options involve some of the same
considerations that are involved in connection with investments in
futures contracts (for example, the existence of a liquid secondary
market). In addition, the purchase of an option also entails the risk
that changes in the value of the underlying futures contract will
not be fully reflected in the value of the option purchased.
Depending on the pricing of the option compared to either the futures
contract upon which it is based, or upon the price of the
securities being hedged, an option may or may not be less risky than
ownership of the futures contract or such securities. In general,
the market prices of options can be expected to be more volatile than
the market prices on the underlying futures contract. Compared to
the purchase or sale of futures contracts, however, the purchase of
call or put options on futures contracts may frequently involve less
potential risk to a Fund because the maximum amount at risk is the
premium paid for the options (plus transaction costs). Although
permitted by their fundamental investment policies, the Funds do
not currently intend to write future options, and will not do so in
the future absent any necessary regulatory approvals.
VI. Accounting and Tax Treatment.
Accounting for futures contracts and options will be in
accordance with generally accepted accounting principles.
Generally, futures contracts and options on futures contracts
held by a Fund at the close of the Fund's taxable year will be treated
for Federal income tax purposes as sold for their fair market value on
the last business day of such year, a process known as
"marking-to-market." Forty percent (40%) of any gains or loss
resulting from such constructive sale will be treated as
short-term capital gain or loss and sixty percent (60%) of such gain
or loss will be treated as long-term capital gain or loss without
regard to the length of time the Fund holds the futures contract or
option (the "40%-60% rule"). The amount of any capital gain or loss
actually realized by a Fund in a subsequent sale or other disposition
of those futures contracts will be adjusted to reflect any capital gain
or loss taken into account by the Fund in a prior year as a result of
the constructive sale of the contracts and options. With respect to
futures contracts to sell or options which will be regarded as parts of
a "mixed straddle" because their values fluctuate inversely to the
values of specific securities held by the Fund, losses as to such
contracts to sell or options will be subject to certain loss
deferral rules which limit the amount of loss currently deductible
on either part of the straddle to the amount thereof which exceeds the
unrecognized gain (if any) with respect to the other part of the
straddle, and to certain wash sales regulations. Under short sales
rules, which also will be applicable, the holding period of the
securities forming part of the straddle will (if they have not been
held for the long-term holding period) be deemed not to begin
B-9
<PAGE>
prior to termination of the straddle. With respect to certain futures
contracts and options, deductions for interest and carrying charges
will not be allowed. Notwithstanding the rules described above, with
respect to futures contracts to sell which are properly identified as
such and certain options, a Fund may make an election which will
except (in whole or in part) those identified futures contracts or
options from being treated for Federal income tax purposes as sold
on the last business day of the Fund's taxable year, but gains and
losses will be subject to such short sales, wash sales, loss deferral
rules and the requirement to capitalize interest and carrying
charges. Under temporary regulations, a Fund would be allowed (in lieu
of the foregoing) to elect to either (1) offset gains or losses from
portions which are part of a mixed straddle by separately identifying
each mixed straddle to which such treatment applies, or (2) establish
a mixed straddle account for which gains and losses would be recognized
and offset on a periodic basis during the taxable year. Under either
election, the 40%-60% rule will apply to the net gain or loss
attributable to the futures contracts, but in the case of a mixed
straddle account election, not more than 50% of any net gain may be
treated as long-term and not more than 40% of any net loss may be
treated as short-term.
Certain foreign currency contracts entered into by a Fund may be
subject to the "marking-to-market" process and the 40%-60% rule in a
manner similar to that described in the preceding paragraph for futures
contracts and options on futures contracts. To receive such Federal
income tax treatment, a foreign currency contract must meet the
following conditions: (1) the contract must require delivery of a
foreign currency of a type in which regulated futures contracts are
traded or upon which the settlement value of the contract depends; (2)
the contract must be entered into at arm's length at a price
determined by reference to the price in the interbank market; and (3)
the contract must be traded in the interbank market. The Treasury
Department has broad authority to issue regulations under the provisions
respecting foreign currency contracts. Other foreign currency
contracts entered into by a Fund may result in the creation of one
or more straddles for Federal income tax purposes, in which case certain
loss deferral, short sales, and wash sales rules and the requirement to
capitalize interest and carrying charges may apply.
As described more full in the section of the SAI entitled
"Additional Information Concerning Taxes," in order to qualify as a
regulated investment company under the Code a Fund must derive less
than 30% of its gross income from investments held for less than three
months. With respect to futures contracts and other financial
instruments subject to the marking-to-market rules, the Internal
Revenue Service has ruled in private letter rulings that a gain
realized from such a futures contract or financial instrument will be
treated as being derived from a security held for three months or more
(regardless of the actual period for which the contract or instrument
is held) if the gain arises as a result of a constructive sale under the
marking-to-market rules, and will be treated as being derived from a
security held for less than three months only if the contract or
instrument is terminated (or transferred) during the taxable year
(other than by reason of marking-to-market) and less than three months
have elapsed between the date the contract or instrument is
acquired and the termination date. In determining whether the 30% test
is met for a taxable year, increases and decreases in the value of each
Fund's futures contracts and other investments that qualify as part
of a "designated hedge," as defined in the Code, may be netted.
B-10
<PAGE>
SCHEDULE C
ADDITIONAL INFORMATION CONCERNING
MORTGAGE-BACKED SECURITIES
Mortgage-Backed Securities
Mortgage-backed securities represent an ownership interest in a
pool of residential mortgage loans. These securities are designed to
provide monthly payments of interest and principal to the investor.
The mortgagor's monthly payments to his/her lending institution are
"passed-through" to an investor. Most issuers or poolers provide
guarantees of payments, regardless of whether or not the mortgagor
actually makes the payment. The guarantees made by issuers or poolers
are supported by various forms of credit, collateral, guarantees or
insurance, including individual loan, title, pool and hazard insurance
purchased by the issuer. There can be no assurance that the private
issuers or poolers can meet their obligations under the policies.
Mortgage-backed securities issued by private issuers or poolers,
whether or not such securities are subject to guarantees, may
entail greater risk than securities directly or indirectly
guaranteed by the U.S. Government.
Interests in pools of mortgage-backed securities differ from
other forms of debt securities, which normally provide for periodic
payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide
a monthly payment which consists of both interest and principal
payments. In effect, these payments are a "pass-through" of the monthly
payments made by the individual borrowers on their residential
mortgage loans, net of any fees paid. Additional payments are
caused by repayments resulting from the sale of the underlying
residential property, refinancing or foreclosure net of fees or
costs which may be incurred. Some mortgage-backed securities are
described as "modified pass-through." These securities entitle the
holders to receive all interest and principal payments owed on the
mortgages in the pool, net of certain fees, regardless of whether or not
the mortgagors actually make the payments.
Residential mortgage loans are pooled by the Federal Home Loan
Mortgage Corporation (FHLMC). FHLMC is a corporate instrumentality of
the U.S. Government and was created by Congress in 1970 for the
purpose of increasing the availability of mortgage credit for
residential housing. Its stock is owned by the twelve Federal Home
Loan Banks. FHLMC issues Participation Certificates ("PC's"), which
represent interests in mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate
collection of principal.
The Federal National Mortgage Association (FNMA) is a Government
sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban
Development. FNMA purchases residential mortgages from a list of
approved sellers/servicers which include state and federally-chartered
savings and loan associations, mutual savings banks, commercial
banks and credit unions and mortgage bankers. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA.
C-1
<PAGE>
The principal Government guarantor of mortgage-backed
securities is the Government National Mortgage Association (GNMA).
GNMA is a wholly-owned U.S. Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to
guarantee, with the full faith and credit of the U.S. Government, the
timely payment of principal and interest on securities issued by
approved institutions and backed by pools of FHA-insured or
VA-guaranteed mortgages.
Commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other secondary
market issuers also create pass-through pools of conventional
residential mortgage loans. Pools created by such non-governmental
issuers generally offer a higher rate of interest than Government
and Government-related pools because there are no direct or indirect
Government guarantees of payments in the former pools. However,
timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan,
title, pool and hazard insurance purchased by the issuer. The
insurance and guarantees are issued by Governmental entities, private
insurers, and the mortgage poolers. There can be no assurance that the
private insurers or mortgage poolers can meet their obligations under
the policies.
The Fund expects that Governmental or private entities may create
mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may
be alternative mortgage instruments, that is, mortgage instruments
whose principal or interest payment may vary or whose terms to maturity
may be shorter than previously customary. As new types of
mortgage-backed securities are developed and offered to investors,
certain Funds will, consistent with their investment objective and
policies, consider making investments in such new types of securities.
Underlying Mortgages
Pools consist of whole mortgage loans or participations in
loans. The majority of these loans are made to purchasers of 1-4
family homes. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among
pools. For example, in addition to fixed-rate, fixed-term
mortgages, a Fund may purchase pools of variable rate mortgages
(VRM), growing equity mortgages (GEM), graduated payment mortgages
(GPM) and other types where the principal and interest payment
procedures vary. VRM's are mortgages which reset the mortgage's interest
rate periodically with changes in open market interest rates. To the
extent that the Fund is actually invested in VRM's, the Fund's
interest income will vary with changes in the applicable interest
rate on pools of VRM's. GPM and GEM pools maintain constant interest
rates, with varying levels of principal repayment over the life of the
mortgage. These different interest and principal payment procedures
should not impact the Fund's net asset value since the prices at which
these securities are valued will reflect the payment procedures.
All poolers apply standards for qualification to local
lending institutions which originate mortgages for the pools. Poolers
also establish credit standards and underwriting criteria for
individual mortgages included in the pools. In addition, some
mortgages included in pools are insured through private mortgage
insurance companies.
C-2
<PAGE>
Average Life
The average life of pass-through pools varies with the
maturities of the underlying mortgage instruments. In addition, a
pool's term may be shortened by unscheduled or early payments of
principal and interest on the underlying mortgages. The occurrence
of mortgage prepayments is affected by factors including the level
of interest rates, general economic conditions, the location and age of
the mortgage, and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not
possible to accurately predict the average life of a particular
pool. For pools of fixed-rated 30-year mortgages, common industry
practice is to assume that prepayments will result in a 12-year
average life. Pools of mortgages with other maturities or different
characteristics will have varying assumptions for average life.
Returns on Mortgage-Backed Securities
Yields on mortgage-backed pass-through securities are typically
quoted based on the maturity of the underlying instruments and the
associated average life assumption. Actual prepayment experience may
cause the yield to differ from the assumed average life yield.
Reinvestment of prepayments may occur at higher or lower
interest rates than the original investment, thus affecting the
yields of the Fund. The compounding effect from reinvestments of
monthly payments received by the Fund will increase its yield to
shareholders, compared to bonds that pay interest semi-annually.
C-3
<PAGE>
[NATIONS FUND LOGO]
ANNUAL
For the Year Ended November 30, 1994
REPORT
NATIONS VALUE FUND
NATIONS CAPITAL
GROWTH FUND
NATIONS EMERGING
GROWTH FUND
NATIONS EQUITY
INDEX FUND
NATIONS BALANCED
ASSETS FUND
NATIONS SPECIAL
EQUITY FUND
<PAGE>
NATIONS FUND TRUST
DEAR SHAREHOLDER:
If the history of the stock market provides a single message, it is
patience. Over the past twelve months, U.S. corporations generated record
profits and inflation remained in check, yet common stocks failed to respond. An
environment which seemingly should have produced strong returns to owners of
equity securities failed to do so. Long-term investors were reacquainted with
the concept of patience while attempting to build wealth through equity
investing. The following is a review of the significant events of 1994 and a
look ahead to 1995.
Last year began on a favorable note as low interest rates and strong
profits in the financial and manufacturing sectors combined to drive stocks to
record levels. While stocks were moving higher during the winter months,
interest rates began to rise. The good news on the economic front, including
accelerating profits and strong increases in the Gross Domestic Product, began
to negatively impact the fixed income markets. In February, the Federal Reserve
Board raised the federal funds and discount rates. Soon thereafter, the stock
market began to falter. Cyclical stocks, particularly in the housing and
automobile areas, began to move lower. Many investors reasoned that if the
Federal Reserve was tightening monetary policy, the economy would surely slow
and corporate profits would decline.
However, the economy did not slow and profits did not falter in the spring
or summer of 1994. Although the stock market attempted several rallies, these
advances generally were short-lived as interest rates continued to rise in light
of further tightening by the Federal Reserve. As companies continued to generate
improved profits, reduce inventory backlogs and accommodate rising orders, the
financial markets became increasingly concerned with the threat of inflation.
Interest rates rose and stock prices remained in a narrow band, yet most
inflationary indicators were tame.
As we leave 1994 and enter 1995 the economic forecast remains uncertain.
The American economy continues to reward investors with higher corporate
profits, but rising interest rates have made the fixed-income markets more
competitive with equity securities for investment dollars.
While it is difficult to predict when the investment environment will
brighten for equities, we do believe that at some point 1995 should afford
investors positive results. As the new year unfolds, the economy should show
some signs of slowing. Although profit growth should slow as well, we believe
the stock market will respond positively to an environment of slower economic
growth because of the reduced threat of rising interest rates and inflation.
The new year will bring a major power shift among the political parties in
the United States. How will Republican control of both Houses of Congress and a
majority of the State Houses affect the stock market? Clearly, the chances of a
capital gains tax cut and enactment of other investment incentives rise.
However, we believe that the ability of Republicans to fundamentally reshape
federal fiscal policy will be constrained by the size of the federal budget
deficit, the political implications of reforming most entitlement programs and
state-level resistance to bearing the burdens imposed by radical reductions in
federal funding.
1
<PAGE>
Although the new political backdrop may present some opportunities for the
stock market, the markets should continue to be impacted by such primary forces
as inflation and interest rates. We continue to believe that the potential
rewards of investing in common stocks will belong to those investors who are
patient.
Sincerely,
<TABLE>
<S> <C>
[Sig] [Sig]
A. Max Walker Mark H. Williamson
President and Chairman of the Board Mutual Funds Group Executive,
NationsBank, N.A. (Carolinas)
</TABLE>
November 30, 1994
- -------------------------------------------------------------------------------
SHARES OF NATIONS FUND TRUST ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
ISSUED, ENDORSED OR GUARANTEED BY, NATIONSBANK, N.A. (CAROLINAS) (TOGETHER WITH
ITS PREDECESSORS "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 NATIONS
FUND TRUST INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
NATIONSBANK IS THE INVESTMENT ADVISER AND AN AFFILIATE OF NATIONSBANK IS
CUSTODIAN TO NATIONS FUND TRUST, 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 TRUST.
- -------------------------------------------------------------------------------
2
<PAGE>
NATIONS FUND
A PORTFOLIO FOR EVERY INVESTOR
Since 1874, NationsBank has built its success upon a long-standing
commitment of quality service to customers. Conditions change rapidly in the
financial world, but the requirements for sustained success remain constant:
quality products and services; a responsible investment philosophy; and a wealth
of knowledge and resources.
These characteristics are the guiding principles behind a family of mutual
funds with you, the Nations Fund investor, in mind. All of the funds are advised
by and made available through NationsBank, which, with its affiliates, has more
than $170 billion in assets, over seven million clients, and one of the
country's largest branch systems.
As investment adviser, NationsBank provides professional management of your
money which parallels the approach that has established NationsBank and its
affiliates as leaders in trust and institutional investment services, currently
managing over $63 billion.
A responsible investment approach guides every decision within the Nations
Fund Family, whether the goal is based on long-term growth or current income.
These decisions are backed by substantial professional resources consisting of
experienced equity and fixed income analysts, researchers and portfolio
managers.
There are currently 39 active funds in the Nations Fund Family, with assets
totaling over $15 billion, to help you with retirement planning, college savings
or any other long-range financial goal.
FOR GROWTH OF CAPITAL
(Investments primarily in stocks)
- --------------------------------
NATIONS CAPITAL GROWTH FUND
Objective: To seek long-term capital appreciation.
Approach: A flexible strategy of
investing primarily in common stocks, wherever growth opportunities appear most
promising. The Fund is not limited to certain industries or sectors, but
invests across a broad range of companies, industries, and types of
securities in search of growth opportunities.
NATIONS EMERGING GROWTH FUND
Objective: To seek capital appreciation.
Approach: Invests in the stocks
of high quality emerging growth companies that are expected to have earnings
growth rates superior to most publicly traded companies. One of our most
aggressive stock funds.
NATIONS EQUITY INDEX FUND*
Objective: Seeks to closely approximate the total return performance of the
S&P 500 Index.
Approach: Invests primarily in equity securities of companies which constitute
the S&P 500. In seeking to duplicate the performance of the S&P 500, the Fund's
holdings will be allocated in approximately the same weightings as the S&P 500.
NATIONS SPECIAL EQUITY FUND
Objective: To seek capital appreciation.
Approach: Invests in small capitalization common stocks with visible revenue,
earnings and share price momentum as well as "special situation" equities. Our
most aggressive stock fund.
FOR GROWTH AND INCOME
(Investments primarily in stocks)
- --------------------------------
NATIONS EQUITY INCOME FUND
Objective: Seeks to provide high current income and secondarily,
capital appreciation.
Approach: The Fund invests primarily in dividend-paying stocks of
established companies, with the
potential for increasing dividends as well as for capital appreciation. The
Portfolio is designed for conservative equity investors.
NATIONS INTERNATIONAL
EQUITY FUND
Objective: To seek a high total
return from long-term growth of
capital and income.
Approach: Invests in stocks of
established non-United States
issuers. Within the framework of
diversification, the Fund seeks to identify and invest in companies
participating in the faster growing foreign economies. While this Fund can be
an important part of a diversified stock portfolio, investors should consider
the additional risk of foreign investing, such as currency fluctuation.
NATIONS VALUE FUND
Objective: To seek long-term capital growth, with income a secondary
consideration.
Approach: Invests in stocks
considered by the investment adviser to be undervalued relative to the overall
stock market. This value-based investment approach is more likely to provide
opportunities for capital appreciation, and seeks to produce a higher than
average dividend yield.
FOR GROWTH OF INCOME, CURRENT
INCOME AND GROWTH OF CAPITAL
(Investments in stocks, bonds and money markets)
- --------------------------------
NATIONS BALANCED ASSETS FUND
Objective: Seeks total investment
return through a combination of growth of capital and current income consistent
with the preservation of capital.
Approach: The Fund invests
primarily in three major asset groups: common stocks, fixed income securities
and cash equivalents. By moving freely among these securities, the Fund is able
to respond to shifting market opportunities. One of our more conservative funds
in the
Nations Fund Family.
3
<PAGE>
FOR CURRENT INCOME
(Investments in fixed income obligations)
- --------------------------------
NATIONS
SHORT-INTERMEDIATE
GOVERNMENT FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: Invests essentially all of its assets in short-intermediate-term
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities and repurchase agreements relating to such obligations.#
NATIONS MANAGED BOND FUND
Objective: To seek a high level of current income consistent with
relative stability of principal.
Approach: The Fund invests primarily in investment grade fixed income
securities such as government and corporate fixed income issues.
NATIONS SHORT-TERM
INCOME FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: Invests primarily in short-term investment grade corporate bonds and
mortgage-backed bonds. This investment program attempts to maintain a higher
level of income than normally provided by money market instruments.
NATIONS DIVERSIFIED
INCOME FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: The Fund invests primarily in a diversified portfolio of
government and corporate fixed
income securities.
NATIONS STRATEGIC
FIXED INCOME FUND
Objective: Seeks to maximize total investment return through the active
management of fixed income securities.
Approach: The Fund invests primarily in a mix of short-, intermediate-, and
long-term investment grade fixed income securities such as corporate
and U.S. government or U.S.
government agency bonds.
NATIONS GOVERNMENT
SECURITIES FUND
Objective: Seeks to provide current income and preservation of capital.
Approach: Invests primarily in debt obligations that are issued or guaranteed
by the U.S. government, its agencies, authorities and instrumentalities.#
FOR CURRENT INCOME
(Investments in fixed income obligations)
- --------------------------------
NATIONS ADJUSTABLE RATE
GOVERNMENT FUND
Objective: To seek as high a level of current income as is consistent with
minimum fluctuation of share price.
Approach: Invests primarily in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.#
NATIONS MORTGAGE-BACKED
SECURITIES FUND*
Objective: To seek as high a level of total investment return as is consistent
with prudent investment risk.
Approach: Invests primarily in
mortgage-related securities, which
combine high credit quality and
high yields.
NATIONS MUNICIPAL INCOME FUND+
Objective: To seek a high level of current interest income that is exempt from
federal income taxes.
Approach: Invests primarily in
investment grade tax-exempt
obligations across a wide range of
municipalities and geographic regions to add diversity to the Fund.
NATIONS INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income that is exempt from
federal income taxes.
Approach: Invests primarily in
intermediate investment grade tax-
exempt obligations across a wide range of municipalities and geographic regions
to add diversity to the Fund.
NATIONS SHORT-TERM
MUNICIPAL INCOME FUND+
Objective: To seek a high level of current interest income that is exempt from
federal income taxes.
Approach: Invests primarily in short-term (average weighted maturity 1 - 3
years) investment grade tax-exempt obligations across a wide range of
municipalities and geographic regions to add diversity to the Fund.
FOR TAX-FREE INCOME
(Investments in municipal securities)
- --------------------------------
NATIONS FLORIDA
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal income and Florida state intangibles tax, consistent with
relative stability of principal.
Approach: Invests substantially all of its assets in Florida intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS FLORIDA
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal income and Florida state intangible taxes, consistent with
relative stability of principal.
Approach: Invests substantially all of its assets in Florida municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
NATIONS GEORGIA INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Georgia state
income taxes, consistent with relative stability of principal.
Approach: Invests substantially all of its assets in Georgia intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS GEORGIA
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Georgia state
income taxes, consistent with relative stability of principal.
Approach: Invests substantially all of its assets in Georgia municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
4
<PAGE>
FOR TAX-FREE INCOME
(Investments in municipal securities)
- --------------------------------
NATIONS MARYLAND
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Maryland state
income taxes, consistent with relative stability of principal.
Approach: Invests substantially all of its assets in Maryland intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS MARYLAND
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Maryland state
income taxes, consistent with relative stability of principal.
Approach: Invests substantially all of its assets in Maryland municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
NATIONS NORTH CAROLINA
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and North Carolina state income taxes and state intangibles tax,
consistent with relative stability of principal.
Approach: Invests substantially all of its assets in North Carolina
intermediate municipal bonds, including those used to support projects that
benefit the public, such as roads, bridges, hospitals and schools.
NATIONS NORTH CAROLINA
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and North Carolina state income taxes and state intangibles tax,
consistent with relative stability of principal.
Approach: Invests substantially all of its assets in North Carolina municipal
bonds, including those used to support projects that benefit the public, such
as roads, bridges, hospitals and schools.
FOR TAX-FREE INCOME
(Investments in municipal securities)
---------------------------------
NATIONS SOUTH CAROLINA
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in South Carolina
intermediate municipal bonds, including those used to support projects that
benefit the public, such as roads, bridges, hospitals and schools.
NATIONS SOUTH CAROLINA
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in South Carolina municipal
bonds, including those used to support projects that benefit the public, such
as roads, bridges, hospitals and schools.
NATIONS TENNESSEE
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Tennessee state
income taxes, consistent with relative stability of principal.
Approach: Invests substantially all of its assets in Tennessee intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS TENNESSEE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Tennessee state
income taxes, consistent with relative stability of principal.
Approach: Invests substantially all of its assets in Tennessee municipal
bonds, including those used to support projects that benefit the public, such
as roads, bridges, hospitals and schools.
FOR TAX-FREE INCOME
(Investments in municipal securities)
- --------------------------------
NATIONS TEXAS INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from federal
income taxes, consistent with relative stability of principal.
Approach: Invests substantially all of its assets in Texas municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
NATIONS TEXAS
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from federal
income taxes, consistent with relative stability of principal.
Approach: Invests substantially all of its assets in Texas municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
NATIONS VIRGINIA INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Virginia state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Virginia intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS VIRGINIA
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Virginia state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Virginia municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
5
<PAGE>
MONEY MARKET FUNDS
FOR CURRENT INCOME AND PRESERVATION
OF CAPITAL
(Investments in money market securities)
- --------------------------------
NATIONS PRIME FUND
Objective: To seek the maximization of current income to the extent consistent
with the preservation of capital and liquidity.
Approach: Invests in high quality money market instruments including bank
certificates of deposit, banker's acceptances and commercial paper.
NATIONS TREASURY FUND
Objective: To seek maximization of current income to the extent consistent
with the preservation of capital and liquidity.
Approach: Invests exclusively in obligations of the U.S. Treasury and
repurchase agreements
secured by Treasury obligations.#
MONEY MARKET FUNDS
FOR CURRENT INCOME AND PRESERVATION
OF CAPITAL
(Investments in money market securities)
- --------------------------------
NATIONS GOVERNMENT MONEY MARKET FUND
Objective: To seek as high a level of current income as is consistent with
liquidity and stability of principal.
Approach: Invests in obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities and repurchase agreements.#
NATIONS TAX EXEMPT FUND+
Objective: To seek as high a level of current interest income exempt from
federal income taxes as is consistent with liquidity and stability of
principal.
Approach: Invests in municipal securities, the interest on which is exempt
from regular federal income tax.
- ---------------
- -------------------------------------------------------------------------------
SHARES OF NATIONS FUND TRUST ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
ISSUED, ENDORSED OR GUARANTEED BY, NATIONSBANK, N.A. (CAROLINAS) (TOGETHER WITH
ITS PREDECESSORS "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 NATIONS
FUND TRUST INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
NATIONSBANK IS THE INVESTMENT ADVISER AND AN AFFILIATE OF NATIONSBANK IS
CUSTODIAN TO NATIONS FUND TRUST, 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 TRUST.
- -------------------------------------------------------------------------------
# These portfolio securities are guaranteed as to the timely payment of
principal and interest only. This is not a guarantee of market value of the
shares of the funds.
* Offers Trust A Shares only.
Offers Trust A Shares, Investor A Shares and Investor C Shares only.
+ A portion of income, from municipal bonds, received by shareholders may be
subject to some federal income, state and/or local tax and/or the federal
alternative minimum tax.
6
<PAGE>
NATIONS VALUE FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by Sharon Herrmann. Ms. Herrmann joined NationsBank in
1973 and is a Senior Vice President and Director of the Value Equity Group. She
has over 19 years of investment experience. Ms. Herrmann attended Virginia
Wesleyan College where she majored in Business Administration/Management. She
earned the Chartered Financial Analyst designation in 1985.
INVESTMENT OBJECTIVE
Nations Value Fund seeks long-term capital growth, with income a secondary
consideration.
PERFORMANCE SUMMARY AND OVERVIEW*
Nations Value Fund endured the volatile stock market experienced during the
fiscal year ended November 30, 1994 reasonably well. The Fund's total return
during the year was (.08)%,** compared to 1.04%*** for the S&P 500 Index.
The modest levels of economic growth in 1993, which produced healthy
investment returns and a steady decline in interest rates, gave way in 1994 to
strong economic growth levels, the rising threat of inflationary pressures and,
finally, higher interest rates from a nervous bond market and an active Federal
Reserve Board.
Nations Value Fund's investment discipline, which includes broad stock
market diversification across multiple industries, allowed the Fund to benefit
somewhat from the strongest performing sectors: technology and basic materials.
However, the Fund also experienced downward pressure from those sectors most
closely aligned with the low price/earnings, "value" investment style, including
consumer cyclicals, utilities, financial services and diversified conglomerates.
After experiencing an excellent "value" environment throughout the 1993 fiscal
year, with returns substantially ahead of the S&P 500 Index, the Fund's
performance in 1994 more closely paralleled that of the overall stock market.
We are pleased to report that Nations Value Fund Trust A Shares completed
its fifth year of operations on September 19, 1994. Over this five-year period,
the Fund's Trust A Shares return ranked it in the top quartile of the Lipper
Growth and Income Fund Average.****
At present, we believe that more favorable investment returns will result
once slower economic growth and lower inflation are achieved. In addition, we
continue to believe that Nations Value Fund can be an attractive investment
vehicle for those seeking long-term capital growth, with income a secondary
consideration.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994 was (0.17)%. The total return for
Investor C Shares for the one-year period ended November 30, 1994 was (0.92)%.
The total return for Investor N Shares for the one-year period ended November
30, 1994 was (0.69)%. Had the maximum sales charge of 5.75% on Investor A
Shares, the maximum contingent deferred sales charge of 1.00% on Investor C
Shares and the maximum contingent deferred sales charge of 5.00% on Investor N
Shares been taken into effect, the total returns for such shares would have been
lower.
*** Source: The S&P 500 is a weighted index which measures the aggregate
change in the market value of the stocks of 400 industrial, 60 transportation
and utility and 40 financial companies.
**** Source: Lipper Analytical Services Inc., an independent mutual fund
performance monitoring service.
7
<PAGE>
NATIONS FUND TRUST
Nations Value Fund
- -----------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- -----------------------------------------
[PIE CHART]
<TABLE>
- ----------------------------------------------
TOP TEN EQUITY HOLDINGS
AS OF 11/30/94
- ----------------------------------------------
<S> <C>
1. Mobil Corporation 2.0%
2. Merck & Company Inc. 1.9
3. Bristol-Meyers Squibb 1.9
4. Intel Corporation 1.9
5. ITT Corporation 1.9
6. Royal Dutch Petroleum Company, ADR 1.8
7. Martin Marietta Corporation 1.8
8. Varity Corporation 1.7
9. Raytheon Company 1.7
10. Chrysler Corporation 1.7
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
-----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------------
<S> <C> <C>
YEAR ENDED (5.91)% (.17)%
11/30/94
-----------------------
INCEPTION
(12/06/89) 8.07% 9.36%
THROUGH
11/30/94
------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 5.75% charge
- -----------------------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor A
Shares of the Nations Value
Fund on December 6, 1989
(inception) with that of a
similar investment in the [LINE CHART]
Standard & Poor's Index of
500 stocks over the same
period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
8
<PAGE>
NATIONS FUND TRUST
Nations Value Fund
- -------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C SHARES AS OF 11/30/94
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
-----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------------
<S> <C> <C>
YEAR ENDED (1.86)%* (.92)%
11/30/94
-----------------------
INCEPTION
(06/17/92) 7.33% 7.33%
THROUGH
11/30/94
-----------------------
*Adjusted Not
for maximum adjusted
contingent for
deferred contingent
sales deferred
charge sales
of 1.00% charge
- -----------------------------------------
</TABLE>
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor C
Shares of the Nations Value
Fund on June 17, 1992
(inception) with that of a
similar investment in the [LINE CHART]
Standard & Poor's Index of
500 stocks over the same
period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- -------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR N SHARES AS OF 11/30/94
- -------------------------------------------------------------------------------
<TABLE>
------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
------------------------------------------
<S> <C> <C>
YEAR ENDED (5.41)% (0.69)%
11/30/94
----------------------
INCEPTION
(06/07/93) 0.65% 3.30%
THROUGH
11/30/94
----------------------
Not
Adjusted for adjusted
applicable for
contingent contingent
deferred deferred
sales charge sales
charge
</TABLE>
------------------------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor N
Shares of the Nations Value
Fund on June 7, 1993
(inception) with that of a
similar investment in the [LINE CHART]
Standard & Poor's Index of
500 stocks over the same
period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
9
<PAGE>
NATIONS FUND TRUST
Nations Value Fund
- -------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- -------------------------------------------------------------------------------
<TABLE>
------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
------------------------------------------
<S> <C>
YEAR ENDED (0.08)%
11/30/94
---------------------
FIVE YEARS
ENDED 9.43%
11/30/94
---------------------
INCEPTION
(09/19/89) 9.14%
THROUGH
11/30/94
------------------------------------------
</TABLE>
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Trust A Shares
of the Nations Value Fund on
September 19, 1989
(inception) with that of a
similar investment in the [LINE CHART]
Standard & Poor's Index of
500 stocks over the same
period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
10
<PAGE>
NATIONS CAPITAL GROWTH FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by C. Edwin Riley, Jr. Mr. Riley is a Senior Vice
President and the Equity Management Division Executive. He is a member of the
adviser's Investment Policy Committee and has 18 years of investment experience.
He joined NationsBank in 1981.
INVESTMENT OBJECTIVE
The objective of Nations Capital Growth Fund 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. This Fund takes a diversified approach to portfolio management and
a variety of economic sectors are represented in the portfolio. This Fund is
characterized by greater volatility than the equity market as a whole.
PERFORMANCE SUMMARY AND OVERVIEW*
Nations Capital Growth Fund produced a 2.14%** total return for the fiscal
year ended November 30, 1994. In comparison, the S&P 500 Index returned 1.04%***
for the same period. Compared to other growth funds, Nations Capital Growth Fund
outperformed the average growth fund represented by the Lipper Growth Fund
Average which returned (0.38%) over the same period.****
The returns from the equity market during the past year generally were
small to negative, depending on the specific index consulted. The Fund generated
positive returns by focusing on technology issues and capital goods stocks. The
Fund also avoided many utilities and consumer cyclical stocks, which proved to
be beneficial.
The Fund's management continues to search for growth opportunities in
today's stock market through the analysis of macroeconomic forces, market trends
and company fundamentals. We continue to believe that companies which possess
superior earnings growth potential will outperform the general market over time.
The U.S. economy should slow over the next four quarters, in part due to
higher short-term interest rates. We believe that earnings growth within the
market will slow as well, providing incremental opportunity for true growth
stocks to outpace the general market. Although earnings growth will be more
difficult to achieve in 1995, we believe the market for growth stocks should
remain favorable in 1995.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994 was 1.93%. The total return for
Investor C Shares for the one-year period ended November 30, 1994 was 1.22%. The
total return for Investor N Shares for the one-year period ended November 30,
1994 was 1.12%. Had the maximum sales charge of 5.75% on Investor A Shares, the
maximum contingent deferred sales charge of 1.00% on Investor C Shares and the
maximum contingent deferred sales charge of 5.00% on Investor N Shares been
taken into effect, the total returns for such shares would have been lower.
*** Source: The S&P 500 is a weighted index which measures the aggregate
change in the market value of the stocks of 400 industrial, 60 transportation
and utility and 40 financial companies.
**** Source: Lipper Analytical Services, Inc., an independent mutual fund
performance monitoring service.
11
<PAGE>
NATIONS FUND TRUST
Nations Capital Growth Fund
- ------------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- ------------------------------------------
[PIE CHART]
------------------------------------------
TOP TEN EQUITY HOLDINGS
AS OF 11/30/94
------------------------------------------
<TABLE>
<S> <C>
1. Intel Corporation 3.1%
2. General Electric Company 2.9
3. Dow Chemical Company 2.8
4. Lowe's Companies Inc. 2.5
5. Coca-Cola Company 2.4
6. Motorola, Inc. 2.2
7. AT&T Corporation 2.2
8. AlliedSignal, Inc. 2.2
9. American International Group Inc. 2.1
10. Applied Materials, Inc. 2.1
- ----------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
------------------------------------------
<S> <C> <C>
YEAR ENDED (3.93)% 1.93%
11/30/94
-------------------------
INCEPTION
(10/02/92) 3.26% 6.13%
THROUGH
11/30/94
-------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 5.75% charge
------------------------------------------
</TABLE>
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor A
Shares of the Nations
Capital Growth Fund on
October 2, 1992 (inception)
with that of a similar [LINE CHART]
investment in the Standard &
Poor's Index of 500 stocks
over the same period.
Figures for the Standard &
Poor's 500, an unmanaged
index of common stock
prices, include reinvestment
of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
12
<PAGE>
NATIONS FUND TRUST
Nations Capital Growth Fund
- -------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C SHARES AS OF 11/30/94
- -------------------------------------------------------------------------------
<TABLE>
------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
------------------------------------------
<S> <C> <C>
YEAR ENDED 0.22%* 1.22%
11/30/94
------------------------
INCEPTION
(10/02/92) 5.34% 5.34%
THROUGH
11/30/94
------------------------
*Adjusted Not
for adjusted
maximum for
contingent contingent
deferred deferred
sales sales
charge charge
of 1.00%
------------------------------------------
</TABLE>
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor C
Shares of the Nations
Capital Growth Fund on
October 2, 1992 (inception) [LINE CHART]
with that of a similar
investment in the Standard &
Poor's Index of 500 stocks
over the same period.
Figures for the Standard &
Poor's 500, an unmanaged
index of common stock
prices, include reinvestment
of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR N SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
------------------------------------------
<S> <C> <C>
YEAR ENDED (3.88)% 1.12%
11/30/94
-------------------------
INCEPTION
(06/07/93) 1.43% 4.10%
THROUGH
11/30/94
-------------------------
Not
Adjusted adjusted
for for
applicable contingent
contingent deferred
deferred sales
sales charge charge
------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor N
Shares of the Nations
Capital Growth Fund on June
7, 1993 (inception) with
that of a similar investment [LINE CHART]
in the Standard & Poor's
Index of 500 stocks over the
same period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
13
<PAGE>
NATIONS FUND TRUST
Nations Capital Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------
<S> <C>
YEAR ENDED 2.14%
11/30/94
---------------------
INCEPTION
(09/30/92) 6.39%
THROUGH
11/30/94
- --------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Trust A Shares
of the Nations Capital
Growth Fund on September 30,
1992 (inception) with that [LINE CHART]
of a similar investment in
the Standard & Poor's Index
of 500 stocks over the same
period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
14
<PAGE>
NATIONS EMERGING GROWTH FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by Jack Smiley. He is a Senior Vice President and
Senior Portfolio Manager with over 25 years of investment experience. He is a
graduate of Southern Methodist University and a Chartered Financial Analyst.
INVESTMENT OBJECTIVE
The Nations Emerging Growth Fund's 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.
PERFORMANCE SUMMARY AND OVERVIEW*
Nations Emerging Growth Fund seeks to provide above-average returns over
longer-term time periods while assuming a higher degree of risk through
investment in companies with a market capitalization between $50 million and
$1.5 billion. The earnings growth rates of companies selected by the Fund
generally rank among the top 20% of all publicly traded companies. The Fund
seeks to invest in high quality companies with strong balance sheets. The
majority of these companies are considered to have superior operating margins
and returns on equity that are achieved primarily by offering high value-added
products and services to their customers.
It is a pleasure to report to you that the Nations Emerging Growth Fund's
total return for the one-year period ending November 30, 1994 was 6.26%.** The
Fund outperformed the Lipper Small Company Growth Funds Average for the same
time period.***
Last year we reported that the Fund was overweighted in technology issues.
At year end 1994, eight of the top fifteen performers for the year were
technology stocks and two were communications stocks. Therefore, two-thirds of
the best 15 performers in 1994 were related to new products in technology.
Health care issues also performed well in 1994 as the Clinton Administration's
health care bill was removed from active consideration. Over the past year, the
Fund pared its investments in certain sectors whose fundamentals declined,
including the specialty retail and restaurant sectors.
Currently, a high percentage of the Fund's portfolio is invested in
technology and health care issues. We believe these industries offer the best
overall earnings growth potential in our domestic economy. New areas of interest
include the communications sector, software providers and health care specialty
firms.
American white collar workers have become increasingly productive in part
because of the technology supplied to them at the desk top. Families are
enjoying personal computers at home and many of the Fund's holdings supply the
parts, software, and enabling technology that allow these machines to
communicate with each other along high speed corporate and personal
communications lines.
Because American corporations continue to wrestle with health care costs,
we expect the Fund to continue to focus on providers of health care cost
containment services that have experienced rapid growth rates.
The Fund is well diversified across industry lines and normally will hold
in excess of 60 to 70 stocks to reduce risk. Dividend yields are low on most of
the Fund's holdings, as the majority of these companies reinvest profits to help
fuel potential future growth.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994 was 5.90%. The total return for
Investor C Shares for the one-year period ended November 30, 1994 was 5.19%. The
total return for Investor N Shares for the one-year period ended November 30,
1994 was 5.17%. Had the maximum sales charge of 5.75% on Investor A Shares, the
maximum contingent deferred sales charge of 1.00% on Investor C Shares and the
maximum contingent deferred sales charge of 5.00% on Investor N Shares been
taken into effect, the total returns for such shares would have been lower.
*** Source: Lipper Analytical Services, Inc., an independent mutual fund
performance monitoring service.
15
<PAGE>
NATIONS FUND TRUST
Nations Emerging Growth Fund
- --------------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- --------------------------------------------
[PIE CHART]
- ------------------------------------------------
TOP TEN EQUITY HOLDINGS
AS OF 11/30/94
- ------------------------------------------------
<TABLE>
<S> <C>
1. AutoZone Inc. 1.9%
2. Western Digital Corporation 1.7
3. Amphenol Corporation, Class A 1.7
4. Stratus Computer Inc. 1.6
5. Teradyne Inc. 1.5
6. Medaphis Corporation 1.5
7. Sierra Health Services 1.5
8. TNT Freightways Corporation 1.5
9. Analog Devices Inc. 1.5
10. Franklin Resources Inc. 1.5
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- --------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------
<S> <C> <C>
YEAR ENDED (0.19)% 5.90%
11/30/94
INCEPTION -------------------------
(12/10/92)
THROUGH 4.84 % 8.04%
11/30/94
-------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 5.75% charge
- --------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor A
Shares of the Nations
Emerging Growth Fund on
December 10, 1992
(inception) with that of a [LINE CHART]
similar investment in the
Standard & Poor's Index of
500 stocks over the same
period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
16
<PAGE>
NATIONS FUND TRUST
Nations Emerging Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------
<S> <C> <C>
YEAR ENDED 4.19%* 5.19%
11/30/94
------------------------
INCEPTION
(12/18/92) 7.26% 7.26%
THROUGH
11/30/94
------------------------
*Adjusted Not
for maximum adjusted
contingent for
deferred contingent
sales deferred
charge sales
of 1.00% charge
- ----------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor C
Shares of the Nations
Emerging Growth Fund on
December 18, 1992
(inception) with that of a [LINE CHART]
similar investment in the
Standard & Poor's Index of
500 stocks over the same
period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR N SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------
<S> <C> <C>
YEAR ENDED 0.17% 5.17%
11/30/94
------------------------
INCEPTION
(06/07/93) 7.42% 10.02%
THROUGH
11/30/94
------------------------
Adjusted Not
for adjusted
applicable for
contingent contingent
deferred deferred
sales sales
charge charge
- ----------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor N
Shares of the Nations
Emerging Growth Fund on June
7, 1993 (inception) with [LINE CHART]
that of a similar investment
in the Standard & Poor's
Index of 500 stocks over the
same period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
17
<PAGE>
NATIONS FUND TRUST
Nations Emerging Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------
<S> <C>
YEAR ENDED 6.26%
11/30/94
INCEPTION ---------------------
(12/04/92)
THROUGH 7.57%
11/30/94
- ----------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Trust A Shares
of the Nations Emerging
Growth Fund on December 4,
1992 (inception) with that
of a similar investment in
the Standard & Poor's Index [LINE CHART]
of 500 stocks over the same
period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
18
<PAGE>
NATIONS BALANCED ASSETS FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by Steven J. Hoeft. Mr. Hoeft joined NationsBank in
1988 as a Vice President and Senior Equity Portfolio Manager. He is a member of
the Growth Equity Group and has over 16 years of investment experience. He
received his B.A. and M.B.A. from the University of Wisconsin, Whitewater, and
the Certified Financial Analyst designation in 1984.
INVESTMENT OBJECTIVE
The objective of Nations Balanced Assets Fund is to seek total investment
return through a combination of growth of capital and current income, consistent
with the preservation of capital. To accomplish this, the Fund allocates its
assets primarily among three major asset groups: common stocks, fixed income
securities and cash equivalents.
PERFORMANCE SUMMARY AND OVERVIEW*
EQUITY MARKET REVIEW
Nations Balanced Assets Fund's total return was (1.73)%** during the fiscal
year ended November 30, 1994, which compares favorably with the (1.74)% total
return for the Lipper Balanced Fund Average over the same period.*** Stock and
bond markets experienced downward price pressure during the year as the economy
quickened. Our asset allocation preference for stocks over bonds helped
performance during the past year as long-term bonds significantly underperformed
stocks. After interest rates had risen significantly, the portfolio manager
reduced the Fund's equity position in favor of bonds.
The Fund's common stock strategy is to invest in stocks believed to be
undervalued and with improving earnings trends. The portfolio emphasizes
companies with accelerating sales and earnings growth. Throughout the period,
the technology, health care, and capital goods sectors performed well. The
Fund's investments in these industries enhanced performance during 1994.
We believe that the technology sector offers the best risk/reward
combination as we believe that this industry should continue to post a
significant improvement in earnings. Many of the companies in this sector
possess multinational opportunities which should enhance their growth potential.
During 1994, the health care sector also showed improvement as President
Clinton's health care package was removed from active consideration.
In 1994, the portfolio manager reduced the Fund's weighting in the
financial services sector in light of the Federal Reserve Board's more
restrictive monetary policy. The likelihood of further Federal Reserve
tightening should limit financial service sector performance.
The common stock portfolio of the Fund is diversified across all economic
sectors and holds, on average, 60-80 individual issues.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994, was (2.02)%. The total return for
Investor C Shares for the one-year period ended November 30, 1994 was (2.72)%.
The total return for Investor N Shares for the one-year period ended November
30, 1994 was (2.51)%. Had the maximum sales charge of 5.75% on Investor A
Shares, the maximum contingent deferred sales charge of 1.00% on Investor C
Shares and the maximum contingent deferred sales charge of 5.00% on Investor N
Shares been taken into effect, the total returns for such shares would have been
lower.
*** Source: Lipper Analytical Services, Inc., an independent mutual fund
performance monitoring service.
19
<PAGE>
FIXED INCOME MARKET REVIEW
Broad-based economic strength and the Federal Reserve's move to raise
short-term interest rates led to a decline in the bond market during the past
year. Inflation fears were rekindled and this led to a dramatic rise in both
short and long-term interest rates. The Fund's fixed income return was enhanced
by a combination of strategies: active sector management, prudent duration
management, in-depth security analysis and coupon opportunities. The Fund's
mortgage and corporate sector holdings helped improve current yield relative to
lower-yielding Treasury securities of comparable maturities.
Although corporate bonds have performed relatively well over the past few
years, the spread between the yields on corporate and Treasury securities
recently has tightened. In light of this, the Fund has repositioned itself by
investing a higher percentage of its assets in Treasury securities. Selling
corporate bonds and buying Treasury securities has upgraded the credit quality
of the portfolio at a time when, we believe, owning a lower quality security
would have provided little incremental yield. We believe this strategy proved
beneficial to the total return of the portfolio. It is consistent with our style
to allocate assets to the sectors of the bond market that we believe have the
most relative value. The current diversification of the fixed-income portion of
the portfolio is 21% governments, 8% mortgages, 6% corporates, and 3%
asset-backed securities based on total investments. The duration of this portion
is 4.9 years compared to the Lehman Aggregate Bond Index of 4.8 years.*
- ---------------
* Source: Lehman Brothers, Inc.
20
<PAGE>
NATIONS FUND TRUST
Nations Balanced Assets Fund
- ----------------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- ----------------------------------------------
[PIE CHART]
<TABLE>
- ----------------------------------------------
TOP TEN HOLDINGS AS OF 11/30/94
- ----------------------------------------------
<S> <C>
1. U.S. T-Note, 6.000% 11/30/1997 4.6%
2. U.S. T-Note, 5.125% 04/30/1998 4.1
3. U.S. T-Note, 5.750% 08/15/2003 3.6
4. U.S. T-Bond, 8.750% 08/15/2020 2.9
5. U.S. T-Bond, 8.875% 08/15/2017 2.8
6. Intel Corporation 2.4
7. General Electric Company 2.2
8. Dow Chemical Company 2.1
9. FNMA, Commitment to Purchase, 8.000%
05/01/2024 2.0
10. GNMA, Commitment to Purchase, 8.500%
07/15/2024 1.9
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
<TABLE>
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------
<S> <C> <C>
YEAR ENDED (7.66)% (2.02)%
11/30/94
--------------------------
INCEPTION
(10/02/92) 1.38% 4.20%
THROUGH
11/30/94
--------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 5.75% charge
- ----------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor A
Shares of the Nations
Balanced Assets Fund on
October 2, 1992 (inception)
with that of a similar
investment in the Standard &
Poor's Index of 500 stocks
and the Lehman Brothers
Aggregate Bond Index over
the same period. Figures for [LINE CHART]
the Lehman Brothers
Aggregate Bond Index, which
is composed of the
Government Corporate Bond
Index, the Asset-Backed
Securities Index and the
Mortgage-Backed Securities
Index and includes U.S.
treasury issues, agency
issues, corporate bond
issues and mortgage-backed
issues, include reinvestment
of dividends. Figures for
the Standard & Poor's 500,
an unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
21
<PAGE>
NATIONS FUND TRUST
Nations Balanced Assets Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------
<S> <C> <C>
YEAR ENDED (3.68)%* (2.72)%
11/30/94
--------------------------
INCEPTION
(10/02/92) 3.42 % 3.42 %
THROUGH
11/30/94
--------------------------
Not
*Adjusted adjusted
for maximum for
contingent contingent
deferred deferred
sales charge sales
of 1.00% charge
- ----------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor C
Shares of the Nations
Balanced Assets Fund on
October 2, 1992 (inception)
with that of a similar
investment in the Standard &
Poor's Index of 500 stocks
and the Lehman Brothers
Aggregate Bond Index, over [LINE CHART]
the same period. Figures for
the Lehman Brothers
Aggregate Bond Index, which
is composed of the
Government Corporate Bond
Index, the Asset-Backed
Securities Index and the
Mortgage-Backed Securities
Index and includes U.S.
treasury issues, agency
issues, corporate bond
issues and mortgage-backed
issues, include reinvestment
of dividends. Figures for
the Standard & Poor's 500,
an unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
22
<PAGE>
NATIONS FUND TRUST
Nations Balanced Assets Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR N SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------
<S> <C> <C>
YEAR ENDED (7.30)% (2.51)%
11/30/94
-------------------------
INCEPTION
(6/7/93) (2.08)% 0.58 %
THROUGH
11/30/94
-------------------------
Adjusted Not
for adjusted
applicable for
contingent contingent
deferred deferred
sales sales
charge charge
- ----------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor N
Shares of the Nations
Balanced Assets Fund on June
7, 1993 (inception) with
that of a similar investment
in the Standard & Poor's
Index of 500 stocks and the
Lehman Brothers Aggregate
Bond Index, over the same
period. Figures for the [LINE CHART]
Lehman Brothers Aggregate
Bond Index, which is
composed of the Government
Corporate Bond Index, the
Asset-Backed Securities
Index and the
Mortgage-Backed Securities
Index and includes U.S.
treasury issues, agency
issues, corporate bond
issues and mortgage-backed
issues, include reinvestment
of dividends. Figures for
the Standard & Poor's 500,
an unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
23
<PAGE>
NATIONS FUND TRUST
Nations Balanced Assets Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------
<S> <C>
YEAR ENDED (1.73)%
11/30/94
---------------------
INCEPTION
(09/30/92) 4.46%
THROUGH
11/30/94
- ----------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Trust A Shares
of the Nations Balanced
Assets Fund on September 30,
1992 (inception) with that
of a similar investment in
the Standard & Poor's Index
of 500 stocks and the Lehman
Brothers Aggregate Bond
Index over the same period.
Figures for the Lehman
Brothers Aggregate Bond
Index, which is composed of [LINE CHART]
the Government Corporate
Bond Index, the Asset-Backed
Securities Index and the
Mortgage-Backed Securities
Index and includes U.S.
treasury issues, agency
issues, corporate bond
issues and mortgage-backed
issues, include reinvestment
of dividends. Figures for
the Standard & Poor's 500,
an unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
24
<PAGE>
NATIONS EQUITY INDEX FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PORTFOLIO
Greg Golden oversees management of the Fund. Mr. Golden joined NationsBank
in 1989. As Vice President and Portfolio Manager for Structured Products, Mr.
Golden also oversees the management of an array of equity index products for
NationsBank. His other duties include Quantitative Analysis and Derivatives
Management. Mr. Golden is a graduate of Belmont University and a Chartered
Financial Analyst Candidate.
INVESTMENT OBJECTIVE
The objective of the Fund is to seek to closely approximate, before fees
and expenses, the total return performance of the S&P 500 Index.
PERFORMANCE SUMMARY AND OVERVIEW*
Nations Equity Index Fund provided a total return of 0.29%** for the period
from commencement of operations (December 15, 1993) to November 30, 1994. The
Fund's performance for the period compares favorably to the Lipper S&P 500 Index
Objective Fund average of 0.18%.***
The Nations Equity Index Fund is comprised of essentially all of the
companies within the S&P 500 with market capitalization weights similar to the
Index. Computer programs are used to continuously monitor and rebalance the Fund
so as to "track" the performance of the S&P 500 Index. Portfolio transactions
are made to align the Fund to the S&P 500 Index composition, invest cash, and
provide for redemptions. In addition, the Fund seeks to minimize trading costs.
Stock index futures and options also are used to manage cash flows in the Fund.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return.
*** Source: Lipper Analytical Services, Inc., an independent mutual fund
performance monitoring service.
25
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- ----------------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- ----------------------------------------------
[PIE CHART]
- ----------------------------------------------
TOP TEN EQUITY HOLDINGS
AS OF 11/30/94
- ----------------------------------------------
<TABLE>
<S> <C>
1. General Electric Company 2.2%
2. AT&T Corporation 2.2
3. Exxon Corporation 2.1
4. Coca-Cola Company 1.9
5. Royal Dutch Petroleum Company, ADR 1.7
6. Wal-Mart Stores Inc. 1.5
7. Philip Morris Companies Inc. 1.5
8. Merck & Company, Inc. 1.3
9. Procter & Gamble Company 1.2
10. International Business Machines
Corporation 1.2
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------
AGGREGATE TOTAL RETURN
- ----------------------------------------------
<S> <C>
INCEPTION
(12/15/93) 0.29%
THROUGH
11/30/94
- ----------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Trust A Shares
of the Nations Equity Index
Fund on December 15, 1993
(inception) with that of a [LINE CHART]
similar investment in the
Standard & Poor's Index of
500 stocks over the same
period. Figures for the
Standard & Poor's 500, an
unmanaged index of common
stock prices, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Aggregate total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
26
<PAGE>
NATIONS SPECIAL EQUITY FUND
PERFORMANCE & COMMENTARY
INVESTMENT MANAGEMENT PROFILES
During the year ended November 30, 1994, the Fund was managed by Gil
Knight. He has a B.A. from Dartmouth College and an M.B.A. from Bernard Baruch
School of Business. Mr. Knight has over 25 years of investment experience and is
a member of the Association of Investment Management and Research and the
International Society of Investment Analysts.
INVESTMENT OBJECTIVE
Nations Special Equity Fund seeks capital appreciation by investing in
smaller capitalization common stocks as well as "special situation" equities.
PERFORMANCE SUMMARY AND OVERVIEW*
The Nations Special Equity Fund produced a total return of (2.96)%** for
the year ended November 30, 1994. This compares to declines in the Russell 2000
Index, (1.1)%, the NASDAQ Composite, (0.54)%, and the New York Stock Exchange
Composite, (2.50)%, over the same period.
It was a difficult year for equity investors in general as the Federal
Reserve Board took active steps to prevent inflation from overwhelming the
economy. Interest rates began to rise, and as a result both equity and bond
markets turned in weak performances through November 1994. The economy of the
United States and certain foreign countries, however, grew smartly.
Nations Special Equity Fund is an aggressive fund that focuses on smaller
capitalization "growth stocks" and those companies involved in "special
situations", which can include initial public offerings (IPOs). The
over-the-counter markets in which the Fund invests were extremely volatile in
1994 as investors switched from one industry to another in search of
performance. The Fund maintained overweighted positions in semiconductors and
semiconductor equipment companies in particular, as well as in the technology,
health care, medical device industries, in-home health service organizations and
health maintenance organization (HMO) providers. Financial stocks such as
regional banks, although quite strong early in the year, declined sharply during
the summer as loan spreads fell. During 1994, the Fund reduced its financial
sector weighting from 18% to 6%.
Although the Fund continued to seek companies with strong earnings
momentum, swings in corporate earnings increased trading activity and made
sustained gains difficult. In the "special situation" categories, the Fund
participated in selected IPOs throughout the year and some "turnaround" stocks
in the oil service industry. Some "takeover" situations were realized in
regional savings and loan and bank issues. In addition, a small percentage of
the portfolio was invested in the emerging countries of Mexico, Chile, Argentina
and Brazil, although stocks in these countries were not present in the Fund's
portfolio as of November 30, 1994.
The growth style of Nations Special Equity Fund modestly lagged the Fund's
various benchmarks over the year. As of November 30, 1994, the companies held by
the Fund had an average market capitalization of $528.9 million and an average
price/earnings multiple of 33 times book value. Although the Fund's emphasis on
small company stocks with earnings momentum entails a higher volatility profile,
we believe this strategy will allow it to excel should small capitalization
growth stocks perform well in 1995.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994 was (3.05)%. The total return for
Investor N Shares from commencement of operations May 20, 1994, through November
30, 1994 was 2.02%. Had the maximum sales charge of 5.75% for Investor A Shares
and the maximum contingent deferred sales charge of 5.00% for Investor N Shares
been taken into effect, the total returns for such shares would have been lower.
27
<PAGE>
NATIONS FUND TRUST
Nations Special Equity Fund
- ----------------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- ----------------------------------------------
[PIE CHART]
<TABLE>
- ----------------------------------------------
TOP TEN HOLDINGS AS OF 11/30/94
- ----------------------------------------------
<S> <C>
1. Business Objects S.A., ADS 2.8%
2. Exide Corporation 2.1
3. Cascade Communication Corporation 2.1
4. Fair Issac and Company Inc. 2.0
5. Applied Digital Access Inc. 1.9
6. Horizon Healthcare Corporation 1.8
7. Cardinal Health Care 1.6
8. Computer Horizons Corporation 1.5
9. SciMed Life Systems Inc. 1.4
10. Clear Channel Communications Inc. 1.3
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------
<S> <C> <C>
YEAR ENDED (9.54)% (3.05)%
11/30/94
------------------------
INCEPTION
(07/26/93) .35% 4.84%
THROUGH
11/30/94
------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 5.75% charge
- ----------------------------------------------
</TABLE>
- ----------------------------
Inception is based on The
Capitol Mutual Funds Special
Equity Portfolio Class B
Shares, which were
reorganized into Investor A
Shares of 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. The chart to the
right compares the growth in
value of a hypothetical
$10,000 investment in
Investor A Shares of the
Nations Special Equity Fund [LINE CHART]
on July 26, 1993 (inception)
with that of a similar
investment in the Standard &
Poor's Index of 500 stocks
and the Wilshire Small Cap
Index over the same period.
Figures for the Standard &
Poor's 500 and the Wilshire
Small Cap Index, unmanaged
indices of common stock
prices, include reinvestment
of dividends. The Wilshire
Small Cap Index is a market-
weighted index comprising
250 domestic stocks with a
median market capitalization
of $488 million. This
broad-based index represents
nine economic sectors.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
28
<PAGE>
NATIONS FUND TRUST
Nations Special Equity Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR N SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------
AGGREGATE TOTAL RETURN
- ----------------------------------------------
<S> <C> <C>
INCEPTION
(05/20/94) (2.98)% 2.02%
THROUGH
11/30/94
-------------------------
Adjusted for Not
maximum adjusted
contingent for
deferred contingent
sales deferred
charge of sales
5.00% charge
- ----------------------------------------------
</TABLE>
- ----------------------------
The chart to the right
compares the growth in value
of a hypothetical $10,000
investment in Investor N
Shares of the Nations
Special Equity Fund on May
20, 1994 (inception) with
that of a similar investment
in the Standard & Poor's
Index of 500 stocks and the
Wilshire Small Cap Index
over the same period. [LINE CHART]
Figures for the Standard &
Poor's 500 and the Wilshire
Small Cap Index, unmanaged
indices of common stock
prices, include reinvestment
of dividends. The Wilshire
Small Cap Index is a
market-weighted index
comprising 250 domestic
stocks with a median market
capitalization of $488
million. This broad-based
index represents nine
economic sectors.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------------------
<S> <C>
YEAR ENDED (2.96)%
11/30/94
---------------------
INCEPTION
(10/01/92) 24.36%
THROUGH
11/30/94
- ----------------------------------------------
</TABLE>
- ----------------------------
Inception is based on The
Capitol Mutual Funds Special
Equity Portfolio Class A
Shares, which were
reorganized into Trust A
Shares of 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. The chart
to the right compares the
growth in value of a
hypothetical $10,000
investment in Trust A Shares
of the Nations Special
Equity Fund on October 1, [LINE CHART]
1992 (inception) with that
of a similar investment in
the Standard & Poor's Index
of 500 stocks and the
Wilshire Small Cap Index
over the same period.
Figures for the Standard &
Poor's 500 and the Wilshire
Small Cap Index, unmanaged
indices of common stock
prices, include reinvestment
of dividends. The Wilshire
Small Cap Index is a market-
weighted index comprising
250 domestic stocks with a
median market capitalization
of $488 million. This
broad-based index represents
nine economic sectors.
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual and aggregate total returns are historical in nature and measure
net investment income and capital gain or loss from portfolio investments
assuming reinvestment of dividends.
29
<PAGE>
NATIONS FUND TRUST
Nations Value Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 91.3%
AEROSPACE AND DEFENSE -- 4.0%
372,600 Martin Marietta Corporation........................................ $16,161,525
237,400 Raytheon Company................................................... 14,926,525
140,000 Rockwell International Corporation................................. 4,742,500
-----------
35,830,550
-----------
AUTOMOBILES -- 3.8%
304,700 Chrysler Corporation............................................... 14,739,863
492,200 Ford Motor Company................................................. 13,350,925
131,450 Paccar, Inc........................................................ 5,455,175
-----------
33,545,963
-----------
AUTOMOTIVE ACCESSORIES -- 1.7%
115,000 Eaton Corporation.................................................. 5,476,875
310,500 Echlin Inc......................................................... 9,392,625
-----------
14,869,500
-----------
BEVERAGES -- 1.1%
163,700 Anheuser Busch Companies, Inc...................................... 8,041,762
65,000 Seagram Company, Ltd............................................... 1,893,125
-----------
9,934,887
-----------
BUSINESS EQUIPMENT AND PERIPHERALS -- 0.5%
61,000 International Business Machines Corporation........................ 4,315,750
-----------
CHEMICALS -- BASICS -- 0.8%
193,200 PPG Industries, Inc................................................ 6,955,200
-----------
CHEMICALS -- SPECIALITY -- 2.1%
316,600 Lubrizol Corporation............................................... 9,972,900
124,000 Monsanto Company................................................... 8,928,000
-----------
18,900,900
-----------
COMPUTER MANUFACTURERS -- 0.8%
180,000 COMPAQ Computer Corporation+....................................... 7,042,500
-----------
DIVERSIFIED HEALTHCARE -- 2.2%
56,000 Foundation Health Corporation+..................................... 2,037,000
265,000 Healthtrust Inc. (The Hospital Company)+........................... 8,546,250
597,000 National Medical Enterprises Inc................................... 8,432,625
-----------
19,015,875
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
NATIONS FUND TRUST
Nations Value Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
DOMESTIC PETROLEUM -- DIVERSIFIED -- 1.6%
66,000 Ashland Oil, Inc................................................... $ 2,244,000
399,000 Tosco Corporation.................................................. 11,770,500
-----------
14,014,500
-----------
DRUGS -- 6.7%
207,100 American Home Products Corporation................................. 13,487,387
290,000 Bristol-Meyers Squibb.............................................. 16,747,500
93,500 Lilly (Eli) & Company.............................................. 5,855,438
450,000 Merck & Company Inc................................................ 16,762,500
85,500 Schering-Plough Corporation........................................ 6,401,813
-----------
59,254,638
-----------
ELECTRIC UTILITIES -- NON-NUCLEAR -- 2.8%
500,061 CINergy Corporation................................................ 11,126,357
250,000 DPL Inc............................................................ 5,093,750
284,600 GTE Corporation.................................................... 8,715,875
-----------
24,935,982
-----------
ELECTRICAL EQUIPMENT -- 2.6%
238,000 General Electric Company........................................... 10,948,000
246,600 Johnson Controls Inc............................................... 11,960,100
-----------
22,908,100
-----------
ELECTRONIC COMPONENTS -- 6.3%
328,000 Arrow Electronics Inc.+............................................ 11,931,000
306,600 Avnet Inc.......................................................... 10,999,275
205,500 General Motors Corporation, Class H................................ 6,858,562
260,200 Intel Corporation.................................................. 16,425,125
126,500 Texas Instruments Inc.............................................. 9,550,750
-----------
55,764,712
-----------
FINANCE -- MISCELLANEOUS -- 1.0%
186,000 Health Care Property Investors, Inc................................ 4,975,500
74,000 Meditrust SBI...................................................... 2,201,500
45,000 Mercantile Bancorporation, Inc..................................... 1,366,875
-----------
8,543,875
-----------
FINANCE -- SERVICES -- 2.2%
104,000 Household International Inc........................................ 4,004,000
130,000 Merrill Lynch & Company, Inc....................................... 4,940,000
781,000 Paine Webber Group, Inc............................................ 10,641,125
-----------
19,585,125
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
NATIONS FUND TRUST
Nations Value Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
FOOD -- PACKAGED -- 0.6%
49,000 Unilever N.V., ADR................................................. $ 5,469,625
-----------
FOREIGN PETROLEUM -- 3.3%
237,000 du Pont (E.I.) de Nemours & Company................................ 12,768,375
149,600 Royal Dutch Petroleum Company, ADR................................. 16,250,300
-----------
29,018,675
-----------
HOUSEHOLD PRODUCTS -- 1.2%
304,100 First Brands Corporation........................................... 10,415,425
-----------
INDUSTRIAL CONGLOMERATES -- 4.9%
426,600 AlliedSignal Inc................................................... 13,917,825
205,200 ITT Corporation.................................................... 16,339,050
179,000 Teradyne Inc.+..................................................... 5,593,750
120,000 TRW Inc............................................................ 7,620,000
-----------
43,470,625
-----------
INSURANCE -- 0.5%
123,539 Travelers Inc. (New)............................................... 4,061,345
-----------
INTERNATIONAL OIL -- MULTINATIONAL -- 6.7%
151,000 Amoco Corporation.................................................. 9,173,250
215,000 Chevron Corporation................................................ 9,379,375
181,800 Exxon Corporation.................................................. 10,976,175
202,900 Mobil Corporation.................................................. 17,297,225
199,900 Texaco Inc......................................................... 12,418,788
-----------
59,244,813
-----------
LEISURE -- 1.0%
326,000 Mattel Inc......................................................... 8,720,500
-----------
LIFE AND SPECIALTY INSURANCE -- 0.5%
109,000 Lincoln National Corporation....................................... 4,237,374
-----------
LONG DISTANCE -- 2.1%
215,600 AT&T Corporation................................................... 10,591,350
258,000 Sprint Corporation................................................. 7,707,750
-----------
18,299,100
-----------
MEDIA -- 0.9%
160,000 Gannett Inc........................................................ 7,580,000
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
NATIONS FUND TRUST
Nations Value Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
METALS -- 2.0%
160,000 Aluminum Company of America........................................ $13,060,000
257,000 Bethlehem Steel Corporation+....................................... 4,561,750
-----------
17,621,750
-----------
MONEY CENTER BANKS -- 4.8%
642,600 Banpais SA, ADS+................................................... 4,578,525
85,000 Chemical Banking Corporation....................................... 3,091,875
438,100 Comerica Inc....................................................... 11,554,887
15,000 Cullen Frost Bankers, Inc.......................................... 472,500
212,000 First Chicago Corporation.......................................... 9,858,000
384,000 Mellon Bank Corporation............................................ 12,720,000
20,000 Union Planters Corporation......................................... 412,500
-----------
42,688,287
-----------
NATURAL GAS -- DIVERSIFIED -- 0.8%
551,000 TransCanada Pipeline Ltd........................................... 6,956,375
-----------
PACKAGING -- 0.5%
178,000 Bowater Inc. plc., ADR............................................. 4,516,750
-----------
PAPER AND FOREST PRODUCTS -- 1.8%
174,000 Mead Corporation................................................... 7,960,500
197,000 Weyerhaeuser Company............................................... 7,559,875
-----------
15,520,375
-----------
PRODUCER GOODS -- MACHINERY -- 4.0%
139,000 Caterpillar Inc.................................................... 7,506,000
322,000 Tenneco Inc........................................................ 12,517,750
410,000 Varity Corporation+................................................ 15,272,500
-----------
35,296,250
-----------
REGIONAL BANKS/THRIFTS -- 0.9%
217,300 Crestar Financial Corporation...................................... 8,311,725
-----------
RETAIL -- FOOD AND DRUGS -- 0.2%
65,800 Supervalu Inc...................................................... 1,612,100
-----------
RETAIL -- MAJORS -- 2.9%
314,000 May Department Stores Company...................................... 11,382,500
315,000 Penney (J.C.) Inc.................................................. 14,490,000
-----------
25,872,500
-----------
RETAIL -- SPECIALTY -- 1.2%
445,500 Circuit City Stores Inc............................................ 10,970,438
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
NATIONS FUND TRUST
Nations Value Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
SOFTWARE AND SERVICES -- 3.0%
164,900 Computer Associates International Inc.............................. $ 7,502,950
142,000 Stratus Computer, Inc.............................................. 5,307,250
134,800 Xerox Corporation.................................................. 13,244,100
-----------
26,054,300
-----------
TELECOMMUNICATION SYSTEMS AND SPECIALTY EQUIPMENT -- 0.4%
93,000 Harris Corporation................................................. 3,813,000
-----------
TELEPHONE -- BELL REGIONAL -- 1.8%
226,000 BellSouth Corporation.............................................. 11,723,750
128,300 Pacific Telesis Group.............................................. 3,720,700
-----------
15,444,450
-----------
TELEPHONE -- CABLE AND CELLULAR -- 1.5%
109,600 British Telecommunications, ADR.................................... 6,507,500
125,400 Telefonos De Mexico SA, ADR........................................ 6,646,200
-----------
13,153,700
-----------
TOBACCO -- 0.9%
126,300 Philip Morris Companies Inc........................................ 7,546,425
-----------
TRANSPORTATION -- SURFACE -- 2.7%
228,000 Burlington Northern Inc............................................ 11,115,000
400,000 Consolidated Freightways Inc.+..................................... 7,750,000
230,000 Dial Corporation................................................... 4,600,000
-----------
23,465,000
-----------
TOTAL COMMON STOCKS (Cost $835,292,807)............................ 804,778,964
===========
PREFERRED STOCK -- 1.2% (Cost $12,715,634)
419,500 PECO Energy Company................................................ 10,120,438
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
NATIONS FUND TRUST
Nations Value Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- ----------
REPURCHASE AGREEMENT -- 7.2% (Cost $63,327,000)
$63,327,000 Agreement with CS First Boston Corporation, 5.650% dated 11/30/1994
to be repurchased at $63,336,939 on 12/01/1994, collaterized by,
$64,751,900 market value of U.S. Treasury Bonds, 8.875%-13.875%,
having various maturities ranging from November, 2009 through
August, 2017..................................................... $ 63,327,000
------------
TOTAL INVESTMENTS (Cost $911,335,441*)................................. 99.7% 878,226,402
OTHER ASSETS AND LIABILITIES (NET)..................................... 0.3 2,474,445
----- ------------
NET ASSETS............................................................. 100.0% $880,700,847
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes is $912,734,774.
+ Non-income producing security.
ABBREVIATIONS:
<TABLE>
<S> <C>
ADR American Depositary Receipt
ADS American Depositary Share
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE>
NATIONS FUND TRUST
Nations Capital Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 88.3%
BEVERAGES -- 2.4%
350,000 Coca-Cola Company................................................... $17,893,750
-----------
BUILDING AND CONSTRUCTION -- 0.6%
145,000 Grupo Tribasa, SA, ADS+............................................. 4,766,875
-----------
BUSINESS EQUIPMENT AND PERIPHERALS -- 4.4%
370,400 Bay Networks, Inc.+................................................. 9,537,800
212,500 Cabletron Systems Inc.+............................................. 10,093,750
425,000 Cisco Systems Inc.+................................................. 13,706,250
-----------
33,337,800
-----------
CHEMICALS -- BASIC -- 7.3%
325,000 Dow Chemical Company................................................ 20,800,000
205,000 Eastman Chemical Company............................................ 9,660,625
210,000 Imperial Chemical Industries Inc. Plc, ADR.......................... 10,027,500
224,000 PPG Industries, Inc................................................. 8,064,000
225,000 Union Carbide Corporation........................................... 6,440,625
-----------
54,992,750
-----------
CHEMICALS -- SPECIALTY -- 1.1%
300,000 Morton International Inc., Industries............................... 8,250,000
-----------
COMPUTER MANUFACTURERS -- 4.1%
350,000 COMPAQ Computer Corporation+........................................ 13,693,750
365,000 EMC Corporation+.................................................... 8,212,500
89,200 Hewlett Packard Company............................................. 8,741,600
-----------
30,647,850
-----------
CONSUMER DURABLES -- 1.0%
145,000 Whirlpool Corporation............................................... 7,231,875
-----------
DIVERSIFIED HEALTHCARE -- 3.5%
94,700 Columbia/HCA Healthcare Corporation................................. 3,586,763
500,000 Humana Inc.......................................................... 11,187,500
15,000 Pfizer, Inc......................................................... 1,160,625
140,000 United Healthcare Corporation....................................... 6,650,000
87,500 U.S. Healthcare Inc................................................. 3,915,625
-----------
26,500,513
-----------
DRUGS -- 2.1%
210,000 Schering-Plough Corporation......................................... 15,723,750
-----------
ELECTRIC UTILITIES -- INDEPENDENT POWER -- 0.4%
275,000 Sithe Energies Inc.+................................................ 2,853,125
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
NATIONS FUND TRUST
Nations Capital Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
ELECTRICAL EQUIPMENT -- 5.2%
150,000 Emerson Electric Company............................................ $ 8,850,000
480,800 General Electric Company............................................ 22,116,800
168,000 Johnson Controls Inc................................................ 8,148,000
-----------
39,114,800
-----------
ELECTRONIC COMPONENTS -- 6.5%
125,000 AMP Inc............................................................. 9,031,250
370,000 Intel Corporation................................................... 23,356,250
300,000 Motorola, Inc....................................................... 16,912,500
-----------
49,300,000
-----------
FINANCE -- SERVICES -- 1.6%
70,000 Morgan Stanley Group, Inc........................................... 4,138,750
600,000 Paine Webber Group, Inc............................................. 8,175,000
-----------
12,313,750
-----------
FOREIGN PETROLEUM -- 1.0%
70,000 Royal Dutch Petroleum Company, ADR.................................. 7,603,750
-----------
HOUSEHOLD PRODUCTS -- 1.7%
200,000 Procter & Gamble Company............................................ 12,500,000
-----------
INDUSTRIAL CONGLOMERATES -- 4.3%
500,000 AlliedSignal Inc.................................................... 16,312,500
330,000 Applied Materials Inc.+............................................. 15,798,750
-----------
32,111,250
-----------
INTERNATIONAL OIL -- MULTINATIONAL -- 3.3%
60,000 Amoco Corporation................................................... 3,645,000
150,000 Chevron Corporation................................................. 6,543,750
175,000 Mobil Corporation................................................... 14,918,750
-----------
25,107,500
-----------
LEISURE -- 1.3%
175,000 Disney (Walt) Company............................................... 7,634,375
70,000 Time Warner Inc..................................................... 2,362,500
-----------
9,996,875
-----------
LIFE AND SPECIALTY INSURANCE -- 2.1%
175,000 American International Group Inc.................................... 16,034,375
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
NATIONS FUND TRUST
Nations Capital Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
LONG DISTANCE -- 3.0%
341,000 AT&T Corporation.................................................... $16,751,625
300,000 MCI Communications Corporation...................................... 5,850,000
-----------
22,601,625
-----------
MEDIA -- 0.6%
60,000 Capital Cities/ABC Inc.............................................. 4,905,000
-----------
METALS -- 2.1%
290,000 Birmingham Steel Corporation........................................ 6,162,500
175,000 Nucor Corporation................................................... 9,537,500
-----------
15,700,000
-----------
PAPER AND FOREST PRODUCTS -- 3.0%
60,000 Burlington Resources Inc............................................ 2,145,000
207,000 Georgia Pacific Corporation......................................... 14,800,500
150,000 Weyerhaeuser Company................................................ 5,756,250
-----------
22,701,750
-----------
PETROLEUM -- DOMESTIC -- 1.0%
60,000 Tosco Corporation................................................... 1,770,000
227,600 Unocal Corporation.................................................. 6,059,850
-----------
7,829,850
-----------
PRODUCER GOODS -- MACHINERY -- 3.3%
175,000 Caterpillar, Inc.................................................... 9,450,000
150,000 Dover Corporation................................................... 7,668,750
169,900 Thermo Electron Corporation......................................... 7,475,600
-----------
24,594,350
-----------
REGIONAL BANKS/THRIFTS -- 3.2%
200,000 BankAmerica Corporation............................................. 8,200,000
180,900 Crestar Financial Corporation....................................... 6,919,425
277,500 Mellon Bank Corporation............................................. 9,192,188
-----------
24,311,613
-----------
RESTAURANTS AND LODGING -- 1.5%
400,000 McDonald's Corporation.............................................. 11,350,000
-----------
RETAIL -- MAJOR -- 0.9%
300,000 Wal-Mart Stores Inc................................................. 6,937,500
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
NATIONS FUND TRUST
Nations Capital Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
RETAIL -- SPECIALITY -- 3.5%
70,000 Home Depot Inc...................................................... $ 3,237,500
500,000 Lowe's Companies Inc................................................ 18,687,500
180,500 OfficeMax, Inc.+.................................................... 4,444,812
-----------
26,369,812
-----------
SOFTWARE AND SERVICES -- 5.8%
100,000 First Data Corporation.............................................. 4,787,500
220,800 Microsoft Corporation+.............................................. 13,882,800
260,000 Oracle Systems Corporation+......................................... 10,725,000
300,000 Sybase Inc.+........................................................ 14,550,000
-----------
43,945,300
-----------
TELECOMMUNICATION SYSTEMS AND SPECIALTY EQUIPMENT -- 1.7%
69,000 Comcast Corporation, Class A, Special............................... 1,095,375
400,000 General Instrument Corporation+..................................... 12,000,000
-----------
13,095,375
-----------
TELEPHONE -- CABLE AND CELLULAR -- 2.1%
85,000 Compania de Telefonos de Chile SA, ADR.............................. 7,310,000
7,770 Grupo Iusacell de C.V., SA, Series D, ADS+.......................... 205,905
18,130 Grupo Iusacell de C.V., SA, Series L, ADS+.......................... 525,770
90,000 NEXTEL Communications, Inc., Class A+............................... 1,597,500
271,000 Tele-Communications Inc., Class A+.................................. 6,402,375
-----------
16,041,550
-----------
TOBACCO -- 0.7%
90,000 Philip Morris Companies, Inc........................................ 5,377,500
-----------
TRANSPORTATION -- AIRLINES -- 1.2%
415,200 Southwest Airlines Company.......................................... 8,771,100
-----------
TRANSPORTATION -- SURFACE -- 0.8%
120,000 Burlington Northern Inc............................................. 5,850,000
-----------
TOTAL COMMON STOCKS (Cost $608,236,316)............................. 666,662,913
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
NATIONS FUND TRUST
Nations Capital Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- 13.1% (Cost $99,062,000)
$99,062,000 Agreement with CS First Boston Corp., 5.650% dated 11/30/94
to be repurchased at $99,077,547 on 12/1/94, collateralized by,
$101,290,962 market value of U.S. Treasury Bonds,
8.875%-13.875%, having various maturities ranging from November,
2009 through August, 2017.......................................... $ 99,062,000
============
TOTAL INVESTMENTS (Cost $707,298,316*)................................... 101.4% 765,724,913
OTHER ASSETS AND LIABILITIES (NET)....................................... (1.4) (10,788,007)
----- ------------
NET ASSETS............................................................... 100.0% $754,936,906
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes is $707,578,816.
+ Non-income producing security.
ABBREVIATIONS:
ADR American Depositary Receipt
ADS American Depositary Share
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
NATIONS FUND TRUST
Nations Emerging Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 90.9%
APPAREL -- 1.0%
72,300 Nautica Enterprises Inc.+............................................ $ 2,060,550
------------
AUTOMOTIVE ACCESSORIES -- 0.4%
33,000 APS Holdings Corporation, Class A+................................... 835,313
------------
BUSINESS EQUIPMENT AND PERIPHERALS -- 3.1%
100,000 Danka Business Systems Plc, ADR...................................... 2,012,500
40,000 Tellabs, Inc.+....................................................... 1,910,000
55,000 3Com Corporation+.................................................... 2,392,500
------------
6,315,000
------------
CHEMICALS -- SPECIALTY -- 1.5%
35,000 Airgas Inc.+......................................................... 875,000
60,100 Georgia Gulf Corporation+............................................ 2,133,550
------------
3,008,550
------------
COMPUTER MANUFACTURERS -- 4.8%
133,000 EMC Corporation+..................................................... 2,992,500
85,000 Stratus Computer Inc.+............................................... 3,176,875
190,000 Western Digital Corporation+......................................... 3,515,000
------------
9,684,375
------------
DIVERSIFIED HEALTHCARE -- 9.1%
67,000 HealthCare COMPARE Corporation+...................................... 1,984,875
100,800 Health Management Association Inc., Class A+......................... 2,318,400
17,000 Lam Research Corporation+............................................ 718,250
74,300 Manor Care Inc....................................................... 2,108,263
79,400 Medaphis Corporation+................................................ 3,116,450
120,000 Mid-Atlantic Medical Services Inc.+.................................. 2,775,000
59,000 PhyCor Inc.+......................................................... 2,286,250
100,000 Sierra Health Services+.............................................. 3,075,000
------------
18,382,488
------------
DRUGS -- 3.7%
52,900 Forest Labs Inc., Class A+........................................... 2,479,688
33,000 Mylan Labs........................................................... 948,750
68,200 Teva Pharmaceutical Industries Ltd., ADR............................. 1,730,575
87,500 Watson Pharmaceuticals Inc.+......................................... 2,231,250
------------
7,390,263
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE>
NATIONS FUND TRUST
Nations Emerging Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
DRUGS -- MEDICAL SUPPLIES -- 1.6%
58,000 STERIS Corporation+.................................................. $ 1,798,000
39,300 Stryker Corporation.................................................. 1,444,275
------------
3,242,275
------------
ELECTRICAL EQUIPMENT -- 1.3%
30,000 KLA Instruments Corporation+......................................... 1,485,000
20,000 Novellus Systems Inc.+............................................... 1,042,500
------------
2,527,500
------------
ELECTRONIC COMPONENTS -- 9.6%
59,000 Allen Group Inc...................................................... 1,416,000
141,000 Amphenol Corporation, Class A+....................................... 3,366,375
91,000 Analog Devices Inc.+................................................. 3,014,375
52,000 ANTEC Corporation+................................................... 1,332,500
117,000 Cypress Semiconductor Corporation+................................... 2,500,875
89,000 Gentex Corporation+.................................................. 1,924,625
25,000 LSI Logic Corporation+............................................... 1,068,750
95,000 Scientific-Atlanta Inc............................................... 1,876,250
61,000 Symbol Technologies, Inc.+........................................... 1,929,125
30,700 Watkins-Johnson Company.............................................. 1,013,100
------------
19,441,975
------------
ENERGY EXPLORATION AND PRODUCTION -- 1.7%
92,000 Pogo Producing Company............................................... 1,759,500
20,700 Seagull Energy Corporation+.......................................... 442,463
62,300 Union Texas Petroleum Holdings Inc................................... 1,152,550
------------
3,354,513
------------
ENTERTAINMENT -- 1.4%
185,000 Acclaim Entertainment Inc.+.......................................... 2,890,625
------------
FINANCE -- MISCELLANEOUS -- 2.2%
117,100 Duff & Phelps Corporation............................................ 1,302,737
39,033 Duff & Phelps Credit Rating Company.................................. 351,293
95,000 T. Rowe Price & Associates........................................... 2,778,750
------------
4,432,780
------------
INSURANCE -- 3.0%
77,000 American Re Corporation+............................................. 1,992,375
90,000 CMAC Investment Corporation.......................................... 2,475,000
61,100 PXRE Corporation..................................................... 1,588,600
------------
6,055,975
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE>
NATIONS FUND TRUST
Nations Emerging Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
JEWELRY -- 0.4%
52,000 Jostens Inc.......................................................... $ 897,000
------------
LEISURE -- 0.9%
6,110 National Gaming Corporation.......................................... 102,342
80,000 Players International Inc.+.......................................... 1,620,000
------------
1,722,342
------------
METALS -- 1.6%
47,800 Allegheny Ludlum Corporation......................................... 908,200
35,000 American Barrick Resources Corporation............................... 730,625
77,400 Birmingham Steel Corporation......................................... 1,644,750
------------
3,283,575
------------
PRODUCER GOODS -- MACHINERY -- 0.8%
28,600 Clark Equipment Company+............................................. 1,576,575
------------
PUBLISHING -- 1.0%
45,000 Houghton Mifflin Company............................................. 2,053,125
------------
REGIONAL BANKS/THRIFTS -- 3.7%
70,000 Boatmen's Bancshares Inc............................................. 1,951,250
30,500 Central Fidelity Banks Inc........................................... 808,250
55,000 Crestar Financial Corporation........................................ 2,103,750
61,100 Cullen Frost Bankers Inc............................................. 1,924,650
25,000 Mercantile Bancorporation Inc........................................ 759,375
------------
7,547,275
------------
RESTAURANTS AND LODGING -- 2.9%
33,600 Brinker International Inc.+.......................................... 571,200
35,000 IHOP Corporation+.................................................... 866,250
97,000 MGM Grand Inc.+...................................................... 2,400,750
82,000 Outback Steakhouse Inc.+............................................. 2,111,500
------------
5,949,700
------------
RETAIL -- SPECIALTY -- 10.4%
77,000 AnnTaylor Stores Inc.+............................................... 2,887,500
148,000 AutoZone Inc.+....................................................... 3,792,500
175,000 Bombay Company+...................................................... 1,859,375
82,000 General Nutrition Companies Inc.+.................................... 2,398,500
98,000 Gymboree Corporation+................................................ 2,989,000
74,900 Pep Boys-Manny, Moe & Jack........................................... 2,424,888
30,200 Sports Authority Inc.+............................................... 687,050
49,300 Stein Mart Inc.+..................................................... 801,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
NATIONS FUND TRUST
Nations Emerging Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
RETAIL -- SPECIALTY -- (CONTINUED)
50,000 Sunglass Hut International Inc.+..................................... $ 2,162,500
65,000 Whole Foods Market Inc.+............................................. 991,250
------------
20,993,688
------------
SERVICES -- 8.4%
67,200 Bolt Beranek & Newman Inc.+.......................................... 1,335,600
39,000 Catalina Marketing Corporation+...................................... 2,086,500
59,000 Envoy Corporation+................................................... 1,165,250
84,000 Franklin Quest Company+.............................................. 2,772,000
79,000 Franklin Resources Inc............................................... 3,002,000
61,100 Hospitality Franchise Systems Inc.+.................................. 1,496,950
60,000 JP Foodservice Inc.+................................................. 690,000
86,000 Paging Network Inc.+................................................. 2,709,000
51,000 Paychex, Inc......................................................... 1,823,250
------------
17,080,550
------------
SOFTWARE AND SERVICES -- 9.3%
40,000 Cabletron Systems Inc.+.............................................. 1,900,000
50,000 Cerner Corporation+.................................................. 1,987,500
23,000 Intuit Inc.+......................................................... 1,604,250
109,900 MEDSTAT Group Inc.+.................................................. 2,934,680
79,000 Parametric Technology Corporation+................................... 2,745,250
6,800 Shiva Corporation.................................................... 210,800
33,600 SunGard Data Systems Inc.+........................................... 1,293,600
60,000 Sybase, Inc.+........................................................ 2,910,000
100,000 Teradyne Inc.+....................................................... 3,125,000
------------
18,711,080
------------
TELECOMMUNICATION SYSTEMS AND SPECIALTY EQUIPMENT -- 4.9%
84,000 ALC Communications Corporation+...................................... 2,856,000
75,000 Aspect Telecommunications Corporation+............................... 2,362,500
128,000 ECI Telecom Limited.................................................. 2,224,000
35,000 Glenayre Technologies Inc.+.......................................... 1,890,000
20,000 Ortel Corporation+................................................... 520,000
------------
9,852,500
------------
TEXTILES -- 0.7%
60,000 Wellman Inc.......................................................... 1,522,500
------------
TRANSPORTATION -- 1.5%
123,000 TNT Freightways Corporation.......................................... 3,059,625
------------
TOTAL COMMON STOCKS (Cost $173,280,191).............................. 183,871,717
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE>
NATIONS FUND TRUST
Nations Emerging Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- 10.0% (Cost $20,147,000)
Agreement with CS First Boston Corporation, 5.650% dated
11/30/94 to be repurchased at $20,150,162 on 12/1/94,
collateralized by, $20,600,321 market value of U.S.
Treasury Bonds, 8.875%-13.875%, having various maturities
ranging
from November, 2009 through August, 2017........................ $ 20,147,000
============
TOTAL INVESTMENTS (Cost $193,427,191*).................................... 100.9% 204,018,717
OTHER ASSETS AND LIABILITIES (NET)........................................ (0.9) (1,875,960)
----- ------------
NET ASSETS................................................................ 100.0% $202,142,757
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes is $193,814,166.
+ Non-income producing security.
ABBREVIATION:
ADR American Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
NATIONS FUND TRUST
Nations Balanced Assets Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 55.0%
BEVERAGES -- 1.9%
82,592 Coca-Cola Company.................................................. $ 4,222,516
------------
BUILDING AND CONSTRUCTION -- 0.3%
19,600 Grupo Tribasa SA ADS+.............................................. 644,350
------------
BUSINESS EQUIPMENT AND PERIPHERALS -- 1.8%
20,500 AMP Inc. .......................................................... 1,481,125
50,588 Cabletron Systems Inc.+............................................ 2,402,930
------------
3,884,055
------------
CHEMICALS -- BASIC -- 5.7%
74,012 Dow Chemical Company............................................... 4,736,768
48,336 Eastman Chemical Company........................................... 2,277,834
47,000 Imperial Chemical Industries Plc ADR............................... 2,244,250
52,900 PPG Industries, Inc................................................ 1,904,400
50,000 Union Carbide Corporation.......................................... 1,431,250
------------
12,594,502
------------
CHEMICALS -- SPECIALTY -- 0.3%
25,600 Morton International Industries.................................... 704,000
------------
COMPUTER MANUFACTURERS -- 2.1%
71,383 COMPAQ Computer Corporation........................................ 2,792,860
19,500 Hewlett Packard Company............................................ 1,911,000
------------
4,703,860
------------
DIVERSIFIED HEALTHCARE -- 2.6%
22,379 Columbia/HCA Healthcare Corporation................................ 847,605
118,800 Humana Inc......................................................... 2,658,150
29,673 United Heathcare Corporation....................................... 1,409,468
18,900 U.S. Healthcare Inc................................................ 845,775
------------
5,760,998
------------
DRUGS -- 0.7%
20,300 Schering-Plough Corporation........................................ 1,519,963
------------
ELECTRICAL EQUIPMENT -- 3.3%
28,514 Emerson Electric Company........................................... 1,682,326
106,900 General Electric Company........................................... 4,917,400
14,000 Johnson Controls Inc............................................... 679,000
------------
7,278,726
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE>
NATIONS FUND TRUST
Nations Balanced Assets Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
ELECTRONIC COMPONENTS -- 7.8%
78,022 Applied Materials Inc.+............................................ $ 3,735,303
87,400 Cisco Systems Inc.+................................................ 2,818,650
76,099 EMC Corporation+................................................... 1,712,227
84,400 Intel Corporation.................................................. 5,327,750
65,100 Motorola, Inc...................................................... 3,670,012
------------
17,263,942
------------
FINANCE -- MISCELLANEOUS -- 1.5%
27,300 First Data Corporation............................................. 1,306,988
14,473 Morgan Stanley Group Inc........................................... 855,716
89,300 Paine Webber Group Inc............................................. 1,216,712
------------
3,379,416
------------
FOREIGN PETROLEUM -- 0.5%
9,900 Royal Dutch Petroleum Company, ADR................................. 1,075,388
------------
HOUSEHOLD PRODUCTS -- 1.1%
39,600 Procter & Gamble Company........................................... 2,475,000
------------
INDUSTRIAL CONGLOMERATES -- 0.6%
24,800 Whirlpool Corporation.............................................. 1,236,900
------------
INTERNATIONAL OIL -- DOMESTIC -- 0.8%
13,513 Burlington Resources Inc........................................... 488,157
50,300 Unocal Corporation................................................. 1,339,237
------------
1,827,394
------------
INTERNATIONAL OIL -- MULTINATIONAL -- 1.6%
12,119 Amoco Corporation.................................................. 736,229
18,800 Chevron Corporation................................................ 820,150
22,800 Mobil Corporation.................................................. 1,943,700
------------
3,500,079
------------
LIFE AND SPECIALTY INSURANCE -- 1.7%
41,050 American International Group, Inc.................................. 3,761,206
------------
LONG DISTANCE -- 1.0%
46,300 AT&T Corporation................................................... 2,274,487
------------
MEDIA -- 0.4%
9,673 Capital Cities/ABC Inc............................................. 790,768
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
NATIONS FUND TRUST
Nations Balanced Assets Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
METALS -- 1.6%
67,966 Birmingham Steel Corporation....................................... $ 1,444,278
39,900 Nucor Corporation.................................................. 2,174,550
------------
3,618,828
------------
PAPER AND FOREST PRODUCTS -- 2.2%
49,980 Georgia-Pacific Corporation........................................ 3,573,570
34,100 Weyerhaeuser Company............................................... 1,308,587
------------
4,882,157
------------
PRODUCER GOODS -- MACHINERY -- 2.4%
32,936 Caterpillar Inc.................................................... 1,778,544
36,100 Dover Corporation.................................................. 1,845,612
37,600 Thermo Electron Corporation........................................ 1,654,400
------------
5,278,556
------------
REGIONAL BANKS/THRIFTS -- 1.7%
41,000 Crestar Financial Corporation...................................... 1,568,250
66,240 Mellon Bank Corporation............................................ 2,194,200
------------
3,762,450
------------
RESTAURANTS AND LODGING -- 1.1%
82,800 McDonald's Corporation............................................. 2,349,450
------------
RETAIL -- SPECIALTY -- 2.2%
15,200 Home Depot Inc..................................................... 703,000
109,800 Lowe's Companies Inc............................................... 4,103,775
------------
4,806,775
------------
SOFTWARE AND SERVICES -- 4.2%
87,392 Bay Networks Inc.+................................................. 2,239,420
45,200 Microsoft Corporation+............................................. 2,841,950
50,500 Oracle Systems Corporation+........................................ 2,083,125
45,200 Sybase Inc.+....................................................... 2,192,200
------------
9,356,695
------------
TELECOMMUNICATION SYSTEMS AND SPECIALTY EQUIPMENT -- 1.4%
14,200 Comcast Corporation, Class A, Special.............................. 225,425
95,100 General Instrument Corporation+.................................... 2,853,000
------------
3,078,425
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
NATIONS FUND TRUST
Nations Balanced Assets Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
TELEPHONE -- CABLE AND CELLULAR -- 1.2%
18,100 Compania de Telefonos de Chile SA ADS.............................. $ 1,556,600
49,800 Tele-Communications Inc., Class A+................................. 1,176,525
------------
2,733,125
------------
TOBACCO -- 0.6%
21,895 Philip Morris Companies Inc........................................ 1,308,226
------------
TRANSPORTATION -- AIRLINES -- 0.7%
69,000 Southwest Airlines Company......................................... 1,457,625
------------
TOTAL COMMON STOCKS (Cost $116,975,344)............................ 121,529,862
============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 3.0%
$2,180,682 Daimler-Benz, Vehicle Trust 94, Class A, 5.950% 12/15/2000......... 2,140,476
1,605,801 EQCC, Home Equity Loan, Certificate 94-2, Class A, 6.350%
06/15/2014....................................................... 1,580,711
1,874,961 General Motors Acceptance Corporation, 94A Grantor Trust, Class A,
6.300% 06/15/1999................................................ 1,838,624
1,129,318 Green Tree Financial Corporation, Class A, Variable Rate Note,
6.55% 07/15/2019................................................. 1,102,497
------------
TOTAL ASSET-BACKED SECURITIES (Cost $6,780,972).................... 6,662,308
============
CORPORATE BONDS AND NOTES -- 6.7%
AUTOMOTIVE -- 2.1%
750,000 Chrysler Financial Corporation, MTN, 7.190% 05/26/1998............. 724,950
1,000,000 Chrysler Financial Corporation, MTN, 7.290% 07/07/1998............. 967,790
1,000,000 Ford Motor Credit Company, MTN, 7.450% 07/12/1999.................. 964,100
2,000,000 Ford Credit Grantor Trust, 94B, Class A, MTN, 7.300% 10/15/1999.... 1,988,120
------------
4,644,960
------------
BANKING AND FINANCE -- 2.2%
1,000,000 BanPonce Financial Corporation, MTN, 6.870% 08/23/1996............. 983,910
1,000,000 Beneficial Corporation, MTN, 8.100% 11/23/1998..................... 993,630
1,000,000 General Motors Acceptance Corporation, MTN, 6.375% 05/23/1996...... 980,400
1,000,000 General Motors Acceptance Corporation, MTN, 7.850% 03/05/1997...... 993,710
1,000,000 Union Bank Finland Ltd, New York, Note, 5.250% 06/15/1996.......... 958,430
------------
4,910,080
------------
CHEMICALS -- SPECIALITY -- 0.5%
1,000,000 Grace (W.R.) and Company, MTN, 6.880% 06/23/1997................... 967,950
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
NATIONS FUND TRUST
Nations Balanced Assets Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
INDUSTRIAL -- 0.9%
$1,000,000 B.A.T. Capital Corporation, MTN, 6.660% 03/22/2000++............... $ 920,600
1,000,000 TKR Cable Inc., Debenture, 10.500% 10/30/2007...................... 1,025,200
------------
1,945,800
------------
PUBLISHING -- 0.6%
1,400,000 News America Holding, Sr. Note, 7.500% 03/01/2000.................. 1,318,604
------------
TRANSPORTATION -- AIRLINE -- 0.4%
1,000,000 Quantas Airways Ltd., Sr. Note, 6.625% 06/30/1998++................ 936,690
------------
TOTAL CORPORATE BONDS AND NOTES (Cost $15,340,738)................. 14,724,084
============
MUNICIPAL BOND -- 0.8% (Cost $1,790,793)
1,725,000 Pennsylvania Intergovernmental Note, 6.800% 06/15/2012............. 1,807,662
============
FOREIGN BOND -- 0.5% (Cost $1,179,854)
1,250,000 Skandia Capital, 6.000% 02/11/1998................................. 1,134,312
============
MORTGAGE-BACKED SECURITIES -- 8.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 0.4%
1,022,963 FHLMC Group #E0-0151, 7.500% 10/01/2007............................ 981,083
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 4.0%
2,300,000 Commitment to Purchase, 7.500% Balloon 09/08/2001**................ 2,238,176
4,600,000 Commitment to Purchase, 8.000% 05/01/2024**........................ 4,398,750
2,300,000 Commitment to Purchase, 7.500% 02/01/2024**........................ 2,141,875
------------
8,778,801
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
CERTIFICATES -- 4.2%
1,250,000 Commitment to Purchase, 30 yr., 8.000% 06/01/2024**................ 1,188,275
4,250,000 Commitment to Purchase, 8.500% 07/15/2024**........................ 4,157,010
1,250,000 Commitment to Purchase, 7.000% 03/01/2024**........................ 1,111,325
2,732,603 9.000% 01/15/2016-09/15/2019 (6 Pools)............................. 2,752,951
------------
9,209,561
------------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $19,093,658)................ 18,969,445
============
U.S. TREASURY SECURITIES -- 22.3%
U.S. TREASURY BONDS -- 5.7%
5,700,000 8.875% 08/15/2017.................................................. 6,139,983
5,975,000 8.750% 08/15/2020.................................................. 6,380,165
------------
12,520,148
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
NATIONS FUND TRUST
Nations Balanced Assets Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY SECURITIES -- (CONTINUED)
U.S. TREASURY NOTES -- 16.6%
$ 450,000 7.375% 05/15/1996.................................................. $ 450,423
3,400,000 4.375% 11/15/1996.................................................. 3,213,544
10,620,000 6.000% 11/30/1997.................................................. 10,153,676
9,850,000 5.125% 04/30/1998.................................................. 9,094,308
2,850,000 8.875% 02/15/1999.................................................. 2,962,204
9,275,000 5.750% 08/15/2003.................................................. 8,020,000
3,000,000 7.875% 11/15/2004.................................................. 2,992,020
------------
36,886,175
------------
TOTAL U.S. TREASURY SECURITIES (Cost $51,811,614).................. 49,406,323
============
REPURCHASE AGREEMENT -- 9.8% (Cost $21,589,000)
21,589,000 Agreement with CS First Boston Corporation, 5.650% dated 11/30/1994
to be repurchased at $ 21,592,388 on 12/01/1994, collateralized
by, $22,074,767 market value of U.S. Treasury Bonds,
8.875%-13.875% having various maturities ranging from November,
2009 through August, 2017........................................ 21,589,000
============
TOTAL INVESTMENTS (Cost $234,561,973*)................................. 106.7% 235,822,996
OTHER ASSETS AND LIABILITIES (NET)..................................... (6.7) (14,871,407)
----- ------------
NET ASSETS............................................................. 100.0% $220,951,589
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes is $235,255,358.
** Security purchased on a when-issued or delayed delivery basis (Note 1).
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration
to qualified institutional buyers.
ABBREVIATIONS:
<TABLE>
<S> <C>
ADR American Depositary Receipt
ADS American Depositary Share
MTN Medium Term Note
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 93.7%
AEROSPACE AND DEFENSE -- 1.9%
12,000 Boeing Company....................................................... $ 537,000
2,000 General Dynamics Corporation......................................... 80,500
2,300 Lockheed Corporation................................................. 158,125
2,800 Loral Corporation.................................................... 110,950
3,100 Martin Marietta Corporation.......................................... 134,463
1,300 McDonnell Douglas Corporation........................................ 181,350
1,800 Northrop Grumman Corporation......................................... 73,125
1,600 Ogden Corporation.................................................... 31,600
4,800 Raytheon Company..................................................... 301,800
7,600 Rockwell International Corporation................................... 257,450
2,900 Rowan Companies Inc.+................................................ 19,212
3,200 Textron Inc.......................................................... 150,400
5,500 Unisys Corporation+.................................................. 51,563
4,300 United Technologies Corporation...................................... 251,550
-----------
2,339,088
-----------
APPAREL AND TEXTILE -- 0.9%
1,200 Armstrong World Industries Inc....................................... 48,000
400 Brown Group Inc...................................................... 12,700
3,600 Charming Shoppes Inc................................................. 24,300
5,300 Gap Inc.............................................................. 186,825
1,000 Hartmarx Corporation+................................................ 5,375
13,000 Limited Inc.......................................................... 251,875
2,900 Liz Claiborne Inc.................................................... 65,613
2,200 National Services Industries Inc..................................... 56,100
2,600 Nike Inc., Class B................................................... 166,075
400 Oshkosh B Gosh Inc., Class A......................................... 5,300
3,300 Reebok International, Ltd............................................ 126,637
1,350 Russell Corporation.................................................. 41,006
500 Springs Industries Inc............................................... 18,563
1,800 Stride Rite Corporation.............................................. 22,275
2,100 V F Corporation...................................................... 101,850
-----------
1,132,494
-----------
AUTOMOBILES -- 2.1%
12,450 Chrysler Corporation................................................. 602,269
35,100 Ford Motor Company................................................... 952,088
26,250 General Motors Corporation........................................... 1,000,781
1,320 Paccar, Inc.......................................................... 54,780
-----------
2,609,918
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
AUTOMOTIVE ACCESSORIES -- 0.6%
3,100 Cooper Tire & Rubber Company......................................... $ 72,463
3,400 Dana Corporation..................................................... 73,525
2,800 Eaton Corporation.................................................... 133,350
2,100 Echlin Inc........................................................... 63,525
4,225 Genuine Parts Company................................................ 147,347
5,230 Goodyear Tire & Rubber Company....................................... 177,166
1,500 Snap On Tools Inc.................................................... 47,250
-----------
714,626
-----------
BEVERAGES -- 3.5%
9,100 Anheuser Busch Companies, Inc........................................ 447,038
2,300 Brown-Forman Corporation, Class B.................................... 68,713
45,300 Coca-Cola Company.................................................... 2,315,963
1,500 Coors (Adolph) Company, Class B...................................... 23,625
27,400 PepsiCo Inc.......................................................... 969,275
13,200 Seagram Company, Ltd................................................. 384,450
3,800 Whitman Corporation.................................................. 60,325
-----------
4,269,389
-----------
BUILDING AND CONSTRUCTION -- 0.3%
3,000 Black & Decker Corporation........................................... 72,000
1,200 Centex Corporation................................................... 24,450
1,100 Foster Wheeler Corporation........................................... 31,488
1,100 Kaufman & Broad Home Corporation..................................... 14,025
5,500 Masco Corporation.................................................... 122,375
900 Pulte Corporation.................................................... 18,113
1,600 Stanley Works........................................................ 57,200
-----------
339,651
-----------
BUSINESS EQUIPMENT AND PERIPHERALS -- 1.7%
2,000 Avery Dennison Corporation........................................... 64,500
8,700 Cisco Systems Inc.+.................................................. 280,575
5,700 Donnelley (R.R.) & Sons Company...................................... 163,163
20,500 International Business Machines Corporation.......................... 1,450,375
5,700 Pitney Bowes Inc..................................................... 189,525
-----------
2,148,138
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
CHEMICALS -- BASIC -- 1.3%
3,775 Coastal Corporation+................................................. $ 97,206
9,450 Dow Chemical Company................................................. 604,800
2,987 Eastman Chemical Company............................................. 140,762
400 First Mississippi Corporation........................................ 8,850
1,300 Hercules Inc......................................................... 148,688
1,500 Owens Corning Fiberglass Corporation+................................ 43,500
1,700 Perkin Elmer Corporation............................................. 46,963
7,200 PPG Industries, Inc.................................................. 259,200
2,300 Rohm & Haas Company.................................................. 128,225
5,600 Union Carbide Corporation............................................ 160,300
-----------
1,638,494
-----------
CHEMICALS -- SPECIALTY -- 1.5%
4,000 Air Products & Chemicals Inc......................................... 177,500
1,600 Bemis Inc............................................................ 35,400
11,650 Eastman Kodak Company................................................ 531,531
3,325 Engelhard Corporation................................................ 73,150
1,000 Goodrich (B.F.) Company.............................................. 44,500
3,300 Grace (W.R.) & Company............................................... 122,100
2,400 Great Lakes Chemical Corporation..................................... 127,200
4,200 Monsanto Company..................................................... 302,400
5,100 Morton International Inc., Industries................................ 140,250
2,600 Nalco Chemical Company............................................... 84,500
4,500 Praxair Inc.......................................................... 91,125
1,600 Sigma Aldrich Corporation............................................ 55,400
-----------
1,785,056
-----------
COMPUTER MANUFACTURERS -- 1.5%
4,200 Apple Computer Inc................................................... 156,450
9,400 COMPAQ Computer Corporation+......................................... 367,775
1,000 Data General Corporation+............................................ 10,750
4,700 Digital Equipment Corporation+....................................... 159,800
8,900 Hewlett Packard Company.............................................. 872,200
4,800 Honeywell Inc........................................................ 140,400
2,000 Parker Hannifin Corporation.......................................... 87,750
-----------
1,795,125
-----------
DIVERSIFIED HEALTHCARE -- 1.9%
2,500 Becton Dickinson & Company........................................... 118,125
3,000 Beverly Enterprises Inc.+............................................ 42,375
12,266 Columbia/HCA Healthcare Corporation.................................. 464,575
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
DIVERSIFIED HEALTHCARE -- (CONTINUED)
1,300 Community Psychiatric Centers........................................ $ 13,000
2,000 Ecolab Inc........................................................... 40,750
2,700 Mallinckrodt Group Inc............................................... 81,000
2,200 Manor Care Inc....................................................... 62,425
5,900 National Medical Enterprises Inc..................................... 83,338
4,099 Pall Corporation..................................................... 72,757
10,800 Pfizer Inc........................................................... 835,650
5,700 United Healthcare Corporation........................................ 270,750
5,800 U.S. Healthcare Inc.................................................. 259,550
-----------
2,344,295
-----------
DOMESTIC PETROLEUM -- 2.8%
2,100 Ashland Oil, Inc..................................................... 71,400
22,800 Chevron Corporation.................................................. 994,650
1,700 Columbia Gas Systems Inc.+........................................... 41,863
3,100 Consolidated Natural Gas Company..................................... 108,500
700 Eastern Enterprises.................................................. 17,850
8,200 Enron Corporation.................................................... 221,400
2,700 ENSERCH Corporation.................................................. 34,088
700 Helmerich & Payne Inc................................................ 19,600
4,900 Homestake Mining Company............................................. 82,688
1,900 Kerr McGee Corporation............................................... 89,775
1,200 Louisiana Land & Exploration Company................................. 49,200
1,800 McDermott International Inc.......................................... 42,750
4,600 Noram Energy Corporation............................................. 25,875
11,200 Occidental Petroleum Corporation..................................... 219,800
1,000 ONEOK Inc............................................................ 17,250
3,400 Oryx Energy Company.................................................. 41,225
2,800 Pacific Enterprises.................................................. 59,850
4,500 Panhandle Eastern Corporation........................................ 95,063
1,500 Pennzoil Company..................................................... 72,563
1,200 Peoples Energy Corporation........................................... 29,400
9,500 Phillips Petroleum Company........................................... 313,500
8,700 Public Service Enterprise Group...................................... 231,638
2,900 Santa Fe Energy Resources............................................ 24,288
6,607 Santa Fe Pacific Corporation......................................... 110,667
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
DOMESTIC PETROLEUM -- (CONTINUED)
3,200 Sonat Inc............................................................ $ 90,000
3,600 Sun Company, Inc..................................................... 104,850
1,400 Transco Energy Company............................................... 17,500
1,900 Western Atlas Inc.+.................................................. 82,888
3,100 Williams Companies Inc............................................... 87,575
-----------
3,397,696
-----------
DRUGS -- 3.3%
2,300 ALZA Corporation+.................................................... 44,275
10,800 American Home Products Corporation................................... 703,350
10,300 Lilly (Eli) & Company................................................ 645,038
44,100 Merck & Company Inc.................................................. 1,642,725
6,500 Schering-Plough Corporation.......................................... 486,688
6,000 Upjohn Company....................................................... 192,750
4,700 Warner Lambert Company............................................... 363,662
-----------
4,078,488
-----------
DRUGS -- MEDICAL SUPPLIES -- 2.5%
28,800 Abbott Laboratories.................................................. 918,000
2,400 Allergan Inc......................................................... 72,300
4,600 Amgen Inc.+.......................................................... 268,525
1,900 Bard (C.R.) Inc...................................................... 49,400
2,100 Bausch & Lomb Inc.................................................... 70,088
10,000 Baxter International Inc............................................. 257,500
3,500 Biomet Inc.+......................................................... 42,875
17,740 Bristol-Myers Squibb................................................. 1,024,485
4,000 Medtronic Inc........................................................ 212,000
1,600 St. Jude Medical Inc................................................. 63,800
2,100 United States Surgical Corporation................................... 45,675
-----------
3,024,648
-----------
ELECTRIC UTILITIES -- NON-NUCLEAR -- 4.2%
6,900 American Electric Power Inc.......................................... 227,700
5,000 Baltimore Gas & Electric Company..................................... 113,125
5,300 Carolina Power & Light Company....................................... 141,775
4,243 CINergy Corporation.................................................. 94,406
6,600 Central & South West Corporation..................................... 140,250
8,300 Consolidated Edison Company New York Inc............................. 214,763
5,600 Dominion Resources Inc............................................... 207,900
7,300 Duke Power Company................................................... 297,475
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
56
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
ELECTRIC UTILITIES -- NON-NUCLEAR -- (CONTINUED)
8,500 Entergy Corporation, New............................................. $ 191,250
6,100 FPL Group Inc........................................................ 215,788
33,600 GTE Corporation...................................................... 1,029,000
4,100 Maxus Energy Corporation+............................................ 15,375
5,600 Niagara Mohawk Power Corporation..................................... 77,700
2,000 Nicor Inc............................................................ 45,000
2,200 Northern States Power Corporation.................................... 99,275
5,500 Ohio Edison Company.................................................. 101,750
15,700 Pacific Gas & Electric Company....................................... 374,838
9,800 PacifiCorp........................................................... 181,300
8,000 PECO Energy Company.................................................. 193,000
15,800 SCEcorp.............................................................. 221,200
23,000 Southern Company..................................................... 477,250
8,200 Texas Utilities Company.............................................. 267,525
7,600 Unicom Corporation................................................... 177,650
3,200 Union Electric Company............................................... 114,800
-----------
5,220,095
-----------
ELECTRIC UTILITIES -- NUCLEAR -- 0.2%
5,400 Detroit Edison Company............................................... 144,450
4,300 Houston Industries Inc............................................... 146,200
-----------
290,650
-----------
ELECTRICAL EQUIPMENT -- 3.9%
3,500 Advanced Micro Devices Inc.+......................................... 88,375
4,000 Cooper Industries Inc................................................ 139,000
8,000 Emerson Electric Company............................................. 472,000
59,900 General Electric Company............................................. 2,755,400
1,500 General Signal Corporation........................................... 48,375
1,200 Johnson Controls Inc................................................. 58,200
800 JWP Inc.............................................................. 0
3,600 Micron Technology, Inc............................................... 149,400
14,900 Minnesota Mining & Manufacturing Company............................. 763,625
2,000 Scientific Atlanta Inc............................................... 39,500
1,400 Tektronix Inc........................................................ 52,325
1,700 Teledyne Inc......................................................... 29,325
12,400 Westinghouse Electric Corporation.................................... 158,100
-----------
4,753,625
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
57
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
ELECTRONIC COMPONENTS -- 2.3%
3,400 Amdahl Corporation................................................... $ 33,150
3,700 AMP Inc.............................................................. 267,325
1,200 E-Systems Inc........................................................ 43,950
1,700 E.G. & G. Inc........................................................ 25,075
1,700 Grainger (W.W.) Inc.................................................. 88,187
14,700 Intel Corporation.................................................... 927,938
19,400 Motorola, Inc........................................................ 1,093,675
4,200 National Semiconductor Corporation+.................................. 77,175
3,159 Texas Instruments Inc................................................ 238,505
500 Thomas & Betts Corporation........................................... 33,125
800 Zenith Electronics Corporation+...................................... 9,800
-----------
2,837,905
-----------
ENGINEERING AND CONSTRUCTION -- 0.2%
3,100 Fluor Corporation.................................................... 132,913
3,900 Halliburton Company.................................................. 136,013
-----------
268,926
-----------
FINANCE -- SERVICES -- 2.4%
17,400 American Express Company............................................. 515,475
2,000 Beneficial Corporation............................................... 73,000
5,968 Dean Witter, Discover & Company...................................... 208,880
3,700 Dow Jones & Company Inc.............................................. 107,300
6,300 Federal Home Loan Mortgage Corporation............................... 314,213
9,500 Federal National Mortgage Association................................ 675,688
2,900 Household International Inc.......................................... 111,650
8,543 KeyCorp (New)........................................................ 208,236
5,900 MBNA Corporation..................................................... 139,388
7,000 Merrill Lynch & Company Inc.......................................... 266,000
11,400 Norwest Corporation.................................................. 247,950
2,400 USF&G Corporation.................................................... 32,700
-----------
2,900,480
-----------
FOOD -- PACKAGED -- 3.6%
11,926 Archer Daniels Midland Company....................................... 329,456
4,800 Borden, Inc.......................................................... 67,200
8,200 Campbell Soup Company................................................ 352,600
8,900 ConAgra Inc.......................................................... 274,788
5,000 CPC International Inc................................................ 256,250
1,100 Fleming Companies Inc................................................ 25,300
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
58
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
FOOD -- PACKAGED -- (CONTINUED)
5,600 General Mills Inc.................................................... $ 301,000
8,700 Heinz (H.J.) Company................................................. 316,463
3,100 Hershey Foods Corporation............................................ 144,925
7,700 Kellogg Company...................................................... 437,937
3,600 Pet Inc., New........................................................ 60,750
3,000 Pioneer Hi-Bred International........................................ 102,000
2,300 Quaker Oats Company.................................................. 140,012
3,600 Ralston Purina Group................................................. 154,350
16,700 Sara Lee Corporation................................................. 407,063
6,700 Sysco Corporation.................................................... 172,525
5,700 Unilever N.V., ADR................................................... 636,263
4,200 Wrigley, (Wm) Jr. Company............................................ 196,350
-----------
4,375,232
-----------
FOREIGN -- PETROLEUM -- 2.7%
23,600 du Pont (E.I.) de Nemours & Company.................................. 1,271,450
18,900 Royal Dutch Petroleum Company, ADR................................... 2,053,013
-----------
3,324,463
-----------
HEALTH AND BEAUTY -- 1.9%
1,000 Alberto-Culver Company, Class B...................................... 25,625
2,400 Avon Products Inc.................................................... 148,500
3,000 Dial Corporation..................................................... 60,000
7,700 Gillette Company..................................................... 565,950
3,800 International Flavors & Fragrances Inc............................... 167,200
22,800 Johnson & Johnson.................................................... 1,216,950
5,500 Newell Company....................................................... 118,250
-----------
2,302,475
-----------
HOUSEHOLD PRODUCTS -- 2.0%
1,900 Clorox Company....................................................... 110,675
5,200 Colgate Palmolive Company............................................ 312,000
7,300 Corning Inc.......................................................... 219,000
3,800 Maytag Corporation................................................... 56,525
24,000 Procter & Gamble Company............................................. 1,500,000
5,800 Rubbermaid Inc....................................................... 156,600
2,550 Whirlpool Corporation................................................ 127,181
-----------
2,481,981
-----------
IMAGING -- 0.0%
1,734 Polaroid Corporation................................................. 54,404
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
59
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
INDUSTRIAL CONGLOMERATES -- 0.9%
1,800 Alco Standard Corporation............................................ $ 100,800
10,200 AlliedSignal Inc..................................................... 332,775
1,000 Ball Corporation..................................................... 28,125
4,000 Illinois Tool Works Inc.............................................. 162,000
4,100 ITT Corporation...................................................... 326,463
2,300 TRW Inc.............................................................. 146,050
-----------
1,096,213
-----------
INSURANCE -- 1.1%
1,000 Alexander & Alexander Services Inc................................... 18,875
3,200 Chubb Corporation.................................................... 224,800
2,300 CIGNA Corporation.................................................... 145,763
1,800 Jefferson-Pilot Corporation.......................................... 91,125
2,600 Marsh & McLennan Companies Inc....................................... 187,525
3,500 Providian Corporation................................................ 105,875
3,100 St. Paul Companies Inc............................................... 127,875
2,500 Torchmark Corporation................................................ 82,813
10,899 Travelers Inc. (New)................................................. 358,305
-----------
1,342,956
-----------
INTERNATIONAL OIL -- DOMESTIC -- 0.4%
3,300 Amerada Hess Corporation............................................. 150,150
8,300 Unocal Corporation................................................... 220,988
10,000 USX-Marathon Group................................................... 180,000
-----------
551,138
-----------
INTERNATIONAL OIL -- MULTINATIONAL -- 4.9%
17,600 Amoco Corporation.................................................... 1,069,200
5,700 Atlantic Richfield Company........................................... 589,950
43,250 Exxon Corporation.................................................... 2,611,219
14,000 Mobil Corporation.................................................... 1,193,500
9,100 Texaco Inc........................................................... 565,337
-----------
6,029,206
-----------
LEISURE -- 1.7%
1,300 Bally Entertainment Corporation+..................................... 7,638
3,500 Brunswick Corporation................................................ 60,375
18,900 Disney (Walt) Company................................................ 824,513
1,500 Fleetwood Enterprises Inc............................................ 29,438
3,100 Hasbro Inc........................................................... 91,450
6,256 Mattel Inc........................................................... 167,348
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
60
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
LEISURE -- (CONTINUED)
400 Skyline Corporation.................................................. $ 7,400
13,100 Time Warner Inc...................................................... 442,125
12,131 Viacom Inc., Class B+................................................ 467,044
300 Zurn Industries Inc.................................................. 5,250
-----------
2,102,581
-----------
LIFE AND SPECIALTY INSURANCE -- 1.8%
4,100 Aetna Life & Casualty Company........................................ 183,475
7,200 American General Corporation......................................... 189,000
11,037 American International Group, Inc.................................... 1,011,265
2,000 Continental Corporation.............................................. 29,000
3,100 General Re Corporation............................................... 363,863
3,300 Lincoln National Corporation......................................... 128,288
2,100 SAFECO Corporation................................................... 103,294
2,800 Transamerica Corporation............................................. 132,650
2,600 UNUM Corporation..................................................... 94,900
900 USLIFE Corporation................................................... 29,025
-----------
2,264,760
-----------
LONG DISTANCE -- 2.5%
55,077 AT&T Corporation..................................................... 2,705,658
11,700 Sprint Corporation................................................... 349,538
-----------
3,055,196
-----------
MEDIA -- 1.5%
5,400 Capital Cities/ABC Inc............................................... 441,450
2,000 CBS Inc.............................................................. 111,000
5,680 Dun & Bradstreet Corporation......................................... 300,330
5,400 Gannett Inc.......................................................... 255,825
1,200 Handleman Company.................................................... 13,800
2,500 Interpublic Group Companies Inc...................................... 79,063
1,450 King World Productions Inc.+......................................... 50,569
1,600 Knight-Ridder Inc.................................................... 77,000
1,600 McGraw-Hill Inc...................................................... 108,600
400 Meredith Corporation................................................. 19,250
3,300 New York Times Company, Class A...................................... 78,375
4,700 Times Mirror Company................................................. 145,113
2,100 Tribune Company...................................................... 105,263
-----------
1,785,638
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
61
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
METALS -- 1.7%
8,650 Alcan Aluminum Ltd................................................... $ 214,087
2,900 Aluminum Company of America.......................................... 236,712
11,100 American Barrick Resource Corporation................................ 231,713
2,800 Armco Inc.+.......................................................... 17,150
1,300 ASARCO Inc........................................................... 35,588
3,500 Bethlehem Steel Corporation+......................................... 62,125
3,200 Crown Cork & Seal Inc.+.............................................. 120,800
3,250 Cyprus Amax Minerals Company......................................... 81,250
3,600 Echo Bay Mines Ltd................................................... 37,350
3,800 Inco Ltd............................................................. 104,500
1,700 Inland Steet Industries Inc.......................................... 55,675
2,796 Newmont Mining Corporation........................................... 102,404
3,000 Nucor Corporation.................................................... 163,500
2,500 Phelps Dodge Corporation............................................. 143,125
8,500 Placer Dome Inc...................................................... 159,375
2,100 Reynolds Metals Company.............................................. 98,962
4,964 Santa Fe Pacific Gold Corporation+................................... 62,670
1,100 Timken Company....................................................... 35,475
2,620 USX-U.S. Steel Group................................................. 90,063
2,725 Worthington Industries Inc........................................... 54,500
-----------
2,107,024
-----------
MONEY CENTER BANKS -- 1.4%
3,100 Bankers Trust N.Y. Corporation....................................... 183,675
7,100 Chase Manhattan Corporation.......................................... 253,825
9,090 Chemical Banking Corporation......................................... 330,649
14,800 Citicorp+............................................................ 616,050
3,700 First Chicago Corporation............................................ 172,050
6,000 National City Corporation............................................ 150,750
-----------
1,706,999
-----------
OIL SERVICES AND EQUIPMENT -- 0.5%
5,000 Baker Hughes Inc..................................................... 90,000
5,500 Dresser Industries Inc............................................... 110,000
8,400 Schlumberger Ltd..................................................... 446,250
-----------
646,250
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
62
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
OTHER -- 0.2%
1,700 Jostens, Inc......................................................... $ 29,325
1,000 National Education Corporation....................................... 4,125
2,750 Service Corporation International.................................... 70,469
3,300 Sherwin Williams Company............................................. 101,475
-----------
205,394
-----------
PAPER AND FOREST PRODUCTS -- 2.1%
2,400 American Greetings Corporation, Class A.............................. 66,600
312 Bassett Furniture Industries Inc..................................... 8,892
1,200 Boise Cascade Corporation............................................ 29,100
4,700 Burlington Resources Inc............................................. 168,025
3,400 Champion International Corporation................................... 118,150
3,300 Deluxe Corporation................................................... 91,575
1,300 Federal Paper Board Inc.............................................. 35,263
3,200 Georgia-Pacific Corporation.......................................... 228,800
1,300 Harland (John H.) Company............................................ 25,675
1,000 Harnischfeger Industries Inc......................................... 26,625
4,400 International Paper Company.......................................... 314,600
3,050 James River Corporation.............................................. 64,431
5,900 Kimberly Clark Corporation........................................... 295,738
4,000 Louisiana Pacific Corporation........................................ 112,000
1,900 Mead Corporation..................................................... 86,925
3,200 Moore Corporation Ltd................................................ 54,800
1,100 Potlatch Corporation................................................. 41,250
2,500 Scott Paper Company.................................................. 163,125
2,332 Stone Container Corporation.......................................... 38,186
1,900 Temple-Inland Inc.................................................... 85,262
2,450 Union Camp Corporation............................................... 113,619
2,575 Westvaco Corporation................................................. 88,516
7,150 Weyerhaeuser Company................................................. 274,381
-----------
2,531,538
-----------
PLASTICS -- 0.1%
2,700 Premark International Inc............................................ 122,850
1,200 Raychem Corporation.................................................. 41,550
-----------
164,400
-----------
PRODUCER GOODS -- MACHINERY -- 1.2%
1,200 Briggs & Stratton Corporation........................................ 40,200
7,000 Caterpillar Inc...................................................... 378,000
1,000 Cincinnati Milacron Inc.............................................. 23,875
600 Clark Equipment Company+............................................. 33,075
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
63
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
PRODUCER GOODS -- MACHINERY -- (CONTINUED)
1,100 Crane Company........................................................ $ 28,600
1,000 Cummins Engine Inc................................................... 43,500
3,100 Deere & Company...................................................... 199,175
2,100 Dover Corporation.................................................... 107,363
1,300 FMC Corporation, New+................................................ 75,725
1,400 Giddings & Lewis Inc................................................. 19,950
3,700 Ingersoll Rand Company............................................... 119,325
1,000 Morrison Knudsen Corporation......................................... 14,750
300 Nacco Industries Inc., Class A....................................... 15,637
500 Outboard Marine Corporation.......................................... 9,313
400 SPX Corporation...................................................... 6,200
5,800 Tenneco Inc.......................................................... 225,475
1,300 Trinova Corporation.................................................. 38,513
1,500 Varity Corporation+.................................................. 55,875
-----------
1,434,551
-----------
REGIONAL BANKS/THRIFTS -- 3.6%
4,100 Ahmanson (H.F.) & Company............................................ 68,163
13,466 Banc One Corporation................................................. 361,899
3,700 Bank of Boston Corporation........................................... 98,975
12,892 BankAmerica Corporation.............................................. 528,572
3,550 Barnett Banks Inc.................................................... 139,781
4,400 Boatmen's Bancshares Inc............................................. 122,650
4,600 CoreStates Financial Corporation..................................... 113,850
2,900 First Fidelity Bancorporation........................................ 130,500
3,700 First Interstate Bancorp............................................. 260,850
6,200 First Union Corporation.............................................. 247,225
5,800 Fleet Financial Group Inc............................................ 180,525
2,100 Golden West Financial Corporation.................................... 73,500
4,550 Great Western Financial Corporation.................................. 77,350
5,700 Mellon Bank Corporation.............................................. 188,813
7,000 Morgan (J.P.) & Company Inc.......................................... 411,250
6,450 NBD Bancorp Inc...................................................... 174,956
8,400 PNC Bank Corporation................................................. 174,300
3,900 Salomon Inc.......................................................... 141,375
4,100 Shawmut National Corporation......................................... 72,775
5,200 SunTrust Banks Inc................................................... 245,050
4,050 U.S. Bancorp......................................................... 93,150
7,100 Wachovia Corporation................................................. 231,638
2,200 Wells Fargo & Company................................................ 317,900
-----------
4,455,047
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
64
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
RESTAURANTS AND LODGING -- 0.9%
1,700 Hilton Hotels Corporation............................................ $ 118,150
750 Luby's Cafeterias Inc................................................ 16,500
4,000 Marriott International Inc........................................... 105,000
25,100 McDonald's Corporation............................................... 712,213
3,350 Promus Companies Inc.+............................................... 92,963
1,700 Ryans Family Steak Houses Inc.+...................................... 11,900
1,500 Shoneys Inc.+........................................................ 20,625
4,300 Wendy's International Inc............................................ 60,200
-----------
1,137,551
-----------
RETAIL -- FOOD AND DRUGS -- 0.7%
9,300 Albertsons Inc....................................................... 267,375
4,900 American Stores Company.............................................. 129,238
2,400 Bruno's, Inc......................................................... 21,000
2,200 Giant Food Inc., Class A............................................. 49,225
1,300 Great Atlantic & Pacific Tea Inc..................................... 28,925
3,300 Kroger Company+...................................................... 79,613
500 Longs Drug Stores Corporation........................................ 15,688
3,100 Rite Aid Corporation................................................. 70,138
2,500 Supervalu Inc........................................................ 61,250
2,400 Winn-Dixie Stores Inc................................................ 120,900
-----------
843,352
-----------
RETAIL -- MAJOR -- 2.8%
3,400 Harcourt General Inc................................................. 121,975
14,300 K Mart Corporation................................................... 207,350
1,200 Mercantile Stores Inc................................................ 48,600
8,100 Penney (J.C.) Inc.................................................... 372,600
12,600 Sears, Roebuck & Company............................................. 595,350
80,200 Wal-Mart Stores Inc.................................................. 1,854,625
4,600 Walgreen Company..................................................... 190,900
4,700 Woolworth Corporation................................................ 66,387
-----------
3,457,787
-----------
RETAIL -- SPECIALTY -- 2.1%
3,700 Circuit City Stores Inc.............................................. 91,113
2,300 Dayton Hudson Corporation............................................ 187,738
3,900 Dillard Department Stores Inc., Class A.............................. 109,687
15,472 Home Depot Inc....................................................... 715,580
5,600 Lowe's Companies Inc................................................. 209,300
8,900 May Department Stores Company........................................ 322,625
3,600 Melville Corporation................................................. 113,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
65
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
RETAIL -- SPECIALTY -- (CONTINUED)
2,700 Nordstrom Inc........................................................ $ 130,275
2,000 Pep Boys Manny, Moe & Jack........................................... 64,750
7,204 Price/Costco Inc.+................................................... 110,762
2,200 Tandy Corporation.................................................... 101,475
2,400 TJX Companies Inc.................................................... 36,300
10,387 Toys R Us Inc.+...................................................... 380,424
-----------
2,573,429
-----------
SOFTWARE AND SERVICES -- 3.0%
1,400 Autodesk Inc......................................................... 52,675
5,100 Automatic Data Processing Inc........................................ 284,962
3,800 Block (H & R) Inc.................................................... 131,575
1,600 Ceridian Corporation+................................................ 40,000
5,800 Computer Associates International Inc................................ 263,900
1,600 Computer Sciences Corporation+....................................... 73,800
800 Cray Research Inc.+.................................................. 14,700
3,900 First Data Corporation............................................... 186,713
1,300 Intergraph Corporation+.............................................. 10,238
1,600 Lotus Development Corporation........................................ 71,600
20,300 Microsoft Corporation+............................................... 1,276,362
1,000 Millipore Corporation................................................ 47,875
12,800 Novell Inc.+......................................................... 254,400
10,100 Oracle Systems Corporation+.......................................... 416,625
800 Shared Medical Systems Corporation................................... 24,100
3,300 Sun Microsystems Inc.+............................................... 110,550
3,800 Tandem Computers Inc.+............................................... 64,600
3,500 Xerox Corporation.................................................... 343,875
-----------
3,668,550
-----------
TELECOMMUNICATION SYSTEMS AND SPECIAL EQUIPMENT -- 1.2%
16,800 AirTouch Communications+............................................. 455,700
1,150 Andrew Corporation+.................................................. 56,063
7,850 Comcast Corporation, Class A......................................... 124,619
3,500 DSC Communications Corporation+...................................... 109,374
1,300 Harris Corporation................................................... 53,300
300 M/A-Com, Inc.+....................................................... 1,875
22,700 MCI Communications Corporation....................................... 442,650
8,900 Northern Telecommunications, Ltd..................................... 284,800
-----------
1,528,381
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
66
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
TELEPHONE -- BELL REGIONAL -- 3.3%
15,100 Bell Atlantic Corporation............................................ $ 756,857
17,650 BellSouth Corporation................................................ 915,593
14,700 NYNEX Corporation.................................................... 553,088
14,600 Pacific Telesis Group................................................ 423,400
21,000 Southwestern Bell Corporation........................................ 868,875
15,500 U S West Inc......................................................... 546,375
-----------
4,064,188
-----------
TELEPHONE -- CABLE AND CELLULAR -- 1.1%
19,200 Ameritech Corporation................................................ 758,400
20,700 Tele-Communications Inc., Class A+................................... 489,037
2,800 Tyco International Ltd............................................... 128,800
-----------
1,376,237
-----------
TOBACCO -- 1.8%
6,700 American Brands Inc.................................................. 237,013
30,600 Philip Morris Companies Inc.......................................... 1,828,350
6,800 UST Inc.............................................................. 187,850
-----------
2,253,213
-----------
TRANSPORTATION -- AIRLINES -- 0.3%
2,600 AMR Corporation+..................................................... 131,950
1,800 Delta Air Lines Inc.................................................. 90,225
5,500 Southwest Airlines Company........................................... 116,188
1,800 USAir Group Inc...................................................... 8,775
-----------
347,138
-----------
TRANSPORTATION -- SURFACE -- 1.2%
3,100 Burlington Northern Inc.............................................. 151,125
2,700 Conrail Inc.......................................................... 140,400
1,700 Consolidated Freightways Inc.+....................................... 32,938
3,600 CSX Corporation...................................................... 250,200
1,900 Federal Express Corporation+......................................... 108,063
2,190 Navistar International Corporation+.................................. 28,744
5,000 Norfolk Southern Corporation......................................... 302,500
1,400 Pittston Services Group.............................................. 33,250
1,300 Roadway Services Inc................................................. 65,650
3,000 Ryder Systems Inc.................................................... 64,875
7,000 Union Pacific Corporation............................................ 325,500
1,000 Yellow Corporation................................................... 19,625
-----------
1,522,870
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
67
<PAGE>
NATIONS FUND TRUST
Nations Equity Index Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
WASTE MANAGEMENT -- (CONTINUED)
WASTE MANAGEMENT -- 0.5%
6,200 Browning-Ferris Industries Inc....................................... $ 167,400
1,900 Rollins Environmental Services Inc................................... 9,025
1,950 Safety-Kleen Corporation............................................. 28,275
17,500 WMX Technologies Inc................................................. 450,625
------------
655,325
------------
TOTAL COMMON STOCKS (Cost $118,508,144).............................. 115,334,254
============
COMMON STOCK RIGHTS -- 0.0% (Cost $11,413)
8,300 Viacom Inc., Variable Common Rights, expire 09/29/1995+.............. 12,450
============
COMMON STOCK WARRANTS -- 0.0% (Cost $0)
45 Shawmut National Corporation Warrants, expire 01/18/1996+............ 118
============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- --------
U.S. TREASURY BILLS -- 0.3%
$300,000 5.080% 02/02/1995++.................................................. 297,333
100,000 5.350% 02/16/1995++.................................................. 98,855
------------
TOTAL U.S. TREASURY BILLS (Cost $396,188)............................ 396,188
============
REPURCHASE AGREEMENT -- 5.7% (Cost $7,039,000)
7,039,000 Agreement with CS First Boston Corporation, 5.650% dated 11/30/1994
to be repurchased at $7,040,105 on 12/01/1994, collaterized by,
$7,197,382 market value of U.S. Treasury Bonds, 8.875%-13.875%,
having various maturities ranging from November, 2009 through
August, 2017....................................................... 7,039,000
------------
TOTAL INVESTMENTS (Cost $125,954,745*)............................. 99.7% 122,782,010
------------
OTHER ASSETS AND LIABILITIES (NET)................................. 0.3 364,744
----- ------------
NET ASSETS......................................................... 100.0% $123,146,754
===== ============
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF APPRECIATION
CONTRACTS (DEPRECIATION)
- --------- --------------
<C> <S> <C>
FUTURES CONTRACTS -- LONG POSITION
31 S&P 500 Index Futures, December 1994...................... (175,850)
1 S&P 500 Index Futures, March 1995......................... 175
------------
TOTAL FUTURES CONTRACTS -- LONG POSITION.................. (175,675)
============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes is $126,308,550.
+ Non-income producing security.
++ Security segregated as collateral for Futures Contracts.
ABBREVIATION:
ADR American Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
68
<PAGE>
NATIONS FUND TRUST
Nations Special Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 83.9%
BUSINESS EQUIPMENT AND PERIPHERALS -- 1.7%
2,950 Corporate Express Inc.+............................................. $ 62,687
3,000 ENCAD Inc.+......................................................... 52,500
4,200 Medar Inc.+......................................................... 56,700
-----------
171,887
-----------
CHEMICALS -- 3.6%
2,500 Betz Laboratories Inc............................................... 111,875
3,000 Ethyl Corporation................................................... 30,750
3,500 Geon Company........................................................ 91,438
4,800 Mississippi Chemical Corporation+................................... 72,600
6,000 Rexene Corporation+................................................. 67,500
-----------
374,163
-----------
COMPUTER/COMPUTER COMPONENTS -- 6.7%
10,500 Computer Horizons Corporation....................................... 152,250
900 FORE System Inc.+................................................... 49,725
4,500 Gateway 2000 Inc.+.................................................. 98,437
2,900 LSI Logic Corporation+.............................................. 123,975
3,000 Microchip Technology Inc.+.......................................... 89,250
7,500 Radius Inc.+........................................................ 71,250
1,000 Tower Semiconductor Ltd.+........................................... 13,250
1,500 Xilinx Inc.+........................................................ 87,750
-----------
685,887
-----------
DIVERSIFIED HEALTHCARE -- 7.7%
4,100 Community Health Systems Inc.+...................................... 100,450
3,000 HBO & Company....................................................... 94,875
7,000 Horizon Healthcare Corporation+..................................... 186,375
3,000 Lincare Holdings Inc.+.............................................. 81,750
6,000 OrNda Health Corporation+........................................... 78,000
6,600 Quorum Health Group Inc.+........................................... 120,450
3,100 TheraTx Inc.+....................................................... 68,975
1,900 Value Health Inc.+.................................................. 70,063
-----------
800,938
-----------
DRUGS -- MEDICAL SUPPLIES -- 3.6%
3,000 Airgas Inc.+........................................................ 75,000
3,625 Cardinal Health Inc................................................. 164,938
1,600 Gulf South Medical Supply Inc.+..................................... 48,000
6,000 Owens & Minor Inc................................................... 90,750
-----------
378,688
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
69
<PAGE>
NATIONS FUND TRUST
Nations Special Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
ELECTRONIC COMPONENTS -- 6.7%
2,300 Analog Devices Inc.+................................................ $ 76,188
3,300 Atmel Corporation+.................................................. 112,200
4,550 Exide Corporation................................................... 220,675
14,200 LTX Corporation+.................................................... 63,900
5,000 Microtest Inc....................................................... 91,250
6,700 Quad Systems Corporation............................................ 73,700
1,500 Teleflex Inc........................................................ 53,437
-----------
691,350
-----------
ENTERTAINMENT -- 1.7%
3,500 Acclaim Entertainment Inc.+......................................... 54,688
4,350 Cannondale Corporation+............................................. 54,919
3,000 Electronic Arts+.................................................... 59,625
550 National Gaming Corporation......................................... 9,213
-----------
178,445
-----------
FINANCIAL SERVICES -- 3.2%
5,000 Eagle Financial Corporation......................................... 67,500
5,000 Fair Issac and Company, Inc......................................... 210,625
3,600 Waterhouse Investor Services Inc.................................... 51,300
-----------
329,425
-----------
FOOD PRODUCTS -- 0.5%
2,800 Ralcorp Holdings Inc.+.............................................. 57,050
-----------
MEDIA -- 0.1%
700 Young Broadcasting Inc., Class A+................................... 12,250
-----------
MEDICAL EQUIPMENT -- 3.9%
3,500 Boston Scientific Corporation+...................................... 56,000
2,100 Diagnostic Products Corporation..................................... 45,675
1,000 Isolyser Inc.+...................................................... 17,000
400 Medrad Inc.+........................................................ 6,400
3,000 SciMed Life Systems Inc.+........................................... 146,625
6,200 U.S. Surgical Corporation........................................... 134,850
-----------
406,550
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
70
<PAGE>
NATIONS FUND TRUST
Nations Special Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
OIL -- 2.8%
3,700 B. J. Services Company+............................................. $ 68,450
5,500 Noble Drilling Corporation+......................................... 34,031
5,200 Oceaneering International Inc.+..................................... 61,100
7,000 Total Petroleum N.A. Limited........................................ 89,250
2,500 Western Company N.A.+............................................... 42,500
-----------
295,331
-----------
PAPER PRODUCTS -- 0.5%
3,000 Stone Container Corporation+........................................ 49,125
-----------
REGIONAL BANKS/THRIFTS -- 2.6%
5,000 Mercantile Bankshares Corporation................................... 101,875
6,800 North Fork Bancorporation........................................... 95,200
7,500 Sovereign Bancorporation Inc........................................ 71,250
-----------
268,325
-----------
RETAIL -- 7.9%
1,500 Carson Pirie Scott and Company...................................... 28,125
6,000 Consolidated Stores Corporation+.................................... 105,000
4,200 Dollar General Corporation.......................................... 123,900
3,000 General Nutrition Companies, Inc.+.................................. 87,750
4,000 Movie Gallery Inc.+................................................. 104,500
5,500 OfficeMax Inc....................................................... 135,438
5,200 Revco D.S. Inc.+.................................................... 117,000
700 Sports Authority Inc.+.............................................. 15,925
3,900 Starbucks Corporation+.............................................. 104,569
-----------
822,207
-----------
SERVICES -- 3.7%
5,000 ABR Information Services, Inc....................................... 82,500
3,000 Gartner Group Inc., Class A+........................................ 102,000
5,500 Hospitality Franchise Systems Inc.+................................. 134,750
4,000 U.S. Delivery Systems Inc.+......................................... 61,000
-----------
380,250
-----------
SOFTWARE AND SERVICES -- 12.7%
2,000 Adobe Systems Inc................................................... 66,000
1,000 Affiliated Computer Services Inc.+.................................. 19,500
200 Aspen Technology Inc................................................ 3,375
3,200 Bay Networks Inc.+.................................................. 82,400
9,000 Business Objects S.A., ADS+......................................... 292,500
10,000 CIBER Inc.+......................................................... 91,250
3,000 Cidco Inc.+......................................................... 80,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
71
<PAGE>
NATIONS FUND TRUST
Nations Special Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
SOFTWARE AND SERVICES -- (CONTINUED)
100 Epic Design Technology Inc.+........................................ $ 2,112
3,000 Frame Technology Corporation+....................................... 45,000
3,000 Macromedia Inc.+.................................................... 60,750
2,500 Micros Systems Inc.................................................. 92,500
7,500 Networth Inc........................................................ 103,125
4,700 Platinum Technology Inc.+........................................... 91,650
2,500 Progress Software Corporation+...................................... 90,625
3,900 Shiva Corporation................................................... 120,900
10,000 Systemsoft Corporation+............................................. 80,000
-----------
1,321,937
-----------
SPORTS AND LEISURE -- 0.9%
2,800 Callaway Golf Company............................................... 98,000
-----------
TECHNOLOGY -- 0.3%
2,000 Uniphase Corporation................................................ 29,500
-----------
TELECOMMUNICATION SYSTEMS AND SPECIALTY EQUIPMENT -- 11.0%
2,400 AFC Cable Systems Inc............................................... 39,600
8,250 Applied Digital Access Inc.+........................................ 198,000
4,000 Cascade Communications Corporation+................................. 218,500
3,000 Clear Channel Communications Inc.+.................................. 137,250
1,700 ECI Telecom Limited................................................. 29,537
1,500 LCI International Inc.+............................................. 33,375
2,200 LDDS Communications Inc.+........................................... 44,275
2,700 MFS Communication Company Inc.+..................................... 98,550
4,500 Network General Corporation+........................................ 102,375
300 Ortel Corporation+.................................................. 7,800
3,800 Read-Rite Corporation+.............................................. 61,987
3,500 Summa Four Inc.+.................................................... 82,250
4,000 United Video Satellite Group Inc., Class A+......................... 85,000
-----------
1,138,499
-----------
TRANSPORTATION -- 1.2%
5,200 TNT Freightways Corporation......................................... 129,350
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
72
<PAGE>
NATIONS FUND TRUST
Nations Special Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- (CONTINUED)
WASTE MANAGEMENT -- 0.9%
2,800 Newpark Resource Inc................................................ $ 64,050
1,500 United Waste Systems................................................ 30,750
-----------
94,800
-----------
TOTAL COMMON STOCKS (Cost $8,272,905)............................... 8,713,957
===========
<CAPTION>
PRINCIPAL
AMOUNT
<C> <S> <C>
- ---------
REPURCHASE AGREEMENT -- 11.1% (Cost $1,148,000)
$1,148,000 Agreement with CS First Boston Corporation, 5.650% dated 11/30/1994
to be repurchased at $1,148,180 on 12/01/1994, collateralized by,
$1,173,831 market value of U.S. Treasury Bonds,
8.875%-13.875% having various maturities ranging from
November, 2009 through August, 2017............................... 1,148,000
===========
TOTAL INVESTMENTS (Cost $9,420,905*)................................... 95.0% 9,861,957
OTHER ASSETS AND LIABILITIES (NET)..................................... 5.0 514,596
----- -----------
NET ASSETS............................................................. 100.0% $10,376,553
===== ===========
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes is $9,446,410.
+ Non-income producing security.
ABBREVIATION:
ADS American Depositary Share
SEE NOTES TO FINANCIAL STATEMENTS.
73
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS NATIONS
NATIONS CAPITAL EMERGING BALANCED EQUITY SPECIAL
VALUE GROWTH GROWTH ASSETS INDEX EQUITY
FUND FUND FUND FUND FUND FUND
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value
See accompanying schedules:
Securities......................... $814,899,402 $666,662,913 $183,871,717 $214,233,996 $115,743,010 $ 8,713,957
Repurchase Agreements.............. 63,327,000 99,062,000 20,147,000 21,589,000 7,039,000 1,148,000
------------ ------------ ------------ ------------ ------------ -----------
Total Investments............ 878,226,402 765,724,913 204,018,717 235,822,996 122,782,010 9,861,957
Cash................................. 108 910 713 947 927 5,476
Dividends receivable................. 3,179,761 1,109,661 83,628 173,011 403,942 1,602
Interest receivable.................. 9,939 15,547 3,162 948,102 1,105 184
Receivable for Fund shares sold...... 3,405,044 3,062,919 552,976 348,478 55,911 61,728
Receivable for investment securities
sold............................... 9,152,150 4,880,013 1,348,464 -- -- 434,589
Unamortized organization costs
(Note 6)........................... -- 11,434 13,677 11,425 6,000 --
Prepaid expenses and other assets.... -- 5,826 5,523 11,087 69 23,300
------------ ------------ ------------ ------------ ------------ -----------
Total Assets................. 893,973,404 774,811,223 206,026,860 237,316,046 123,249,964 10,388,836
------------ ------------ ------------ ------------ ------------ -----------
LIABILITIES
Variation margin/due to broker
(Note 1)........................... -- -- -- -- 36,775 --
Payable for Fund shares redeemed..... 1,085,232 986,805 304,630 392,446 1,094 --
Payable for investment securities
purchased.......................... 11,190,237 18,293,540 3,301,179 15,674,670 -- --
Investment advisory fee payable
(Note 2)........................... 550,753 464,587 123,549 139,129 10,183 1,279
Sub-advisory fee payable (Note 2).... -- -- -- -- -- 5,114
Administration fee payable (Note
2)................................. 67,559 56,989 15,155 17,067 9,368 791
Transfer agent fee payable (Note
2)................................. 77,662 14,155 27,985 26,693 2,750 474
Custodian fees payable (Note 2)...... 11,045 8,634 3,923 4,011 9,308 --
Shareholder servicing and
distribution fees payable (Note
3)................................. 35,815 23,670 13,877 34,987 -- 156
Accrued Trustees' fees and expenses
(Note 2)........................... 4,966 3,808 916 1,375 664 47
Accrued expenses and other
payables........................... 249,288 22,129 92,889 74,079 33,068 4,422
------------ ------------ ------------ ------------ ------------ -----------
Total Liabilities.................... 13,272,557 19,874,317 3,884,103 16,364,457 103,210 12,283
------------ ------------ ------------ ------------ ------------ -----------
NET ASSETS........................... $880,700,847 $754,936,906 $202,142,757 $220,951,589 $123,146,754 $10,376,553
============ ============ ============ ============ ============ ===========
Investments at cost (Note 1)......... $911,335,441 $707,298,316 $193,427,191 $234,561,973 $125,954,745 $ 9,420,905
============ ============ ============ ============ ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
74
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS NATIONS
NATIONS CAPITAL EMERGING BALANCED EQUITY SPECIAL
VALUE GROWTH GROWTH ASSETS INDEX EQUITY
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Undistributed net investment
income............................. $ 3,965,488 $ 1,443,806 $ -- $ 705,130 $ 638,134 $ --
Accumulated net realized gain/(loss)
on securities and futures
contracts.......................... 43,223,588 17,454,951 6,878,758 (786,421) 1,160,792 (413,394)
Net unrealized
appreciation/(depreciation) on
securities and futures contracts... (33,109,039) 58,426,597 10,591,526 1,261,023 (3,348,410) 441,052
Paid-in capital...................... 866,620,810 677,611,552 184,672,473 219,771,857 124,696,238 10,348,895
------------ ------------ ------------ ------------ ------------ -----------
$880,700,847 $754,936,906 $202,142,757 $220,951,589 $123,146,754 $10,376,553
============ ============ ============ ============ ============ ===========
NET ASSETS:
Trust A Shares....................... $799,743,005 $717,914,115 $182,458,610 $162,214,717 $123,146,754 $ 9,946,707
============ ============ ============ ============ ============ ===========
Investor A Shares.................... $ 35,445,171 $ 11,037,552 $ 3,233,823 $ 4,880,761 $ -- $ 252,382
============ ============ ============ ============ ============ ===========
Investor C Shares (formerly Investor
B Shares).......................... $ 2,983,103 $ 2,394,329 $ 541,524 $ 951,385 $ -- $ --
============ ============ ============ ============ ============ ===========
Investor N Shares (formerly Investor
C Shares).......................... $ 42,529,568 $ 23,590,910 $ 15,908,800 $ 52,904,726 $ -- $ 177,464
============ ============ ============ ============ ============ ===========
SHARES OUTSTANDING:
Trust A Shares....................... 61,589,760 63,927,236 15,993,828 15,538,224 12,511,236 760,694
============ ============ ============ ============ ============ ===========
Investor A Shares.................... 2,729,704 984,464 284,821 468,236 -- 19,329
============ ============ ============ ============ ============ ===========
Investor C Shares.................... 231,159 214,976 48,344 91,678 -- --
============ ============ ============ ============ ============ ===========
Investor N Shares.................... 3,285,406 2,111,547 1,414,762 5,086,031 -- 13,625
============ ============ ============ ============ ============ ===========
TRUST A SHARES:
Net asset value, offering price and
redemption price per share......... $12.98 $11.23 $11.41 $10.44 $9.84 $13.08
====== ====== ====== ====== ===== ======
INVESTOR A SHARES:
Net asset value and redemption price
per share.......................... $12.98 $11.21 $11.35 $10.42 -- $13.06
====== ====== ====== ====== ===== ======
Maximum sales charge............... 5.75% 5.75% 5.75% 5.75% -- 5.75%
Maximum offering price per share... $13.77 $11.89 $12.04 $11.06 -- $13.86
====== ====== ====== ====== ===== ======
INVESTOR C SHARES:
Net asset value per share*........... $12.90 $11.14 $11.20 $10.38 -- --
====== ====== ====== ====== ===== ======
INVESTOR N SHARES:
Net asset value per share*........... $12.94 $11.17 $11.24 $10.40 -- $13.02
====== ====== ====== ====== ===== ======
</TABLE>
- ---------------
* Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
75
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS NATIONS
NATIONS CAPITAL EMERGING BALANCED EQUITY SPECIAL
VALUE GROWTH GROWTH ASSETS INDEX EQUITY
FUND FUND FUND FUND FUND* FUND**
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of
$190,092, $144,833, $3,586, $0, $16,431 and
$0, respectively)........................... $22,517,804 $10,447,484 $ 590,977 $ 2,406,542 $ 2,589,294 $ 25,355
Interest...................................... 1,853,199 2,117,639 647,657 5,433,562 474,042 42,830
Fee income (Note 4)........................... -- -- -- 84,410 -- --
----------- ----------- ---------- ----------- ----------- --------
Total investment income............... 24,371,003 12,565,123 1,238,634 7,924,514 3,063,336 68,185
----------- ----------- ---------- ----------- ----------- --------
EXPENSES:
Investment advisory fee (Note 2).............. 6,587,811 5,381,628 1,288,934 1,805,446 535,809 8,160
Sub-advisory fee (Note 2)..................... -- -- -- -- -- 32,640
Administration fee (Note 2)................... 878,375 717,550 171,858 240,726 107,162 5,440
Registration and filing fees.................. 54,000 20,427 96,382 85,628 20,611 2,119
Transfer agent fees (Note 2).................. 187,653 92,113 52,297 94,204 6,304 1,343
Custodian fees (Note 2)....................... 144,353 103,263 44,781 47,388 85,867 23,093
Legal and audit fees.......................... 167,135 92,301 33,570 45,257 21,938 2,109
Trustees' fees and expenses (Note 2).......... 22,733 18,259 4,324 6,306 2,804 118
Amortization of organization costs (Note 6)... 2,903 4,036 4,559 4,032 1,500 --
Other......................................... 154,689 82,170 45,730 48,644 22,562 9,892
----------- ----------- ---------- ----------- ----------- --------
Subtotal.............................. 8,199,652 6,511,747 1,742,435 2,377,631 804,557 84,914
Shareholder servicing and distribution fee
(Note 3):
Investor A Shares..................... 88,816 28,095 6,769 12,835 -- 123
Investor C Shares..................... 34,010 25,700 4,845 11,189 -- --
Investor N Shares..................... 208,561 178,648 99,544 353,782 -- 415
Fees waived by investment adviser and
administrators and expenses reimbursed by
custodian (Note 2).......................... (65,219) (53,278) (12,760) (17,874) (445,650) (23,507)
----------- ----------- ---------- ----------- ----------- --------
Total expenses........................ 8,465,820 6,690,912 1,840,833 2,737,563 358,907 61,945
----------- ----------- ---------- ----------- ----------- --------
NET INVESTMENT INCOME/(LOSS).................. 15,905,183 5,874,211 (602,199) 5,186,951 2,704,429 6,240
----------- ----------- ---------- ----------- ----------- --------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS
(NOTES 1 AND 4):
Net realized gain/(loss) on investments:
Securities.................................. 44,428,639 20,667,121 7,614,329 2,124,345 237,837 (413,394)
Futures contracts........................... -- -- -- -- 922,955 --
Change in unrealized appreciation/depreciation
of investments:
Securities.................................. (68,927,667) (15,641,309) 2,098,503 (12,250,587) (3,172,735) 441,052
Futures contracts........................... -- -- -- -- (175,675) --
----------- ----------- ---------- ----------- ----------- --------
Net realized and unrealized gain/(loss)
on investments.............................. (24,499,028) 5,025,812 9,712,832 (10,126,242) (2,187,618) 27,658
----------- ----------- ---------- ----------- ----------- --------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................... $(8,593,845) $10,900,023 $9,110,633 $(4,939,291) $ 516,811 $ 33,898
=========== =========== ========== =========== =========== ========
</TABLE>
- ---------------
* The Nations Equity Index Fund commenced operations on December 15, 1993.
** The period for the Nations Special Equity Fund reflects operations from April
30, 1994 through November 30, 1994. (Note 9)
SEE NOTES TO FINANCIAL STATEMENTS.
76
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS YEAR ENDED NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS NATIONS
NATIONS CAPITAL EMERGING BALANCED EQUITY SPECIAL
VALUE GROWTH GROWTH ASSETS INDEX EQUITY
FUND FUND FUND FUND FUND* FUND**
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------
Net investment income/(loss)........ $ 15,905,183 $ 5,874,211 $ (602,199) $ 5,186,951 $ 2,704,429 $ 6,240
Net realized gain/(loss) on
securities and futures contracts... 44,428,639 20,667,121 7,614,329 2,124,345 1,160,792 (413,394)
Change in unrealized
appreciation/depreciation on
securities and futures contracts... (68,927,667) (15,641,309) 2,098,503 (12,250,587) (3,348,410) 441,052
------------ ------------ ------------ ------------ ------------ -----------
Net increase/(decrease) in net
assets resulting from operations... (8,593,845) 10,900,023 9,110,633 (4,939,291) 516,811 33,898
Distributions to shareholders from
net investment income:
Trust A Shares................... (13,766,977) (5,028,665) -- (4,292,175) (2,066,295) (6,113)
Investor A Shares................ (517,366) (58,336) -- (107,313) -- (116)
Investor C Shares................ (24,215) -- -- (15,801) -- --
Investor N Shares................ (309,175) -- -- (769,113) -- (11)
Distributions to shareholders from
net realized gain on investments:
Trust A Shares................... (28,230,888) (235,983) (1,722,720) -- -- --
Investor A Shares................ (1,320,383) (4,039) (27,035) -- -- --
Investor C Shares................ (119,312) (1,055) (6,038) -- -- --
Investor N Shares................ (467,946) (3,860) (52,823) -- -- --
Return of capital (Note 1):
Trust A Shares................... -- -- -- -- -- (3,133)
Investor A Shares................ -- -- -- -- -- (60)
Investor C Shares................ -- -- -- -- -- --
Investor N Shares................ -- -- -- -- -- (6)
Net increase/(decrease) in net
assets from:
Trust A transactions............. 141,823,408 65,765,165 54,250,065 (8,681,327) 124,696,238 1,818,607
Investor A transactions.......... 4,789,875 (304,011) 1,052,641 (90,193) -- 111,006
Investor C transactions.......... 173,989 (575,658) 47,602 (198,022) -- --
Investor N transactions.......... 34,026,771 14,210,525 12,051,030 27,406,781 -- 178,688
------------ ------------ ------------ ------------ ------------ -----------
Net increase in net assets.......... 127,463,936 84,664,106 74,703,355 8,313,546 123,146,754 2,132,760
NET ASSETS:
Beginning of year................... 753,236,911 670,272,800 127,439,402 212,638,043 -- 8,243,793
------------ ------------ ------------ ------------ ------------ -----------
End of year (including undistributed
net investment income of
$3,965,488, $1,443,806, $0,
$705,130, $638,134 and $0,
respectively)...................... $880,700,847 $754,936,906 $202,142,757 $220,951,589 $123,146,754 $10,376,553
============ ============ ============ ============ ============ ===========
</TABLE>
- ---------------
* The Nations Equity Index Fund commenced operations on December 15, 1993.
** The period for the Nations Special Equity Fund reflects operations from
April 30, 1994 through November 30, 1994. (Note 9)
SEE NOTES TO FINANCIAL STATEMENTS.
77
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) YEAR ENDED NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
NATIONS CAPITAL EMERGING BALANCED SPECIAL
VALUE GROWTH GROWTH ASSETS EQUITY
FUND FUND FUND* FUND FUND**
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income/(loss)................ $ 9,950,967 $ 5,902,714 $ (160,281) $ 4,649,183 $ (43,956)
Net realized gain/(loss) on investments sold
during the period......................... 29,538,260 (2,568,676) 1,324,681 (2,356,200) 1,046,187
Net change in unrealized appreciation on
investments during the period............. 18,574,383 28,223,686 8,493,023 10,754,888 (166,210)
------------ ------------ ------------ ------------ -----------
Net increase in net assets resulting from
operations................................ 58,063,610 31,557,724 9,657,423 13,047,871 836,021
Distributions to shareholders from net
investment income:
Trust A Shares.......................... (7,921,875) (6,764,050) -- (4,252,185) --
Investor A Shares....................... (470,068) (51,183) -- (85,012) --
Investor C Shares....................... (22,823) (3,529) -- (14,204) --
Investor N Shares....................... (24,338) (2,892) -- (88,123) --
Distributions to shareholders from net
realized gains on investments:
Trust A Shares.......................... (2,060,700) (822,252) -- -- (1,510,917)
Investor A Shares....................... (184,825) (3,257) -- -- (13,999)
Investor C Shares....................... (11,258) (1,190) -- -- --
Investor N Shares....................... -- -- -- -- --
Return of capital (Note 1):
Trust A Shares.......................... -- -- (90,905) -- --
Investor A Shares....................... -- -- (450) -- --
Investor C Shares....................... -- -- -- -- --
Investor N Shares....................... -- -- -- -- --
Net increase/(decrease) in net assets from:
Trust A transactions.................... 380,962,082 (105,274,327) 111,955,056 57,872,995 4,110,236
Investor A transactions................. 5,151,361 9,591,492 1,937,556 4,438,661 184,421
Investor C transactions................. 1,466,382 2,418,216 430,354 1,030,571 --
Investor N transactions................. 10,329,076 9,367,700 3,550,368 28,030,455 --
------------ ------------ ------------ ------------ -----------
Net increase/(decrease) in net assets....... 445,276,624 (59,987,548) 127,439,402 99,981,029 3,605,762
NET ASSETS:
Beginning of year........................... 307,960,287 730,260,348 -- 112,657,014 4,638,031
------------ ------------ ------------ ------------ -----------
End of year (including undistributed net
investment income/(accumulated net
investment loss) of $2,678,038, $647,398,
$(160,281), $905,960 and $0,
respectively)............................. $753,236,911 $670,272,800 $127,439,402 $212,638,043 $ 8,243,793
============ ============ ============ ============ ===========
</TABLE>
- ---------------
<TABLE>
<C> <S>
* The Nations Emerging Growth Fund commenced operations on December 4, 1992.
** Formerly Special Equity Portfolio, a series of The Capitol Mutual Funds. The period reflects operations from
May 1, 1993 through April 29, 1994 (Note 9).
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
78
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
NATIONS VALUE FUND NATIONS CAPITAL GROWTH FUND
---------------------------------------------- ----------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, 1994 NOVEMBER 30, 1993 NOVEMBER 30, 1994 NOVEMBER 30, 1993
------------------- ------------------- ------------------- ---------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TRUST A SHARES:
Sold............... 24,151,217 $330,303,535 36,487,617 $482,128,088 27,082,507 $309,813,478 25,033,702 $ 269,862,758
Issued in
exchange for Class
A Shares of The
Capitol Mutual
Funds Equity
Portfolio......... 2,139,143 28,600,342 -- -- -- -- -- --
Issued as
reinvestment of
dividends......... 373,924 5,070,322 129,076 1,660,535 33,231 378,603 46,120 502,274
Redeemed........... (16,543,074) (222,150,791) (7,805,793) (102,826,541) (21,559,659) (244,426,916) (34,943,692) (375,639,359)
----------- ------------ ---------- ------------ ----------- ------------ ----------- -------------
Net increase/
(decrease)........ 10,121,210 $141,823,408 28,810,900 $380,962,082 5,556,079 $ 65,765,165 (9,863,870) $(105,274,327)
=========== ============ ========== ============ =========== ============ =========== ============
INVESTOR A SHARES:
Sold............... 660,750 $ 8,920,870 765,445 $ 9,852,655 227,329 $ 2,590,259 991,977 $ 10,639,692
Issued in exchange
for Class B Shares
of The Capitol
Mutual Funds Equity
Portfolio......... 19,677 262,688 -- -- -- -- -- --
Issued as
reinvestment of
dividends......... 266,697 3,629,175 50,492 647,397 3,414 39,004 3,789 40,988
Redeemed........... (593,790) (8,022,858) (410,991) (5,348,691) (257,065) (2,933,274) (99,804) (1,089,188)
=========== ============ ========== ============ =========== ============ =========== ============
Net increase/
(decrease)........ 353,334 $ 4,789,875 404,946 $ 5,151,361 (26,322) $ (304,011) 895,962 $ 9,591,492
----------- ------------ ---------- ------------ ----------- ------------ ----------- ------------
INVESTOR C SHARES:
Sold............... 82,153 $ 1,124,360 127,906 $ 1,624,174 18,705 $ 214,035 252,264 $ 2,690,385
Issued as
reinvestment
of dividends.,.... 19,831 268,695 2,660 33,880 92 1,049 296 3,181
Redeemed........... (90,540) (1,219,066) (14,491) (191,672) (68,832) (790,742) (25,614) (275,350)
----------- ------------ ---------- ------------ ----------- ------------ ----------- ------------
Netincrease/
(decrease)........ 11,444 $ 173,989 116,075 $ 1,466,382 (50,035) $ (575,658) 226,946 $ 2,418,216
=========== ============ ========== ============ =========== ============ =========== ============
<CAPTION>
PERIOD ENDED PERIOD ENDED
NOVEMBER 30, 1993* NOVEMBER 30, 1993*
----------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTOR N SHARES:
Sold............... 2,674,590 $ 36,038,535 772,436 $ 10,467,310 1,415,969 $ 16,069,390 883,471 $ 9,614,905
Issued as
reinvestment
of dividends...... 100,887 1,372,747 1,735 23,682 331 3,783 270 2,882
Redeemed........... (252,251) (3,384,511) (11,991) (161,916) (165,619) (1,862,648) (22,875) (250,087)
----------- ------------ ---------- ------------ ----------- ------------ ----------- ------------
Netincrease........ 2,523,226 $ 34,026,771 762,180 $ 10,329,076 1,250,681 $ 14,210,525 860,866 $ 9,367,700
=========== ============ ========== ============ =========== ============ =========== ============
</TABLE>
- ---------------
* The Nations Value Fund's Investor N Shares commenced operations on June 7,
1993.
The Nations Capital Growth Fund's Investor N Shares commenced operations on
June 7, 1993.
SEE NOTES TO FINANCIAL STATEMENTS.
79
<PAGE>
NATIONS FUND TRUST
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<CAPTION>
NATIONS EMERGING GROWTH FUND NATIONS BALANCED ASSETS FUND
-------------------------------------------------------- ---------------------------------------------------------
YEAR ENDED NOVEMBER 30, PERIOD ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
1994 1993* 1994 1993
-------------------------- -------------------------- --------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TRUST A
SHARES:
Sold....... 8,166,260 $ 91,682,920 12,545,057 $126,079,725 8,751,677 $ 94,454,382 10,652,781 $113,483,801
Issued as
reinvestment
of
dividends. 7,836 87,526 119 1,161 150,747 1,604,956 72,018 777,327
Redeemed... (3,334,666) (37,520,381) (1,390,778) (14,125,830) (9,759,219) (104,740,665) (5,263,515) (56,388,133)
---------- ------------ ---------- ------------ ---------- ------------- ---------- ------------
Net
increase/
(decrease). 4,839,430 $ 54,250,065 11,154,398 $111,955,056 (856,795) $ (8,681,327) 5,461,284 $ 57,872,995
---------- ------------ ---------- ------------ ---------- ------------- ---------- ------------
INVESTOR A
SHARES:
Sold....... 142,784 $ 1,612,909 207,041 $ 2,080,720 145,010 $ 1,578,550 467,937 $ 4,910,051
Issued as
reinvestment
of
dividends. 2,397 26,701 46 446 9,967 106,366 7,382 82,295
Redeemed... (53,510) (586,969) (13,937) (143,610) (164,673) (1,775,109) (50,861) (553,685)
---------- ------------ ---------- ------------ ---------- ------------- ---------- ------------
Net
increase/
(decrease).. 91,671 $ 1,052,641 193,150 $ 1,937,556 (9,696) $ (90,193) 424,458 $ 4,438,661
---------- ------------ ---------- ------------ ---------- ------------- ---------- ------------
INVESTOR C
SHARES:
Sold....... 13,151 $ 142,722 44,554 $ 441,624 3,080 $ 33,089 101,329 $ 1,096,892
Issued as
reinvestment
of
dividends. 543 6,007 -- -- 1,450 15,444 1,300 13,918
Redeemed... (8,860) (101,127) (1,044) (11,270) (23,352) (246,555) (7,426) (80,239)
---------- ------------ ---------- ------------ ---------- ------------- ---------- ------------
Net
increase/
(decrease). 4,834 $ 47,602 43,510 $ 430,354 (18,822) $ (198,022) 95,203 $ 1,030,571
---------- ------------ ---------- ------------ ---------- ------------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1993*
--------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTOR N
SHARES:
Sold....... 1,154,104 $ 12,845,956 338,359 $ 3,613,512 3,187,761 $ 34,643,155 2,624,034 $ 28,520,169
Issued as
reinvestment
of
dividends... 4,623 51,365 -- -- 69,311 735,874 7,486 82,340
Redeemed... (76,006) (846,291) (6,318) (63,144) (750,078) (7,972,248) (52,483) (572,054)
---------- ------------ ---------- ------------ ---------- ------------- ---------- ------------
Net
increase... 1,082,721 $ 12,051,030 332,041 $ 3,550,368 2,506,994 $ 27,406,781 2,579,037 $ 28,030,455
---------- ------------ ---------- ------------ ---------- ------------- ---------- ------------
<FN>
- ---------------
* The Nations Emerging Growth Fund's Trust A, Investor A, Investor C and Investor N Shares commenced operations on December 4,
1992, December 10, 1992, December 18, 1992 and June 7, 1993, respectively.
The Nations Balanced Assets Fund's Investor N Shares commenced operations on June 7, 1993.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
80
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NATIONS EQUITY
INDEX FUND NATIONS SPECIAL EQUITY FUND
-------------------------- -------------------------------------------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
NOVEMBER 30, 1994* NOVEMBER 30, 1994** APRIL 29, 1994****
-------------------------- ---------------------- ---------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
19,980,612 $198,737,016 245,701 $ 3,008,180 297,149 $4,644,556
56,290 554,406 446 5,571 47,454 658,478
(7,525,666) (74,595,184) (92,387) (1,195,144) (79,603) (1,192,798)
---------- ------------ ------- ----------- ------- ----------
12,511,236 $124,696,238 153,760 $ 1,818,607 265,000 $4,110,236
---------- ------------ ------- ----------- ------- ----------
8,031 $ 124,695 12,502 $ 192,139
14 177 507 7,792
(1,093) (13,866) (1,009) (15,510)
------- ----------- ------- ----------
6,952 $ 111,006 12,000 $ 184,421
------- ----------- ------- ----------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1994***
----------------------
<S> <C>
13,625 $ 178,688
-- --
-- --
------ -----------
13,625 $ 178,688
------ -----------
<FN>
- ---------------
* The Nations Equity Index Fund's Trust A Shares commenced operations on
December 15, 1993.
** This period reflects operations from April 30, 1994 through November 30,
1994. (Note 9)
*** The Nations Special Equity Fund's Investor N Shares commenced operations on
May 20, 1994.
**** The Nations Special Equity Fund's Trust A Shares (formerly The Capitol
Mutual Funds Special Equity Portfolio's Class A Shares prior to April 30,
1994) and Investor A Shares (formerly The Capitol Mutual Funds Special
Equity Portfolio's Class B Shares prior to April 30, 1994) commenced
operations on October 1, 1992 and July 26, 1993, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
81
<PAGE>
NATIONS FUND TRUST
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<CAPTION>
TRUST A SHARES
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92 11/30/91 11/30/90 11/30/89*#
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NATIONS VALUE FUND:
Operating performance:
Net asset value, beginning of year. ................... $ 13.74 $ 12.45 $ 11.16 $ 9.71 $ 10.04 $ 10.00
-------- -------- -------- ------- ------- --------
Net investment income.................................. 0.24 0.24 0.28 0.34 0.35 0.08
Net realized and unrealized gain/(loss) on
investments.......................................... (0.23) 1.38 1.57 1.47 (0.36) (0.04)
-------- -------- -------- ------- ------- --------
Net increase/(decrease) in net assets resulting from
investment operations................................ 0.01 1.62 1.85 1.81 (0.01) 0.04
Distributions:
Dividends from net investment income................... (0.23) (0.24) (0.27) (0.36) (0.32) --
Distributions from net realized capital gains.......... (0.54) (0.09) (0.29) -- -- --
-------- -------- -------- ------- ------- --------
Total distributions.................................... (0.77) (0.33) (0.56) (0.36) (0.32) --
-------- -------- -------- ------- ------- --------
Net asset value, end of year........................... $ 12.98 $ 13.74 $ 12.45 $ 11.16 $ 9.71 $ 10.04
-------- -------- -------- ------- ------- --------
Total return++......................................... (0.08)% 13.19% 17.00%+++ 18.79%+++ (0.16)%+++ 0.40%+++
-------- -------- -------- ------- ------- --------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's). ................... $799,743 $707,185 $282,138 $82,360 $19,769 $ 5,161
Ratio of operating expenses to average net assets...... 0.93% 0.96% 0.90% 0.53% 0.21% 0.49%+
Ratio of net investment income to average net assets... 1.85% 1.98% 2.31% 3.33% 4.19% 4.41%+
Portfolio turnover rate................................ 75% 64% 60% 51% 24% --
Ratio of operating expenses to average net assets
before fee waivers and/or expense reimbursements..... 0.93% 0.97% 0.97% 0.99% 1.11% 1.41%+
Net investment income per share before fee waivers
and/or expense reimbursements........................ $ 0.24 $ 0.24 $ 0.27 $ 0.30 $ 0.26 $ 0.06
<FN>
- ---------------
* The Nations Value Fund Trust A, Investor A, Investor C Shares and Investor N Shares commenced operations on September 19,
1989, December 6, 1989, June 17, 1992 and June 7, 1993, respectively.
+ 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 monthly 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
82
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTOR A SHARES INVESTOR C SHARES INVESTOR N SHARES
- ------------------------------------------------------------- ----------------------------------- ----------------------
YEAR YEAR YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92 11/30/91 11/30/90* 11/30/94 11/30/93 11/30/92* 11/30/94 11/30/93*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 13.72 $ 12.45 $ 11.16 $ 9.71 $ 10.04 $13.64 $12.41 $ 11.63 $ 13.71 $ 13.08
- ------- ------- ------- ------- ------ ------ ------ ------ ------ -------
0.20 0.22 0.26 0.34 0.35 0.12 0.13 0.07 0.15 0.11
(0.20) 1.35 1.59 1.47 (0.36) (0.22) 1.32 0.78 (0.22) 0.63
- ------- ------- ------- ------- ------ ------ ------ ------ ------ -------
0.00 1.57 1.85 1.81 (0.01) (0.10) 1.45 0.85 (0.07) 0.74
(0.20) (0.21) (0.27) (0.36) (0.32) (0.10) (0.13) (0.07) (0.16) (0.11)
(0.54) (0.09) (0.29) -- -- (0.54) (0.09) -- (0.54) --
- ------- ------- ------- ------- ------ ------ ------ ------ ------ -------
(0.74) (0.30) (0.56) (0.36) (0.32) (0.64) (0.22) (0.07) (0.70) (0.11)
- ------- ------- ------- ------- ------ ------ ------ ------ ------ -------
$ 12.98 $ 13.72 $ 12.45 $ 11.16 $ 9.71 $12.90 $13.64 $ 12.41 $ 12.94 $ 13.71
- ------- ------- ------- ------- ------ ------ ------ ------ ------- -------
(0.17)% 12.80% 16.96%+++ 18.79%+++ (0.16)%+++ (0.92)% 11.85% 7.33%+++ (0.69)% 5.65%
- ------- ------- ------- ------- ------ ------ ------ ------ ------- -------
$35,445 $32,607 $24,536 $13,514 $ 7,020 $2,983 $2,997 $ 1,286 $42,530 $10,449
1.18% 1.21% 1.06% 0.53% 0.21%+ 1.93% 1.96% 1.98%+ 1.68% 1.71%+
1.60% 1.73% 2.15% 3.33% 4.19%+ 0.85% 0.98% 1.22%+ 1.10% 1.23%+
75% 64% 60% 51% 24% 75% 64% 60% 75% 64%
1.18% 1.22% 1.15% 0.99% 1.11%+ 1.93% 1.97% 1.98%+ 1.68% 1.72%+
0.21
$ $ 0.22 $ 0.25 $ 0.30 $ 0.26 $ 0.12 $ 0.13 $ 0.07 $ 0.15 $ 0.11
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
83
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
TRUST A SHARES INVESTOR A SHARES
------------------------------------------ ---------------------------------------
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92* 11/30/94 11/30/93 11/30/92*
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NATIONS CAPITAL GROWTH FUND:
Operating performance:
Net asset value, beginning of year..... $ 11.08 $ 10.68 $ 10.00 $ 11.06 $ 10.67 $ 10.00
------- ------- -------- ------- ------- -------
Net investment income/(loss)........... 0.09 0.09 0.02 0.07 0.07 0.01
Net realized and unrealized gain on
investments........................... 0.14 0.42 0.66## 0.14 0.41 0.66##
------- ------- -------- ------- ------- -------
Net increase in net assets resulting
from investment operations............ 0.23 0.51 0.68 0.21 0.48 0.67
Distributions:
Dividends from net investment income... (0.08) (0.10) -- (0.06) (0.08) --
Distributions from net realized
gains................................. (0.00)(a) (0.01) -- (0.00)(a) (0.01) --
------- ------- -------- ------- ------- -------
Total distributions.................... (0.08) (0.11) -- (0.06) (0.09) --
------- ------- -------- ------- ------- -------
Net asset value, end of year........... $ 11.23 $ 11.08 $ 10.68 $ 11.21 $ 11.06 $ 10.67
------- ------- -------- ------- ------- -------
Total return++......................... 2.14% 4.84% 6.80%+++ 1.93% 4.56% 6.70%+++
------- ------- -------- ------- ------- -------
Ratios to average net
assets/supplemental data:
Net assets, end of year (in 000's)..... $717,914 $646,661 $728,629 $11,038 $11,182 $ 1,225
Ratio of operating expenses to average
net assets............................ 0.90% 0.80% 0.30%+ 1.15% 1.05% 0.55%+
Ratio of net investment income/(loss)
to average net assets................. 0.85% 0.84% 1.33%+ 0.60% 0.59% 1.08%+
Portfolio turnover rate................ 56% 81% 7% 56% 81% 7%
Ratio of operating expenses to average
net assets before fee waivers......... 0.91% 0.89% 1.05%+ 1.16% 1.14% 1.30%+
Net investment income/(loss) per share
before fee waivers.................... $ 0.09 $ 0.08 $ 0.01 $ 0.07 $ 0.06 $ 0.00(a)
<FN>
- ---------------
* The Nations Capital Growth Fund Trust A Shares, Investor A Shares, Investor C Shares and Investor N Shares commenced
operations on September 30, 1992, October 2, 1992, October 2, 1992 and June 7, 1993, respectively.
+ 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.
(a) Value represents less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
TRUST A SHARES INVESTOR A SHARES
--------------------------- --------------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
11/30/94# 11/30/93* 11/30/94# 11/30/93*
--------------------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS EMERGING GROWTH FUND:
Operating performance:
Net asset value, beginning of year............................... $ 10.87 $ 10.00 $ 10.85 $ 9.87
-------- -------- ------- -------
Net investment loss.............................................. (0.03) (0.01) (0.06) (0.03)
Net realized and unrealized gain on investments.................. 0.71 0.89 0.70 1.02
-------- -------- ------- -------
Net increase in net assets resulting from investment
operations...................................................... 0.68 0.88 0.64 0.99
Distributions:
Distributions from net realized gains............................ (0.14) (0.01) (0.14) (0.01)
-------- -------- ------- -------
Total distributions.............................................. (0.14) (0.01) (0.14) (0.01)
-------- -------- ------- -------
Net asset value, end of year..................................... $ 11.41 $ 10.87 $ 11.35 $ 10.85
-------- -------- ------- -------
Total return++................................................... 6.26% 8.81% 5.90% 9.99%
-------- -------- ------- -------
to average net assets/supplemental data:
Net assets, end of year (in 000's)............................... $182,459 $121,281 $ 3,234 $ 2,095
Ratio of operating expenses to average net assets................ 1.01% 0.80%+ 1.26% 1.05%+
Ratio of net investment loss to average net assets............... (0.29)% (0.15)%+ (0.54)% (0.40)%+
Portfolio turnover rate.......................................... 129% 159% 129% 159%
Ratio of operating expenses to average net assets before fee
waivers......................................................... 1.01% 1.01%+ 1.26% 1.26%+
Net investment loss per share before fee waivers................. $ (0.03) $ (0.03) $ (0.05) $ (0.04)
<FN>
- ---------------
* The Nations Emerging Growth Fund Trust A Shares, Investor A Shares, Investor C Shares and Investor N Shares commenced
operations on December 4, 1992, December 10, 1992, December 18, 1992 and June 7, 1993, respectively.
+ 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
84
<PAGE>
NATIONS FUND TRUST
<TABLE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<CAPTION>
INVESTOR C SHARES INVESTOR N SHARES
----------------------------------- ---------------------
YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92* 11/30/94 11/30/93*
-------------------------------------------------------------
<S> <C> <C> <C> <C>
$11.01 $10.67 $ 10.00 $ 11.05 $10.55
-------- -------- --------- -------- --------
(0.02) (0.00)(a) (0.00)(a) (0.01 ) (0.01)
0.15 0.38 0.67## 0.13 0.53
-------- -------- --------- -------- --------
0.13 0.38 0.67 0.12 0.52
-- (0.03) -- -- (0.02)
(0.00)(a) (0.01) -- (0.00 )(a) --
-------- -------- --------- -------- --------
(0.00)(a) (0.04) 0.00(a) (0.00 )(a) (0.02)
-------- -------- --------- -------- --------
$11.14 $11.01 $ 10.67 $ 11.17 $11.05
------ ------ ------ ------- ------
1.22% 3.61% 6.70%+++ 1.12 % 4.95%
------ ------ ------ ------- ------
$2,394 $2,919 $ 406 $23,591 $9,511
1.90% 1.80% 1.30%+ 1.90 % 1.80%+
(0.15)% (0.16)% 0.33%+ (0.15 )% (0.16)%+
56% 81% 7% 56 % 81%
1.91% 1.89% 2.05%+ 1.91 % 1.89%+
$(0.02) $ 0.00(a) $ 0.00(a) $ (0.01 ) $(0.02)
</TABLE>
<TABLE>
<CAPTION>
INVESTOR C SHARES INVESTOR N SHARES
----------------------- -----------------------
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
11/30/94# 11/30/93* 11/30/94# 11/30/93*
---------------------------------------------------
<S> <C> <C> <C>
$ 10.78 $ 9.89 $ 10.82 $ 9.88
--------- --------- --------- ---------
(0.14) (0.09) (0.14) (0.02)
0.70 0.98 0.70 0.96
--------- --------- --------- ---------
0.56 0.89 0.56 0.94
(0.14) -- (0.14) --
--------- --------- --------- ---------
(0.14) -- (0.14) --
--------- --------- --------- ---------
$ 11.20 $ 10.78 $ 11.24 $ 10.82
------ ------ ------ ------
5.19% 9.00% 5.17% 9.51%
------ ------ ------ ------
$ 542 $ 469 $15,909 $ 3,594
2.01% 1.80%+ 2.01% 1.80%+
(1.29)% (1.15)%+ (1.29)% (1.15)%+
129% 159% 129% 159%
2.01% 2.01%+ 2.01% 2.01%+
$ (0.12) $ (0.11) $ (0.09) $ (0.03)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
85
<PAGE>
NATIONS FUND TRUST
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<CAPTION>
TRUST A SHARES INVESTOR A SHARES
------------------------------- -------------------------------
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92* 11/30/94 11/30/93 11/30/92*
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NATIONS BALANCED ASSETS FUND:
Operating performance:
Net asset value, beginning of year.......................... $ 10.87 $ 10.24 $ 10.00 $ 10.86 $ 10.24 $ 10.00
-------- -------- --------- -------- -------- --------
Net investment income....................................... 0.25 0.29 0.06 0.22 0.29 0.01
Net realized and unrealized gain/(loss) on investments...... (0.43) 0.64 0.18## (0.44) 0.62 0.23##
-------- -------- --------- -------- -------- --------
Net increase/(decrease) in net assets resulting from
investment operations..................................... (0.18) 0.93 0.24 (0.22) 0.91 0.24
Distributions:
Dividends from net investment income........................ (0.25) (0.30) -- (0.22) (0.29) --
-------- -------- --------- -------- -------- --------
Total distributions:........................................ (0.25) (0.30) -- (0.22) (0.29) --
-------- -------- --------- -------- -------- --------
Net asset value, end of year................................ $ 10.44 $ 10.87 $ 10.24 $ 10.42 $ 10.86 $ 10.24
-------- -------- --------- -------- -------- --------
Total return++.............................................. (1.73)% 9.22% 2.40%+++ (2.02)% 8.93% 2.40%+++
-------- -------- --------- -------- -------- --------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's).......................... $162,215 $178,270 $ 111,953 $ 4,881 $ 5,191 $ 547
Ratio of operating expenses to average net assets........... 0.98% 0.90% 0.30%+ 1.23% 1.15% 0.55%+
Ratio of net investment income to average net assets........ 2.31% 2.82% 3.85%+ 2.06% 2.57% 3.60%+
Portfolio turnover rate..................................... 156% 50% 79% 156% 50% 79%
Ratio of operating expenses to average net assets before
fee waivers............................................... 0.99% 0.97% 1.05%+ 1.24% 1.22% 1.30%+
Net investment income per share before fee waivers.......... $ 0.25 $ 0.29 $ 0.05 $ 0.22 $ 0.28 $ 0.01
<FN>
- ---------------
* The Nations Balanced Assets Fund Trust A Shares, Investor A Shares, Investor C Shares and Investor N Shares commenced
operations on September 30, 1992, October 2, 1992, October 2, 1992 and June 7, 1993, respectively.
+ 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
86
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTOR C SHARES INVESTOR N SHARES
- ----------------------------------- ----------------------
YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92* 11/30/94 11/30/93*
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
$10.82 $10.23 $ 10.00 $ 10.85 $ 10.61
------ ------ ------- ------- -------
0.14 0.23 0.01 0.17 0.14
(0.43) 0.59 0.22## (0.44 ) 0.23
------ ------ ------- ------- -------
(0.29) 0.82 0.23 (0.27 ) 0.37
(0.15) (0.23) -- (0.18 ) (0.13)
------ ------ ------- ------- -------
(0.15) (0.23) -- (0.18 ) (0.13)
------ ------ ------- ------- -------
$10.38 $10.82 $ 10.23 $ 10.40 $ 10.85
------ ------ ------- ------- -------
(2.72)% 8.06% 2.30%+++ (2.51 )% 3.45%
------ ------ ------- ------- -------
$ 951 $1,196 $ 156 $52,905 $27,982
1.98% 1.90% 1.30%+ 1.73% 1.65%+
1.31% 1.82% 2.85%+ 1.56% 2.07%+
156% 50% 79% 156% 50%
1.99% 1.97% 2.05%+ 1.74% 1.72%+
$ 0.14 $ 0.22 $ 0.01 $ 0.17 $ 0.14
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
87
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
PERIOD
ENDED
11/30/94*
-------
<S> <C>
NATIONS EQUITY INDEX FUND:
Operating performance:
Net asset value, beginning of period..................................................................... $ 10.00
--------
Net investment income.................................................................................... 0.24
Net realized and unrealized loss on investments.......................................................... (0.21)
--------
Net increase in net assets resulting from investment operations.......................................... 0.03
Distributions:
Dividends from net investment income..................................................................... (0.19)
--------
Total distributions:..................................................................................... (0.19)
--------
Net asset value, end of period........................................................................... $ 9.84
-------
Total return++........................................................................................... 0.29%
-------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)..................................................................... $123,147
Ratio of operating expenses to average net assets........................................................ 0.35%+
Ratio of net investment income to average net assets..................................................... 2.64%+
Portfolio turnover rate.................................................................................. 14%
Ratio of operating expenses to average net assets before fee waivers..................................... 0.79%+
Net investment income per share before fee waivers....................................................... $ 0.20
<FN>
- ---------------
* The Nations Equity Index Fund Trust A Shares commenced operations on December 15, 1993.
+ Annualized.
++ Total Return represents aggregate total return for the period indicated.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
88
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
TRUST A SHARES INVESTOR A SHARES INVESTOR N SHARES
------------------------------------- ------------------------- -----------------
PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94* 04/29/94* 04/30/93* 11/30/94** 04/29/94** 11/30/94***
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NATIONS SPECIAL EQUITY FUND
Operating performance:
Net asset value, beginning of
period.............................. $ 13.31 $ 13.65 $ 10.00 $13.30 $14.94 $12.77
------- ------- ------- ------ ------ ------
Net investment income/(loss).......... 0.01 (0.05) (0.03) 0.00(a) (0.04) (0.02)
Net realized and unrealized
gain/(loss) on investments.......... (0.23)## 2.66 3.74 (0.23)## 1.35 0.28
------- ------- ------- ------ ------ ------
Net increase/(decrease) in net assets
resulting from investment
operations.......................... (0.22) 2.61 3.71 (0.23) 1.31 0.26
Distributions:
Dividends from net investment
income.............................. (0.01) -- -- (0.01) -- (0.01)
Distributions from net realized
gains............................... -- (2.95) (0.06) -- (2.95) --
Return of capital..................... (0.00)(a) -- -- (0.00)(a) -- (0.00)(a)
------- ------- ------- ------ ------ ------
Total distributions:.................. (0.01) (2.95) (0.06) (0.01) (2.95) (0.01)
------- ------- ------- ------ ------ ------
Net asset value, end of period........ $ 13.08 $ 13.31 $ 13.65 $13.06 $13.30 $13.02
------- ------- ------- ------ ------ ------
Total return++........................ (1.62)% 18.79% 37.13% (1.71)% 8.31% 2.02%
------- ------- ------- ------ ------ ------
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's).............................. $ 9,947 $ 8,079 $ 4,638 $ 252 $ 165 $ 177
Ratio of operating expenses to average
net assets.......................... 1.13%+ 1.20%+ 1.20%+ 1.23%+ 1.30%+ 2.09%+
Ratio of net investment income/(loss)
to average net assets............... 0.12%+ (0.60)%+ (0.58)%+ 0.02%+ (0.62)%+ (0.84)%+
Portfolio turnover rate............... 177% 475% 203% 177% 475% 177%
Ratio of operating expenses to average
net assets before fee waivers....... 1.56%+ 1.53%+ 1.31%+ 1.66%+ 1.74%+ 2.52%+
Net investment income/(loss) per share
before fee waivers.................. $ (0.03) $ (0.08) $ (0.03) $(0.07) $(0.07) $ (0.03)
<FN>
- ---------------
* The current period for the Nations Special 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 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. (Note 9).
** The current period for the Nations Special 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 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. (Note 9).
*** The Nations Special Equity Fund Investor N Shares commenced operations on May 20, 1994.
+ Annualized.
++ Total Return represents aggregate total return for the periods indicated and does not reflect any applicable sales
charges.
## 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
89
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES.
Nations Fund Trust (the "Trust") is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end management investment
company. As of the date of this report, the Trust offers thirty-four separate
portfolios. Information presented in these financial statements pertains only to
Nations Value Fund, Nations Capital Growth Fund, Nations Balanced Assets Fund,
Nations Emerging Growth Fund, Nations Equity Index Fund and Nations Special
Equity Fund (collectively the "Funds"). The financial statements for the
remaining funds have been presented under separate covers. Each Fund (except
Equity Index Fund) currently offers four classes of shares: Trust A Shares,
Investor A Shares, Investor C Shares (formerly Investor B Shares) and Investor N
Shares (formerly Investor C Shares). The Equity Index Fund currently offers only
Trust A Shares. The Board of Trustees has authorized each Fund to issue Trust B
Shares. As of November 30, 1994, no Trust B Shares have been issued. Matters
affecting each class will be voted on exclusively by their shareholders. The
following is a summary of significant accounting policies followed by the Funds
in the preparation of their financial statements.
Securities Valuation: The Funds' portfolio securities which are traded on
a recognized stock exchange are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sale price
on the national securities market. Securities traded only on over-the-counter
markets are valued on the basis of the closing over-the-counter bid prices or if
no sale occurred on such day at the mean of the current bid and ask prices.
Certain securities may be valued by one or more principal market makers.
Restricted securities, securities for which market quotations are not readily
available and other assets are valued under the supervision of the Board of
Trustees. Short-term investments that mature in 60 days or less are valued at
amortized cost.
Repurchase Agreements: Each Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. There is potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights. Unless permitted by the Securities and Exchange
Commission, the Fund will not enter into repurchase agreements with the
investment adviser, the distributor or any of their affiliates. The Funds'
investment adviser, under the supervision of the Board of Trustees, reviews the
value of the collateral and the creditworthiness of those banks and dealers with
which the Funds enter into repurchase agreements to evaluate potential risks.
Dollar Roll Transactions: 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. The fee is accrued as income over the
life of the dollar roll contract. If the broker/dealer to whom the Fund sells
the security becomes insolvent, the Fund's commitment 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.
90
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Futures Contracts: The Equity Index Fund engages in futures contracts.
Upon entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin." Subsequent payments
("variation margin") are made or received by the Fund each day, depending on the
daily fluctuation of the value of the contract.
For long futures positions, the asset is marked-to-market daily to reflect
the current market value of the futures contract. The daily changes in the
contract are recorded as unrealized gains or losses. The Fund recognizes a
realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as
a hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
Securities Transactions and Investment Income: Securities transactions are
accounted for on a trade date basis. Realized gains and losses are computed on
the specific identification of the securities sold. Interest income adjusted for
amortization of market discounts and premiums on investments on the
straight-line method and of original issue discounts on the effective yield
method, is earned from settlement date and is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date. Each Fund's investment
income and realized and unrealized gains and losses are allocated among the
classes based upon the relative average net assets of each class.
Dividends and Distributions to Shareholders: It is the policy of each Fund
to declare and pay dividends from net investment income each calendar quarter.
Each Fund will distribute net realized capital gains (including net short-term
capital gains), unless offset by any available capital loss carryforward,
annually after the fiscal year in which earned. Additional distributions of net
investment income and capital gains may be made at the discretion of the Board
of Trustees in order to avoid application of the 4% non-deductible Federal
excise tax. Income distributions and capital gain distributions on a Fund level
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Fund, timing differences and differing characterization of distributions
made by the Fund.
<TABLE>
For the year ended November 30, 1994, certain reclassification adjustments
were made between undistributed net investment income, realized gains and
paid-in capital due to different book and tax accounting for post October
losses, net operating losses and paydowns of certain debt instruments.
<CAPTION>
INCREASE/(DECREASE) INCREASE/(DECREASE)
INCREASE/ UNDISTRIBUTED NET ACCUMULATED
(DECREASE) INVESTMENT NET REALIZED
PAID-IN CAPITAL INCOME/(LOSS) GAIN/(LOSS)
-----------------------------------------------------
<S> <C> <C> <C>
Value Fund...................... $ 593,555 $-- $(593,555)
Emerging Growth Fund............ (602,199) 602,199 --
Balanced Assets Fund............ -- (80,533) 80,533
</TABLE>
Paid-in capital was reduced by $3,199 for the Special Equity Fund, due to a
tax return of capital.
Federal Income Taxes: Each Fund intends to qualify as a regulated
investment company, by complying with the requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders. Therefore,
no Federal income or excise tax provision is required.
91
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Expenses: General expenses of the Trust are allocated to all the Funds
based upon relative net assets. Operating expenses directly attributable to a
class of shares are charged to that class' operations. Expenses of each Fund not
directly attributable to the operations of any class of shares are prorated
among the classes based on the relative average net assets of each class.
Reclassifications: During the current period, the Funds adopted Statement
of Position 93-2 "Determination, Disclosure and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies." Accordingly, certain reclassifications have been made to the
components of capital in the Statement of Assets and Liabilities to conform with
the accounting and reporting guidelines of this statement. Distributions from
book basis accumulated realized gains or undistributed net investment income
that were the result of permanent book and tax accounting differences have been
reclassified to paid-in capital. Accordingly, amounts have been reclassified to
reflect an increase/(decrease) in paid-in capital, an increase/(decrease) in
undistributed net investment income and an increase/(decrease) in accumulated
net realized gain/(loss) as of November 30, 1993. The Statement of Changes in
Net Assets and Financial Highlights for the prior periods have not been restated
to reflect this change in presentation.
<TABLE>
Amounts reclassified as of November 30, 1993 were based on the following
adjustments:
<CAPTION>
INCREASE/(DECREASE) INCREASE/(DECREASE)
UNDISTRIBUTED NET ACCUMULATED
INCREASE/(DECREASE) INVESTMENT NET REALIZED
PAID-IN CAPITAL INCOME/(LOSS) GAIN/(LOSS)
---------------------------------------------------------
<S> <C> <C> <C>
Capital Growth Fund.......... $(9,198) $ 9,198 $ --
Emerging Growth Fund......... 91,355 160,281 (251,636)
Balanced Assets Fund......... -- (122,846) 122,846
</TABLE>
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS.
The Trust has entered into an Investment Advisory Agreement with
NationsBank, N.A. (Carolinas) ("NationsBank"), as successor to NationsBank of
North Carolina, N.A., an indirect wholly owned subsidiary of NationsBank
Corporation, with respect to each Fund.
<TABLE>
Under the terms of the Investment Advisory Agreement, the Funds pay a fee
at the following annual rates of average daily net assets:
<CAPTION>
ANNUAL RATE
----------
<S> <C>
Value Fund, Capital Growth Fund, Emerging Growth Fund and Balanced
Assets Fund...................................................... 0.75%
Equity Index Fund.................................................. 0.50%
Special Equity Fund................................................ 0.15%
</TABLE>
In addition, the Trust, on behalf of the Special Equity Fund, has entered
into a Sub-Investment Advisory Agreement with ASB Capital Management, Inc.
("ASBCM"), an indirect, wholly owned subsidiary of NationsBank Corporation.
Under this Agreement, ASBCM is entitled to a fee equal to 0.60%, on an
annualized basis, of the average daily net assets of the Special Equity Fund.
Stephens Inc. ("Stephens") serves as the Trust's administrator pursuant to
an Administration Agreement. The Shareholder Services Group, Inc. ("TSSG"),
wholly owned subsidiary of First Data Corporation, serves as the Trust's
co-administrator pursuant to a Co-Administration Agreement. Pursuant to the
Administration and Co-Administration Agreements, the administrator and the
co-administrator are entitled to
92
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
receive a combined fee, computed daily and paid monthly, at the annual rate of
0.10% of average daily net assets of the Trust and the investment portfolios of
Nations Fund, Inc. (another registered open-end investment company that is part
of the Nations Fund Family) on a combined basis.
Prior to May 6, 1994, The Boston Company Advisors, Inc. served as the
Trust's co-administrator and received fees equivalent to the current rate for
its services.
For the year ended November 30, 1994, Stephens earned $1,097,401 (after fee
waivers) for its services.
<TABLE>
The investment adviser, administrator and co-administrator may, from time
to time, reduce their fees payable by each Fund (either voluntarily or pursuant
to applicable state limitations). For the year ended November 30, 1994, the
investment adviser, administrator and/or co-administrator voluntarily waived
fees as follows:
<CAPTION>
FEES WAIVED FEES WAIVED BY
BY ADMINISTRATOR/
NATIONSBANK CO-ADMINISTRATOR
-----------------------------
<S> <C> <C>
Value Fund.......................................... $ 53,149 $12,070
Capital Growth Fund................................. -- 53,278
Emerging Growth Fund................................ -- 12,760
Balanced Assets Fund................................ -- 17,874
Equity Index Fund................................... 433,345 12,305
Special Equity Fund................................. -- 414
</TABLE>
No officer, director or employee of NationsBank, Stephens or TSSG, or any
affiliate thereof, receives any compensation from the Trust for serving as
Trustee or officer of the Trust. The Trust pays each Trustee an annual fee of
$1,000 ($3,000 for the Chairman of the Board), plus an additional $500 for each
fund and an additional $500 for each board meeting attended, plus reimbursement
of expenses incurred in attending such meetings.
NationsBank of Texas, N.A. acts as the Funds' custodian. For the year ended
November 30, 1994, NationsBank of Texas, N.A. earned $425,652 for providing
custody services. The custodian may, from time to time, reduce its fees payable
by each Fund. For the year ended November 30, 1994, the custodian reimbursed
expenses of $23,093 to the Special Equity Fund. TSSG serves as transfer agent
for the Funds' Shares. NationsBank of Texas, N.A. acts as the sub-transfer agent
for the Trust A Shares. Prior to July 1, 1994, NationsBank of Texas, N.A. served
as the sole transfer agent for the Trust A Shares. For the year ended November
30, 1994, NationsBank of Texas, N.A. earned $36,996 for providing transfer
agency services.
Stephens acts as the distributor of the Funds' Shares. For the year ended
November 30, 1994, the Funds were informed that the distributor received
$74,574, representing commissions (sales charges) on sales of Investor A Shares
of the Funds. For the year ended November 30, 1994, the Funds were informed that
the distributor received $278,327 in contingent deferred sales charges from
Investor C and Investor N Shareholders of the Funds. A substantial portion of
these fees are paid to affiliates of NationsBank.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS.
The Trust has adopted a shareholder servicing and distribution plan
("Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act for Investor A
Shares of each Fund. Aggregate fees under the Investor A Plan may not exceed
0.25%, on an annualized basis, of the average daily net assets of the Investor A
Shares of the Funds. Fees paid by the Funds under the Investor A Plan are paid
directly to the distributor. Fees paid pursuant to the Investor A Plan are
charged as expenses of Investor A Shares of a Fund as accrued.
93
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Trust has adopted distribution plans pursuant to Rule 12b-1 under the
1940 Act with respect to Investor C Shares ("Investor C Plan") and Investor N
Shares ("Investor N Plan") of each Fund. Pursuant to the Plans, the Funds pay
the distributor for certain expenses that are incurred in connection with the
support and distribution of Investor C or Investor N Shares of the Funds.
Payments under the Investor C Plan and Investor N Plan are accrued daily and
paid monthly at a rate that will not exceed 0.75%, on an annualized basis, of
the average daily net assets of the Investor C or Investor N Shares of the
Funds, respectively. Fees paid pursuant to the Investor C Plan and Investor N
Plan are charged as expenses of Investor C or Investor N Shares of a Fund,
respectively, as accrued.
The Trust also has adopted shareholder servicing plans with respect to
Investor C Shares (Investor C Servicing Plan") and Investor N Shares ("Investor
N Servicing Plan") of each Fund. Under the Plans, a Fund may pay for certain
shareholder support services that are provided to holders of Investor C and
Investor N Shares by the servicing agents that have entered into a shareholder
servicing agreement with the Trust. Payments under the Investor C Servicing Plan
and Investor N Servicing Plan are accrued daily and paid monthly at a rate that
will not exceed 0.25% of the average daily net assets of the Investor C or
Investor N Shares of the Fund, respectively. Fees paid pursuant to the Investor
C Servicing Plan and Investor N Servicing Plan are charged as expenses of
Investor C or Investor N Shares of a Fund, respectively, as accrued.
A substantial portion of the fees paid, pursuant to the Plans described
above, are paid to affiliates of NationsBank.
<TABLE>
For the year ended November 30, 1994, the Funds incurred the following
amounts pursuant to the above Plans:
<CAPTION>
FEES PAID PURSUANT TO:
----------------------------------------------------------------------
INVESTOR A INVESTOR C INVESTOR C INVESTOR N INVESTOR N
PLAN PLAN SERVICING PLAN PLAN SERVICING PLAN
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Value Fund................ $ 88,816 $ 25,508 $8,502 $ 139,041 $ 69,520
Capital Growth Fund....... 28,095 19,275 6,425 133,986 44,662
Emerging Growth Fund...... 6,769 3,634 1,211 74,658 24,886
Balanced Assets Fund...... 12,835 8,392 2,797 235,855 117,927
Special Equity Fund....... 123 N/A N/A 294 121
</TABLE>
<TABLE>
The chart below shows the effective rates, expressed as a percentage of
average daily net assets, paid by the Funds under the shareholder servicing and
distribution plans for the period ended November 30, 1994:
<CAPTION>
INVESTOR A INVESTOR C INVESTOR C INVESTOR N INVESTOR N
PLAN PLAN SERVICING PLAN PLAN SERVICING PLAN
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Value Fund................ 0.25% 0.75% 0.25% 0.50% 0.25%
Capital Growth Fund....... 0.25 0.75 0.25 0.75 0.25
Emerging Growth Fund...... 0.25 0.75 0.25 0.75 0.25
Balanced Assets Fund...... 0.25 0.75 0.25 0.50 0.25
Special Equity Fund....... 0.10 N/A N/A 0.71 0.25
</TABLE>
94
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PURCHASES AND SALES OF SECURITIES.
<TABLE>
The aggregate cost of purchases and proceeds from sales of securities,
excluding U.S. government securities and short-term investments, for the year
ended November 30, 1994 were as follows:
<CAPTION>
PURCHASES SALES
---------------------------------
<S> <C> <C>
Value Fund................................... $715,381,363 $619,164,243
Capital Growth Fund.......................... 391,245,625 372,386,777
Emerging Growth Fund......................... 259,364,822 203,334,791
Balanced Assets Fund......................... 188,702,482 183,251,895
Equity Index Fund............................ 130,193,469 11,915,535
Special Equity Fund.......................... 15,555,535 11,875,451
</TABLE>
<TABLE>
The aggregate cost of purchases and proceeds from sales of securities of
long-term U.S. government securities for the year ended November 30, 1994 were
as follows:
<CAPTION>
PURCHASES SALES
---------------------------------
<S> <C> <C>
Balanced Assets Fund......................... $195,657,799 $179,988,287
</TABLE>
<TABLE>
At November 30, 1994, aggregate gross unrealized appreciation and
unrealized depreciation of securities for tax purposes were as follows:
<CAPTION>
UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION
-----------------------------------
<S> <C> <C>
Value Fund..................................... $ 20,674,801 $ 55,183,173
Capital Growth Fund............................ 80,633,714 22,487,617
Emerging Growth Fund........................... 18,899,749 8,695,198
Balanced Assets Fund........................... 9,341,584 8,773,946
Equity Index Fund.............................. 4,595,353 8,121,893
Special Equity Fund............................ 794,331 378,784
</TABLE>
<TABLE>
Information regarding dollar roll transactions for the Balanced Assets Fund
is as follows:
<S> <C>
Maximum amount outstanding during the year....................... $ 6,948,516
Average amount outstanding during the year....................... 2,161,676
Average fund shares outstanding during the year.................. 22,182,882
Average amount outstanding per share............................. $ 0.10
</TABLE>
Fee income earned by the Balanced Assets Fund for the year ended November
30, 1994, under dollar roll transactions aggregated $84,410.
The average amount outstanding during the year was calculated by summing
borrowings at the end of each day and dividing the sum by the number of days in
the year ended November 30, 1994.
5. SHARES OF BENEFICIAL INTEREST.
As of November 30, 1994, an unlimited number of shares without par value
were authorized for the Trust. The 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. See Schedule of Capital Stock Activity.
95
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. ORGANIZATION COSTS.
The Funds bear all costs in connection with their organization, including
the fees and expenses of registering and qualifying their shares for
distribution under Federal and state securities regulations. All such costs are
being amortized on the straight-line method over a period of five years from
commencement of operations. In the event that any of the shares issued by the
Funds to their sponsor prior to the commencement of the Funds' public offering
("initial shares") are redeemed during such amortization period by any holder
thereof, the Funds will be reimbursed by the holder for any unamortized
organization costs in the same proportion as the number of initial shares
redeemed bears to the number of initial shares outstanding at the time of
redemption.
7. LINE OF CREDIT.
The Trust and Nations Fund, Inc. participate in a $25 million line of
credit provided by Mellon Bank, N.A. (the "Bank") under a Line of Credit
Agreement (the "Agreement") dated March 17, 1994. 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. Under this Agreement, each Fund may borrow up to the lesser of $10
million or 5% of its net assets. Interest is payable at the higher of the Bank's
Money Market Rate or the London Interbank Offered Rate (LIBOR) plus 0.25% on an
annualized basis. The Funds and the other affiliated entities are charged an
aggregate commitment fee of 0.25% per annum on the amount of the line of credit.
Each Fund shall be liable only for that portion of the commitment with respect
to such Fund and shall not be liable for the portion of the commitment fee of
any other fund. The Agreement requires, among other things, that each
participating fund maintain a ratio of net assets (not including funds borrowed
pursuant to the Agreement) to aggregate amount of indebtedness pursuant to the
Agreement of no less than 4 to 1.
<TABLE>
During the year ended November 30, 1994, the Equity Index Fund had the following borrowings under the Agreement:
<CAPTION>
AMOUNT
OUTSTANDING AT MAXIMUM AVERAGE AVERAGE INTEREST RATE
NOVEMBER 30, AMOUNT AMOUNT AVERAGE DEBT ---------------- INTEREST
1994 OUTSTANDING OUTSTANDING SHARES PER SHARE HIGH LOW EXPENSE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-- $ 300,000 $ 2,740 22,182,882 $ 0.00(a) 5.50% 5.00% $ 151
<FN>
(a) Value represents less than $0.01 per share.
</TABLE>
The average amount outstanding was calculated by summing the borrowings at
the end of each day and dividing the sum by the number of days in the year ended
November 30, 1994.
8. CAPITAL LOSS CARRYFORWARD.
<TABLE>
At November 30, 1994, the following Fund had a capital loss carryforward as follows:
<CAPTION>
FUND CAPITAL LOSS CARRYFORWARD EXPIRING
--------------------------------------------------------------------------------------
<S> <C> <C>
Special Equity Fund.......................... $(367,963) 11/30/2002
</TABLE>
96
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. REORGANIZATION.
<TABLE>
On April 29, 1994, the Value Fund (Acquiring Fund) acquired the assets and certain liabilities of The Capitol Mutual Fund's
Equity Portfolio (Acquired Fund), in exchange for shares of the Acquiring Fund, pursuant to a plan of tax-free reorganization
approved by the Acquired Fund's shareholders on March 31, 1994. Total shares issued by the Acquiring Fund, the value of the shares
issued by the Acquiring Fund, the total net assets of the Acquired Fund and the Acquiring Fund and any unrealized depreciation
included in the Acquired Fund's total net assets at the acquiring date were as follows:
<CAPTION>
VALUE OF
SHARES SHARES TOTAL NET TOTAL NET ACQUIRED
ISSUED BY ISSUED BY ASSETS OF ASSETS OF FUND
ACQUIRING ACQUIRING ACQUIRING ACQUIRED ACQUIRING UNREALIZED
FUND ACQUIRED FUND FUND FUND FUND FUND* DEPRECIATION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nations Value The Capitol Mutual
Fund Funds Equity
Portfolio 2,158,820 $28,863,030 $28,863,030 $867,890,020 $ 1,410,132
<FN>
* The value of the net assets of the Acquiring Fund immediately after the acquisition was $896,753,050
</TABLE>
Effective April 30, 1994, substantially all of the assets and liabilities of The
Capitol Mutual Funds Special Equity Portfolio were reorganized, in a tax-free
exchange, into Nations Special Equity Fund. Shares of beneficial interest
exchanged were on a one for one basis.
97
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS FUND TRUST
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Nations Value Fund, Nations Capital
Growth Fund, Nations Emerging Growth Fund, Nations Balanced Assets Fund, Nations
Equity Index Fund and Nations Special Equity Fund (each a Portfolio of Nations
Fund Trust, hereafter referred to as the "Trust") at November 30, 1994 and the
results of each of their operations, the changes in each of their net assets and
the financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1994 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 19, 1995
98
<PAGE>
THE NATIONS FUND FAMILY
EQUITY FUNDS
GROWTH
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Equity Index Fund*
Nations Special Equity Fund
GROWTH AND INCOME
Nations Balanced Assets Fund
Nations Equity Income Fund
Nations International Equity Fund
Nations Value Fund
BOND FUNDS
INCOME
Nations Adjustable Rate Government Fund
Nations Diversified Income Fund
Nations Government Securities Fund
Nations Managed Bond Fund
Nations Short-Intermediate Government Fund
Nations Short-Term Income Fund
Nations Strategic Fixed Income Fund
Nations Mortgage-Backed Securities Fund*
TAX-FREE INCOME
Nations Florida Municipal Bond Fund
Nations Florida Intermediate Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Georgia Intermediate Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations Maryland Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Tennessee Intermediate Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Texas Intermediate Municipal Bond Fund
Nations Virginia Municipal Bond Fund
Nations Virginia Intermediate Municipal Bond Fund
Nations Municipal Bond Fund
Nations Intermediate Municipal Bond Fund
Nations Short-Term Municipal Income Fund
MONEY MARKET FUNDS
Nations Government Money Market Fund
Nations Prime Fund
Nations Tax Exempt Fund
Nations Treasury Fund
*Trust classes only
<PAGE>
[NATIONS FUND LOGO] BULK RATE
PO Box 9654 U.S. POSTAGE
Providence, RI 02940-9654 PAID
Toll Free 1-800-982-2271 BOSTON, MA
PERMIT NO.
54201
AR1-11/94
<PAGE>
[NATIONS FUND LOGO]
ANNUAL
For the Year Ended November 30, 1994
REPORT
NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND
NATIONS MANAGED
BOND FUND
NATIONS SHORT-TERM
INCOME FUND
NATIONS ADJUSTABLE RATE
GOVERNMENT FUND
NATIONS DIVERSIFIED
INCOME FUND
NATIONS STRATEGIC FIXED
INCOME FUND
NATIONS MORTGAGE-BACKED
SECURITIES FUND
<PAGE>
NATIONS FUND TRUST
DEAR SHAREHOLDER:
Throughout 1994, the yield on the 30-year U.S. Treasury bond was on the
rise. This benchmark began the year at 6.3% and pushed above 8.0% by Fall. Both
short-term and long-term interest rates increased and the yield curve, which
measures the difference between short-term and long-term rates, flattened. The
difference in yield between the two-year Treasury note and the 30-year Treasury
bond shrank from over two points at the outset of the year, to less than half a
point by year-end. What accounted for the rise in interest rates and the
flattening of the yield curve? Simply stated, the economy produced more goods
and services and a greater number of jobs than expected. After many quarters of
sub-standard economic performance, 1994 became the year in which the economy
would not quit.
In order to understand the fixed income market in 1994, it is important to
first comprehend the unusual environment that preceded it. After the last
recession officially ended, the economy remained sluggish. While long-term
interest rates declined during this period, short-term rates plunged, resulting
in an unusually steep yield curve. The steep yield curve worked well to
accommodate economic expansion and in the fourth quarter of 1993 the economy
surged to life. Gross Domestic Product advanced 6.3% (initially reported at over
7%) in the fourth quarter.
Initially, many investors assumed that the rapid expansion in late 1993 was
an aberration, and the reaction in the credit markets was mild. However, the
economic report card in 1994 dispelled any notion of sluggishness. Unemployment,
after hovering in the 6.5% to 7% range, dropped to 6% by mid-year. Capacity
utilization moved above 84% by July, and began to trigger concern that the U.S.
economy was nearing its full potential. Moreover, the Federal Reserve Board
acted on numerous occasions to raise short-term rates. Meanwhile inflation
remained largely in check. The annualized rate of increase in the Consumer Price
Index rose from about 2.5% in January to about 3% at the beginning of the fourth
quarter. By historic standards, the rise in inflation was rather mild.
As a result, real rates of interest (yield less inflation) were quite high.
Nonetheless, investors remained wary of the bond market. Investors feared that
at some point in the economic cycle inflation would be unleashed, thereby
undermining their fixed income investments. As a result, the bond markets
suffered several setbacks as the year wore on.
The new year may prove more generous to fixed income investors than 1994.
The economic recovery has aged considerably and much of its potential may be
exhausted. Moreover, rising interest rates and tightening Federal Reserve policy
will eventually draw down economic vitality. Thus, we anticipate that 1995 may
bring a modest rally to the fixed income markets. As the months go by we think
the fears of an over-heated economy and rampant inflation will recede.
Sincerely,
[sig] [sig]
A. Max Walker Mark H. Williamson
President and Chairman of the Board Mutual Funds Group Executive,
NationsBank, N.A. (Carolinas)
November 30, 1994
SHARES OF NATIONS FUND TRUST ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
ISSUED, ENDORSED OR GUARANTEED BY, NATIONSBANK, N.A. (CAROLINAS) (TOGETHER WITH
ITS PREDECESSORS "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 NATIONS
FUND TRUST INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL
NATIONSBANK IS THE INVESTMENT ADVISER AND AN AFFILIATE OF NATIONSBANK IS
CUSTODIAN TO NATIONS FUND TRUST, 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 TRUST.
1
<PAGE>
NATIONS FUND
A PORTFOLIO FOR EVERY INVESTOR
Since 1874, NationsBank has built its success upon a long-standing
commitment of quality service to customers. Conditions change rapidly in the
financial world, but the requirements for sustained success remain constant:
quality products and services; a responsible investment philosophy; and a wealth
of knowledge and resources.
These characteristics are the guiding principles behind a family of mutual
funds with you, the Nations Fund investor, in mind. All of the funds are advised
by and made available through NationsBank, which, with its affiliates, has more
than $170 billion in assets, over seven million clients, and one of the
country's largest branch systems.
As investment adviser, NationsBank provides professional management of your
money which parallels the approach that has established NationsBank and its
affiliates as leaders in trust and institutional investment services, currently
managing over $63 billion.
A responsible investment approach guides every decision within the Nations
Fund Family, whether the goal is based on long-term growth or current income.
These decisions are backed by substantial professional resources consisting of
experienced equity and fixed income analysts, researchers and portfolio
managers.
There are currently 39 active funds in the Nations Fund Family, with assets
totaling over $15 billion, to help you with retirement planning, college savings
or any other long-range financial goal.
FOR GROWTH OF CAPITAL
(Investments primarily in stocks)
- --------------------------------
- - NATIONS CAPITAL GROWTH FUND
Objective: To seek long-term capital appreciation.
Approach: A flexible strategy of investing primarily in common stocks,
wherever growth opportunities appear most promising. The Fund is not limited
to certain industries or sectors, but invests across a broad range of
companies, industries, and types of securities in search of growth
opportunities.
- - NATIONS EMERGING GROWTH FUND
Objective: To seek capital appreciation.
Approach: Invests in the stocks of high quality emerging growth companies
that are expected to have earnings growth rates superior to most publicly
traded companies. One of our most aggressive stock funds.
- - NATIONS EQUITY INDEX FUND*
Objective: Seeks to closely approximate the total return performance of the
S&P 500 Index.
Approach: Invests primarily in equity securities of companies which
constitute the S&P 500. In seeking to duplicate the performance of the S&P
500, the Fund's holdings will be allocated in approximately the same
weightings as the S&P 500.
- - NATIONS SPECIAL EQUITY FUND
Objective: To seek capital appreciation.
Approach: Invests in small capitalization common stocks with visible
revenue, earnings and share price momentum as well as "special situation"
equities. Our most aggressive stock fund.
FOR GROWTH AND INCOME
(Investments primarily in stocks)
- --------------------------------
- - NATIONS EQUITY INCOME FUND
Objective: Seeks to provide high current income and secondarily, capital
appreciation.
Approach: The Fund invests primarily in dividend-paying stocks of
established companies, with the potential for increasing dividends as well
as for capital appreciation. The Portfolio is designed for conservative
equity investors.
- - NATIONS INTERNATIONAL EQUITY FUND
Objective: To seek a high total return from long-term growth of capital and
income.
Approach: Invests in stocks of established non-United States issuers. Within
the framework of diversification, the Fund seeks to identify and invest in
companies participating in the faster growing foreign economies. While this
Fund can be an important part of a diversified stock portfolio, investors
should consider the additional risk of foreign investing, such as currency
fluctuation.
- - NATIONS VALUE FUND
Objective: To seek long-term capital growth, with income a secondary
consideration.
Approach: Invests in stocks considered by the investment adviser to be
undervalued relative to the overall stock market. This value-based investment
approach is more likely to provide opportunities for capital appreciation,
and seeks to produce a higher than average dividend yield.
FOR GROWTH OF INCOME, CURRENT INCOME AND GROWTH OF CAPITAL
(Investments in stocks, bonds and money markets)
- --------------------------------
- - NATIONS BALANCED ASSETS FUND
Objective: Seeks total investment return through a combination of growth of
capital and current income consistent with the preservation of capital.
Approach: The Fund invests primarily in three major asset groups: common
stocks, fixed income securities and cash equivalents. By moving freely among
these securities, the Fund is able to respond to shifting market
opportunities. One of our more conservative funds in the Nations Fund Family.
2
<PAGE>
FOR CURRENT INCOME
(Investments in fixed income obligations)
- --------------------------------
- - NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: Invests essentially all of its assets in short-intermediate-term
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities and repurchase agreements relating to such obligations.#
- - NATIONS MANAGED BOND FUND++
Objective: To seek a high level of current income consistent with relative
stability of principal.
Approach: The Fund invests primarily in investment grade fixed income
securities such as government and corporate fixed income issues.
- - NATIONS SHORT-TERM INCOME FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: Invests primarily in short-term investment grade corporate bonds
and mortgage-backed bonds. This investment program attempts to maintain a
higher level of income than normally provided by money market instruments.
- - NATIONS DIVERSIFIED INCOME FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: The Fund invests primarily in a diversified portfolio of
government and corporate fixed income securities.
- - NATIONS STRATEGIC FIXED INCOME FUND
Objective: Seeks to maximize total investment return through the active
management of fixed income securities.
Approach: The Fund invests primarily in a mix of short-, intermediate-, and
long-term investment grade fixed income securities such as corporate and
U.S. government or U.S. government agency bonds.
- - NATIONS GOVERNMENT SECURITIES FUND
Objective: Seeks to provide current income and preservation of capital.
Approach: Invests primarily in debt obligations that are issued or
guaranteed by the U.S. government, its agencies, authorities and
instrumentalities.#
FOR CURRENT INCOME
(Investments in fixed income obligations)
- --------------------------------
- - NATIONS ADJUSTABLE RATE GOVERNMENT FUND
Objective: To seek as high a level of current income as is consistent with
minimum fluctuation of share price.
Approach: Invests primarily in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.#
- - NATIONS MORTGAGE-BACKED SECURITIES FUND*
Objective: To seek as high a level of total investment return as is
consistent with prudent investment risk.
Approach: Invests primarily in mortgage-related securities, which combine
high credit quality and high yields.
- - NATIONS MUNICIPAL INCOME FUND+
Objective: To seek a high level of current interest income that is exempt
from federal income taxes.
Approach: Invests primarily in investment grade tax-exempt obligations
across a wide range of municipalities and geographic regions to add
diversity to the Fund.
- - NATIONS INTERMEDIATE MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income that is exempt
from federal income taxes.
Approach: Invests primarily in intermediate investment grade tax-exempt
obligations across a wide range of municipalities and geographic regions to
add diversity to the Fund.
- - NATIONS SHORT-TERM MUNICIPAL INCOME FUND+
Objective: To seek a high level of current interest income that is exempt
from federal income taxes.
Approach: Invests primarily in short-term (average weighted maturity 1 - 3
years) investment grade tax-exempt obligations across a wide range of
municipalities and geographic regions to add diversity to the Fund.
FOR TAX-FREE INCOME
(Investments in municipal securities)
- --------------------------------
- - NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal income and Florida state intangibles tax, consistent with relative
stability of principal.
Approach: Invests substantially all of its assets in Florida intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
- - NATIONS FLORIDA MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal income and Florida state intangible taxes, consistent with relative
stability of principal.
Approach: Invests substantially all of its assets in Florida municipal
bonds, including those used to support projects that benefit the public,
such as roads, bridges, hospitals and schools.
- - NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Georgia state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Georgia intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
- - NATIONS GEORGIA MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Georgia state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Georgia municipal
bonds, including those used to support projects that benefit the public,
such as roads, bridges, hospitals and schools.
3
<PAGE>
FOR TAX-FREE INCOME
(Investments in municipal securities)
- --------------------------------
- - NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Maryland state income taxes, consistent with relative stability
of principal.
Approach: Invests substantially all of its assets in Maryland intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
- - NATIONS MARYLAND MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Maryland state income taxes, consistent with relative stability
of principal.
Approach: Invests substantially all of its assets in Maryland municipal
bonds, including those used to support projects that benefit the public,
such as roads, bridges, hospitals and schools.
- - NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and North Carolina state income taxes and state intangibles tax,
consistent with relative stability of principal.
Approach: Invests substantially all of its assets in North Carolina
intermediate municipal bonds, including those used to support projects that
benefit the public, such as roads, bridges, hospitals and schools.
- - NATIONS NORTH CAROLINA MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and North Carolina state income taxes and state intangibles tax,
consistent with relative stability of principal.
Approach: Invests substantially all of its assets in North Carolina
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
FOR TAX-FREE INCOME
(Investments in municipal securities)
---------------------------------
- - NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in South Carolina
intermediate municipal bonds, including those used to support projects that
benefit the public, such as roads, bridges, hospitals and schools.
- - NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in South Carolina
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
- - NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Tennessee state income taxes, consistent with relative stability
of principal.
Approach: Invests substantially all of its assets in Tennessee intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
- - NATIONS TENNESSEE MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Tennessee state income taxes, consistent with relative stability
of principal.
Approach: Invests substantially all of its assets in Tennessee municipal
bonds, including those used to support projects that benefit the public, such
as roads, bridges, hospitals and schools.
FOR TAX-FREE INCOME
(Investments in municipal securities)
- --------------------------------
- - NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from
federal income taxes, consistent with relative stability of principal.
Approach: Invests substantially all of its assets in Texas municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
- - NATIONS TEXAS MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from
federal income taxes, consistent with relative stability of principal.
Approach: Invests substantially all of its assets in Texas municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
- - NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Virginia state income taxes, consistent with relative stability
of principal.
Approach: Invests substantially all of its assets in Virginia intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
- - NATIONS VIRGINIA MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Virginia state income taxes, consistent with relative stability
of principal.
Approach: Invests substantially all of its assets in Virginia municipal
bonds, including those used to support projects that benefit the public,
such as roads, bridges, hospitals and schools.
4
<PAGE>
MONEY MARKET FUNDS FOR CURRENT INCOME AND PRESERVATION OF CAPITAL
(Investments in money market securities)
- --------------------------------
- - NATIONS PRIME FUND
Objective: To seek the maximization of current income to the extent
consistent with the preservation of capital and liquidity.
Approach: Invests in high quality money market instruments including bank
certificates of deposit, banker's acceptances and commercial paper.
- - NATIONS TREASURY FUND
Objective: To seek maximization of current income to the extent consistent
with the preservation of capital and liquidity.
Approach: Invests exclusively in obligations of the U.S. Treasury and
repurchase agreements secured by Treasury obligations.#
MONEY MARKET FUNDS FOR CURRENT INCOME AND PRESERVATION OF CAPITAL
(Investments in money market securities)
- --------------------------------
- - NATIONS GOVERNMENT MONEY MARKET FUND
Objective: To seek as high a level of current income as is consistent with
liquidity and stability of principal.
Approach: Invests in obligations issued or guaranteed by the U.S. government
or its agencies or instrumentalities and repurchase agreements.#
- - NATIONS TAX EXEMPT FUND+
Objective: To seek as high a level of current interest income exempt from
federal income taxes as is consistent with liquidity and stability of
principal.
Approach: Invests in municipal securities, the interest on which is exempt
from regular federal income tax.
- ---------------
SHARES OF NATIONS FUND TRUST ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
ISSUED, ENDORSED OR GUARANTEED BY, NATIONSBANK, N.A. (CAROLINAS) (TOGETHER WITH
ITS PREDECESSORS "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 NATIONS
FUND TRUST INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
NATIONSBANK IS THE INVESTMENT ADVISER AND AN AFFILIATE OF NATIONSBANK IS
CUSTODIAN TO NATIONS FUND TRUST, 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 TRUST.
# These portfolio securities are guaranteed as to the timely payment of
principal and interest only. This is not a guarantee of market value of the
shares of the funds.
* Offers Trust A Shares only.
++ Offers Trust A Shares, Investor A Shares and Investor C Shares only.
+ A portion of income, from municipal bonds, received by shareholders may be
subject to some federal income, state and/or local tax and/or the federal
alternative minimum tax.
5
<PAGE>
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by William Brown. Mr. Brown joined NationsBank in 1969.
He is a member of the Fixed Income Group and has over 22 years investment
experience. He received his B.S. from Washington and Lee University and an
M.B.A. from the University of Texas.
INVESTMENT OBJECTIVE
Nations Short-Intermediate Government Fund seeks as high a level of current
income as is consistent with prudent investment risk.
PERFORMANCE SUMMARY AND OVERVIEW*
The 1994 bond market will be remembered as one of the worst that investors
have seen since the 1920s. The dramatic rise in interest rates over the last 12
months can be attributed to several factors, including a weaker U.S. dollar,
strength in the domestic economy, rising price pressures, and tighter monetary
policy by the Federal Reserve Board (the "Fed").
Relative performance this year was as much a function of what was not
owned, as what was owned. While there have been many well-documented reports of
significant losses by investors who owned securities that didn't perform as the
investors had originally anticipated, we believe that our disciplined approach
to risk analysis served the Fund well in 1994. We sought to avoid such pitfalls
by carefully analyzing each investment's yield in light of its potential price
volatility under changing market conditions. We believe that this disciplined
approach has helped us meet our customers' expectations in a difficult market
environment without providing the type of negative surprises that have dominated
the headlines.
An example of how this discipline benefited shareholders during the past
year is found in the mortgage component of Nations Short-Intermediate Government
Fund. Traditionally, the Fund has utilized mortgage-backed securities to seek to
add incremental yield while maintaining the low risk credit profile of
government securities. Within the mortgage sector, the Fund had historically
focused its strategy on U.S. government agency Collateralized Mortgage
Obligations (CMOs).
In 1994, however, CMOs began to underperform other mortgage-backed
securities. As a result, we reevaluated our mortgage strategy and shifted the
focus of the strategy from CMOs to other types of pass-through securities issued
by the Government National Mortgage Association and the Federal National
Mortgage Association. At the beginning of the calendar year, CMOs represented
almost 40% of the Fund's assets. As of November 30, 1994, CMOs comprised less
than 6% of Fund assets and those that remain have short-term maturities. The CMO
market has continued to underperform due to increased investor sales of such
securities. By reducing the Fund's exposure to CMOs, we have reduced the impact
such market pressures have on the Fund.
The Fund has also benefited from its defensive stance in a rising rate
environment. Fund duration was kept neutral to shorter than the market as
represented by the Lehman Brothers Intermediate U.S. Government Index, thus
lessening the interest rate sensitivity of the Fund. The Fund was also
positioned to take advantage of the flattening yield curve. When short-term
interest rates rose, the difference between the yield of short-term securities
and longer-term securities declined. The Fund was structured to capture the
positive effects of this flattening by concentrating its assets in 2-year
maturities and 10-year maturities without altering the Fund's basic average
maturity structure. At the end of November, the Fund had an average duration of
2.99 years and an average maturity of 4.20 years.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
6
<PAGE>
For the fiscal year ending November 30, 1994, Nations Short-Intermediate
Government Fund reported a (2.23)% return.* This return exceeded the total
return of the Fund's U.S. Treasury benchmark, the 5-year U.S. Treasury note,
which returned (4.26)% over the same period.
It is important to remember that interest rates move in cycles and that the
present level of interest rates generally provides fixed-income investors with
higher current yields than were available just one year ago. We believe that the
market is nearing the end of the Fed's tightening cycle and, while a significant
rally in bond prices may still be some time off, the traditional benefits of
investing a portion of one's portfolio in fixed-income investments remain
intact: stable income flow, diversification and a reduction in total portfolio
volatility over the long term.
- ---------------
* Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994 was (2.41)%. The total return for
Investor C Shares for the one-year period ended November 30, 1994 was (2.80)%.
The total return for Investor N Shares for the one-year period ended November
30, 1994 was (2.81)%. Had the maximum sales charge of 3.25% on Investor A
Shares, the contingent deferred sales charge of 1.00% on Investor C Shares and
the contingent deferred sales charge of 4.00% on Investor N Shares been taken
into effect, the total returns for such classes of shares would have been lower.
7
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- --------------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<CAPTION>
- -----------------------------------------
TOP HOLDINGS AS OF 11/30/94
- -----------------------------------------
<S> <C>
1. U.S. Treasury Notes 67.6%
2. Federal National Mortgage
Association Certificates 26.2
3. Government National Mortgage
Association Certificates 5.6
4. U.S. Treasury Bill 5.3
5. Federal Home Loan Bank, 4.500%
10/20/2000 3.2
6. Federal Home Loan Mortgage
Corporation Certificates 2.6
7. Second Attransco Trailer
Corporation, Series A,
8.500% 06/15/2002 0.8
8. Collateralized Mortgage
Securities Corporation,
Series 1992-1, Class C, 6.750%
06/20/2017 0.8
9. Third Attransco Trailer
Corporation, 8.200%
11/01/1997 0.5
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
- -----------------------------------------
<S> <C> <C>
YEAR ENDED (5.58)% (2.41)%
11/30/94
--------------------------
INCEPTION
(08/05/91) 4.85% 5.90%
THROUGH
11/30/94
--------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 3.25% charge
- -----------------------------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor A Shares of the Nations Short-Intermediate Government
Fund on August 5, 1991 (inception) with that of a similar investment in the
Lehman Brothers Short 1-5 Year U.S. Government Index, over the same time period.
The Lehman Brothers Short 1-5 Year U.S. Government Index is composed of all U.S.
government agency and treasury securities with maturities between 1 and 5 years.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
8
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
<S> <C> <C>
YEAR ENDED (3.71)%* (2.80)%
11/30/94
--------------------------
INCEPTION
(06/17/92) 2.76% 2.76%
THROUGH
11/30/94
--------------------------
Not
*Adjusted for adjusted
maximum for
contingent contingent
deferred deferred
sales charge sales
of 1.00% charge
- ---------------------------------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor C Shares of the Nations Short-Intermediate Government
Fund on June 17, 1992 (inception) with that of a similar investment in the
Lehman Brothers Short 1-5 Year U.S. Government Index, over the same time
period. The Lehman Brothers Short 1-5 Year U.S. Government Index is composed of
all U.S. government agency and treasury securities with maturities between 1
and 5 years.
[LINE GRAPH]
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR N SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
<S> <C> <C>
YEAR ENDED (6.49)% (2.81)%
11/30/94
--------------------------
INCEPTION
(06/07/93) (2.04)% (0.16)%
THROUGH
11/30/94
--------------------------
Not
Adjusted for adjusted
applicable for
contingent contingent
deferred deferred
sales charge sales
charge
- ---------------------------------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor N Shares of the Nations Short-Intermediate Government
Fund on June 7, 1993 (inception) with that of a similar investment in the
Lehman Brothers Short 1-5 Year U.S. Government Index, over the same time
period. The Lehman Brothers Short 1-5 Year U.S. Government Index is composed of
all U.S. government agency and treasury securities with maturities between 1
and 5 years.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
9
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
<S> <C>
YEAR ENDED (2.23)%
11/30/94
------------------
INCEPTION
(08/01/91) 6.02%
THROUGH
(11/30/94)
------------------
- ----------------------------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Trust A Shares of the Nations Short-Intermediate Government Fund
on August 1, 1991 (inception) with that of a similar investment in the Lehman
Brothers Short 1-5 Year U.S. Government Index, over the same time period. The
Lehman Brothers Short 1-5 Year U.S. Government Index is composed of all U.S.
government agency and treasury securities with maturities between 1 and 5 years.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
10
<PAGE>
NATIONS MANAGED BOND FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by Mark S. Ahnrud. Mr. Ahnrud joined NationsBank in
1985 and is a Vice President and Senior Portfolio Manager. He is a member of the
Fixed Income Group and has over seven years investment experience. He received a
B.S. from Babson College and an M.B.A. from Fuqua School of Business at Duke
University. Mr. Ahnrud is a Chartered Financial Analyst, a member of the
Association for Investment Management and Research and the North Carolina
Society of Financial Analysts.
INVESTMENT OBJECTIVE
The objective of Nations Managed Bond Fund is to seek a high level of
current income consistent with relative stability of principal.
PERFORMANCE SUMMARY AND OVERVIEW*
Nations Managed Bond Fund recorded a return of (3.79)% for the fiscal year
ended November 30, 1994.** This return generally was consistent with that of the
broad fixed income market, two common measures of which are the Lehman
Government/Corporate Index and the Lehman Brothers Aggregate Bond Index, which
returned (3.72)% and (3.06)%, respectively, over the same period.***
The 1994 bond market will be remembered as one of the worst investors have
seen since the 1920s. The dramatic rise in interest rates over the last 12
months can be attributed to several factors, including a weaker U.S. dollar,
strength in the domestic economy, rising price pressures and tighter monetary
policy by the Federal Reserve Board (the "Fed").
Relative performance this year was as much a function of what was not
owned, as what was owned. There have been many well-documented reports of
significant losses by investors who purchased securities offering above-market
yields. Many of these investors, however, did not fully understand the potential
price risk of these securities. As interest rate levels and volatility
increased, many of these securities suffered significant price declines. We
sought to avoid such pitfalls by carefully analyzing each investment's yield in
light of its potential price volatility under changing market conditions. We
believe that this disciplined approach has helped us meet our customers'
expectations in a difficult market environment without providing the type of
negative surprises that have dominated the headlines.
At the beginning of the calendar year, we increased the Fund's weighting in
certain pass-through mortgage-backed securities to almost 30% as we felt such
pass-through securities represented good relative value in the marketplace. We
believe that this strategy benefitted the Fund, as pass-through securities
(other than collateralized mortgage obligations) performed relatively well in
1994. More recently, we have reduced the Fund's investments in the corporate
bond market, from over 30%, to approximately 14% as of November 30, 1994.
Although corporate bonds have performed well over the last three years, we feel
that they are overvalued in the marketplace at current levels. We look for
corporate bonds to underperform U.S. Treasuries over the coming months, at which
time we may seek to add corporate bonds to the portfolio once again.
It is important to remember that interest rates move in cycles. The present
level of interest rates should provide fixed-income investors with higher
current yields than were available just one year ago. We believe that the market
is nearing the end of the Fed's tightening cycle and, while a significant rally
in bond prices may still be some time off, the traditional benefits of investing
a portion of one's portfolio in fixed-income investments remain intact: stable
income flow, diversification and a reduction in total portfolio volatility over
the long term.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994 was (3.98)%. The total return for
Investor C Shares for the one-year period ended November 30, 1994 was (4.35)%.
Had the maximum sales charge of 3.25% on Investor A Shares and the contingent
deferred sales charge of 1.00% on Investor C Shares been taken into effect, the
total returns for such shares would have been lower.
*** Source: Lehman Brothers, Inc.
11
<PAGE>
NATIONS FUND TRUST
NATIONS MANAGED BOND FUND
- --------------------------------------------------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- --------------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<CAPTION>
- -----------------------------------------
TOP TEN HOLDINGS AS OF 11/30/94
- -----------------------------------------
<S> <C>
1. U.S. Treasury Notes 50.4%
2. U.S. Treasury Bonds 11.8
3. Government National Mortgage
Association
Certificates 10.8
4. Federal National Mortgage
Association Certificates 10.7
5. General Motors Acceptance
Corporation,
Series 1994-A Grantor Trust,
Class A 6.300%
06/15/1999 2.6
6. General Motors Acceptance
Corporation, 8.625%
06/15/1999 2.3
7. Daimler-Benz Auto Grantor
Trust, Series 1994-A, Class A,
5.950% 12/15/2000 2.3
8. Du Page County, Illinois, GO
Alternative Revenue Source,
6.550% 01/01/2021 1.9
9. EQCC Home Equity Loan Trust,
Series 1994-2,
Class A1, 6.350% 06/15/2014 1.9
0. Ford Credit Corporation
Grantor Trust,
Series 1994-B, Class A, 7.300%
10/15/1999 1.7
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
<S> <C> <C>
YEAR ENDED (7.10)% (3.98)%
11/30/94
-------------------------
INCEPTION
(12/08/89) 6.15% 6.86%
THROUGH
11/30/94
-------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 3.25% charge
---------------------------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor A Shares of the Nations Managed Bond Fund on December 8,
1989 (inception) with that of a similar investment in the Lehman Brothers
Aggregate Bond Index, over the same time period. The Lehman Brothers Aggregate
Bond Index is composed of the Lehman Government/Corporate Index and the
Mortgage-Backed Securities Index which include U.S. treasury issues, agency
issues, corporate bond issues and mortgage-backed securities.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary
with market conditions, and the principal value of shares, when redeemed, may
be more or less than original cost.
Average annual total returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestment of dividends.
12
<PAGE>
NATIONS FUND TRUST
NATIONS MANAGED BOND FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
<S> <C> <C>
YEAR ENDED (5.25)%* (4.35)%
11/30/94
--------------------------
INCEPTION
(06/17/92) 3.69% 3.69%
THROUGH
11/30/94
--------------------------
*Adjusted Not
for maximum adjusted
contingent for
deferred contingent
sales deferred
charge of sales
1.00% charge
----------------------------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor C Shares of the Nations Managed Bond Fund on June 17,
1992 (inception) with that of a similar investment in the Lehman Brothers
Aggregate Bond Index, over the same time period. The Lehman Brothers Aggregate
Bond Index is composed of the Lehman Government/Corporate Index and the
Mortgage-Backed Securities Index which include U.S. treasury issues, agency
issues, corporate bond issues and mortgage-backed securities.
[LINE GRAPH]
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
<S> <C>
YEAR ENDED
11/30/94
(3.79)%
------------------
FIVE YEARS
ENDED
11/30/94
6.91%
------------------
INCEPTION
(09/19/89)
THROUGH
11/30/94
7.08%
------------------
-----------------------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Trust A Shares of the Nations Managed Bond Fund on September 19,
1989 (inception) with that of a similar investment in the Lehman Brothers
Aggregate Bond Index, over the same time period. The Lehman Brothers Aggregate
Bond Index is composed of the Lehman Government/Corporate Index and the
Mortgage-Backed Securities Index which include U.S. treasury issues, agency
issues, corporate bond issues and mortgage-backed securities.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary
with market conditions, and the principal value of shares, when redeemed, may
be more or less than original cost.
Average annual total returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestment of dividends.
13
<PAGE>
NATIONS SHORT-TERM INCOME FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by Greg Cobb. Mr. Cobb, a Vice President, joined
NationsBank in 1993 and has eight years of investment management experience. He
received a B.S. in economics from the University of North Carolina, Chapel Hill.
INVESTMENT OBJECTIVE
Nations Short-Term Income Fund seeks as high a level of current income as
is consistent with prudent investment risk. Under normal market conditions, it
is expected that the Fund will have an average dollar weighted maturity of three
years or less.
PERFORMANCE SUMMARY AND OVERVIEW*
The 1994 bond market will be remembered as one of the most difficult that
investors have seen since the 1920s. The bond market experienced a dramatic rise
in interest rates over the last 12 months. This can be attributed to several
factors, including continued strength in the domestic economy, a weaker U.S.
dollar, rising price pressures and a tighter monetary policy by the Federal
Reserve Board (the "Fed").
Relative performance this year was as much a function of what was not
owned, as what was owned. There have been many well-documented reports of
significant losses by investors who purchased securities offering above-market
yields. Many of these investors, however, did not fully understand the potential
price risk of these securities. As interest rate levels and volatility
increased, many of these securities suffered significant price declines. We
sought to avoid such pitfalls by carefully analyzing each investment's yield in
light of its potential price volatility under changing market conditions. We
believe this disciplined approach to risk analysis served the Fund well in 1994.
In addition, we believe this disciplined approach has helped us meet our
customers' expectations in a difficult market environment without providing the
type of negative surprises that have dominated the headlines.
In this difficult environment, the Nations Short-Term Income Fund recorded
a total return of (0.11)% for the fiscal year ending November 30, 1994.** This
exceeded the (1.36)% total return of the Fund's 3-year U.S. Treasury benchmark.
The Fund also performed well relative to its peers in the Lipper Short
Investment Grade Debt Fund Universe, which had an average total return of 0.01%
over the same period.***
The Fund employed three strategies to reduce risk, enhance current income
and improve overall performance. First, to reduce price risk in a rising
interest rate environment, the average maturity of the Fund was reduced from
three years to two years. Second, the Fund increased its holdings of high
quality corporate bonds which can provide higher income streams than U.S.
Treasuries of similar maturities. We believed that short-term corporate bonds
presented an attractive investment as the economy continued to expand, corporate
earnings remained strong and balance sheets improved. Finally, the Fund
increased its exposure to AAA-rated asset-backed securities, which provided
higher current income relative to similarly rated corporate securities.
It is important to remember that interest rates move in cycles. The present
level of interest rates should provide fixed-income investors with higher
current yields than were available just one year ago. We believe that the market
is nearing the end of the Fed's tightening cycle and, while a significant rally
in bond prices may still be some time off, the traditional benefits of investing
a portion of one's portfolio in fixed-income investments remain intact:
diversification, stable income flow and a reduction in total portfolio
volatility over the long term.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994 was (0.33)%. The total return for
Investor C Shares for the one-year period ended November 30, 1994 was (0.51)%.
The total return for Investor N Shares for the one-year period ended November
30, 1994 was (0.46)%. Had the maximum sales charge of 1.50% on Investor A Shares
been taken into effect, the total return for such shares would have been lower.
*** Source: Lipper Analytical Services, Inc., an independent mutual fund
performance monitoring service.
14
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-TERM INCOME FUND
----------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
----------------------------------------
[PIE CHART]
<TABLE>
<CAPTION>
- ----------------------------------------
TOP TEN HOLDINGS AS OF 11/30/94
- ----------------------------------------
<S> <C>
1. U.S. Treasury Notes 6.1%
2. Union Bank of Finland, Ltd.,
5.250% 06/15/1996 3.3
3. International Lease Finance
Corporation, 5.790%
11/03/1997 3.2
4. Tennessee Gas Pipeline
Company, 9.250%
05/15/1996 3.0
5. Private Label Credit Card
Master Trust II,
Series 1994-1, 7.150%
06/01/2001 2.9
6. McDonnell Douglas Financial
Corporation, 5.260%
11/30/1995 2.9
7. Household Affinity Credit
Master Trust I, 7.000%
12/15/1999 2.9
8. Hertz Corporation, 9.125%
08/01/1996 2.7
9. Lord Realty Corporation,
10.500% 12/30/1997 2.7
10. First Deposit Master Trust,
Series 1994-1, 6.900%
08/15/2001 2.6
</TABLE>
---------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
---------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------
<S> <C> <C>
YEAR ENDED (1.83)% (0.33)%
11/30/94
-------------------------
INCEPTION
(10/02/92) 1.89% 2.61%
THROUGH
11/30/94
-------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 1.50% charge
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor A Shares of the Nations Short-Term Income Fund on
October 2, 1992 (inception) with that of a similar investment in the Lehman
Brothers 1-5 Year Government/Corporate Index, over the same time period. The
Lehman Brothers 1-5 Year Government/Corporate Index is composed of all U.S.
government and corporate bonds with maturities of 1-5 years.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
15
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-TERM INCOME FUND
---------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C SHARES AS OF 11/30/94
---------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
<S> <C>
YEAR ENDED (0.51)%
11/30/94
------------------
INCEPTION
(10/02/92) 2.39%
THROUGH
11/30/94
------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor C Shares of the Nations Short-Term Income Fund on
October 2, 1992 (inception) with that of a similar investment in the Lehman
Brothers 1-5 Year Government/Corporate Index, over the same time period. The
Lehman Brothers 1-5 Year Government/Corporate Index is composed of all U.S.
government and corporate bonds with maturities of 1-5 years.
[LINE GRAPH]
---------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR N SHARES AS OF 11/30/94
---------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
<S> <C>
YEAR ENDED (0.46)%
11/30/94
------------------
INCEPTION
(06/07/93) 1.67%
THROUGH
11/30/94
------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor N Shares of the Nations Short-Term Income Fund on June
7, 1993 (inception) with that of a similar investment in the Lehman Brothers
1-5 Year Government/Corporate Index, over the same time period. The Lehman
Brothers 1-5 Year Government/Corporate Index is composed of all U.S. government
and corporate bonds with maturities of 1-5 years.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
16
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-TERM INCOME FUND
------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
<S> <C>
YEAR ENDED (0.11)%
11/30/94
------------------
INCEPTION
(09/30/92) 2.92%
THROUGH
11/30/94
------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Trust A Shares of the Nations Short-Term Income Fund on September
30, 1992 (inception) with that of a similar investment in the Lehman Brothers
1-5 Year Government/Corporate Index, over the same time period. The Lehman
Brothers 1-5 Year Government/Corporate Index is composed of all U.S. government
and corporate bonds with maturities of 1-5 years.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary
with market conditions, and the principal value of shares, when redeemed, may
be more or less than original cost.
Average annual total returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestment of dividends.
17
<PAGE>
NATIONS ADJUSTABLE RATE GOVERNMENT FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by John Swaim. He joined NationsBank in 1986 and is a
Vice President and Fixed Income Portfolio Manager. Mr. Swaim has managed the
Fund since its inception in 1992. He is a member of the Fixed Income Group with
over seven years of investment experience. Mr. Swaim received a B.S. from the
University of North Texas and an M.B.A. from the University of Texas at
Arlington.
INVESTMENT OBJECTIVE
The objective of Nations Adjustable Rate Government Fund is to seek a high
level of current income consistent with minimum fluctuation in share price. The
Fund seeks to achieve this objective by investing primarily in adjustable rate
mortgage securities.
PERFORMANCE SUMMARY AND OVERVIEW*
Nations Adjustable Rate Government Fund seeks to outperform the Lipper
Adjustable Rate Government Fund Average, provide a return competitive to other
short maturity assets, and minimize, to the extent possible, fluctuation in the
Fund's net asset value ("NAV"). The Fund produced a (0.34)% total return for the
year ended November 30, 1994.** This total return compared favorably with the
total return of the Lipper Adjustable Rate Government Fund Average of (1.18)%
over the same period.*** We believe that this positive relative performance was
due, in part, to our conservative investment strategy which we believe is in
line with the expectations of Fund investors.
NAV volatility was low relative to other fixed income assets, as the Fund's
net asset value per share declined about 5% over the year. This decline was in
line with short maturity U.S. government agency debt, and compares favorably to
the short maturity corporate securities (5.6% decline in price), and the fixed
rate mortgage universe (8.0% decline in price).
The dramatic rise in interest rates over the last 12 months can be
attributed to several factors, including a weaker U.S. dollar, strength in the
domestic economy, rising commodity price pressures, and tighter monetary policy
by the Federal Reserve. While many investors experienced substantial losses due
to interest rate increases over the past year, we believe that Nations
Adjustable Rate Government Fund investors have benefited from our disciplined
approach that strives to meet our customer expectations without providing the
type of negative surprises that have dominated the headlines.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994 was (0.52)%. The total return for
Investor C Shares for the one-year period ended November 30, 1994 was (0.82)%.
The total return for Investor N Shares for the one-year period ended November
30, 1994 was (0.84)%. Had the maximum sales charge of 3.25% on Investor A Shares
and the maximum contingent deferred sales charge of 4.00% on Investor N Shares
been taken into effect, the total returns for such shares would have been lower.
*** Source: Lipper Analytical Services, Inc., an independent mutual fund
performance monitoring service.
18
<PAGE>
NATIONS FUND TRUST
NATIONS ADJUSTABLE RATE GOVERNMENT FUND
----------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
----------------------------------
[PIE CHART]
<TABLE>
<CAPTION>
- -----------------------------------------
TOP HOLDINGS AS OF 11/30/94
- -----------------------------------------
<S> <C>
1. Federal National Mortgage
Association
Certificates 57.1%
2. U.S. Treasury Notes 19.7
3. Government National Mortgage
Association
Certificates 19.4
4. Federal Home Loan Mortgage
Corporation Certificates 5.7
5. Student Loan Marketing
Association Certificates 3.1
6. Drexel Burnham Lambert, Series
S-2, 9.000% 08/01/2018 1.5
</TABLE>
---------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
---------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------
<S> <C> <C>
YEAR ENDED (3.76)% (0.52)%
11/30/94
-------------------------
INCEPTION
(10/20/92) 0.38% 1.96%
THROUGH
11/30/94
-------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 3.25% charge
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor A Shares of the Nations Adjustable Rate Government Fund
on October 20, 1992 (inception) with that of a similar investment in the Lehman
Brothers 1-3 Year Government Index, over the same time period. The Lehman
Brothers 1-3 Year Government Index is composed of all U.S. government issues
with maturities of 1-3 years.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
19
<PAGE>
NATIONS FUND TRUST
NATIONS ADJUSTABLE RATE GOVERNMENT FUND
- -------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C SHARES AS OF 11/30/94
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------------------
AVERAGE ANNUAL TOTAL RETURN
------------------------------------
<S> <C>
YEAR ENDED (0.82)%
11/30/94
---------------------
INCEPTION
(10/19/92) 1.42%
THROUGH
11/30/94
---------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor C Shares of the Nations Adjustable Rate Government Fund
on October 19, 1992 (inception) with that of a similar investment in the Lehman
Brothers 1-3 Year Government Index over the same time period. The Lehman
Brothers 1-3 Year Government Index is composed of all U.S. government issues
with maturities of 1-3 years.
[LINE GRAPH]
- -------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR N SHARES AS OF 11/30/94
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
<S> <C> <C>
YEAR ENDED (4.62)% (0.84)%
11/30/94
--------------------------
INCEPTION
(06/07/93) (1.46)% 0.46%
THROUGH
11/30/94
--------------------------
Not
Adjusted for adjusted
applicable for
contingent contingent
deferred deferred
sales charge sales
charge
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor N Shares of the Nations Adjustable Rate Government Fund
on June 7, 1993 (inception) with that of a similar investment in the Lehman
Brothers 1-3 Year Government Index, over the same time period. The Lehman
Brothers 1-3 Year Government Index is composed of all U.S. government issues
with maturities of 1-3 years.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
20
<PAGE>
NATIONS FUND TRUST
NATIONS ADJUSTABLE RATE GOVERNMENT FUND
- -------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
<S> <C>
YEAR ENDED (0.34)%
11/30/94
------------------
INCEPTION
(10/13/92) 2.18%
THROUGH
11/30/94
------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Trust A Shares of the Nations Adjustable Rate Government Fund on
October 13, 1992 (inception) with that of a similar investment in the Lehman
Brothers 1-3 Year Government Index, over the same time period. The Lehman
Brothers 1-3 Year Government Index is composed of all U.S. government issues
with maturities of 1-3 years.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
21
<PAGE>
NATIONS DIVERSIFIED INCOME FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by Mark S. Ahnrud. Mr. Ahnrud joined NationsBank in
1985 and is a Vice President and Senior Portfolio Manager. He is a member of the
Fixed Income Group and has over seven years investment experience. He received a
B.S. from Babson College and an M.B.A. from the Fuqua School of Business at Duke
University. Mr. Ahnrud is a Chartered Financial Analyst, a member of the
Association for Investment Management and Research and the North Carolina
Society of Financial Analysts.
INVESTMENT OBJECTIVE
The objective of Nations Diversified Income Fund is to seek as high a level
of current income as is consistent with prudent investment risk. The Fund seeks
to achieve this objective by investing primarily in a wide range of fixed income
securities.
PERFORMANCE SUMMARY AND OVERVIEW*
The 1994 bond market will be remembered as one of the worst investors have
seen since the 1920s. The dramatic rise in interest rates over the last 12
months can be attributed to several factors, including a weaker U.S. dollar,
strength in the domestic economy, rising price pressures and tighter monetary
policy by the Federal Reserve Board (the "Fed").
Relative performance this year was as much a function of what was not
owned, as what was owned. There have been many well-documented reports of
significant losses by investors who purchased securities offering above-market
yields. Many of these investors, however, did not fully understand the potential
price risk of these securities. As interest rate levels and volatility
increased, many of these securities suffered significant price declines.
We sought to avoid such pitfalls by carefully analyzing each investment's
yield in light of its potential price volatility under changing market
conditions. We believe that this disciplined approach helped us meet our
customers' expectations in a difficult market environment without providing the
types of negative surprises that have dominated the headlines.
For the fiscal year ending November 30, 1994, Nations Diversified Income
Fund reported a (3.05)% total return.** This return exceeded the total return of
the Fund's U.S. Treasury benchmark, the 10-year U.S. Treasury Note, which
returned (8.27)% over the same period. The Fund also demonstrated strong
performance relative to its peers in the Lipper Corporate Debt "BBB" Rated Fund
Average, which had an average total return of (4.64)% over the same time
period.***
For most of 1994, the portfolio maintained an overweighted position in
corporate bonds. We believe this strategy benefited the Fund's performance as
corporate bonds have represented the best performing sector of the fixed income
market over the last three years. However, given the Fed activity this year
aimed at slowing economic growth, we believe it may be appropriate to reduce the
Fund's exposure to corporate securities. This is based on our belief that they
have become overvalued, and that the sector could underperform in the months
ahead. We have reduced the Fund's exposure to corporate bonds from almost 90%
one year ago, to approximately 49.5% as of November 30, 1994. As a part of this
process, we have reduced the Fund's investments in high yield debt securities
from 35% to 20%. Cash from these sales has generally been reinvested in the U.S.
Treasury and mortgage-backed securities markets.
It is important to remember that interest rates move in cycles and that the
present level of interest rates should provide fixed income investors with
higher yields than were available just one year ago. We believe that the market
is nearing the end of the Fed's tightening cycle and, while a significant rally
in bonds may still be some time off, the traditional benefits of investing a
portion of one's portfolio in fixed-income investments remain intact: stable
income flow, diversification and a reduction in total portfolio volatility over
the long term.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994 was (3.26)%. The total return for
Investor C Shares for the one-year period ended November 30, 1994 was (3.77)%.
The total return for Investor N Shares for the one-year period ended November
30, 1994 was (3.77)%. Had the sales charge of 4.75% on Investor A Shares, the
contingent deferred sales charge of 1.00% on Investor C Shares and the
contingent deferred sales charge of 5.00% on Investor N Shares been taken into
effect, the total return for such shares would have been lower.
*** Source: Lipper Analytical Services, Inc., an independent mutual fund
performance monitoring service.
22
<PAGE>
NATIONS FUND TRUST
NATIONS DIVERSIFIED INCOME FUND
- ----------------------------------------------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- ----------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<CAPTION>
- ----------------------------------------
TOP TEN HOLDINGS AS OF 11/30/94
- ----------------------------------------
<S> <C>
1. U.S. Treasury Bonds 19.2%
2. U.S. Treasury Note 19.1
3. Federal National Mortgage
Association Certificates 9.5
4. Government National Mortgage
Association Certificates 5.1
5. Global Marine Inc., 12.750%
12/15/1999 2.3
6. Transco Energy Corporation,
11.250% 07/01/1999 2.3
7. News America Holdings Inc.,
10.125% 10/15/2012 2.3
8. Stone Container Corporation,
11.875% 12/01/1998 2.3
9. Clark Oil & Refining
Corporation, 9.500%
09/15/2004 2.2
10. Louis Dreyfus Natural Gas,
9.250% 06/15/2004 2.1
</TABLE>
- ----------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------
<S> <C> <C>
YEAR ENDED (7.85)% (3.26)%
11/30/94
-------------------------
INCEPTION
(11/25/92) 3.69% 6.23%
THROUGH
11/30/94
-------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 4.75% charge
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor A Shares of the Nations Diversified Income Fund on
November 25, 1992 (inception) with that of a similar investment in the Lehman
Brothers Government/Corporate Bond Index, over the same time period. The Lehman
Brothers Government/Corporate Bond Index is composed of U.S. government,
treasury and agency securities, corporate and yankee bonds.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
23
<PAGE>
NATIONS FUND TRUST
NATIONS DIVERSIFIED INCOME FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
<S> <C> <C>
YEAR ENDED (4.66)%* (3.77)%
11/30/94
--------------------------
INCEPTION
(11/09/92) 6.05% 6.05%
THROUGH
11/30/94
--------------------------
*Adjusted Not
for maximum adjusted
contingent for
deferred contingent
sales deferred
charge of sales
1.00% charge
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor C Shares of the Nations Diversified Income Fund on
November 9, 1992 (inception) with that of a similar investment in the Lehman
Brothers Government/Corporate Bond Index, over the same time period. The Lehman
Brothers Government/Corporate Bond Index is composed of U.S. government,
treasury and agency securities, corporate and yankee bonds.
[LINE GRAPH]
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR N SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
<S> <C> <C>
YEAR ENDED (8.21)% (3.77)%
11/30/94
--------------------------
INCEPTION
(06/07/93) (1.39)% 1.08%
THROUGH
11/30/94
--------------------------
Adjusted Not
for adjusted
applicable for
contingent contingent
deferred deferred
sales sales
charge charge
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor N Shares of the Nations Diversified Income Fund on June
7, 1993 (inception) with that of a similar investment in the Lehman Brothers
Government/Corporate Bond Index, over the same time period. The Lehman Brothers
Government/Corporate Bond Index is composed of U.S. government, treasury and
agency securities, corporate and yankee bonds.
[LINE CHART]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
24
<PAGE>
NATIONS FUND TRUST
Nations Diversified Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
<S> <C>
YEAR ENDED (3.05)%
11/30/94
------------------
INCEPTION
(10/30/92) 6.56%
THROUGH
11/30/94
------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Trust A Shares of the Nations Diversified Income Fund on October
30, 1992 (inception) with that of a similar investment in the Lehman Brothers
Government/Corporate Bond Index, over the same time period. The Lehman Brothers
Government/Corporate Bond Index is composed of U.S. government, treasury and
agency securities, corporate and yankee bonds.
[LINE CHART]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
25
<PAGE>
NATIONS STRATEGIC FIXED INCOME FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by Mark S. Ahnrud. Mr. Ahnrud joined NationsBank in
1985 and is a Vice President and Senior Portfolio Manager. He is a member of the
Fixed Income Group and has over seven years investment experience. He received a
B.S. from Babson College and an M.B.A. from Fuqua School of Business at Duke
University. Mr. Ahnrud is a Chartered Financial Analyst, a member of the
Association for Investment Management and Research and the North Carolina
Society of Financial Analysts.
INVESTMENT OBJECTIVE
The objective of Nations Strategic Fixed Income Fund is to maximize total
investment return through the active management of fixed income securities.
PERFORMANCE SUMMARY AND OVERVIEW*
Nations Strategic Fixed Income Fund recorded a return of (3.58)% for the
fiscal year ended November 30, 1994.** This return was consistent with that of
the broad fixed income market, two common measures of which are the Lehman
Government/Corporate Index and the Lehman Brothers Aggregate Bond Index which
returned (3.72)% and (3.06)%, respectively, over the same period.***
The 1994 bond market will be remembered as one of the worst investors have
seen since the 1920s. The dramatic rise in interest rates over the last 12
months can be attributed to several factors, including a weaker U.S. dollar,
strength in the domestic economy, rising price pressures and tighter monetary
policy by the Federal Reserve.
Relative performance this year was as much a function of what was not
owned, as what was owned. There have been many well-documented reports of
significant losses by investors who purchased securities offering above-market
yields. Many of these investors, however, did not fully understand the potential
price risk of these securities. As interest rate levels and volatility
increased, many of these securities suffered significant price declines. We
sought to avoid such pitfalls by carefully analyzing each investment's yield in
light of its potential price volatility under changing market conditions. We
believe that this disciplined approach has helped us meet our customers'
expectations in a difficult market environment without providing the type of
negative surprises that have dominated the headlines.
At the beginning of the calendar year, we increased the Fund's weighting in
certain pass-through mortgage-backed securities to almost 30% as we felt
pass-through securities represented good relative value in the marketplace. We
believe that this strategy benefited the Fund, as pass-through securities (other
than collateralized mortgage obligations) performed relatively well in 1994.
More recently, we have reduced the Fund's investments in the corporate bond
market, from over 30% to approximately 12% as of November 30, 1994. Although
corporate bonds have performed well over the last three years, we feel that they
are overvalued in the marketplace at current levels. We look for corporate bonds
to underperform U.S. Treasuries over the coming months, at which time we may
seek to add additional corporate bonds to the portfolio.
It is important to remember that interest rates move in cycles and that the
present level of interest rates should provide fixed-income investors with
higher yields than were available just one year ago. We believe that the market
is nearing the end of the Fed's tightening cycle and, while a significant rally
in bond prices may still be some time off, the traditional benefits of investing
a portion of one's portfolio in fixed-income investments remain intact: stable
income flow, diversification and a reduction in total portfolio volatility over
the long term.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return. The total return for Investor A Shares for
the one-year period ended November 30, 1994 was (3.76)%. The total return for
Investor C Shares for the one-year period ended November 30, 1994 was (4.14)%.
The total return for Investor N Shares for the one-year period ended November
30, 1994 was (4.21)%. Had the sales charge of 3.25% on Investor A Shares, the
contingent deferred sales charge of 1.00% on Investor C Shares and the
contingent deferred sales charge of 5.00% on Investor N Shares been taken into
effect, the total returns for such shares would have been lower.
*** Source: Lehman Brothers, Inc.
26
<PAGE>
NATIONS FUND TRUST
NATIONS STRATEGIC FIXED INCOME FUND
- --------------------------------------------------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- --------------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<CAPTION>
- ----------------------------------------
TOP TEN HOLDINGS AS OF 11/30/94
- ----------------------------------------
<S> <C>
1. U.S. Treasury Notes 47.7%
2. U.S. Treasury Bonds 13.1
3. Federal National Mortgage
Association Certificates 13.1
4. Government National Mortgage
Association Certificates 8.8
5. General Motors Acceptance
Corporation,
Series 1994-A Grantor Trust,
Class A, 6.300%
06/15/1999 2.1
6. Daimler-Benz Auto Grantor
Trust Series 1994-A,
Class A, 5.950% 12/15/2000 1.9
7. Du Page County, Illinois, GO,
Alternative Revenue Source,
6.550% 01/01/2021 1.9
8. EQCC Home Equity Loan Trust,
Series 1994-2,
Class A1, 6.350% 06/15/2014 1.6
9. Skandia Capital AB, 6.000%
02/11/1998 1.5
10. News America Holdings Inc.,
7.500% 03/01/2000 1.4
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
---------------------------------------
AVERAGE ANNUAL TOTAL RETURN
---------------------------------------
<S> <C> <C>
YEAR ENDED (6.89)% (3.76)%
11/30/94
-------------------------
INCEPTION
(11/19/92) 1.79% 3.45%
THROUGH
11/30/94
-------------------------
Adjusted for Not
maximum adjusted
sales charge for sales
of 3.25% charge
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor A Shares of the Nations Strategic Fixed Income Fund on
November 19, 1992 (inception) with that of a similar investment in the Lehman
Brothers Aggregate Bond Index, over the same time period. The Lehman Brothers
Aggregate Bond Index is composed of the Lehman Government/Corporate Index and
the Mortgage-Backed Securities Index which include U.S. treasury issues, agency
issues, corporate bond issues and mortgage-backed securities.
[LINE GRAPH]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestment of dividends.
27
<PAGE>
NATIONS FUND TRUST
NATIONS STRATEGIC FIXED INCOME FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
<S> <C> <C>
YEAR ENDED (5.03)%* (4.14)%
11/30/94
--------------------------
INCEPTION
(11/16/92) 3.07% 3.07%
THROUGH
11/30/94
--------------------------
Not
*Adjusted for adjusted
maximum for
contingent contingent
deferred deferred
sales charge sales
of 1.00% charge
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor C Shares of the Nations Strategic Fixed Income Fund on
November 16, 1992 (inception) with that of a similar investment in the Lehman
Brothers Aggregate Bond Index, over the same time period. The Lehman Brothers
Aggregate Bond Index is composed of the Lehman Government/Corporate Index and
the Mortgage-Backed Securities Index which include U.S. treasury issues, agency
issues, corporate bond issues and mortgage-backed securities.
[LINE CHART]
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR N SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
<S> <C> <C>
YEAR ENDED (8.62)% (4.21)%
11/30/94
--------------------------
INCEPTION
(06/07/93) (2.93)% (0.49)%
THROUGH
11/30/94
--------------------------
Not
Adjusted for adjusted
applicable for
contingent contingent
deferred deferred
sales charge sales
charge
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Investor N Shares of the Nations Strategic Fixed Income Fund on
June 7, 1993 (inception) with that of a similar investment in the Lehman
Brothers Aggregate Bond Index, over the same time period. The Lehman Brothers
Aggregate Bond Index is composed of the Lehman Government/Corporate Index and
the Mortgage-Backed Securities Index which include U.S. treasury issues, agency
issues, corporate bond issues and mortgage-backed securities.
[LINE CHART]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
28
<PAGE>
NATIONS FUND TRUST
NATIONS STRATEGIC FIXED INCOME FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
<S> <C>
YEAR ENDED (3.58)%
11/30/94
------------------
INCEPTION
(10/30/92) 3.72%
THROUGH
11/30/94
------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Trust A Shares of the Nations Strategic Fixed Income Fund on
October 30, 1992 (inception) with that of a similar investment in the Lehman
Brothers Aggregate Bond Index, over the same time period. The Lehman Brothers
Aggregate Bond Index is composed of the Lehman Government/Corporate Index and
the Mortgage-Backed Securities Index which include U.S. treasury issues, agency
issues, corporate bond issues and mortgage-backed securities.
[LINE CHART]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
29
<PAGE>
NATIONS MORTGAGE-BACKED SECURITIES FUND
PERFORMANCE AND COMMENTARY
INVESTMENT MANAGEMENT PROFILE
The Fund is managed by John Swaim. Mr. Swaim joined NationsBank in 1986 and
is a Vice President and Fixed Income Portfolio Manager. He is a member of the
Fixed Income Group with over seven years of investment experience. Mr. Swaim
received a B.S. from the University of North Texas and an M.B.A. from the
University of Texas at Arlington.
INVESTMENT OBJECTIVE
The objective of Nations Mortgage-Backed Securities Fund 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.
PERFORMANCE SUMMARY AND OVERVIEW*
Nations Mortgage-Backed Securities Fund invests primarily in U.S.
government agency issued mortgage-backed securities. The Fund seeks to
outperform the Lipper U.S. Mortgage Average universe and provide a return
competitive to alternative fixed income assets, consistent with prudent
investment risk. The Fund produced a (3.41)% total return for the year ended
November 30, 1994.** This return compared favorably to that of the Lipper U.S.
Mortgage Average benchmark which had a total return of (4.25)% for the same time
period.*** Mortgages in general have been a good relative investment during the
year as prepayments have eased, price volatility has not been substantial, and
spreads to U.S. Treasury securities have been stable.
We believe the good relative performance of the Fund during one of the
worst periods in bond market history was due, in part, to our conservative
investment strategy, which we believe is in line with the expectations of Fund
investors. The dramatic rise in interest rates over the last 12 months can be
attributed to several factors, including a weaker U.S. dollar, strength in the
domestic economy, rising commodity price pressures, and tighter monetary policy
by the Federal Reserve. While many investors have been severely penalized for
poor risk management this year, we believe that Nations Mortgage-Backed
Securities Fund investors benefited from our disciplined approach that strives
to meet our customers expectations without providing the type of negative
surprises that have dominated the headlines.
The Fund was repositioned during the course of the year to take better
advantage of relative value opportunities in the pass-through sectors of the
mortgage market. We continue to believe that mortgages look favorable in 1995
given their relatively small credit risk, high liquidity, and stable spread to
U.S. Treasuries.
- ---------------
* The performance shown includes the effect of fee waivers and/or expense
reimbursements by the investment adviser and/or the administrator(s). Such fee
waivers and/or expense reimbursements have the effect of increasing total
return.
** Trust A Shares total return.
*** Source: Lipper Analytical Services, Inc., an independent mutual fund
performance monitoring service.
30
<PAGE>
NATIONS FUND TRUST
NATIONS MORTGAGE-BACKED SECURITIES FUND
- --------------------------------------------------------------------------------
PORTFOLIO BREAKDOWN AS OF 11/30/94
- --------------------------------------------------------------------------------
[PIE CHART]
<TABLE>
<CAPTION>
- -----------------------------------------
TOP HOLDINGS AS OF 11/30/94
- -----------------------------------------
<S> <C>
1. Government National Mortgage
Association
Certificates 37.5%
2. U.S. Treasury
Obligations 31.3
3. Federal National Mortgage
Association
Certificates 29.0
4. Federal Home Loan Mortgage
Corporation
Certificates 18.3
5. Resolution Trust Corporation,
Series 91-3,
Class A-2, 10.402%
08/25/2021 1.5
6. First Boston Mortgage
Securities, Series 1989-5
Class A-1, 7.500%
12/25/2019 1.1
7. Residential Funding Mortgage,
Series 1990-13,
Class A-13, 9.500%
10/25/2005 0.8
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - TRUST A SHARES AS OF 11/30/94
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
<S> <C>
YEAR ENDED (3.41)%
11/30/94
------------------
INCEPTION
(10/30/92) 1.63%
THROUGH
11/30/94
------------------
</TABLE>
The chart to the right compares the growth in value of a hypothetical $10,000
investment in Trust A Shares of the Nations Mortgage- Backed Securities Fund on
October 30, 1992 (inception) with that of a similar investment in the Lehman
Brothers Mortgage-Backed Securities Index, over the same time period. The Lehman
Brothers Mortgage-Backed Securities Index is composed of all fixed-rate
securities backed by Mortgage Pools of the Government National Mortgage
Association, Federal Home Loan Mortgage Corporation and Federal National
Mortgage Association.
[LINE CHART]
- --------------------------------------------------------------------------------
The performance shown represents past performance and is not predictive of
future results. A mutual fund's share price and investment return will vary with
market conditions, and the principal value of shares, when redeemed, may be more
or less than original cost.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
31
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITY -- 0.8% (Cost $4,031,167)
$4,085,910 Collateralized Mortgage Securities Corporation, Series 1992-1,
Class C,
6.750% 06/20/2017.............................................. $ 4,046,317
============
GOVERNMENT GUARANTEED BONDS -- 1.3%
4,140,000 Second Attransco Trailer Corporation, Series A, 8.500%
06/15/2002....................................................... 4,151,112
2,773,000 Third Attransco Trailer Corporation, 8.200% 11/01/1997............. 2,818,810
------------
TOTAL GOVERNMENT GUARANTEED BONDS (Cost $7,030,836)................ 6,969,922
============
MORTGAGE-BACKED SECURITIES -- 34.4%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 2.6%
925,369 Gold 5 Year Balloon, 8.500% 01/01/1996............................. 933,465
Multiclass:
2,000,000 Series 77, Class F, 8.500% 06/15/2017............................ 1,993,750
3,566,975 Series 105, Class D, 6.000% 01/15/2019........................... 3,417,590
3,010,210 Series 1188, Class E, 7.000% 01/15/2014.......................... 2,994,196
4,731,728 Series 1202, Class C, 6.000% 12/15/2001.......................... 4,681,430
------------
14,020,431
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 26.2%
5,000,000 6.200% 01/10/1997................................................ 4,862,500
1,700,000 8.150% 05/11/1998................................................ 1,711,679
10,000,000 7.500% 09/08/2001, TBA++......................................... 9,731,200
15,000,000 7.900% 04/10/2002................................................ 14,728,050
8,000,000 7.550% 06/10/2004................................................ 7,474,960
6,265,635 8.000% 06/01/2008................................................ 6,136,125
15,000,000 7.000% 10/01/2009, TBA++......................................... 14,088,280
6,703,502 9.000% 04/01/2016................................................ 6,804,590
25,000,000 7.500% 02/01/2024, TBA++......................................... 23,281,250
35,000,000 8.000% 05/01/2024, TBA++......................................... 33,468,750
REMIC:
523,848 Series 1989-81D, 9.000% 06/25/2016............................... 530,558
11,000,000 Series 1992-171PD, 6.300% 04/25/2017............................. 10,198,980
8,000,000 Series 1992-G31-G, 7.000% 09/25/2018............................. 7,802,480
------------
140,819,402
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- (CONTINUED)
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) CERTIFICATES -- 5.6%
$ 6,442,889 8.500% 02/15/2005 -- 08/15/2008, (27 Pools)........................ $ 6,478,854
15,000,000 8.000% 05/11/2024, TBA++........................................... 14,259,300
10,000,000 7.500% 10/01/2024, TBA++........................................... 9,206,200
-----------
29,944,354
-----------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $187,285,815)................. 184,784,187
===========
U.S. GOVERNMENT AGENCY SECURITY -- 3.2% (Cost $18,313,003)
20,000,000 Federal Home Loan Bank, 4.550% 10/20/2000.......................... 17,350,000
===========
U.S. TREASURY OBLIGATIONS -- 72.9%
U.S. TREASURY BILL -- 5.3%
30,000,000 6.630% 09/21/1995.................................................. 28,614,525
-----------
U.S. TREASURY NOTES -- 67.6%
50,000,000 8.500% 11/15/1995.................................................. 50,718,500
30,000,000 4.250% 11/30/1995.................................................. 29,226,600
40,000,000 9.250% 01/15/1996.................................................. 40,924,800
60,000,000 7.625% 04/30/1996.................................................. 60,300,000
10,000,000 8.000% 10/15/1996.................................................. 10,106,200
5,000,000 6.875% 10/31/1996.................................................. 4,955,450
25,000,000 7.250% 11/15/1996.................................................. 24,929,750
3,500,000 8.000% 01/15/1997.................................................. 3,535,560
35,000,000 6.750% 02/28/1997.................................................. 34,458,550
40,000,000 8.500% 04/15/1997.................................................. 40,824,800
25,000,000 8.500% 05/15/1997.................................................. 25,523,500
25,000,000 8.500% 07/15/1997.................................................. 25,546,750
5,000,000 8.750% 10/15/1997.................................................. 5,140,600
8,000,000 7.250% 08/15/2004.................................................. 7,633,760
-----------
363,824,820
-----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $398,315,914).................. 392,439,345
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.5% (Cost $35,090,000)
<S> <C> <C>
$35,090,000 Agreement with CS First Boston Corporation, 5.650% dated 11/30/1994
to be repurchased at $35,095,507 on 12/01/1994, collateralized by
$35,879,549 market value of U.S. Treasury Bonds, 8.875% -
13.875%, having maturities ranging from November, 2009 through
August, 2017..................................................... $ 35,090,000
=============
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS (Cost $650,066,735*)................................. 119.1% 640,679,771
OTHER ASSETS AND LIABILITIES (NET)..................................... (19.1) (102,573,613)
----- -------------
NET ASSETS............................................................. 100.0% $ 538,106,158
===== =============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes was $650,827,477.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATIONS/DEFINITIONS:
BALLOON 5 and 7 year mortgages with larger dollar amounts of payments
falling due in the later years of the obligation.
GOLD Payments are on accelerated 45 day payment cycle instead of regular
75 day cycle.
REMIC Real Estate Mortgage Investment Conduit
TBA To Be Announced
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
NATIONS FUND TRUST
NATIONS MANAGED BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 9.9%
<S> <C> <C>
$3,925,227 Daimler-Benz Auto Grantor Trust, Series 1994-A, Class A,
5.950% 12/15/2000................................................ $ 3,852,856
3,211,602 EQCC Home Equity Loan Trust, Series 1994-2, Class A1, 6.350%
06/15/2014....................................................... 3,161,421
3,000,000 Ford Credit Grantor Trust, Series 1994-B, Class A, 7.300%
10/15/1999....................................................... 2,982,180
4,483,601 General Motors Acceptance Corporation, Series 1994-A Grantor Trust,
Class A, 6.300% 06/15/1999....................................... 4,396,709
2,258,637 Green Tree Financial Corporation, Class A-1, 6.550% 07/15/2019+.... 2,204,994
65,095 Morgan Stanley Mortgage, CMO, 8.000% 07/20/2017.................... 64,953
127,770 Western Financial Auto Loans 2, 1991-1, 7.700% 09/01/1996.......... 127,890
-----------
TOTAL ASSET-BACKED SECURITIES (Cost $16,360,185)................... 16,791,003
===========
CORPORATE BONDS AND NOTES -- 14.0%
BANKING AND FINANCE -- 6.6%
2,000,000 Beneficial Corporation, MTN, 8.100% 11/23/1998..................... 1,987,260
1,500,000 Chrysler Financial Corporation, MTN, 7.190% 05/26/1998............. 1,449,900
2,000,000 Chrysler Financial Corporation, MTN, 7.290% 07/07/1998............. 1,935,580
2,000,000 Ford Motor Credit Corporation, MTN, 7.450% 07/12/1999.............. 1,928,200
4,000,000 General Motors Acceptance Corporation, 8.625% 06/15/1999........... 4,000,200
-----------
11,301,140
-----------
INDUSTRIAL -- 2.5%
2,500,000 B.A.T. Capital Corporation, MTN, 6.660% 03/22/2000**............... 2,301,500
2,000,000 Grace, (W.R.) & Company, MTN, 6.880% 06/23/1997.................... 1,935,900
-----------
4,237,400
-----------
PUBLISHING -- 1.6%
2,800,000 News America Holdings Inc., Sr. Note, 7.500% 03/01/2000............ 2,637,208
-----------
TELECOMMUNICATIONS -- 1.5%
2,500,000 TKR Cable Inc., Sr. Deb., 10.500% 10/30/2007....................... 2,563,000
-----------
TRANSPORTATION -- 0.8%
1,500,000 Quantas Airways Limited, Sr. Note, 6.625% 06/30/1998**............. 1,405,035
-----------
UTILITIES -- 1.0%
1,750,000 Cooperative Utilities, Cajun Electric, Series A9, 8.920%
03/15/2019....................................................... 1,779,068
-----------
TOTAL CORPORATE BONDS AND NOTES (Cost $25,112,837)................. 23,922,851
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE>
NATIONS FUND TRUST
NATIONS MANAGED BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
FOREIGN BONDS AND NOTES -- 4.1%
$1,000,000 Banponce Financial Corporation, MTN, 6.870% 08/23/1996............. $ 983,910
1,500,000 Banponce Financial Corporation, MTN, 7.170% 08/26/1997............. 1,458,075
3,000,000 Skandia Capital AB, Guaranteed Eurobonds, 6.000% 02/11/1998........ 2,722,350
2,000,000 Union Bank of Finland Limited, 5.250% 06/15/1996................... 1,916,860
-----------
TOTAL FOREIGN BONDS AND NOTES (Cost $7,325,299).................... 7,081,195
===========
MORTGAGE-BACKED SECURITIES -- 21.5%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 10.7%
5,500,000 7.500% 09/08/2001, TBA++........................................... 5,352,160
9,000,000 8.000% 05/01/2024, TBA++........................................... 8,606,250
4,500,000 7.500% 02/01/2024, TBA++........................................... 4,190,625
-----------
18,149,035
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
CERTIFICATES -- 10.8%
2,763,296 9.000% 06/15/2018 - 11/15/2027, (12 Pools)......................... 2,767,778
3,750,000 8.000% 06/01/2024, TBA++........................................... 3,564,825
9,000,000 8.500% 07/15/2024, TBA++........................................... 8,803,080
3,750,000 7.000% 03/01/2024, TBA++........................................... 3,333,975
-----------
18,469,658
-----------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $36,616,034)................ 36,618,693
===========
MUNICIPAL BOND -- 1.9% (Cost $3,914,781)
3,115,000 Du Page County, Illinois, GO, Alternative Revenue Source,
(Stormwater Project),
6.550% 01/01/2021................................................ 3,257,137
===========
U.S. TREASURY OBLIGATIONS -- 62.2%
U.S. TREASURY BONDS -- 11.8%
16,750,000 8.875% 08/15/2017................................................ 18,042,932
2,000,000 8.750% 08/15/2020................................................ 2,135,620
-----------
20,178,552
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
NATIONS FUND TRUST
NATIONS MANAGED BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- (CONTINUED)
<S> <C> <C>
U.S. TREASURY NOTES -- 50.4%
$20,900,000 7.375% 05/15/1996.................................................. $ 20,919,646
8,000,000 4.375% 11/15/1996.................................................. 7,561,280
15,575,000 6.000% 11/30/1997.................................................. 14,891,102
19,500,000 5.125% 04/30/1998.................................................. 18,003,960
3,860,000 8,875% 02/15/1999.................................................. 4,011,968
19,150,000 5.750% 08/15/2003.................................................. 16,558,813
4,000,000 7.875% 11/15/2004.................................................. 3,989,360
------------
85,936,129
------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $110,418,940)................ 106,114,681
============
</TABLE>
<TABLE>
<S> <C>
REPURCHASE AGREEMENT -- 5.2% (Cost $8,922,000)
8,922,000 Agreement with CS First Boston Corporation, 5.650% dated
11/30/1994, to be repurchased at $8,923,400 on 12/01/1994,
collateralized by $9,122,751 market value of U.S. Treasury Bonds,
8.875% -- 13.875%, having maturities ranging from November, 2009
through August, 2017............................................. 8,922,000
============
TOTAL INVESTMENTS (Cost $208,670,076*).................................. 118.8% 202,707,560
OTHER ASSETS AND LIABILITIES (NET)...................................... (18.8) (32,056,798)
----- ------------
NET ASSETS.............................................................. 100.0% $170,650,762
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes was $209,206,317.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATIONS:
CMO Collateralized Mortgage Obligation
GO General Obligation Bond
MTN Medium Term Note
TBA To Be Announced
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- 23.0%
<S> <C> <C>
$3,000,000 Citicorp Note, A1, Series 1989-17, 8.750% 11/01/1996............... $ 3,040,770
4,000,000 Discover Card Master Trust, Series 1994-1A, 6.700% 02/16/2000...... 3,871,240
3,670,403 EQCC Home Equity Loan Trust, Series 1994-2, Class A1, 6.350%
06/15/2014....................................................... 3,613,053
5,500,000 First Deposit Master Trust, Series 1994-1, 6.900% 08/15/2001....... 5,372,785
3,000,000 Ford Credit Auto Loan Master Trust, Series 1992-2, 7.375%
04/15/1999....................................................... 2,966,250
6,000,000 Household Affinity Credit Master Trust I, 1994-2, 7.000%
12/15/1999....................................................... 5,858,438
4,365,000 National Credit Card Trust Certificates, Series 1989-4, 9.450%
12/31/1997....................................................... 4,468,669
6,000,000 Private Label Credit Card Master Trust II, Series 1994-1, 7.150%
06/01/2001....................................................... 5,947,500
2,596,936 SCFC Recreation Vehicle Loan, 1991-1, 7.250% 09/15/2006............ 2,561,228
4,000,000 Sears Credit Account Master Trust II, Series 1994-2, Class A,
7.250% 02/15/1998................................................ 3,937,500
5,500,000 Signet Credit Card Master Trust, Series 1994-4, Class A, 6.800%
08/15/1997....................................................... 5,335,000
-----------
TOTAL ASSET-BACKED SECURITIES (Cost $47,918,365)................... 46,972,433
===========
CORPORATE BONDS AND NOTES -- 51.7%
BANK -- 4.4%
4,500,000 Home Savings of America, California, 10.500% 06/12/1997............ 4,647,960
4,400,000 World Savings & Loan Association, Oakland, 4.875% 03/01/1996....... 4,281,024
-----------
8,928,984
-----------
BROKERAGE -- 6.8%
5,000,000 Dean Witter, Discover & Company, 5.000% 04/01/1996................. 4,831,550
4,000,000 Lehman Brothers Inc., Sr. Sub. Note, 7.000% 05/15/1997............. 3,875,080
5,000,000 Paine Webber Group Inc., MTN, 9.250% 11/15/1995.................... 5,077,750
-----------
13,784,380
-----------
CAPTIVE FINANCE -- 14.7%
4,000,000 Florida Progress Capital Holding, MTN, 8.250% 09/05/1996**......... 4,016,440
4,000,000 Ford Motor Credit Corporation, 8.625% 04/15/1996................... 4,046,040
General Motors Acceptance Corporation, MTN:
2,000,000 7.500% 06/04/1997................................................ 1,968,400
5,000,000 6.750% 06/16/1997................................................ 4,834,200
6,000,000 McDonnell Douglas Financial Corporation, MTN, 5.260% 11/30/1995.... 5,877,840
4,500,000 Potomac Capital Investment Company, MTN, 6.190% 04/28/1997**....... 4,291,695
5,000,000 Textron Financial Corporation, MTN, 5.320% 03/04/1996**............ 4,867,400
-----------
29,902,015
-----------
CHEMICAL -- 2.4%
5,000,000 Grace (W.R.) & Company, MTN, 7.250% 07/15/1997..................... 4,876,100
-----------
ENERGY -- 3.0%
6,000,000 Tennessee Gas Pipeline Company, 9.250% 05/15/1996.................. 6,105,900
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
INDEPENDENT FINANCE -- 8.9%
$5,000,000 ADVANTA Corporation, MTN, 7.400% 11/04/1996........................ $ 4,938,500
2,750,000 Greyhound Financial Corporation, 8.250% 03/11/1997................. 2,756,545
4,000,000 Household Finance Corporation, 7.625% 12/15/1996................... 3,980,440
7,000,000 International Lease Finance Corporation, MTN, 5.790% 11/03/1997.... 6,563,340
------------
18,238,825
------------
INDUSTRIAL -- 7.0%
3,500,000 Comdisco, Inc., MTN, 6.890% 08/30/1996............................. 3,438,295
5,250,000 General American Transportation Corporation, MTN, 6.390%
12/21/1995....................................................... 5,183,010
5,500,000 Hertz Corporation, Sr. Sub. Note, 9.125% 08/01/1996................ 5,605,875
------------
14,227,180
------------
RETAIL -- 0.8%
1,500,000 Sears, Roebuck & Company, MTN, 9.420% 04/01/1996................... 1,535,355
------------
SAVINGS AND LOAN -- 0.0%
1,224 Home Savings and Loan Association, California, MTN, 9.171%
03/01/2008+...................................................... 1,181
------------
TELECOMMUNICATIONS -- 2.5%
250,000 Bell Atlantic Tricon Corporation, 8.000% 03/03/1997................ 250,690
5,000,000 Tele-Communications Inc., MTN, 4.830% 08/21/1995................... 4,916,100
------------
5,166,790
------------
UTILITIES -- 1.2%
2,500,000 Public Service Electric & Gas Capital Corporation, MTN,
9.400% 10/18/1995**.............................................. 2,539,800
------------
TOTAL CORPORATE BONDS AND NOTES (Cost $107,580,752)................ 105,306,510
============
FOREIGN BONDS AND NOTES -- 16.1%
5,000,000 Banponce Financial Corporation, MTN, 5.450% 01/07/1997............. 4,747,850
2,000,000 Banponce Financial Corporation, MTN, 6.870% 08/23/1996............. 1,967,820
2,500,000 Boots Company, PLC Bonds, 9.000% 01/03/1997........................ 2,543,950
3,000,000 Boral Limited, 7.340% 06/20/1997................................... 2,927,310
5,180,000 Lord Realty Corporation, Equitable Note, 10.500% 12/30/1997........ 5,419,782
3,500,000 Statens BostadsFinansier, Note, 8.500% 03/05/1997.................. 3,516,835
7,000,000 Union Bank of Finland Limited, 5.250% 06/15/1996................... 6,709,010
5,000,000 Unum Corporation, MTN, 6.160% 05/01/1996........................... 4,892,700
------------
TOTAL FOREIGN BONDS AND NOTES (Cost $33,918,503)................... 32,725,257
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY -- 1.0% (Cost $2,070,854)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 1.0%
$2,000,000 8.632% 01/01/1996+................................................. $ 2,022,540
============
U.S. TREASURY NOTES -- 6.1%
3,000,000 8.000% 01/15/1997.................................................. 3,030,480
9,650,000 6.500% 05/15/1997.................................................. 9,425,348
------------
TOTAL U.S. TREASURY NOTES (Cost $12,654,174)....................... 12,455,828
============
REPURCHASE AGREEMENT -- 0.6% (Cost $1,292,000)
1,292,000 Agreement with CS First Boston Corporation, 5.650% dated
11/30/1994, to be repurchased at $1,292,203 on 12/01/1994,
collateralized by $1,321,071 market value of U.S. Treasury Bonds,
8.875% -- 13.875%, having maturities ranging from November, 2009
through August, 2017............................................. 1,292,000
============
TOTAL INVESTMENTS (Cost $205,434,648*).................................. 98.5% 200,774,568
OTHER ASSETS AND LIABILITIES (NET)...................................... 1.5 3,079,320
----- ------------
NET ASSETS.............................................................. 100.0% $203,853,888
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
ABBREVIATION:
MTN Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
NATIONS FUND TRUST
Nations Adjustable Rate Government Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITY -- 1.5% (Cost $844,068)
$ 792,319 Drexel Burnham Lambert, Series S-2, 9.000% 08/01/2018................. $ 801,232
===========
MORTGAGE-BACKED SECURITIES -- 82.2%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 5.7%
188,591 6.500% 09/01/2003................................................... 183,476
950,574 8.500% 04/01/2008................................................... 955,621
268,358 6.564% 06/01/2016+.................................................. 264,000
299,099 7.167% 07/01/2022+.................................................. 300,915
178,575 5.695% 12/01/2022+.................................................. 178,200
1,265,759 5.847% 03/01/2023+.................................................. 1,255,279
-----------
3,137,491
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 57.1%
335,522 9.000% 04/01/2016................................................... 340,582
1,004,419 5.778% 07/01/2017+.................................................. 1,011,952
3,603,436 5.842% 06/01/2018+.................................................. 3,596,698
3,117,402 6.448% 11/01/2018+.................................................. 3,118,867
2,023,256 7.007% 12/01/2020+.................................................. 2,063,722
2,212,553 6.786% 12/01/2021+.................................................. 2,248,507
244,969 6.480% 06/01/2022+.................................................. 243,678
586,395 6.270% 08/01/2022+.................................................. 573,568
157,181 7.625% 10/01/2022+.................................................. 156,507
978,874 6.335% 11/01/2022+.................................................. 955,938
314,842 7.605% 11/01/2022+.................................................. 313,674
2,707,270 5.545% 12/01/2022+.................................................. 2,701,775
2,024,832 6.009% 03/01/2023+.................................................. 2,013,452
2,151,981 5.947% 04/01/2023+.................................................. 2,148,280
1,897,730 4.400% 06/01/2024+.................................................. 1,828,938
4,029,731 5.251% 08/01/2024+.................................................. 3,962,999
REMIC,
4,000,000 Certificate 1992-204FG, 7.150% 01/25/2022+............................ 3,858,720
-----------
31,137,857
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
CERTIFICATES -- 19.4%
3,000,000 7.500% 12/22/2024, TBA++............................................ 3,005,625
GNMA II:
1,667,179 6.000% 04/20/2022+.................................................. 1,608,311
1,785,250 5.125% 10/20/2022+.................................................. 1,699,343
522,043 5.125% 11/20/2022+.................................................. 496,923
388,659 5.500% 02/20/2023+.................................................. 370,198
792,148 5.500% 02/20/2023+.................................................. 754,521
2,772,564 6.000% 05/20/2023+.................................................. 2,663,408
-----------
10,598,329
-----------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $46,413,387)................. 44,873,677
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE>
NATIONS FUND TRUST
NATIONS ADJUSTABLE RATE GOVERNMENT FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES -- 3.1%
STUDENT LOAN MARKETING ASSOCIATION (SLMA) CERTIFICATES -- 3.1%
$1,000,000 5.770% 08/02/1999+.................................................. $ 1,000,640
250,000 Series BA, 6.125% 04/24/1995+....................................... 250,367
500,000 Series 10-J, 5.135% 06/01/1998+..................................... 464,765
-----------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES (Cost $1,748,696)........... 1,715,772
===========
U.S. TREASURY NOTES -- 19.7%
1,000,000 5.125% 03/31/1996................................................... 974,060
3,000,000 6.250% 08/31/1996................................................... 2,945,160
5,000,000 6.875% 10/31/1996................................................... 4,955,450
74,000 7.250% 11/15/1996................................................... 73,792
2,000,000 4.750% 09/30/1998................................................... 1,804,060
-----------
TOTAL U.S. TREASURY NOTES (Cost $11,056,322)........................ 10,752,522
===========
REPURCHASE AGREEMENT -- 0.2% (Cost $103,000)
103,000 Agreement with CS First Boston Corporation, 5.650% dated 11/30/1994,
to be repurchased at $103,016 on 12/01/1994, collateralized by
$105,318 market value of U.S. Treasury Bonds, 8.875% - 13.875%,
having maturities ranging from November, 2009 through August,
2017.............................................................. 103,000
===========
TOTAL INVESTMENTS (Cost $60,165,473*)................................... 106.7% 58,246,203
OTHER ASSETS AND LIABILITIES (NET)...................................... (6.7) (3,664,197)
------ -----------
NET ASSETS.............................................................. 100.0% $54,582,006
===== ===========
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATIONS:
REMIC Real Estate Mortgage Investment Conduit
TBA To Be Announced
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE>
NATIONS FUND TRUST
NATIONS DIVERSIFIED INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES -- 49.5%
AEROSPACE -- 1.7%
$1,500,000 McDonnell Douglas Corporation, 9.750% 04/01/2012................... $ 1,565,430
-----------
BANKING AND FINANCE -- 5.3%
2,000,000 General Motors Acceptance Corporation, MTN, 7.500% 07/24/2000...... 1,899,400
1,499,370 G.P.A. Leasing USA, Series BN-5, 9.125% 12/02/1996+**.............. 1,376,272
1,500,000 Sunamerica Inc., 9.000% 01/15/1999................................. 1,519,500
-----------
4,795,172
-----------
COMPUTER -- 1.8%
1,500,000 Unisys Corporation, Credit Sensitive Notes, 13.500% 07/01/1997+.... 1,620,000
-----------
ENERGY -- 8.4%
2,000,000 Clark Oil & Refining Corporation, Sr. Note, 9.500% 09/15/2004...... 1,980,000
1,500,000 Coastal Corporation, Sr. Deb., 11.750% 06/15/2006.................. 1,640,625
2,000,000 Cogentrix Energy, Inc., Sr. Note, 8.100% 03/15/2004................ 1,812,680
750,000 Maxus Energy Corporation, Deb., 11.500% 11/15/2015................. 712,500
1,500,000 USX-Marathon Group, 9.625% 08/15/2003.............................. 1,510,590
-----------
7,656,395
-----------
ENTERTAINMENT -- 1.4%
1,500,000 Time Warner Inc., Deb., 9.150% 02/01/2023.......................... 1,302,195
-----------
FOOD -- 1.1%
1,000,000 Chiquita Brands International Inc., Sub. Note, 11.500%
06/01/2001....................................................... 1,005,000
-----------
GAS -- 2.1%
2,000,000 Louis Dreyfus Natural Gas, Sr. Sub. Note, 9.250% 06/15/2004........ 1,901,500
-----------
INDUSTRIAL -- 13.6%
1,000,000 Auburn Hills Certificates, 12.375% 05/01/2020+..................... 1,312,540
2,000,000 B.A.T. Capital Corporation, MTN, 6.500% 11/24/2003................. 1,713,860
1,000,000 Bowater Inc., Deb., 9.500% 10/15/2012.............................. 1,001,850
1,500,000 Domtar, Inc., Sr. Note, 12.000% 04/15/2001......................... 1,575,000
2,000,000 Global Marine Inc., Sr. Sec. Note, 12.750% 12/15/1999.............. 2,100,000
1,500,000 Inland Steel Company, First Mortgage, Series T, 12.000%
12/01/1998....................................................... 1,612,500
2,000,000 Stone Container Corporation, Sr. Note, 11.875% 12/01/1998.......... 2,050,000
1,000,000 Valassis Inserts Inc., Sr. Note, 9.375% 03/15/1999................. 996,250
-----------
12,362,000
-----------
LEISURE -- 0.8%
1,000,000 Bally Health & Tennis Corporation, 13.000% 01/15/2003.............. 750,000
-----------
PAPER AND PAPER PRODUCTS -- 1.5%
1,500,000 Georgia Pacific Corporation, Deb., 8.250% 03/01/2023............... 1,340,730
-----------
PUBLISHING -- 2.3%
2,000,000 News America Holdings Inc., Deb., 10.125% 10/15/2012............... 2,066,560
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
NATIONS FUND TRUST
NATIONS DIVERSIFIED INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
RETAIL -- 1.1%
$1,000,000 Hechinger Company, Sr. Deb., 9.450% 11/15/2012..................... $ 971,760
-----------
TELECOMMUNICATIONS -- 1.7%
1,500,000 TKR Cable Inc., Sr. Deb., 10.500% 10/30/2007....................... 1,537,800
-----------
TRANSPORTATION -- 1.5%
1,500,000 Quantas Airways Ltd., Sr. Note, 6.625% 06/30/1998**................ 1,405,035
-----------
UTILITIES -- 5.2%
1,000,000 Commonwealth Edison Company, First Mortgage, 8.625% 02/01/2022..... 924,950
750,000 GTE Corporation, Deb., 7.830% 05/01/2023........................... 655,005
1,000,000 Texas Utilities Electric Company, First Mortgage & Collateral,
9.750% 05/01/2021................................................ 1,023,860
2,000,000 Transco Energy Corporation, 11.250% 07/01/1999..................... 2,090,000
-----------
4,693,815
-----------
TOTAL CORPORATE BONDS AND NOTES (Cost $48,028,468)................. 44,973,392
===========
FOREIGN BONDS AND NOTES -- 3.7%
1,000,000 Banco Nacional De Commerce Ext. SNC, 7.500% 07/01/2000............. 896,250
1,000,000 Hydro-Quebec, Deb., Series H, 9.400% 02/01/2021.................... 1,025,970
1,500,000 Nova Scotia Province (of Canada), 9.125% 05/01/2021................ 1,478,820
-----------
TOTAL FOREIGN BONDS AND NOTES (Cost $3,865,866).................... 3,401,040
===========
MORTGAGE-BACKED SECURITIES -- 14.6%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 9.5%
9,000,000 8.000% 05/01/2024, TBA++......................................... 8,606,250
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
CERTIFICATES -- 5.1%
4,889,589 8.000% 08/15/2024................................................ 4,648,142
-----------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $13,422,924)................ 13,254,392
===========
U.S. TREASURY OBLIGATIONS -- 38.3%
U.S. TREASURY BONDS -- 19.2%
8,000,000 9.250% 02/15/2016+++............................................. 8,910,000
8,000,000 8.750% 08/15/2020................................................ 8,542,480
-----------
17,452,480
-----------
U.S. TREASURY NOTE -- 19.1%
20,000,000 5.750% 08/15/2003................................................ 17,293,800
-----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $35,137,982)................. 34,746,280
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE>
NATIONS FUND TRUST
NATIONS DIVERSIFIED INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 1.1% (Cost $949,000)
$ 949,000 Agreement with CS First Boston Corporation, 5.650% dated
11/30/1994, to be repurchased at $949,149 on 12/01/1994,
collateralized by $970,353 market value of U.S. Treasury Bonds,
8.875% - 13.875%, having maturities ranging from November, 2009
through August, 2017............................................. $ 949,000
===========
TOTAL INVESTMENTS (Cost $101,404,240*)................................. 107.2% 97,324,104
OTHER ASSETS AND LIABILITIES (NET)................................... (7.2) (6,513,176)
----- -----------
NET ASSETS............................................................. 100.0% $90,810,928
===== ===========
<CAPTION>
NET
NUMBER OF UNREALIZED
CONTRACTS APPRECIATION
- ---------- ------------
FUTURES CONTRACTS -- SHORT POSITION
90 U.S. Treasury Bond Futures, December 1994.......................... $ 59,250
===========
- ---------------
</TABLE>
* Aggregate cost for Federal tax purposes was $101,508,514.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
+++ Security pledged as collateral on futures contracts.
ABBREVIATIONS:
MTN Medium Term Note
TBA To Be Announced
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
NATIONS FUND TRUST
NATIONS STRATEGIC FIXED INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES -- 8.1%
$10,903,409 Daimler-Benz Auto Grantor Trust, Series 1994-A, Class A, 5.950%
12/15/2000....................................................... $10,702,378
9,176,007 EQCC Home Equity Loan Trust, Series 1994-2, Class A1, 6.350%
06/15/2014....................................................... 9,032,632
7,500,000 Ford Credit Grantor Trust, Series 1994-B, Class A, 7.300%
10/15/1999....................................................... 7,455,450
11,820,404 General Motors Acceptance Corporation, Series 1994-A, Grantor
Trust, Class A, 6.300% 06/15/1999................................ 11,591,324
6,324,183 Green Tree Financial Corporation, Class A-1, 6.550% 07/15/2019+.... 6,173,984
-----------
TOTAL ASSET-BACKED SECURITIES (Cost $45,665,332)................... 44,955,768
===========
CORPORATE BONDS AND NOTES -- 11.7%
BANKING AND FINANCE -- 6.4%
5,500,000 Beneficial Corporation, MTN, 8.100% 11/23/1998..................... 5,464,965
Chrysler Financial Corporation, MTN:
5,500,000 7.190% 05/26/1998................................................ 5,316,300
5,500,000 7.290% 07/07/1998................................................ 5,322,845
6,725,000 Ford Motor Credit Corporation, MTN, 7.450% 07/12/1999.............. 6,483,573
General Motors Acceptance Corporation, MTN:
5,500,000 6.375% 05/23/1996................................................ 5,392,200
7,500,000 7.850% 03/05/1997................................................ 7,452,825
-----------
35,432,708
-----------
CHEMICAL -- 1.0%
5,750,000 Grace (W.R.) & Company, MTN, 6.880% 06/23/1997..................... 5,565,712
-----------
INDUSTRIAL -- 1.2%
7,000,000 B.A.T. Capital Corporation, MTN, 6.660% 03/22/2000**............... 6,444,200
-----------
PUBLISHING -- 1.4%
8,250,000 News America Holdings Inc., Sr. Note, 7.500% 03/01/2000............ 7,770,345
-----------
TELECOMMUNICATIONS -- 1.0%
5,500,000 TKR Cable Inc., Sr. Deb. 10.500% 10/30/2007........................ 5,638,600
-----------
TRANSPORTATION -- 0.7%
4,500,000 Quantas Airways Limited, Sr. Note, 6.625% 06/30/1998**............. 4,215,105
-----------
TOTAL CORPORATE BONDS AND NOTES (Cost $68,349,114)................. 65,066,670
===========
FOREIGN BONDS AND NOTES -- 3.3%
1,000,000 Banponce Financial Corporation, MTN, 6.870% 08/23/1996............. 983,910
4,500,000 Banponce Financial Corporation, MTN, 7.170% 08/26/1997............. 4,374,225
9,000,000 Skandia Capital AB, Guaranteed Eurobonds, 6.000% 02/11/1998........ 8,167,050
5,000,000 Union Bank of Finland Limited, 5.250% 06/15/1996................... 4,792,150
-----------
TOTAL FOREIGN BONDS AND NOTES (Cost $18,980,175)................... 18,317,335
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE>
NATIONS FUND TRUST
NATIONS STRATEGIC FIXED INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED SECURITIES -- 21.8%
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 13.1%
$34,000,000 7.500% 09/08/2001, TBA++......................................... $ 33,086,080
27,600,000 8.000% 05/01/2024, TBA++......................................... 26,392,500
13,800,000 7.500% 02/01/2024, TBA++......................................... 12,851,250
------------
72,329,830
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
CERTIFICATES -- 8.7%
5,618,203 9.000% 05/15/2016 - 07/15/2022, (42 Pools)....................... 5,653,715
10,000,000 8.000% 06/01/2024, TBA++......................................... 9,506,200
25,000,000 8.500% 07/15/2024, TBA++......................................... 24,453,000
10,000,000 7.000% 03/01/2024, TBA++......................................... 8,890,600
------------
48,503,515
------------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $120,848,741)............... 120,833,345
============
MUNICIPAL BOND -- 1.9% (Cost $10,350,448)
10,000,000 Du Page County, Illinois, GO, Alternate Revenue Source, (Stormwater
Project), 6.550% 01/01/2021...................................... 10,456,300
============
U.S. TREASURY OBLIGATIONS -- 60.8%
U.S. TREASURY BONDS -- 13.1%
23,800,000 8.875% 08/15/2017................................................ 25,637,122
43,755,000 8.750% 08/15/2020................................................ 46,722,027
------------
72,359,149
------------
U.S. TREASURY NOTES -- 47.7%
49,225,000 7.375% 05/15/1996................................................ 49,271,271
31,000,000 4.375% 11/15/1996................................................ 29,299,960
37,050,000 6.000% 11/30/1997................................................ 35,423,134
63,175,000 5.125% 04/30/1998................................................ 58,328,214
27,440,000 8.875% 02/15/1999................................................ 28,520,313
60,450,000 5.750% 08/15/2003................................................ 52,270,510
11,000,000 7.875% 11/15/2004................................................ 10,970,740
------------
264,084,142
------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $348,867,253)................ 336,443,291
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
NATIONS FUND TRUST
NATIONS STRATEGIC FIXED INCOME FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- -----------------------------------------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENT -- 11.6% (Cost $64,366,000)
$64,366,000 Agreement with CS First Boston Corporation, 5.650% dated
11/30/1994, to be repurchased at $64,376,102 on 12/01/1994,
collateralized by $65,814,279 market value of U.S. Treasury
Bonds, 8.875%-13.875%, having maturities ranging from November,
2009 through August, 2017........................................ $ 64,366,000
=============
TOTAL INVESTMENTS (Cost $677,427,063*).................................. 119.2% 660,438,709
OTHER ASSETS AND LIABILITIES (NET)...................................... (19.2) (106,589,502)
----- -------------
NET ASSETS.............................................................. 100.0% $ 553,849,207
===== =============
- ---------------
</TABLE>
* Aggregate cost for Federal tax purposes was $683,964,031.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATIONS:
GO General Obligation Bond
MTN Medium Term Note
TBA To Be Announced
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
NATIONS FUND TRUST
NATIONS MORTGAGE-BACKED SECURITIES FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS NOVEMBER 30, 1994
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSET-BACKED SECURITIES -- 1.9%
$ 750,210 First Boston Mortgage Securities, CMO, Series 1989-5, Class A-1,
7.500% 12/25/2019................................................ $ 714,106
478,138 Residential Funding Mortgage, Series 1990-13, Class A-13,
9.500% 10/25/2005................................................ 477,988
-----------
TOTAL ASSET-BACKED SECURITIES (Cost $1,239,161).................... 1,192,094
===========
MORTGAGE-BACKED SECURITIES -- 84.8%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) CERTIFICATES -- 18.3%
384,857 7.500% 08/01/2008 - 06/01/2009, (2 Pools).......................... 362,439
4,911,898 8.000% 08/01/2007 - 05/01/2017, (7 Pools).......................... 4,816,536
5,025,366 8.500% 02/01/2008 - 05/01/2017, (3 Pools).......................... 4,951,854
1,142,655 9.500% 04/01/2018 - 06/01/2021, (4 Pools).......................... 1,180,961
-----------
11,311,790
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) CERTIFICATES -- 29.0%
8,728,384 7.500% 08/01/2022 - 06/01/2023, (13 Pools)......................... 8,128,308
886,432 8.000% 05/01/2009 - 07/01/2017, (3 Pools).......................... 866,772
289,926 8.250% 04/01/2009, (2 Pools)....................................... 285,346
1,023,983 8.500% 12/01/2011 - 02/01/2017, (2 Pools).......................... 1,025,233
3,000,000 7.000% 10/01/2029, TBA++........................................... 2,817,656
5,000,000 7.500% 09/08/2001, TBA++........................................... 4,867,969
-----------
17,991,284
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
CERTIFICATES -- 37.5%
1,730,432 7.000% 06/15/2023, (3 Pools)....................................... 1,538,458
987,199 8.000% 09/15/2006 - 12/15/2007, (5 Pools).......................... 973,881
1,292,554 8.500% 07/15/2016 - 07/15/2021, (10 Pools)......................... 1,273,226
3,051,040 9.000% 11/15/2008 - 07/15/2017, (16 Pools)......................... 3,077,486
915,176 9.500% 06/15/2009 - 07/15/2018, (5 Pools).......................... 951,552
1,459,654 10.000% 11/15/2009 - 08/15/2020, (13 Pools)........................ 1,544,167
343,572 11.750% 09/15/2000 - 12/15/2000, (2 Pools)......................... 367,623
68,771 12.750% 12/15/1997................................................. 73,670
10,000,000 7.000% 03/01/2024, TBA++........................................... 8,812,500
5,000,000 7.500% 10/01/2024, TBA++........................................... 4,607,813
-----------
23,220,376
-----------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $54,478,543).................. 52,523,450
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE>
<TABLE>
<CAPTION>
NATIONS FUND TRUST
NATIONS MORTGAGE-BACKED SECURITIES FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) NOVEMBER 30, 1994
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT (NOTE 1)
- -----------------------------------------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT AGENCY SECURITY -- 1.5% (Cost $930,197)
$ 881,140 Resolution Trust Corporation, Series 91-3, Class A-2,
10.402% 08/25/2021+.............................................. $ 903,719
===========
U.S. TREASURY OBLIGATIONS -- 31.3%
U.S. TREASURY BILL -- 23.1%
15,000,000 6.543% 08/24/1995.................................................. 14,310,617
-----------
U.S. TREASURY BOND -- 0.2%
100,000 8.500% 02/15/2020.................................................. 104,047
-----------
U.S. TREASURY NOTE -- 8.0%
5,000,000 7.750% 11/30/1999.................................................. 4,989,850
-----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $19,525,191)................. 19,404,514
===========
REPURCHASE AGREEMENT -- 14.7% (Cost $9,117,000)
9,117,000 Agreement with CS First Boston Corporation, 5.650% dated
11/30/1994, to be repurchased at $9,118,431 on 12/01/1994,
collateralized by $9,322,139 market value of U.S. Treasury Bonds,
8.875% -- 13.875%, having maturities ranging from November, 2009
through August, 2017............................................. 9,117,000
===========
TOTAL INVESTMENTS (Cost $85,290,092*).................................. 134.2% 83,140,777
OTHER ASSETS AND LIABILITIES (NET).................................... (34.2) (21,194,535)
----- -----------
NET ASSETS............................................................. 100.0% $61,946,242
===== ===========
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes was $85,565,405.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATIONS:
CMO Collateralized Mortgage Obligation
TBA To Be Announced
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES NOVEMBER 30, 1994
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
SHORT- NATIONS NATIONS ADJUSTABLE NATIONS STRATEGIC MORTGAGE-
INTERMEDIATE MANAGED SHORT-TERM RATE DIVERSIFIED FIXED BACKED
GOVERNMENT BOND INCOME GOVERNMENT INCOME INCOME SECURITIES
FUND FUND FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value.
See accompanying
schedules:
Securities........... $605,589,771 $193,785,560 $199,482,568 $58,143,203 $96,375,104 $596,072,709 $74,023,777
Repurchase
Agreements......... 35,090,000 8,922,000 1,292,000 103,000 949,000 64,366,000 9,117,000
----------- ------------ ------------ ----------- ------------ ------------ -----------
Total
Investments...... 640,679,771 202,707,560 200,774,568 58,246,203 97,324,104 660,438,709 83,140,777
Cash..................... 744 467,782 543 232 811 1,112,379 947
Interest receivable...... 5,703,839 1,852,954 3,601,327 328,327 2,203,489 5,782,486 313,577
Dollar roll fee income
receivable (Notes 1 and
4)..................... 154,549 -- -- -- 15,248 -- 15,677
Receivable for Fund
shares sold............ 2,093,002 380,848 1,578,663 40,435 381,424 4,985,443 76,241
Receivable from
investment adviser
(Note 2)............... -- -- -- 20,635 -- -- --
Unamortized organization
costs (Note 6)......... 11,659 -- 11,425 11,425 11,763 11,763 --
Prepaid expenses and
other assets........... 5,012 70 13,463 1,549 13,437 766 787
------------ ------------ ------------ ----------- ------------ ------------ -----------
Total Assets......... 648,648,576 205,409,214 205,979,989 58,648,806 99,950,276 672,331,546 83,548,006
------------ ------------ ------------ ----------- ------------ ------------ -----------
LIABILITIES
Payable for Fund shares
redeemed............... 3,683,618 47,602 1,136,249 818,553 51,790 730,247 19,837
Payable for investment
securities purchased
(Notes 1 and 4)........ 104,038,476 33,735,703 -- 3,009,375 8,599,922 114,904,351 21,127,344
Investment advisory fee
payable (Note 2)....... 180,301 70,965 17,352 -- 10,025 225,593 25,562
Administration fee
payable (Note 2)....... 41,469 13,057 15,801 4,343 6,807 41,509 3,868
Shareholder servicing and
distribution fee
payable (Note 3)....... 25,456 928 8,011 4,391 37,338 1,349 --
Transfer agent fee
payable (Note 2)....... 52,807 24,718 3,384 4,577 9,333 28,971 2,750
Custodian fees payable
(Note 2)............... 6,911 2,812 3,078 1,347 1,821 6,711 1,495
Dividends payable........ 2,381,916 783,880 920,474 193,709 341,146 2,427,967 358,275
Accrued Trustees' fees
and expenses (Note
2)..................... 3,412 1,037 1,270 365 484 3,001 402
Variation margin due to
broker (Note 1)........ -- -- -- -- 59,063 -- --
Accrued expenses and
other payables......... 128,052 77,750 20,482 30,140 21,619 112,640 62,231
------------ ------------ ------------ ----------- ------------ ------------ -----------
Total Liabilities.... 110,542,418 34,758,452 2,126,101 4,066,800 9,139,348 118,482,339 21,601,764
------------ ------------ ------------ ----------- ------------ ------------ -----------
NET ASSETS............... $538,106,158 $170,650,762 $203,853,888 $54,582,006 $90,810,928 $553,849,207 $61,946,242
============ ============ ============ =========== =========== ============ ===========
Investments, at cost
(Note 1)............... $650,066,735 $208,670,076 $205,434,648 $60,165,473 $101,404,240 $677,427,063 $85,290,092
============ ============ ============ =========== ============ ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) NOVEMBER 30, 1994
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
SHORT- NATIONS NATIONS ADJUSTABLE NATIONS STRATEGIC MORTGAGE-
INTERMEDIATE MANAGED SHORT-TERM RATE DIVERSIFIED FIXED BACKED
GOVERNMENT BOND INCOME GOVERNMENT INCOME INCOME SECURITIES
FUND FUND FUND FUND FUND FUND FUND
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net
investment
income/(distributions in
excess of net investment
income)................. $ (2,239,557) $ 1,402,225 $ (920,474) $ (193,709) $ (138,327) $ (1,351,845) $ (358,275)
Accumulated net realized
loss on investments sold
and futures contracts... (26,333,476) (5,588,378) (7,291,315) (2,158,320) (2,571,759) (22,358,183) (4,604,597)
Net unrealized
depreciation of
investments and futures
contracts............... (9,386,964) (5,962,516) (4,660,080) (1,919,270) (4,020,886) (16,988,354) (2,149,315)
Paid-in capital........... 576,066,155 180,799,431 216,725,757 58,853,305 97,541,900 594,547,589 69,058,429
------------ ----------- ----------- ----------- ----------- ------------ -----------
$538,106,158 $170,650,762 $203,853,888 $54,582,006 $90,810,928 $553,849,207 $61,946,242
------------ ----------- ----------- ----------- ----------- ------------ -----------
NET ASSETS:
Trust A Shares............ $433,278,125 $165,005,501 $176,711,742 $37,518,250 $22,297,669 $550,696,653 $61,946,242
------------ ----------- ----------- ----------- ----------- ------------ -----------
Investor A Shares......... $ 77,128,479 $ 5,525,413 $ 2,490,308 $ 9,417,548 $10,819,135 $ 966,640 $ N/A
------------ ----------- ----------- ----------- ----------- ------------ -----------
Investor C Shares
(formerly Investor B
Shares)................. $ 16,725,442 $ 119,848 $ 8,101,952 $ 2,522,636 $ 2,636,262 $ 41,392 $ N/A
------------ ----------- ----------- ----------- ----------- ------------ -----------
Investor N Shares
(formerly Investor C
Shares)................. $ 10,974,112 $ N/A $16,549,886 $ 5,123,572 $55,057,862 $ 2,144,522 $ N/A
----------- ------------- ----------- ----------- ----------- ------------ -----------
SHARES OUTSTANDING:
Trust A Shares............ 110,321,224 17,097,147 18,647,560 3,983,924 2,305,768 59,081,947 6,903,285
------------ ------------ ----------- ----------- ----------- ------------ -----------
Investor A Shares......... 19,638,951 572,501 262,778 1,000,023 1,118,795 103,709 N/A
------------ ------------ ----------- ----------- ----------- ------------ -----------
Investor C Shares......... 4,258,656 12,418 854,911 267,866 272,615 4,441 N/A
------------ ------------ ----------- ----------- ----------- ------------ -----------
Investor N Shares......... 2,794,145 N/A 1,746,428 544,047 5,693,472 230,090 N/A
------------ ------------ ----------- ----------- ----------- ------------ -----------
TRUST A SHARES:
Net asset value, offering
price and redemption
price per share......... $3.93 $9.65 $9.48 $9.42 $9.67 $9.32 $8.97
------------ ------------ ----------- ----------- ----------- ------------ -----------
INVESTOR A SHARES:
Net asset value and
redemption price per
share................... $3.93 $9.65 $9.48 $9.42 $9.67 $9.32 N/A
------------ ------------ ----------- ----------- ----------- ------------ -----------
Maximum sales charge...... 3.25% 3.25% 1.50% 3.25% 4.75% 3.25%
Maximum offering price per
share................... $4.06 $9.97 $9.62 $9.74 $10.15 $9.63 N/A
------------ ------------ ----------- ----------- ----------- ------------ -----------
INVESTOR C SHARES:
Net asset value and
offering price per
share*.................. $3.93 $9.65 $9.48 $9.42 $9.67 $9.32 N/A
------------ ------------ ----------- ----------- ----------- ------------ -----------
INVESTOR N SHARES:
Net asset value and
offering price per
share*.................. $3.93 N/A $9.48 $9.42 $9.67 $9.32 N/A
------------ ------------ ----------- ----------- ----------- ------------ -----------
</TABLE>
- ---------------
* Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge ("CDSC") for all Funds except Nations
Short-Term Income Fund for which there is no CDSC.
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
SHORT- NATIONS NATIONS ADJUSTABLE NATIONS STRATEGIC MORTGAGE-
INTERMEDIATE MANAGED SHORT-TERM RATE DIVERSIFIED FIXED BACKED
GOVERNMENT BOND INCOME GOVERNMENT INCOME INCOME SECURITIES
FUND FUND FUND FUND FUND FUND FUND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 4)........... $ 39,987,182 $ 12,013,216 $ 13,882,180 $ 4,022,011 $ 6,557,119 $ 32,878,902 $ 5,258,543
Dividends................... 165,515 41,415 59,424 15,771 16,606 204,175 23,341
Dollar roll fee income (Note
4)........................ 452,541 198,223 -- -- 127,481 849,250 128,293
------------ ------------ ------------ ----------- ----------- ------------ -----------
Total investment income... 40,605,238 12,252,854 13,941,604 4,037,782 6,701,206 33,932,327 5,410,177
------------ ------------ ------------ ----------- ----------- ------------ -----------
EXPENSES:
Investment advisory fee
(Note 2).................. 3,835,073 1,175,992 1,461,128 428,494 499,925 3,330,604 429,618
Administration fee (Note
2)........................ 639,179 195,999 243,521 71,416 83,321 555,101 71,603
Transfer agent fees (Note
2)........................ 227,442 40,763 67,744 38,504 71,744 51,212 6,645
Custodian fees (Note 2)..... 89,365 35,833 41,738 17,211 19,364 88,652 20,148
Legal and audit fees........ 117,673 36,858 32,212 24,550 17,939 90,422 30,532
Trustees' fees and expenses
(Note 2).................. 12,603 5,091 5,289 1,839 2,154 14,322 1,874
Amortization of organization
costs
(Note 6).................. 6,996 3,009 4,032 4,032 4,032 4,032 --
Registration and filing
fees...................... 66,585 27,734 60,311 79,809 72,430 42,620 15,481
Other....................... 104,594 64,489 66,616 37,747 19,938 68,820 38,339
------------ ------------ ------------ ----------- ----------- ------------ -----------
Subtotal.................. 5,099,510 1,585,768 1,982,591 703,602 790,847 4,245,785 614,240
Shareholder servicing and
distribution fee (Note 3):
Investor A Shares......... 218,173 11,775 12,644 31,111 25,810 2,079 --
Investor C Shares......... 134,984 1,113 53,378 16,292 23,730 376 --
Investor N Shares......... 68,196 -- 101,147 21,940 313,196 12,724 --
Fees waived and/or expenses
reimbursed by investment
adviser and administrators
(Note 2).................. (1,325,817) (170,552) (782,816) (311,453) (176,827) (468,997) (76,920)
------------ ------------ ------------ ----------- ----------- ------------ -----------
Total expenses.......... 4,195,046 1,428,104 1,366,944 461,492 976,756 3,791,967 537,320
------------ ------------ ------------ ----------- ----------- ------------ -----------
NET INVESTMENT INCOME....... 36,410,192 10,824,750 12,574,660 3,576,290 5,724,450 30,140,360 4,872,857
------------ ------------ ------------ ----------- ----------- ------------ -----------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
(NOTES 1 AND 4):
Realized gain/(loss) on:
Securities................ (28,549,654) (5,692,171) (7,691,096) (2,438,655) (2,972,689) (21,814,719) (5,031,029)
Futures contracts......... -- -- -- -- 265,335 -- --
Written options........... -- -- -- -- -- 126,562 --
Change in unrealized
appreciation/depreciation
of:
Securities................ (24,476,389) (12,966,429) (5,441,726) (1,410,042) (5,940,696) (29,605,380) (2,364,621)
Futures contracts......... -- -- -- -- 59,250 -- --
------------ ------------ ------------ ----------- ----------- ------------ -----------
Net realized and unrealized
loss on investments....... (53,026,043) (18,658,600) (13,132,822) (3,848,697) (8,588,800) (51,293,537) (7,395,650)
------------ ------------ ------------ ----------- ----------- ------------ -----------
NET DECREASE IN NET ASSETS
RESULTING FROM
OPERATIONS................ $(16,615,851) $ (7,833,850) $ (558,162) $ (272,407) $(2,864,350) $(21,153,177) $(2,522,793)
============ ============ ============ =========== =========== ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
SHORT- NATIONS NATIONS ADJUSTABLE NATIONS STRATEGIC MORTGAGE-
INTERMEDIATE MANAGED SHORT-TERM RATE DIVERSIFIED FIXED BACKED
GOVERNMENT BOND INCOME GOVERNMENT INCOME INCOME SECURITIES
FUND FUND FUND FUND FUND FUND FUND
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income............ $ 36,410,192 $10,824,750 $12,574,660 $3,576,290 $ 5,724,450 $30,140,360 $4,872,857
Net realized loss on investments
sold and futures contracts
during
the year....................... (28,549,654) (5,692,171) (7,691,096) (2,438,655) (2,707,354) (21,688,157) (5,031,029)
Change in unrealized
appreciation/depreciation of
investments during the year.... (24,476,389) (12,966,429) (5,441,726) (1,410,042) (5,881,446) (29,605,380) (2,364,621)
------------ ----------- ----------- ---------- ----------- ----------- ----------
Net decrease in net assets
resulting from operations...... (16,615,851) (7,833,850) (558,162) (272,407) (2,864,350) (21,153,177) (2,522,793)
Distributions to shareholders
from net investment income:
Trust A Shares................. (27,184,146) (10,551,102) (9,632,385) (2,158,005) (1,931,956) (29,201,850) (4,260,311)
Investor A Shares.............. (6,359,840) (345,269) (260,874) (744,045) (843,251) (57,573) --
Investor C Shares.............. (1,158,627) (9,531) (597,428) (138,975) (208,437) (2,272) --
Investor N Shares.............. (567,087) -- (1,271,197) (181,086) (2,740,806) (90,250) --
Distributions to shareholders in
excess of net investment
income:
Trust A Shares................. (608,559) -- (417,856) -- (1,077) (989,071) --
Investor A Shares.............. (142,373) -- (12,497) -- (496) (2,013) --
Investor C Shares.............. (25,939) -- (28,534) -- (135) (182) --
Investor N Shares.............. (12,695) -- (61,806) -- (1,024) (3,397) --
Distributions to shareholders
from net realized gains on
investments:
Trust A Shares................. (2,862,616) (3,140,770) -- (91,521) (389,055) (17,655,811) --
Investor A Shares.............. (691,160) (113,147) -- (32,841) (179,394) (37,550) --
Investor C Shares.............. (136,409) (3,388) -- (6,624) (48,931) (2,083) --
Investor N Shares.............. (66,609) -- -- (8,604) (369,942) (54,901) --
Distributions from capital
(Note 1):
Trust A Shares................. -- -- (336,576) (140,298) -- -- (663,165)
Investor A Shares.............. -- -- (12,733) (50,986) -- -- --
Investor C Shares.............. -- -- (24,695) (10,129) -- -- --
Investor N Shares.............. -- -- (54,839) (13,176) -- -- --
Net increase/(decrease) in net
assets from Fund share
transactions (Note 5):
Trust A........................ 32,833,999 (21,384,855) (14,463,998) (18,984,287) (3,157,987) 74,025,010 (3,203,096)
Investor A..................... (85,905,643) (1,189,546) (8,389,118) (16,607,124) (1,029,274) (26,909) --
Investor C..................... (12,682,260) (79,717) (11,014,290) (1,434,706) (597,232) (15,871) --
Investor N..................... 3,129,388 -- (21,665,080) 2,438,342 35,066,952 755,895 --
------------ ----------- ----------- ---------- ----------- ----------- ----------
Net increase/(decrease) in net
assets......................... (119,056,427) (44,651,175) (68,802,068) (38,436,472) 20,703,605 5,487,995 (10,649,365)
NET ASSETS:
Beginning of year................ 657,162,585 215,301,937 272,655,956 93,018,478 70,107,323 548,361,212 72,595,607
------------ ------------ ----------- ----------- ----------- ----------- -----------
End of year...................... $538,106,158 $170,650,762 $203,853,888 $54,582,006 $90,810,928 $553,849,207 $61,946,242
============ ============ ============ =========== =========== ============ ===========
Undistributed net investment
income/(distributions in excess
of net investment income)...... $(2,239,557) $ 1,402,225 $ (920,474) $ (193,709) $ (138,327) $(1,351,845) $ (358,275)
============ ============ ============ =========== =========== ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30, 1993
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
SHORT- NATIONS NATIONS ADJUSTABLE NATIONS STRATEGIC MORTGAGE-
INTERMEDIATE MANAGED SHORT-TERM RATE DIVERSIFIED FIXED BACKED
GOVERNMENT BOND INCOME GOVERNMENT INCOME INCOME SECURITIES
FUND FUND FUND FUND FUND FUND FUND
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income............ $ 32,859,203 $11,991,104 $12,256,037 $2,311,585 $ 3,002,114 $29,829,552 $ 4,824,484
Net realized gain/(loss) on
investments sold and futures
contracts during
the year....................... 3,021,939 5,022,801 100,473 (127,503) 1,071,713 17,615,252 (574,049)
Change in unrealized
appreciation/depreciation of
investments during the year.... 15,863,494 5,822,832 5,100,227 (455,184) 1,849,998 15,524,952 325,353
------------ ----------- ----------- ---------- ----------- ----------- -----------
Net increase in net assets
resulting from operations...... 51,744,636 22,836,737 17,456,737 1,728,898 5,923,825 62,969,756 4,575,788
Distributions to shareholders
from net investment income:
Trust A Shares................. (21,255,812) (11,535,353) (10,270,112) (955,052) (1,978,063) (29,751,054) (4,824,484)
Investor A Shares.............. (9,986,481) (448,247) (629,339) (1,192,490) (514,981) (53,918) --
Investor B Shares.............. (1,524,760) (7,504) (872,708) (127,784) (154,643) (4,515) --
Investor C Shares.............. (92,150) -- (483,878) (36,259) (354,427) (20,065) --
Distributions to shareholders
from net realized gain on
investments:
Trust A Shares................. (1,431,597) (3,093,875) -- -- -- (281,593) --
Investor A Shares.............. (783,972) (136,302) -- -- -- (608) --
Investor B Shares.............. (108,594) (1,788) -- -- -- (39) --
Investor C Shares.............. -- -- -- -- -- (598) --
Net increase/(decrease) in net
assets from Fund share
transactions (Note 5):
Trust A........................ 72,876,627 25,736,475 6,178,128 54,446,840 2,329,588 (68,593,583) 9,261,802
Investor A..................... (20,826,243) (1,232,816) 10,779,986 24,966,375 12,844,405 974,373 --
Investor B..................... 6,188,438 138,959 12,847,578 3,121,669 3,331,510 (24,880) --
Investor C..................... 8,889,017 -- 39,968,270 2,953,230 24,551,170 1,622,397 --
------------ ----------- ----------- ---------- ----------- ----------- -----------
Net increase/(decrease) in net
assets......................... 83,689,109 32,256,286 74,974,662 84,905,427 45,978,384 (33,164,327) 9,013,106
NET ASSETS:
Beginning of year................ 573,473,476 183,045,651 197,681,294 8,113,051 24,128,939 581,525,539 63,582,501
------------ ------------ ------------ ----------- ----------- ------------ -----------
End of year...................... $657,162,585 $215,301,937 $272,655,956 $93,018,478 $70,107,323 $548,361,212 $72,595,607
------------ ------------ ------------ ----------- ----------- ------------ -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
--------------------------------------------------------------
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1994 NOVEMBER 30, 1993
---------------------------- ----------------------------
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------------------------
<S> <C> <C> <C> <C>
TRUST A SHARES:
Sold.................................................... 63,710,168 $266,160,158 52,740,056 $226,058,093
Issued as reinvestment of dividends..................... 1,726,591 7,134,660 2,162,531 9,221,716
Redeemed................................................(58,620,856) (240,460,819) (38,012,585) (162,403,182)
---------- ------------ ---------- ------------
Net increase/(decrease)................................. 6,815,903 $ 32,833,999 16,890,002 $ 72,876,627
========== ============ ========== ============
INVESTOR A SHARES:
Sold.................................................... 2,977,983 $ 12,430,201 16,187,122 $ 69,062,172
Issued as reinvestment of dividends..................... 1,356,282 5,604,186 2,100,279 8,949,762
Redeemed................................................(25,182,476) (103,940,030) (23,121,307) (98,838,177)
---------- ------------ ---------- ------------
Net increase/(decrease).................................(20,848,211) $(85,905,643) (4,833,906) $(20,826,243)
========== ============ ========== ============
INVESTOR C SHARES:
Sold.................................................... 201,361 $ 843,418 3,065,703 $ 12,992,841
Issued as reinvestment of dividends..................... 252,433 1,039,833 303,867 1,296,519
Redeemed................................................ (3,533,774) (14,565,511) (1,882,814) (8,100,922)
---------- ------------ ---------- ------------
Net increase/(decrease)................................. (3,079,980) $(12,682,260) 1,486,756 $ 6,188,438
========== ============ ========== ============
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1993*
----------------------------
<S> <C> <C> <C> <C>
INVESTOR N SHARES:
Sold.................................................... 1,500,229 $ 6,262,021 2,202,150 $ 9,481,418
Issued as reinvestment of dividends..................... 106,509 436,013 14,668 63,202
Redeemed................................................ (877,675) (3,568,646) (151,736) (655,603)
---------- ------------ ---------- ------------
Net increase/(decrease)................................. 729,063 $ 3,129,388 2,065,082 $ 8,889,017
========== ============ ========= ============
</TABLE>
- ---------------
* The Nations Short-Intermediate Government Fund's Investor N Shares commenced
operations on June 7, 1993.
The Nations Short-Term Income Fund's Investor N Shares commenced operations on
June 7, 1993.
SEE NOTES TO FINANCIAL STATEMENTS.
56
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
NATIONS MANAGED BOND FUND NATIONS SHORT-TERM INCOME FUND
- ------------------------------------------------------- -------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, 1994 NOVEMBER 30, 1993 NOVEMBER 30, 1994 NOVEMBER 30, 1993
- ------------------------- ------------------------- ------------------------- -------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3,747,250 $38,604,168 6,883,807 $73,306,405 7,757,098 $75,869,101 8,536,278 $85,249,417
197,589 2,030,462 172,173 1,829,145 46,721 456,621 28,774 288,830
(6,130,848) (62,019,485) (4,614,734) (49,399,075) (9,318,440) (90,789,720) (7,961,065) (79,360,119)
--------- ----------- --------- ----------- ---------- ----------- --------- -----------
(2,186,009) $(21,384,855) 2,441,246 $25,736,475 (1,514,621) $(14,463,998) 603,987 $ 6,178,128
========= =========== ========= =========== ========== =========== ========= ===========
203,173 $ 2,035,869 102,781 $ 1,097,057 194,250 $ 1,910,089 2,828,049 $28,194,164
35,077 359,685 44,771 472,423 25,830 253,013 51,766 517,968
(355,374) (3,585,100) (263,658) (2,802,296) (1,077,216) (10,552,220) (1,785,929) (17,932,146)
--------- ----------- --------- ----------- --------- ----------- --------- -----------
(117,124) $(1,189,546) (116,106) $(1,232,816) (857,136) $(8,389,118) 1,093,886 $10,779,986
======== =========== ========= =========== ========= =========== ========= ===========
-- $ -- 19,454 $ 206,938 581,753 $ 5,697,406 3,050,649 $30,424,045
606 6,217 619 6,549 55,070 536,756 75,365 753,647
(8,741) (85,934) (7,101) (74,528) (1,765,994) (17,248,452) (1,833,948) (18,330,114)
--------- ----------- --------- ----------- --------- ----------- --------- -----------
(8,135) $ (79,717) 12,972 $ 138,959 (1,129,171) $(11,014,290) 1,292,066 $12,847,578
========= =========== ========= =========== ========= ========== ========= ===========
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1993*
-------------------------
<C> <C> <C> <C>
2,699,703 $26,797,836 5,873,220 $58,919,993
124,814 1,218,040 43,667 438,412
(5,061,930) (49,680,956) (1,933,046) (19,390,135)
--------- ----------- --------- -----------
(2,237,413) $(21,665,080) 3,983,841 $39,968,270
========= =========== ========= ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
57
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
NATIONS ADJUSTABLE RATE GOVERNMENT FUND
----------------------------------------------------
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1994 NOVEMBER 30, 1993
------------------------ ------------------------
SHARES DOLLARS SHARES DOLLARS
----------------------------------------------------
<S> <C> <C> <C> <C>
TRUST A SHARES:
Sold.......................................................... 2,326,217 $22,954,107 5,882,846 $58,928,675
Issued in exchange for Class A Shares of The Capitol Mutual
Funds Fixed Income Portfolio (Note 9)....................... -- -- -- --
Issued as reinvestment of dividends........................... 39,778 388,602 23,334 233,342
Redeemed...................................................... (4,319,675) (42,326,996) (471,737) (4,715,177)
--------- ----------- --------- -----------
Net increase/(decrease)....................................... (1,953,680) $(18,984,287) 5,434,443 $54,446,840
========= =========== ========= ===========
INVESTOR A SHARES:
Sold.......................................................... 1,476,472 $14,594,656 5,553,675 $55,647,099
Issued in exchange for Class B Shares of The Capitol Mutual
Funds Fixed Income Portfolio (Note 9)....................... -- -- -- --
Issued as reinvestment of dividends........................... 66,372 646,618 87,407 876,844
Redeemed...................................................... (3,246,749) (31,848,398) (3,148,925) (31,557,568)
--------- ----------- --------- -----------
Net increase/(decrease)....................................... (1,703,905) $(16,607,124) 2,492,157 $24,966,375
========= =========== ========= ===========
INVESTOR C SHARES:
Sold.......................................................... 1,814 $ 17,261 373,815 $ 3,737,059
Issued as reinvestment of dividends........................... 12,689 123,394 9,542 95,454
Redeemed...................................................... (162,436) (1,575,361) (70,939) (710,844)
--------- ----------- --------- -----------
Net increase/(decrease)....................................... (147,933) $(1,434,706) 312,418 $ 3,121,669
========= =========== ========= ===========
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1993*
------------------------
<S> <C> <C> <C> <C>
INVESTOR N SHARES:
Sold.......................................................... 310,597 $ 3,033,329 297,760 $ 2,979,277
Issued as reinvestment of dividends........................... 13,888 134,366 2,313 23,130
Redeemed...................................................... (75,588) (729,353) (4,923) (49,177)
--------- ----------- --------- -----------
Net increase.................................................. 248,897 $ 2,438,342 295,150 $ 2,953,230
========= =========== ========= ===========
</TABLE>
- ---------------
* The Nations Adjustable Rate Government Fund's Investor N Shares commenced
operations on June 7, 1993.
The Nations Diversified Income Fund's Investor N Shares commenced operations
on June 7, 1993.
The Nations Strategic Fixed Income Fund's Investor N Shares commenced
operations on June 7, 1993.
SEE NOTES TO FINANCIAL STATEMENTS.
58
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
NATIONS DIVERSIFIED INCOME FUND NATIONS STRATEGIC FIXED INCOME FUND
- ---------------------------------------------------- ------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, 1994 NOVEMBER 30, 1993 NOVEMBER 30, 1994 NOVEMBER 30, 1993
- ------------------------ ------------------------ ------------------------- -------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
427,988 $ 4,350,216 453,114 $ 4,876,187 27,421,382 $272,058,507 21,765,061 $227,643,026
-- -- -- -- 2,135,389 20,649,210 -- --
3,140 32,035 5,948 60,534 356,632 3,520,081 188,186 1,938,161
(748,696) (7,540,238) (239,381) (2,607,133) (22,556,971) (222,202,788) (28,718,596) (298,174,770)
- --------- ----------- --------- ----------- ---------- ----------- ---------- -----------
(317,568) $(3,157,987) 219,681 $ 2,329,588 7,356,432 $74,025,010 (6,765,349) $(68,593,583)
========= =========== ========= =========== ========== =========== ========== ============
245,670 $ 2,515,124 1,283,798 $13,510,332 98,950 $ 969,620 136,644 $ 1,393,186
-- -- -- -- 1,482 14,327 -- --
52,214 537,364 30,035 322,817 5,956 59,039 4,161 43,495
(400,519) (4,081,762) (94,173) (988,744) (110,593) (1,069,895) (44,266) (462,308)
- --------- ----------- --------- ----------- ---------- ----------- ---------- -----------
(102,635) $(1,029,274) 1,219,660 $12,844,405 (4,205) $ (26,909) 96,539 $ 974,373
========= =========== ========= =========== ========== =========== ========== ============
53,170 $ 553,692 336,343 $ 3,521,596 487 $ 5,002 18,281 $ 191,185
15,493 159,534 7,219 77,778 333 3,302 79 835
(129,826) (1,310,458) (24,728) (267,864) (2,503) (24,175) (20,657) (216,900)
- --------- ----------- --------- ----------- ---------- ----------- ---------- -----------
(61,163) $ (597,232) 318,834 $ 3,331,510 (1,683) $ (15,871) (2,297) $ (24,880)
========= =========== ========= =========== ========== =========== ========== ===========
<CAPTION>
PERIOD ENDED PERIOD ENDED
NOVEMBER 30, 1993* NOVEMBER 30, 1993*
------------------------ -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
4,005,665 $40,841,538 2,272,992 $24,590,356 104,746 $ 1,031,340 162,031 $ 1,711,006
174,145 1,763,664 17,987 196,437 11,648 115,227 1,610 17,146
(749,173) (7,538,250) (28,144) (235,623) (39,953) (390,672) (9,992) (105,755)
- --------- ----------- --------- ----------- ---------- ----------- ---------- -----------
3,430,637 $35,066,952 2,262,835 $24,551,170 76,441 $ 755,895 153,649 $ 1,622,397
========= =========== ========= =========== ========== =========== ========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
59
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
NATIONS MORTGAGE-BACKED SECURITIES FUND
----------------------------------------------------
YEAR ENDED YEAR ENDED
NOVEMBER 30, 1994 NOVEMBER 30, 1993
------------------------ ------------------------
SHARES DOLLARS SHARES DOLLARS
----------------------------------------------------
<S> <C> <C> <C> <C>
TRUST A SHARES:
Sold........................................................... 2,680,779 $26,217,285 2,285,562 $23,100,345
Issued as reinvestment of dividends............................ 11,435 108,433 21,093 212,134
Redeemed....................................................... (3,085,142) (29,528,814) (1,388,907) (14,050,677)
--------- ----------- --------- -----------
Net increase/(decrease)........................................ (392,928) $(3,203,096) 917,748 $ 9,261,802
========= =========== ========= ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
60
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
61
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
TRUST A SHARES
--------------------------------------------------
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92 11/30/91*
------------------------------------------------
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year........... $ 4.28 $ 4.16 $ 4.17 $ 4.00 ##
------- ------- ------- --------
Net investment income........................ 0.23 0.23 0.28 0.10
Net realized and unrealized gain/(loss) on
investments................................ (0.33) 0.14 (0.01) 0.17
------- ------- ------- --------
Net increase/(decrease) in net assets
resulting from investment operations....... (0.10) 0.37 0.27 0.27
Distributions:
Dividends from net investment income......... (0.23) (0.23) (0.28) (0.10)
Distributions in excess of net investment
income..................................... (0.00)# -- -- --
Distributions from net realized capital
gains...................................... (0.02) (0.02) -- --
------- ------- ------- --------
Total distributions.......................... (0.25) (0.25) (0.28) (0.10)
-------- -------- -------- --------
Net asset value, end of year................. $ 3.93 $ 4.28 $ 4.16 $ 4.17
======== ======== ======== ========
Total return++............................... (2.23)% 9.03% 6.70%+++ 6.81%+++
======== ======== ======== ========
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's)........... $433,278 $443,426 $360,497 $158,435
Ratio of operating expenses to average net
assets..................................... 0.59% 0.55% 0.37% 0.08%+
Ratio of net investment income to average net
assets..................................... 5.76% 5.40% 6.48% 7.21%+
Portfolio turnover rate...................... 133% 92% 25% 11%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements............................. 0.80% 0.79% 0.77% 0.82%+
Net investment income before fee waivers
and/or expense reimbursements.............. $0.22 $0.22 $0.26 $0.00
</TABLE>
- ---------------
* The Nations Short-Intermediate Government Fund Trust A Shares, Investor A
Shares, Investor C Shares and Investor N Shares commenced operations on
August 1, 1991, August 5, 1991, June 17, 1992 and June 7, 1993,
respectively.
+ 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).
SEE NOTES TO FINANCIAL STATEMENTS.
62
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTOR A SHARES INVESTOR C SHARES INVESTOR N SHARES
------------------------------------------------ ----------------------------------- ----------------------
YEAR YEAR YEAR PERIOD YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92 11/30/91* 11/30/94 11/30/93 11/30/92* 11/30/94 11/30/93*
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 4.28 $ 4.16 $ 4.17 $ 4.00## $ 4.28 $ 4.16 $ 4.19 $ 4.28 $ 4.26
------- -------- -------- ------- ------- ------- ------- ------- -------
0.22 0.22 0.27 0.10 0.20 0.20 0.10 0.20 0.09
(0.33) 0.14 (0.01) 0.17 (0.33) 0.14 (0.03) (0.33) 0.02
------- -------- -------- ------- ------- ------- ------- ------- -------
(0.11) 0.36 0.26 0.27 (0.13) 0.34 0.07 (0.13) 0.11
(0.22) (0.22) (0.27) (0.10) (0.20) (0.20) (0.10) (0.20) (0.09)
(0.00)# -- -- -- (0.00)# -- -- (0.00)# --
(0.02) (0.02) -- -- (0.02) (0.02) -- (0.02) --
------- -------- -------- ------- ------- ------- ------- ------- -------
(0.24) (0.24) (0.27) (0.10) (0.22) (0.22) (0.10) (0.22) (0.09)
------- -------- -------- ------- ------- ------- ------- ------- -------
$ 3.93 $ 4.28 $ 4.16 $ 4.17 $ 3.93 $ 4.28 $ 4.16 $ 3.93 $ 4.28
======= ======== ======== ======= ======= ======= ======= ======= =======
(2.41)% 8.85% 6.61%+++ 6.81%+++ (2.80)% 8.20% 1.64%+++ (2.81)% 2.65%
======= ======== ======== ======= ======= ======= ======= ======= =======
$77,128 $173,449 $188,624 $55,874 $16,725 $31,440 $24,352 $10,974 $ 8,847
0.77% 0.70% 0.48% 0.08%+ 1.17% 1.30% 1.18%+ 1.19% 1.15%+
5.58% 5.25% 6.34% 7.21%+ 5.18% 4.65% 4.80%+ 5.16% 4.80%+
133% 92% 25% 11% 133% 92% 25% 133% 92%
0.98% 0.94% 0.88% 0.82%+ 1.38% 1.54% 1.44%+ 1.40% 1.39%+
$0.21 $0.21 $0.25 $0.00 $0.19 $0.19 $0.09 $0.19 $0.09
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
63
<PAGE>
NATIONS FUND TRUST
NATIONS MANAGED BOND FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
TRUST A SHARES
----------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94# 11/30/93 11/30/92 11/30/91 11/30/90 11/30/89#*
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year........... $ 10.77 $ 10.37 $ 10.27 $ 9.87 $ 10.13 $10.00
-------- ------- ------- ------- ------- -------
Net investment income........................ 0.56 0.62 0.69 0.77 0.81 0.15
Net realized and unrealized gain/(loss) on
investments................................ (0.95) 0.58 0.14 0.40 (0.19) 0.06
-------- ------- ------- ------- ------- -------
Net increase/(decrease) in net assets
resulting from investment operations....... (0.39) 1.20 0.83 1.17 0.62 0.21
Distributions:
Dividends from net investment income......... (0.56) (0.62) (0.69) (0.77) (0.88) (0.08)
Distributions from net realized capital
gains...................................... (0.17) (0.18) (0.04) -- -- --
-------- ------- ------- ------- ------- -------
Total distributions.......................... (0.73) (0.80) (0.73) (0.77) (0.88) (0.08)
-------- ------- ------- ------- ------- -------
Net asset value, end of year................. $ 9.65 $ 10.77 $ 10.37 $ 10.27 $ 9.87 $10.13
======== ======== ======== ======== ======= =======
Total return++............................... (3.79)% 11.98% 8.35%+++ 12.36%+++ 6.51%+++ 2.13%+++
======== ======== ======== ======== ======= =======
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's)........... $165,006 $207,654 $174,615 $115,641 $28,987 $ 9,865
Ratio of operating expenses to average net
assets..................................... 0.72% 0.67% 0.55% 0.40% 0.17% 0.28%+
Ratio of net investment income to average net
assets..................................... 5.53% 5.79% 6.62% 7.44% 8.33% 8.11%+
Portfolio turnover rate...................... 246% 60% 79% 74% 98% 116%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements............................. 0.81% 0.79% 0.82% 0.84% 0.92% 1.08%+
Net investment income before fee waivers
and/or expense reimbursements.............. $0.55 $0.61 $0.64 $0.73 $0.72 $0.08
</TABLE>
- ---------------
* The Nations Managed Bond Fund Trust A Shares, Investor A Shares and Investor
C Shares commenced operations on September 19, 1989, December 8, 1989 and
June 17, 1992, respectively.
+ 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.
SEE NOTES TO FINANCIAL STATEMENTS.
64
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTOR A SHARES INVESTOR C SHARES
-------------------------------------------------------------- ------------------------------------
YEAR YEAR YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94# 11/30/93 11/30/92 11/30/91 11/30/90* 11/30/94# 11/30/93 11/30/92*
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10.77 $10.37 $10.27 $ 9.87 $ 10.13 $ 10.77 $10.36 $ 10.32
------ ------ ------ ------ ------- ------ ------ ------
0.54 0.60 0.68 0.77 0.81 0.50 0.54 0.24
(0.95) 0.58 0.14 0.40 (0.19) (0.95) 0.59 0.04
------ ------ ------ ------- ------ ------ ------ ------
(0.41) 1.18 0.82 1.17 0.62 (0.45) 1.13 0.28
(0.54) (0.60) (0.68) (0.77) (0.88) (0.50) (0.54) (0.24)
(0.17) (0.18) (0.04) -- -- (0.17) (0.18) --
------ ------ ------ ------- ------ ------ ------ ------
(0.71) (0.78) (0.72) (0.77) (0.88) (0.67) (0.72) (0.24)
------ ------ ------ ------- ------ ------ ------ ------
$ 9.65 $10.77 $10.37 $ 10.27 $ 9.87 $ 9.65 $10.77 $ 10.36
======= ====== ====== ======= ======= ======= ====== =======
(3.98)% 11.82% 8.27%+++ 12.36%+++ 6.51%+++ (4.35)% 11.26% 2.71%+++
======= ====== ====== ======= ======= ======= ====== =======
$ 5,525 $7,426 $8,352 $10,469 $ 2,471 $ 120 $ 221 $ 79
0.90% 0.82% 0.63% 0.40% 0.17%+ 1.30% 1.42% 1.28%+
5.35% 5.64% 6.54% 7.44% 8.33%+ 4.95% 5.04% 5.49%+
246% 60% 79% 74% 98% 246% 60% 79%
0.99% 0.94% 0.96% 0.84% 0.92%+ 1.39% 1.54% 1.78%+
$0.53 $0.59 $0.65 $0.73 $0.72 $0.49 $0.53 $0.22
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
65
<PAGE>
NATIONS FUND TRUST
NATIONS SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
TRUST A SHARES INVESTOR A SHARES
------------------------------------ ------------------------------------
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94# 11/30/93 11/30/92* 11/30/94# 11/30/93 11/30/92*
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year........... $ 10.01 $ 9.75 $ 10.00 $ 10.01 $ 9.75 $ 10.00
-------- ------- -------- ------ ------- ------
Net investment income........................ 0.50 0.53 0.09 0.48 0.51 0.08
Net realized and unrealized gain/(loss) on
investments................................ (0.51) 0.26 (0.25) (0.51) 0.26 (0.26)
-------- ------- -------- ------ ------- ------
Net increase/(decrease) in net assets
resulting from investment operations....... (0.01) 0.79 (0.16) (0.03) 0.77 (0.18)
Distributions:
Dividends from net investment income......... (0.48) (0.53) (0.09) (0.46) (0.51) (0.07)
Distributions in excess of net investment
income..................................... (0.02) -- -- (0.02) -- --
Distributions from capital (Note 1).......... (0.02) -- -- (0.02) -- --
-------- ------- -------- ------ ------- ------
Total distributions.......................... (0.52) (0.53) (0.09) (0.50) (0.51) (0.07)
-------- ------- -------- ------ ------- ------
Net asset value, end of year................. $ 9.48 $ 10.01 $ 9.75 $ 9.48 $ 10.01 $ 9.75
======== ======== ======== ======= ======= =======
Total return++............................... (0.11)% 8.26% (1.58)%+++ (0.33)% 8.03% (1.81)%+++
======== ======== ======== ======= ======= =======
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's)........... $176,712 $201,738 $190,680 $ 2,490 $11,205 $ 254
Ratio of operating expenses to average net
assets..................................... 0.50% 0.37% 0.30%+ 0.71% 0.57% 0.45%+
Ratio of net investment income to average net
assets..................................... 5.23% 5.27% 5.54%+ 5.02% 5.07% 5.39%+
Portfolio turnover rate...................... 293% 121% 45% 293% 121% 45%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements............................. 0.82% 0.79% 0.90%+ 1.03% 0.99% 1.05%+
Net investment income before fee waivers
and/or expense reimbursements.............. $0.47 $0.48 $0.08 $0.45 $0.48 $0.07
</TABLE>
- ---------------
* The Nations Short-Term Income Fund Trust A Shares, Investor A Shares,
Investor C Shares and Investor N Shares commenced operations on September
30, 1992, October 2, 1992, October 2, 1992 and June 7, 1993, respectively.
+ 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.
SEE NOTES TO FINANCIAL STATEMENTS.
66
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR C SHARES INVESTOR N SHARES
- -------------------------------------------- ---------------------------
YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
11/30/94# 11/30/93 11/30/92* 11/30/94# 11/30/93*
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10.01 $ 9.75 $ 10.00 $ 10.01 $ 9.94
------ ------- ------ ------- -------
0.46 0.48 0.08 0.47 0.22
(0.51) 0.26 (0.26) (0.51) 0.07
------ ------- ------ ------- -------
(0.05) 0.74 (0.18) (0.04) 0.29
(0.44) (0.48) (0.07) (0.45) (0.22)
(0.02) -- -- (0.02) --
(0.02) -- -- (0.02) --
------ ------- ------ ------- -------
(0.48) (0.48) (0.07) (0.49) (0.22)
------ ------- ------ ------- -------
$ 9.48 $ 10.01 $ 9.75 $ 9.48 $ 10.01
------ ------- ------ ------- -------
(0.51)% 7.73% (1.82)%+++ (0.46)% 2.96%
------ ------- ------ ------- -------
$ 8,102 $19,851 $ 6,747 $16,550 $39,861
0.89% 0.87% 0.80%+ 0.85% 0.72%+
4.84% 4.77% 5.04%+ 4.88% 4.92%+
293% 121% 45% 293% 121%
1.21% 1.29% 1.40%+ 1.17% 1.14%+
$0.43 $0.45 $0.07 $0.44 $0.21
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
67
<PAGE>
NATIONS FUND TRUST
NATIONS ADJUSTABLE RATE GOVERNMENT FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
TRUST A SHARES INVESTOR A SHARES
------------------------------------ ------------------------------------
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94# 11/30/93 11/30/92* 11/30/94# 11/30/93 11/30/92*
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year........... $ 9.95 $ 9.92 $ 10.00 $ 9.95 $ 9.92 $ 10.01
------- ------- ------ ------ ------- ------
Net investment income........................ 0.50 0.48 0.06 0.48 0.47 0.06
Net realized and unrealized gain/(loss) on
investments................................ (0.53) 0.03 (0.08) (0.53) 0.03 (0.09)
------- ------- ------ ------ ------- ------
Net increase/(decrease) in net assets
resulting from investment operations....... (0.03) 0.51 (0.02) (0.05) 0.50 (0.03)
Distributions:
Dividends from net investment income......... (0.45) (0.48) (0.06) (0.43) (0.47) (0.06)
Distributions from net realized capital
gains...................................... (0.02) -- -- (0.02) -- --
Distributions from capital (Note 1).......... (0.03) -- -- (0.03) -- --
------- ------- ------ ------ ------- ------
Total distributions.......................... (0.50) (0.48) (0.06) (0.48) (0.47) (0.06)
------- ------- ------ ------ ------- ------
Net asset value, end of year................. $ 9.42 $ 9.95 $ 9.92 $ 9.42 $ 9.95 $ 9.92
------- ------- ------ ------- ------- -------
Total return++............................... (0.34)% 5.24% (0.17)%+++ (0.52)% 5.10% (0.35)%+++
======= ======= ====== ======= ======= =======
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's)........... $ 37,518 $55,055 $ 4,989 $ 9,418 $26,893 $ 2,100
Ratio of operating expenses to average net
assets..................................... 0.55% 0.36% 0.00%+ 0.73% 0.51% 0.15%+
Ratio of net investment income to average net
assets..................................... 5.10% 4.70% 4.79%+ 4.92% 4.55% 4.64%+
Portfolio turnover rate...................... 176% 212% 0% 176% 212% 0%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements............................. 0.99% 0.97% 0.94%+ 1.17% 1.12% 1.09%+
Net investment income before fee waivers
and/or expense reimbursements.............. $0.46 $0.42 $0.05 $0.44 $0.42 $0.05
</TABLE>
- ---------------
* The Nations Adjustable Rate Government Fund Trust A Shares, Investor A
Shares, Investor C Shares and Investor N Shares commenced operations on
October 13, 1992, October 20, 1992, October 19, 1992 and June 7, 1993,
respectively.
+ 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.
SEE NOTES TO FINANCIAL STATEMENTS.
68
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR C SHARES INVESTOR N SHARES
- -------------------------------------------- ---------------------------
YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
11/30/94# 11/30/93 11/30/92* 11/30/94# 11/30/93*
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 9.95 $ 9.91 $ 10.02 $ 9.95 $ 9.99
------ ------ ------ ------ ------
0.45 0.41 0.05 0.45 0.19
(0.53) 0.04 (0.11) (0.53) (0.04)
------ ------ ------ ------ ------
(0.08) 0.45 (0.06) (0.08) 0.15
(0.40) (0.41) (0.05) (0.40) (0.19)
(0.02) -- -- (0.02) --
(0.03) -- -- (0.03) --
------ ------ ------ ------ ------
(0.45) (0.41) (0.05) (0.45) (0.19)
------ ------ ------ ------ ------
$ 9.42 $ 9.95 $ 9.91 $ 9.42 $ 9.95
====== ====== ====== ====== ======
(0.82)% 4.56% (0.65)%+++ (0.84)% 1.53%
====== ====== ====== ====== ======
$ 2,523 $ 4,136 $ 1,024 $ 5,124 $ 2,936
1.03% 1.11% 0.75%+ 1.05% 0.86%+
4.62% 3.95% 4.04%+ 4.60% 4.20%+
176% 212% 0% 176% 212%
1.47% 1.72% 1.69%+ 1.49% 1.47%+
$0.41 $0.34 $0.04 $0.41 $0.16
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
69
<PAGE>
NATIONS FUND TRUST
NATIONS DIVERSIFIED INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
TRUST A SHARES INVESTOR A SHARES
------------------------------------- -------------------------------------
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94# 11/30/93# 11/30/92* 11/30/94# 11/30/93# 11/30/92*
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of year........... $ 10.88 $ 9.97 $ 10.00 $ 10.88 $ 9.96 $ 10.02
------- ------- ------- ------- ------- ------
Net investment income........................ 0.74 0.78 0.06 0.72 0.76 0.01
Net realized and realized gain/(loss) on
investments................................ (1.06) 0.91 (0.03) (1.06) 0.92 (0.06)
------- ------- ------- ------- ------- ------
Net increase/(decrease) in net assets
resulting from investment operations....... (0.32) 1.69 0.03 (0.34) 1.68 (0.05)
Distributions:
Dividends from net investment income......... (0.74) (0.78) (0.06) (0.72) (0.76) (0.01)
Distributions in excess of net investment
income..................................... (0.00)## -- -- (0.00)## -- --
Distributions from net realized capital
gains...................................... (0.15) -- -- (0.15) -- --
------- ------- ------- ------- ------- ------
Total distributions.......................... (0.89) (0.78) (0.06) (0.87) (0.76) (0.01)
------- ------- ------- ------- ------- ------
Net asset value, end of year................. $ 9.67 $ 10.88 $ 9.97 $ 9.67 $ 10.88 $ 9.96
======= ======= ======= ======= ======= =======
Total return++............................... (3.05)% 17.40% 0.32%+++ (3.26)% 17.32% (0.49)%+++
======= ======= ======= ======= ======= =======
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's)........... $22,298 $28,553 $23,962 $10,819 $13,291 $ 18
Ratio of operating expenses to average net
assets..................................... 0.74% 0.55% 0.25%+ 0.96% 0.70% 0.40%+
Ratio of net investment income to average net
assets..................................... 7.31% 7.02% 7.76%+ 7.09% 6.87% 7.61%+
Portfolio turnover rate...................... 144% 86% 46% 144% 86% 46%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements............................. 0.95% 0.95% 0.85%+ 1.17% 1.10% 1.00%+
Net investment income before fee waivers
and/or expense reimbursements.............. $0.72 $0.70 $0.05 $0.70 $0.70 $0.01
</TABLE>
- ---------------
* The Nations Diversified Income Fund Trust A Shares, Investor A Shares,
Investor C Shares and Investor N Shares commenced operations on October 30,
1992, November 25, 1992, November 9, 1992 and June 7, 1993, respectively.
+ 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.
SEE NOTES TO FINANCIAL STATEMENTS.
70
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR C SHARES INVESTOR N SHARES
- --------------------------------------------- ---------------------------
YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
11/30/94# 11/30/93# 11/30/92* 11/30/94# 11/30/93#*
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 10.88 $ 9.96 $9.93 $ 10.88 $ 10.59
------ ------ ------ ------- -------
0.67 0.70 0.03 0.67 0.30
(1.06) 0.92 0.02 (1.06) 0.29
------ ------ ------ ------- -------
(0.39) 1.62 0.05 (0.39) 0.59
(0.67) (0.70) (0.02) (0.67) (0.30)
(0.00)## -- -- (0.00)## --
(0.15) -- -- (0.15) --
------ ------ ------ ------- -------
(0.82) (0.70) (0.02) (0.82) (0.30)
------ ------ ------ ------- -------
$ 9.67 $ 10.88 $9.96 $ 9.67 $ 10.88
====== ====== ====== ======= =======
(3.77)% 16.65% 0.54%+++ (3.77)% 5.58%
====== ====== ====== ======= =======
$ 2,636 $ 3,633 $ 149 $55,058 $24,630
1.49% 1.30% 1.00%+ 1.49% 1.30%+
6.56% 6.27% 7.01%+ 6.56% 6.27%+
144% 86% 46% 144% 86%
1.70% 1.70% 1.60%+ 1.70% 1.70%+
$0.65 $0.64 $0.03 $0.65 $0.27
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
71
<PAGE>
NATIONS FUND TRUST
Nations Strategic Fixed Income Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
TRUST A SHARES INVESTOR A SHARES
----------------------------------- -----------------------------------
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92* 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------
Operating performance:
Net asset value, beginning of year........... $ 10.55 $ 9.94 $ 10.00 $10.55 $ 9.94 $ 9.99
------- ------- -------- ------ ------ ------
Net investment income........................ 0.53 0.56 0.05 0.51 0.54 0.01
Net realized and unrealized gain/(loss) on
investments................................ (0.89) 0.62 (0.06) (0.89) 0.62 (0.06)
------- ------- -------- ------ ------ ------
Net increase/(decrease) in net assets
resulting from investment operations....... (0.36) 1.18 (0.01) (0.38) 1.16 (0.05)
Distributions:
Dividends from net investment income......... (0.51) (0.56) (0.05) (0.49) (0.54) --
Distributions in excess of net investment
income..................................... (0.02) -- -- (0.02) -- --
Distributions from net realized capital
gains...................................... (0.34) (0.01) -- (0.34) (0.01) --
------- ------- -------- ------ ------ ------
Total distributions.......................... (0.87) (0.57) (0.05) (0.85) (0.55) --
------- ------- -------- ------ ------ ------
Net asset value, end of year................. $ 9.32 $ 10.55 $ 9.94 $ 9.32 $10.55 $ 9.94
======= ======= ======== ====== ====== =======
Total return++............................... (3.58)% 12.05% (0.11)%+++ (3.76)% 11.88% (0.49)%+++
======= ======= ======== ====== ====== =======
Ratios to average net assets/supplemental
data:
Net assets, end of year (in 000's)........... $550,697 $545,538 $581,329 $ 967 $1,138 $ 113
Ratio of operating expenses to average net
assets..................................... 0.68% 0.61% 0.26%+ 0.86% 0.76% 0.40%+
Ratio of net investment income to average net
assets..................................... 5.43% 5.40% 6.15%+ 5.25% 5.25% 6.00%+
Portfolio turnover rate...................... 307% 161% 12% 307% 161% 12%
Ratio of operating expenses to average net
assets before fee waivers and/or expense
reimbursements............................. 0.76% 0.77% 0.86%+ 0.94% 0.92% 1.00%+
Net investment income before fee waivers
and/or expense reimbursements.............. $0.52 $0.55 $0.04 $0.50 $0.53 $0.01
</TABLE>
- ---------------
* The Nations Strategic Fixed Income Fund Trust A Shares, Investor A Shares,
Investor C Shares and Investor N Shares commenced operations on October 30,
1992, November 19, 1992, November 16, 1992 and June 7, 1993, respectively.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
72
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTOR C SHARES INVESTOR N SHARES
- ------------------------------------------- --------------------------
YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92* 11/30/94 11/30/93*
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
$10.55 $ 9.94 $ 9.97 $10.55 $ 10.39
------ ------ ------ ------ ------
0.47 0.48 0.02 0.47 0.21
(0.89) 0.62 (0.04) (0.89) 0.17
------ ------ ------ ------ ------
(0.42) 1.10 (0.02) (0.42) 0.38
(0.45) (0.48) (0.01) (0.45) (0.21)
(0.02) -- -- (0.02) --
(0.34) (0.01) -- (0.34) (0.01)
------ ------ ------ ------ ------
(0.81) (0.49) (0.01) (0.81) (0.22)
------ ------ ------ ------ ------
$ 9.32 $10.55 $ 9.94 $ 9.32 $ 10.55
====== ====== ====== ====== ======
(4.14)% 11.20% (0.22)%+++ (4.21)% 3.64%
====== ====== ====== ====== ======
$ 41 $ 65 $ 84 $2,145 $ 1,620
1.43% 1.36% 1.03%+ 1.33% 1.26%+
4.68% 4.65% 5.40%+ 4.78% 4.75%+
307% 161% 12% 307% 161%
1.51% 1.52% 1.63%+ 1.41% 1.42%+
$0.46 $0.47 $0.02 $0.46 $0.21
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
73
<PAGE>
NATIONS FUND TRUST
NATIONS MORTGAGE-BACKED SECURITIES FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
TRUST A SHARES
-----------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
11/30/94 11/30/93 11/30/92*
-----------------------------------
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of year................................................. $ 9.95 $ 9.97 $ 10.00
-------- -------- ---------
Net investment income.............................................................. 0.65 0.68 0.06
Net realized and unrealized loss on investments.................................... (0.97) (0.02) (0.03)
-------- -------- ---------
Net increase/(decrease) in net assets resulting from investment operations......... (0.32) 0.66 0.03
Distributions:
Dividends from net investment income............................................... (0.57) (0.68) (0.06)
Distributions from capital (Note 1)................................................ (0.09) -- --
-------- -------- ---------
Total distributions................................................................ (0.66) (0.68) (0.06)
-------- -------- ---------
Net asset value, end of year....................................................... $ 8.97 $ 9.95 $ 9.97
======== ======== ========
Total return++..................................................................... (3.41)% 6.73% 0.35%+++
======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's)................................................. $ 61,946 $ 72,596 $ 63,583
Ratio of operating expenses to average net assets.................................. 0.75% 0.67% 0.25%+
Ratio of net investment income to average net assets............................... 6.81% 6.70% 8.16%+
Portfolio turnover rate............................................................ 207% 167% 4%
Ratio of operating expenses to average net assets before fee waivers and/or expense
reimbursements................................................................... 0.86% 0.86% 0.85%+
Net investment income before fee waivers and/or expense reimbursements............. $ 0.64 $ 0.66 $ 0.06
</TABLE>
- ---------------
* The Nations Mortgage-Backed Securities Fund Trust A Shares commenced
operations on October 30, 1992.
+ Annualized.
++ Total returns represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
74
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES.
Nations Fund Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company. As of the date of this report, the Trust offers thirty-four separate
portfolios. Information presented in these financial statements pertains only to
the following funds: Nations Short-Intermediate Government Fund, Nations Managed
Bond Fund, Nations Short-Term Income Fund, Nations Adjustable Rate Government
Fund, Nations Diversified Income Fund, Nations Strategic Fixed Income Fund and
Nations Mortgage-Backed Securities Fund (the "Funds"). The financial statements
for the remaining funds have been presented under separate cover. The Funds,
except for Managed Bond Fund and Mortgage-Backed Securities Fund, currently
offer four classes of shares: Trust A Shares, Investor A Shares, Investor C
Shares (formerly Investor B Shares) and Investor N Shares (formerly Investor C
Shares). The Managed Bond Fund currently offers three classes of shares: Trust A
Shares, Investor A Shares and Investor C Shares (formerly Investor B Shares).
The Mortgage-Backed Securities Fund currently offers only one class of shares:
Trust A Shares. The Board of Trustees has authorized the issuance of Trust B
Shares of all Funds. As of November 30, 1994, no Trust B Shares have been issued
by the Funds. Matters affecting each class will be voted on exclusively by their
shareholders. The following is a summary of significant accounting policies
followed by the Funds in the preparation of their financial statements.
Securities Valuation: The Funds' portfolio securities which are traded on
a recognized stock exchange are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sale price
on the national securities market. Securities traded only on over-the-counter
markets are valued on the basis of the closing over-the-counter bid prices or if
no sale occurred on such day at the mean of the current bid and ask prices.
Certain securities may be valued by one or more principal market makers.
Restricted securities, securities for which market quotations are not readily
available and other assets are valued at fair value under the supervision of the
Board of Trustees. Short-term investments that mature in 60 days or less are
valued at amortized cost.
Repurchase Agreements: Each Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, a Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. There is potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights. Unless permitted by the Securities and Exchange
Commission, the Fund will not enter into repurchase agreements with the
investment adviser, the distributor or any of their affiliates. The Fund's
investment adviser, under the supervision of the Board of Trustees, reviews the
value of the collateral and the creditworthiness of those banks and dealers with
which the Funds enter into repurchase agreements to evaluate potential risks.
Dollar Roll Transactions: 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. This fee is accrued as income over the
life of the dollar roll contract. Risks associated with dollar roll transactions
include, the Fund's commitment to purchase or repurchase the security may be
restricted if the broker/dealer to whom a Fund sells the security becomes
insolvent; 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
75
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
Option contracts: The Funds may engage in options contracts. Upon the
purchase of a put option or a call option by the Fund, the premium paid is
recorded as an investment, the value of which is marked-to-market daily to
reflect the current market value. When a purchased option expires, the Fund will
realize a loss in the amount of the cost of the option. When the Fund enters
into a closing sale transaction, the Fund will realize a gain or loss depending
on whether the sales proceeds from the closing sale transaction are greater or
less than the cost of the option. When the Fund exercises a put option, it will
realize a gain or loss from the sale of the underlying security and the proceeds
from such sale will be decreased by the premium originally paid. When the Fund
exercises a call option, the cost of the security which the Fund purchases upon
exercise will be increased by the premium originally paid.
The risk associated with purchasing options is limited to the premium
originally paid. In addition, there is a risk the Fund may not be able to enter
into a closing transaction because of an illiquid secondary market.
Futures Contracts: Certain of the Funds may engage in futures contracts.
Upon entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin." Subsequent payments
("variation margin") are made or received by the Fund each day, depending on the
daily fluctuations of the value of the contract.
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses, by "marking-to-market" on
a daily basis to reflect the market value of the contract at the end of each
day. The Fund recognizes a realized gain or loss when the contract is closed
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Fund's basis in the contract.
Risks arise in the possible movement of the securities or indices
underlying those investments. Risks also include the possibility that there may
not be a liquid secondary market for these contracts, that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities or that the counterparty to a contract may default on its obligation
to perform.
Securities Transactions and Investment Income: Securities transactions are
accounted for on a trade date basis. Realized gains and losses are computed on
the specific identification of the securities sold. Interest income, adjusted
for amortization of market discounts and premiums on investments on the
straight-line method, is earned from settlement date and is recorded on the
accrual basis (amortization of discounts and premiums on stripped
mortgage-backed securities and zero coupon bonds is accounted for using the
effective yield method). Dividend income is recorded on the ex-dividend date.
Each Fund's investment income and realized and unrealized gains and losses are
allocated among the classes based upon the relative net assets of each class.
Securities purchased or sold on a when-issued or delayed delivery basis may
be settled a month or more after the trade date; interest income is not accrued
until settlement date.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities structured so that one class receives most, if not all, of
the principal from the mortgage assets, while the other class receives most, if
not all, of the interest and the remainder of the principal. If the underlying
mortgage assets experience greater than anticipated repayments of principal, a
Fund may fail to fully recoup its initial investment in these securities. The
market value of these securities is unusually volatile in response to changes in
interest rates.
Dividends and Distributions to Shareholders: It is the policy of each Fund
to declare dividends daily from net investment income and to pay such dividends
monthly. Each Fund will distribute net realized capital gains (including
short-term capital gains), unless offset by any available capital loss
carryforward, annually after the
76
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
fiscal year in which earned. Additional distributions of net investment income
and capital gains may be made at the discretion of the Board of Trustees in
order to avoid application of the 4% non-deductible Federal excise tax. Income
distributions and capital gain distributions on a Fund level are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to timing differences
and differing characterization of distributions made by the Fund.
For the year ended November 30, 1994, certain reclassification adjustments
were made between undistributed net investment income, realized gains and
paid-in capital due primarily to different book and tax accounting for gain/loss
of paydowns from mortgage-backed and asset-backed securities.
Federal Income Taxes: Each Fund intends to qualify as a regulated
investment company by complying with the requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders. Therefore,
no Federal income or excise tax provision is required.
Expenses: General expenses of the Trust are allocated to the Funds based
upon relative net assets. Operating expenses directly attributable to a class of
shares are charged to that class' operations. Expenses of each Fund not directly
attributable to the operations of any class of shares are prorated among the
classes based on the relative average net assets of each class.
Reclassifications: During the current period, the Funds adopted Statement
of Position 93-2 "Determination, Disclosure and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies." Accordingly, certain reclassifications have been made to the
components of capital in the Statement of Assets and Liabilities to conform with
the accounting and reporting guidelines of this statement. Distributions in
excess of book basis accumulated realized gains or undistributed net investment
income that was the result of permanent book and tax accounting differences have
been reclassified to paid-in capital. Accordingly, amounts have been
reclassified to reflect an increase/(decrease) in paid-in capital, an
increase/(decrease) in undistributed net investment income and an
increase/(decrease) in accumulated net realized gain/(loss) as of November 30,
1993. The Statement of Changes in Net Assets and Financial Highlights for the
prior periods have not been restated to reflect this change in presentation.
The amounts reclassified as of November 30, 1993 were as follows:
<TABLE>
<CAPTION>
INCREASE/(DECREASE) INCREASE/(DECREASE)
UNDISTRIBUTED NET ACCUMULATED
INCREASE/(DECREASE) INVESTMENT NET REALIZED
PAID-IN CAPITAL INCOME/(LOSS) GAIN/(LOSS)
---------------------------------------------------------------
<S> <C> <C> <C>
Short-Intermediate Government Fund...... $(261,064) $(374,305) $ 635,369
Managed Bond Fund....................... 27,511 1,587,170 (1,614,681)
Short-Term Income Fund.................. (5,413) (812,776) 818,189
Adjustable Rate Government Fund......... 230 (221,397) 221,167
Diversified Income Fund................. -- -- --
Strategic Fixed Income Fund............. (32,800) (788,410) 821,210
Mortgage-Backed Securities Fund......... (110,005) (370,134) 480,139
</TABLE>
77
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The reclassifications for the year ended November 30, 1994 were as follows:
<TABLE>
<CAPTION>
INCREASE/(DECREASE) INCREASE/(DECREASE)
IN UNDISTRIBUTED IN ACCUMULATED
DECREASE IN NET INVESTMENT REALIZED
PAID-IN CAPITAL INCOME GAIN/(LOSS)
-------------------------------------------------------------
<S> <C> <C> <C>
Short-Intermediate Government Fund...... $ -- $(2,216,178) $2,216,178
Managed Bond Fund....................... -- (103,793) 103,793
Short-Term Income Fund.................. -- (399,781) 399,781
Adjustable Rate Government Fund......... -- (111,902) 111,902
Diversified Income Fund................. -- (135,595) 135,595
Strategic Fixed Income Fund............. 835,103 (357,187) (477,916)
Mortgage-Backed Securities Fund......... -- (600,687) 600,687
</TABLE>
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS.
The Trust has entered into an Investment Advisory Agreement with
NationsBank, N.A. (Carolinas) ("NationsBank"), as successor to NationsBank of
North Carolina, N.A., an indirect wholly owned subsidiary of NationsBank
Corporation, with respect to the Funds. Under the terms of this Investment
Advisory Agreement, NationsBank is entitled to advisory fees from each Fund
equal to 0.60%, on an annualized basis, of the average daily net assets of each
Fund.
Stephens Inc. ("Stephens") serves as the Trust's administrator pursuant to
an Administration Agreement. The Shareholders Services Group, Inc. ("TSSG"), a
wholly owned subsidiary of First Data Corporation, Inc., serves as the Trust's
co-administrator pursuant to a Co-Administration Agreement. Pursuant to the
Administration and Co-Administration Agreements, the administrator and the
co-administrator are entitled to receive a combined fee, computed daily and paid
monthly, at the annual rate of 0.10% of average daily net assets of the Trust
and the investment portfolios of Nations Fund, Inc. (another registered open-end
investment company that is part of the Nations Fund Family) on a combined basis.
Prior to close of business on May 6, 1994, The Boston Company Advisors,
Inc. served as the Trust's co-administrator and received fees equivalent to the
current rate for its services.
For the year ended November 30, 1994, the administrator earned $964,915
(after fee waivers) for its services.
78
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The investment adviser, administrator and co-administrator may, from time
to time, reduce their fees payable by each Fund (either voluntarily or pursuant
to applicable state limitations). For the year ended November 30, 1994, the
investment adviser, administrator and/or co-administrator voluntarily waived
fees and/or reimbursed expenses as follows:
<TABLE>
<CAPTION>
FEES WAIVED BY EXPENSES
--------------------------------------------- REIMBURSED BY
ADVISER ADMINISTRATOR/CO-ADMINISTRATOR ADVISER
--------------------------------------------------------------
<S> <C> <C> <C>
Short-Intermediate Government
Fund............................. $1,278,358 $ 47,459 $ --
Managed Bond Fund.................. 155,999 14,553 --
Short-Term Income Fund............. 730,564 18,081 34,171
Adjustable Rate Government Fund.... 226,150 5,303 80,000
Diversified Income Fund............ 170,640 6,187 --
Strategic Fixed Income Fund........ 427,781 41,216 --
Mortgage-Backed Securities Fund.... 71,603 5,317 --
</TABLE>
No officer, director or employee of NationsBank, Stephens or TSSG, or any
affiliate thereof, receives any compensation from the Trust for serving as a
trustee or officer of the Trust. The Trust pays each Trustee an annual fee of
$1,000 ($3,000 for the Chairman of the Board), plus an additional $500 for each
Fund and an additional $500 for each board meeting attended, plus reimbursement
of expenses incurred in attending such meetings.
NationsBank of Texas, N.A., acts as the Trust's custodian and earned
$312,311 for such services during the year ended November 30, 1994. TSSG
serves as transfer agent for the Funds' Shares. NationsBank of Texas, N.A.
acts a the sub-transfer agent for the Trust A Shares. Prior to July 1, 1994,
NationsBank of Texas, N.A. served as the sole transfer agent for the Trust A
Shares. For the year ended November 30, 1994, NationsBank of Texas, N.A.
earned $39,758 for providing transfer agency services.
Stephens, acts as the distributor of the Funds' shares. For the year ended
November 30, 1994, the Funds were informed that the distributor received $41,801
representing commission (sales charges) on sales of Investor A Shares of the
Funds. For the year ended November 30, 1994, the Funds were informed that the
distributor received $300,262 in contingent deferred sales charges from Investor
C and Investor N Shares of the Funds. A substantial portion of these fees are
paid to affiliates of NationsBank.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS.
The Trust has adopted a shareholder servicing and distribution plan
("Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor A
Shares of the Funds. Under the Investor A Plan, fees paid by the Funds are paid
directly to the distributor. Aggregate payments by a Fund under the Investor A
Plan may not exceed 0.25%, on an annualized basis, of the average daily net
assets of the Fund's Investor A Shares. Fees paid pursuant to the Investor A
Plan are charged as expenses of the Investor A Shares of a Fund as accrued.
The Trust also has adopted a shareholder servicing plan ("Investor A
Servicing Plan") with respect to Investor A Shares of the Short-Term Income
Fund. Under the Investor A Servicing Plan, the Short-Term Income Fund may pay
for shareholder services provided by institutions to shareholders of Investor A
Shares of the Fund. Payments by the Short-Term Income Fund under the Investor A
Servicing Plan may not exceed 0.25%, on an annualized basis, of the average
daily net assets of Investor A Shares of the Fund.
The Trust also has adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act with respect to Investor C ("Investor C Plan") and Investor N
("Investor N Plan") Shares of each Fund. Pursuant to the Plans,
79
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
fees for each Fund are paid directly to the distributor. Payments under the
Plans are accrued daily and paid monthly at a rate that will not exceed 0.75%,
on an annualized basis, of the average daily net assets of the Investor C or
Investor N Shares, respectively, of the Funds. Fees paid pursuant to the Plans
are charged as expenses of Investor C or Investor N Shares of a Fund as accrued.
The Trust also has adopted a shareholder servicing plan with respect to
Investor C ("Investor C Servicing Plan") and Investor N ("Investor N Servicing
Plan") Shares of the Funds. Pursuant to the Plans, a Fund may pay for certain
shareholder support services that are provided to the owners of Investor C or
Investor N Shares by servicing agents that have entered into a shareholder
servicing agreement with the Trust. Payments under the Plans are accrued daily
and paid monthly at a rate that will not exceed 0.25%, on an annualized basis,
of the average daily net assets of the Investor C or Investor N Shares of the
Funds. Fees paid pursuant to the Plans are charged as expenses of Investor C or
Investor N Shares of a Fund as accrued.
A substantial portion of the fees, paid pursuant to the Plans described
above, are paid to affiliates of NationsBank.
For the year ended November 30, 1994, the Funds incurred the following
amounts pursuant to the above Plans:
<TABLE>
<CAPTION>
FEES PAID PURSUANT TO:
-------------------------------------------------------------------------------------
INVESTOR A INVESTOR A INVESTOR C INVESTOR C INVESTOR N INVESTOR N
PLAN SERVICING PLAN PLAN SERVICING PLAN PLAN SERVICING PLAN
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Intermediate Government
Fund.......................... $ 218,173 $ -- $ 115,791 $19,193 $ 39,781 $ 28,415
Managed Bond Fund............... 11,775 -- 956 157 -- --
Short-Term Income Fund.......... -- 12,644 42,306 11,072 28,899 72,248
Adjustable Rate Government
Fund.......................... 31,111 -- 13,496 2,796 17,552 4,388
Diversified Income Fund......... 25,810 -- 21,106 2,624 208,797 104,399
Strategic Fixed Income Fund..... 2,079 -- 251 125 7,830 4,894
</TABLE>
The chart below shows the effective rates, expressed as a percentage of
average daily net assets, paid by the Funds under the shareholder servicing and
distribution plans for the period ended November 30, 1994:
<TABLE>
<CAPTION>
INVESTOR A INVESTOR A INVESTOR C INVESTOR C INVESTOR N INVESTOR N
PLAN SERVICING PLAN PLAN SERVICING PLAN PLAN SERVICING PLAN
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Intermediate Government
Fund.......................... 0.18% N/A 0.50% 0.08% 0.35% 0.25%
Managed Bond Fund............... 0.18 N/A 0.50 0.08 N/A N/A
Short-Term Income Fund.......... 0.00 0.21% 0.31 0.08 0.10 0.25
Diversified Income Fund......... 0.22 N/A 0.67 0.08 0.50 0.25
Strategic Fixed Income Fund..... 0.18 N/A 0.50 0.25 0.40 0.25
Adjustable Rate Government
Fund.......................... 0.18 N/A 0.40 0.08 0.40 0.10
</TABLE>
80
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PURCHASES AND SALES OF SECURITIES.
The aggregate cost of purchases and proceeds from sales of securities,
excluding U.S. government securities and short-term investments, for the year
ended November 30, 1994 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------------------------------
<S> <C> <C>
Short-Intermediate Government Fund............................ $ 2,910,000 $ 31,301,142
Managed Bond Fund............................................. 78,260,116 118,067,817
Short-Term Income Fund........................................ 303,862,636 239,926,300
Adjustable Rate Government Fund............................... -- 272,857
Diversified Income Fund....................................... 37,156,101 34,134,253
Strategic Fixed Income Fund................................... 232,709,755 319,390,227
Mortgage-Backed Securities Fund............................... 3,937,082 11,439,674
</TABLE>
The aggregate cost of purchases and proceeds from sales of long-term U.S.
government securities for the year ended November 30, 1994 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------------------------------
<S> <C> <C>
Short-Intermediate Government Fund............................ $ 792,730,068 $ 842,393,081
Managed Bond Fund............................................. 428,978,309 386,056,863
Short-Term Income Fund........................................ 376,822,147 489,415,633
Adjustable Rate Government Fund............................... 120,022,844 146,658,663
Diversified Income Fund....................................... 110,805,656 83,396,629
Strategic Fixed Income Fund................................... 1,624,098,629 1,442,995,015
Mortgage-Backed Securities Fund............................... 138,083,657 153,483,653
</TABLE>
At November 30, 1994, aggregate gross unrealized appreciation and
unrealized depreciation of securities for tax purposes were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION
--------------------------------
<S> <C> <C>
Short-Intermediate Government Fund............................ $ 229,494 $ 10,377,200
Managed Bond Fund............................................. 54,962 6,553,719
Short-Term Income Fund........................................ -- 4,660,080
Adjustable Rate Government Fund............................... 2,346 1,921,616
Diversified Income Fund....................................... 90,979 4,275,389
Strategic Fixed Income Fund................................... 126,945 23,652,267
Mortgage-Backed Securities Fund............................... 850 2,425,478
</TABLE>
During the year ended November 30, 1994, activity in written options for
the Strategic Fixed Income Fund was as follows:
<TABLE>
<CAPTION>
NUMBER
OF CONTRACTS PREMIUM
--------------------------------
<S> <C> <C>
Options beginning of year..................................... $ -- $ --
Options written............................................... 200 244,688
Options closed................................................ (200) (244,688)
-------------- --------------
Options outstanding at November 30, 1994...................... $ -- $ --
============= =============
</TABLE>
81
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Information regarding dollar roll transactions by the Funds is as follows:
<TABLE>
<CAPTION>
AVERAGE AVERAGE
MAXIMUM AVERAGE AMOUNT FEE FUND SHARES AMOUNT
OUTSTANDING OUTSTANDING INCOME OUTSTANDING OUTSTANDING
DURING YEAR DURING YEAR EARNED DURING YEAR PER SHARE
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Intermediate Government
Fund.............................. $80,083,789 $ 14,408,721 $452,541 155,072,744 $ 0.09
Managed Bond Fund................... 16,345,108 5,087,193 198,223 19,354,404 0.26
Diversified Income Fund............. 8,703,633 3,205,335 127,481 8,181,272 0.39
Strategic Fixed Income Fund......... 82,181,734 23,287,999 849,250 56,689,913 0.41
Mortgage-Backed Securities Fund..... 11,812,500 4,288,161 128,293 96,739,456 0.04
</TABLE>
The average amount outstanding during the period was calculated by summing
the borrowings at the end of each day and dividing the sum by the number of days
in the year ended November 30, 1994.
5. SHARES OF BENEFICIAL INTEREST.
As of November 30, 1994, an unlimited number of shares without par value
were authorized for the Trust. The 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. See Schedule of Capital Stock Activity.
6. ORGANIZATION COSTS.
The Funds bear all costs in connection with their organization, including
the fees and expenses of registering and qualifying their shares for
distribution under Federal and state securities regulations. All such costs are
being amortized on the straight-line method over a period of five years from
commencement of operations. In the event that any of the shares issued by the
Funds to their sponsor prior to the commencement of the Funds' public offering
("initial shares") are redeemed during such amortization period by any holder
thereof, the Funds will be reimbursed by the holder for any unamortized
organization costs in the same proportion as the number of initial shares
redeemed bears to the number of initial shares outstanding at the time of
redemption.
7. LINE OF CREDIT.
The Trust and Nations Fund, Inc. participate in a $25 million line of
credit provided by Mellon Bank, N.A. (the "Bank") under a Line of Credit
Agreement (the "Agreement") dated March 17, 1994. Advances under the Agreement
are taken primarily for temporary or emergency purposes, including the meeting
of redemption requests. Under this Agreement, a Fund may borrow up to the lesser
of $10 million or 5% of its net assets. Interest is payable at the higher of the
Bank's Money Market Rate or the London Interbank Offered Rate (LIBOR) plus 0.25%
on an annualized basis. The Funds and the other affiliated entities are charged
an aggregate commitment fee of 0.25% per annum on the amount of the line of
credit. Each Fund shall be liable only for that portion of the commitment with
respect to such Fund and shall not be liable for the portion of the commitment
fee of any other fund. The Agreement requires, among other things, that each
participating Fund maintain a ratio of net assets (not including funds borrowed
pursuant to the Agreement) to aggregate amount of indebtedness pursuant to the
Agreement of no less than 4 to 1.
82
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
During the year ended November 30, 1994, the following Funds borrowed under
this Agreement:
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING AT MAXIMUM AVERAGE AVERAGE INTEREST
NOVEMBER 30, AMOUNT AMOUNT AVERAGE DEBT RATE INTEREST
FUND 1994 OUTSTANDING OUTSTANDING SHARES PER SHARE HIGH LOW EXPENSE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Intermediate
Government Fund... -- $7,900,000 $ 45,479 155,072,744 $ 0.00(a) 4.10% 4.10% $1,891
Short-Term Income
Fund.............. -- 1,600,000 4,932 24,927,251 0.00(a) 5.50 3.70 195
</TABLE>
(a) Value represents less than $0.01 per share.
The average amount outstanding was calculated by summing the borrowings at
the end of each day and dividing the sum by the number of days in the year ended
November 30, 1994.
8. CAPITAL LOSS CARRYFORWARD.
At November 30, 1994 the following Funds had available for Federal income
tax purposes unused capital losses as follows:
<TABLE>
<CAPTION>
NAME OF FUND EXPIRING IN 2002
- ------------ --------------
<S> <C>
Short-Intermediate Government Fund........................................... $ 22,968,237
Managed Bond Fund............................................................ 4,599,700
Adjustable Rate Government Fund.............................................. 2,087,054
Diversified Income Fund...................................................... 2,249,163
Strategic Fixed Income Fund.................................................. 11,546,423
Mortgage-Backed Securities Fund.............................................. 4,229,412
</TABLE>
9. REORGANIZATION.
On April 29, 1994, the Strategic Fixed Income Fund (Acquiring Fund)
acquired the assets and certain liabilities of The Capitol Mutual Funds Fixed
Income Portfolio (Acquired Fund), in a tax-free exchange for shares of the
Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired
Fund's shareholders on March 31, 1994. Total shares issued by the Acquiring
Fund, the value of the shares issued by the Acquiring Fund, the total net assets
of the Acquired Fund and the Acquiring Fund and any unrealized depreciation
included in the Acquired Fund's total net assets at the acquisition date are as
follows:
<TABLE>
<CAPTION>
VALUE OF
SHARES SHARES TOTAL NET TOTAL NET ACQUIRED
ISSUED BY ISSUED BY ASSETS OF ASSETS OF FUND
ACQUIRING ACQUIRING ACQUIRING ACQUIRED ACQUIRING UNREALIZED
FUND ACQUIRED FUND FUND FUND FUND* FUND DEPRECIATION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Strategic The Capitol Mutual
Fixed Income Funds Fixed
Fund Income Portfolio 2,136,871 $20,663,537 $20,663,537 $553,906,019 $311,904
</TABLE>
- ---------------
* The net assets of the Acquiring Fund immediately after the acquisition were
$574,569,556.
83
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES OF NATIONS FUND TRUST
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Nations Short-Intermediate
Government Fund, Nations Managed Bond Fund, Nations Short-Term Income Fund,
Nations Adjustable Rate Government Fund, Nations Diversified Income Fund,
Nations Strategic Fixed Income Fund, and Nations Mortgage-Backed Securities Fund
(each a Portfolio of Nations Fund Trust, hereafter referred to as the "Trust")
at November 30, 1994 and the results of each of their operations, the changes in
each of their net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
November 30, 1994 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 19, 1995
84
<PAGE>
THE NATIONS FUND FAMILY
EQUITY FUNDS
GROWTH
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Equity Index Fund*
Nations Special Equity Fund
GROWTH AND INCOME
Nations Balanced Assets Fund
Nations Equity Income Fund
Nations International Equity Fund
Nations Value Fund
BOND FUNDS
INCOME
Nations Adjustable Rate Government Fund
Nations Diversified Income Fund
Nations Government Securities Fund
Nations Managed Bond Fund
Nations Short-Intermediate Government Fund
Nations Short-Term Income Fund
Nations Strategic Fixed Income Fund
Nations Mortgage-Backed Securities Fund*
TAX-FREE INCOME
Nations Florida Municipal Bond Fund
Nations Florida Intermediate Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Georgia Intermediate Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations Maryland Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Tennessee Intermediate Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Texas Intermediate Municipal Bond Fund
Nations Virginia Municipal Bond Fund
Nations Virginia Intermediate Municipal Bond Fund
Nations Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Short-Term Municipal Income Fund
MONEY MARKET FUNDS
Nations Government Money Market Fund
Nations Prime Fund
Nations Tax Exempt Fund
Nations Treasury Fund
*Trust classes only
<PAGE>
[NATIONS FUND LOGO] BULK RATE
PO Box 9654 U.S. POSTAGE
Providence, RI 02940-9654 PAID
Toll Free 1-800-982-2271 BOSTON, MA
PERMIT NO.
54201
AR3-11/94
<PAGE>
[NATIONS FUND LOGO]
S E M I
ANNUAL
For the Period Ended May 31, 1995
REPORT
NATIONS VALUE FUND
NATIONS CAPITAL
GROWTH FUND
NATIONS EMERGING
GROWTH FUND
NATIONS BALANCED
ASSETS FUND
NATIONS EQUITY
INDEX FUND
NATIONS DISCIPLINED
EQUITY FUND
<PAGE>
NATIONS FUND AND OTHER MUTUAL FUNDS ARE NOT FDIC INSURED AND ARE NOT OBLIGA-
TIONS OF, ENDORSED BY, DEPOSITS IN, OR GUARANTEED BY NATIONSBANK, N.A.
(CAROLINAS) ("NATIONSBANK") OR ANY OF ITS AFFILIATES. INVESTMENTS IN MUTUAL
FUNDS AND OTHER INVESTMENT PRODUCTS INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL INVESTED.
NATIONS FUND DISTRIBUTOR: STEPHENS INC. STEPHENS INC., WHICH IS NOT AFFILIATED
WITH NATIONSBANK, IS NOT A BANK AND SECURITIES OFFERED BY IT ARE NOT GUARANTEED
BY ANY BANK OR INSURED BY THE FDIC. STEPHENS INC., MEMBER NYSE-SIPC.
NATIONS FUND INVESTMENT ADVISER: NATIONSBANK
<PAGE>
NATIONS FUND TRUST
DEAR SHAREHOLDER:
We are pleased to present the semi-annual results for Nations Fund Trust for the
period ended May 31, 1995. During this period, the assets in the Nations Fund
family of funds continued to grow, recently surpassing the $16 billion level. We
are pleased with this growth and feel it is only appropriate to thank our
shareholders for placing their confidence in our portfolios.
FINANCIAL MARKETS SUMMARY
The complexion of financial markets can change rapidly in today's investment
world. Through the second half of 1994, the stock and bond markets struggled
with a variety of tough financial issues. However, as the new year unfolded,
investors suddenly discovered a near-ideal world for the investment of financial
assets. As we look forward to the remainder of 1995 and begin to anticipate
1996, it is important to draw some lessons from the past twelve months. It is
interesting to note that most of the lessons derived from last year's activity
are not new. Past economic and credit cycles have presented investors with
similar opportunities and pitfalls as we discuss below.
As a result of the rise in interest rates in the summer and fall of 1994, many
investors learned painful lessons in financial speculation. Examples include the
significant losses in hedge funds, the Orange County, California bankruptcy
filing, and the demise of United Kingdom-based Barings Securities Plc. All three
situations produced serious losses for those who chose to reach for additional
return without paying proper attention to risk. Many of these losses could be
directly attributed to the speculative use of derivative securities.
The term "derivative" is used to describe a wide range and variety of financial
instruments. Derivatives include any security whose performance is linked to the
behavior of another security or market index. Traditional derivatives include
exchange-traded options and futures contracts. While derivative securities
inherently are neither good nor bad, they can be used in ways that lead to
greater losses, as seen in the case of Orange County and Barings Securities Plc.
Derivatives, however, can be effectively used.
Perhaps this lesson taught us something even more important -- that our
financial system is sound. While these episodes initially created great
discomfort, our capital markets proved they could absorb the blows.
Late in 1994, the devaluation of the Mexican peso introduced another element of
uncertainty into the financial markets. Although the decline in Mexican stock
prices was dramatic and the financial pain in Mexico continues to be real, our
financial markets and institutions were able to withstand the crisis. In
addition, the problem in Mexico helped to drive a great deal of excess out of
the emerging markets sector, which helped to adjust stock prices to more
realistic levels and create a more favorable environment for foreign investment.
The U.S. economy experienced strong growth in 1994 with little in the way of
inflationary pressure. Throughout 1994, and into early 1995, the Federal Reserve
Board repeatedly raised short-term interest rates in order to control inflation.
As we prepare to move into the second half of 1995, we can see that this policy
has clearly produced positive results for investors. Slow economic growth and
low inflation are ideal conditions for maximizing the potential of your
financial assets.
Those investors who had the courage to resist doing the wrong thing at the wrong
time earlier in the year are in the best position to reap the benefits of the
present environment. At various points in 1994, many investors were tempted to
sell financial assets because they believed that the economy might overheat or
that inflation might suddenly accelerate. However, a sound investment strategy
requires a steady hand and a long-term perspective. By early 1995, the benefits
of patience and conviction were already being reflected in the performance of
many stock and bond portfolios.
FINANCIAL OUTLOOK
We expect the investment environment to remain positive over the next twelve
months. The economy, in our view, will continue to slow. However, continued
corporate investment in productivity and technology, combined with modest
consumer spending, should produce a pattern of moderate economic growth. As we
speculate on events yet to take place in Washington, we see a major shift toward
downsizing in government, which should be received favorably by the financial
markets.
Unquestionably, we will experience setbacks in stock and bond prices.
Volatility, after all, is an essential component of any financial market.
However, investors who shun speculation, believe in the soundness of our
financial system, build diversified investment portfolios and act with
conviction on their long-term beliefs may be well positioned to reap potential
market rewards. It is our belief that an investment philosophy built on these
principles should serve us well in the years to come. We remain committed to
meeting the investment challenges that lie ahead.
1
<PAGE>
WHAT SHOULD STOCK MUTUAL FUND INVESTORS CONSIDER DOING?
While we are not in a position to recommend specific steps that an individual
investor should take, the following represent general information and investment
strategies that stock mutual fund investors may want to consider. Remember,
specific investment recommendations should always be based on an analysis of
your individual financial goals, tolerance for risk, and investment time frame.
Your investment representative can best help you develop a strategy reflecting
your needs and goals.
DIVERSIFY YOUR INVESTMENT PORTFOLIO. A well-diversified investment portfolio
can help establish a level of risk and potential reward in line with your
investment time frame and goals. To do so, you should allocate assets among
stock, bond and money market investments.
MAINTAIN A LONG-TERM PERSPECTIVE. While stock prices may rise and fall over the
short term, stocks historically have offered the greatest potential for
long-term gains among the traditional investment classes.
As the chart below shows, since 1926, a period which includes the Great
Depression, wars and recessions, stocks have historically outperformed all other
types of financial assets.
[LINEGRAPH]
SMALL COMPANY STOCKS: Small company stocks are units of ownership of publicly
traded corporations, generally with a market capitalization of $50 million to
$1.5 billion as measured by the total value of outstanding stock.
COMMON STOCKS: Common stocks are units of ownership of a public corporation.
Prices fluctuate with market conditions and there is no guaranteed rate of
return. Performance of common stocks is measured by the S&P 500, a weighted
index which measures the aggregate change in the market value of 400 industrial,
60 transportation and utility company stocks and 40 financial issues. The S&P
500 is an unmanaged index.
LONG-TERM CORPORATE BONDS: Long-term corporate bonds are debt instruments
issued by public and private corporations. They are usually taxable and
typically have a par value of $1,000.
LONG-TERM GOVERNMENT BONDS: Long-term government bonds are debt securities
issued or guaranteed by the U.S. government, its agencies and instrumentalities
and backed by its full faith and credit. They offer stable principal value if
held to maturity. Long-term bonds have maturities of ten years or longer. While
long-term government bonds offer fixed rates of return, their prices will
fluctuate with market conditions.
TREASURY BILLS: U.S. Treasury bills are also debt securities issued by the U.S.
government and backed by its full faith and credit. U.S. Treasury bills offer
stable principal value if held to maturity which is one-year or less. While U.S.
Treasury bills offer fixed rates of return, their prices will fluctuate with
market conditions.
INFLATION: Inflation is the rise in the prices of goods and services that takes
place when spending increases relative to the supply of goods and services on
the market. Inflation is measured by the Consumer Price Index (CPI), which is
also known as the Cost of Living Index and is determined by the U.S. Bureau of
Labor Statistics.
*Source: STOCKS, BONDS, BILLS AND INFLATION 1995 YEARBOOK(TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
This chart represents historical performance. It is intended for illustrative
purposes only and is not intended to be representative of the past or future
performance of any particular investment. Performance of investments in each of
these types of securities may differ for future periods and will vary with
market conditions.
2
<PAGE>
CONSIDER A SYSTEMATIC INVESTMENT STRATEGY. Investing regularly through a method
called "dollar cost averaging" involves investing a consistent dollar amount at
regular intervals. Using this method, you will buy fewer shares when prices are
high and more shares when prices are low. As a long-term investment strategy,
dollar cost averaging may help you average down the overall cost of your shares
over time. Please note that while a program of regular investing can help reduce
risk, it cannot assure a profit or protect against a loss in a declining market.
Since such a program involves continuous investment regardless of fluctuating
share values, investors should consider their financial ability to continue the
program through periods of low share prices.
CONSULT AN INVESTMENT REPRESENTATIVE. A professional investment representative
can help you to develop a long-term investment strategy that reflects your
goals, time frame and tolerance for risk. He or she is available to provide
information on allocating investment assets, or answer questions about specific
investments.
There are many factors that will affect a stock's share price -- from changes in
supply and demand for a particular company's products or services, to overall
economic and financial market conditions.
When held for long periods of time -- five years or more -- stock market
investments will generally experience a series of ups and downs. In determining
the level of investment risk you are comfortable with, there are several key
points to consider:
- - Stocks can be unpredictable. Stock market investments are generally not
suitable for pursuing your short-term investment goals. It is rare that an
investor would be in a position to buy and sell a particular stock in a short
period of time and make a substantial profit.
- - Invest for the long term. The longer your investment time frame, the better
your chances are of weathering stock market downturns.
- - Avoid placing all of your eggs in one basket. Spread your investment dollars
among several different stock market investments or among different types of
securities to seek to reduce the risk of principal loss should a particular
investment perform poorly.
WHAT SHOULD BOND MUTUAL FUND INVESTORS CONSIDER DOING?
Again, while we are not in a position to recommend specific steps that an
individual investor should take, the following represent general information and
investment strategies that bond mutual fund investors may want to consider.
Remember, specific investment recommendations should always be based on an
analysis of your individual financial goals, tolerance for risk, and investment
time frame. Your investment representative can best help you develop a strategy
reflecting your needs and goals.
Bond funds offer the potential to receive regular dividend income -- usually on
a monthly basis. Like stocks, bond prices may fluctuate as market conditions and
interest rates change. The highest yields are generally found in funds that
invest in long-term bonds or in lower quality bonds where share prices tend to
fluctuate more. High quality short-term bonds generally offer the least price
fluctuation.
HOW INTEREST RATES AFFECT BONDS. As market interest rates fall, bond prices
rise. As market interest rates rise, bond prices fall. One type of risk that
bond investors face is that the price of a bond will decline in a rising
interest rate environment. For instance, an investor holding a U.S. Treasury
bond earning 7% annually may have difficulty selling that bond in a rising
interest rate environment. A 7% bond becomes less attractive when newly issued
bonds offering 8% annually can be purchased.
Longer-term bonds are more sensitive to interest rate changes than short- or
intermediate-term bonds. The longer the time period until your investment
matures, the more price fluctuation the investment may incur. Many investors
choose to invest in short- or intermediate-term bonds to seek to reduce interest
rate risk.
HOW TAXES AFFECT BOND RETURNS. Municipal bonds provide investors the option to
earn a portion of their bond returns through tax-exempt coupon payments. Unlike
other bond coupons, which would be subject to federal, state and perhaps local
income taxes, the coupons paid by municipal bonds are exempt from some or all of
these taxes. While investors could earn taxable gains or losses on the price
change due to interest rate changes on their municipal bonds, the exempt feature
of the income stream is of considerable benefit to many investors. Investors
should consider the potential federal and state tax advantages of municipal bond
mutual funds when assessing their overall investment portfolio needs. Nations
Fund offers 19 different municipal bond funds to serve a variety of taxpayer
needs.
3
<PAGE>
INTEREST RATE PROTECTION THROUGH PORTFOLIO LADDERING.1 Portfolio laddering is
the process of investing in securities with different maturity dates to seek to
reduce a portfolio's overall price fluctuation and provide protection regardless
of the direction of interest rate movements. To build a portfolio ladder,
investments can be divided among bond mutual funds with short-, intermediate-
and long-term maturities. The exact mix will depend upon your investment
objectives and the current interest rate environment. Nations Fund offers a
comprehensive selection of fixed-income investment portfolios for this purpose.
UNDERSTANDING CREDIT RISK. One of the difficulties many investors face in
selecting individual bonds is judging credit quality. Bond ratings are based on
the bond issuer's ability to make interest payments and to repay the loan.
Ratings are typically determined by one or more highly-regarded rating services
such as Moody's Investor Service, Inc. or Standard & Poor's Corporation. While
bond ratings are based on in-depth research and analysis, and careful
examination of the issuer's financial situation, they are not a guarantee of
repayment of the loan at maturity.
MUTUAL FUNDS PROVIDE ACCESS TO IN-DEPTH CREDIT RESEARCH AND ANALYSIS. The
selection of quality bonds for your portfolio is dependent upon in-depth
research and credit analysis. For most investors, this can be difficult and time
consuming. Mutual funds offer the advantage of professional research, analysis
and portfolio management. Experienced investment managers are dedicated to
selecting appropriate investments and managing portfolios to pursue specific
investment goals.
THE NATIONS FUND ADVANTAGE
A family of mutual funds provides investors with a number of advantages,
including the ability to shift investment assets among funds as your financial
objectives or market conditions change.2 Nations Fund provides a broad array of
professionally managed stock, bond and money market mutual funds advised by
NationsBank. The Nations Fund family of mutual funds was designed to accommodate
a wide variety of investment objectives across the risk/reward spectrum.
For specific information on allocating assets to more closely target your
investment objectives, contact your investment representative. He or she can
provide additional information, including fund prospectuses. Prospectuses
contain more complete information on the funds, including charges and expenses.
Always read a fund's prospectus carefully before investing or sending money.
We hope this information proves valuable in the development of your investment
strategy. We look forward to helping you pursue your investment goals.
Sincerely,
/s/ A. Max Walker
- ------------------------
A. Max Walker
President and Chairman
of the Board
May 31, 1995
1 Portfolio laddering does not reduce market risk and the principal and yield of
investment securities will fluctuate with changes in market conditions.
2 Exchange privileges may be amended with 60-days written notice from the Fund.
4
<PAGE>
EFFECTIVE ASSET ALLOCATION THROUGH THE NATIONS FUND FAMILY
Nations Fund portfolios span the risk/reward spectrum providing investors with
the ability to pursue a wide range of objectives within a single fund family.
Stock, bond and money market portfolios allow investors to pursue short-,
intermediate-, and long-term investment goals ranging from preservation of
principal to capital accumulation.*
LOGO
* Mutual fund investment returns will fluctuate with market conditions so that
shares, when redeemed, may be worth more or less than original cost. Money
market instruments are neither insured nor guaranteed by the U.S. government.
While money market funds strive to maintain a constant $1.00 per share, there
can be no assurance that the funds will be able to maintain a stable net
asset value.
** Trust classes only.
5
<PAGE>
NATIONS FUND
A PORTFOLIO FOR EVERY INVESTOR
Since 1874, NationsBank, investment adviser to the Nations Fund family of mutual
funds, has built its success upon a long-standing commitment of quality service
to customers. Conditions change rapidly in the financial world, but the
requirements for sustained success remain constant: quality products and
services; a responsible investment philosophy; and a wealth of knowledge and
resources.
These characteristics are the guiding principles behind a family of mutual funds
with you, the Nations Fund investor, in mind. All of the funds are advised by
and made available through NationsBank, which, with its affiliates, has more
than $171 billion in assets, over seven million clients, and one of the
country's largest branch systems.
As investment adviser, NationsBank provides professional management of your
money which parallels the approach that has established NationsBank and its
affiliates as leaders in trust and institutional investment services, currently
managing over $57 billion.
A responsible investment approach guides every decision within the Nations Fund
family, whether the goal is based on long-term growth or current income. These
decisions are backed by substantial professional resources consisting of
experienced equity and fixed income analysts, researchers and portfolio
managers.
There are currently 39 funds in the Nations Fund family, with assets totaling
over $16 billion, to help you with retirement planning, college savings or any
other long-range financial goal.
FOR GROWTH OF CAPITAL
(Investments primarily in stocks)
- -----------------------------------
NATIONS CAPITAL GROWTH FUND
Objective: To seek long-term capital appreciation.
Approach: Invests in stocks with superior growth characteristics, selling at
reasonable prices, that should outperform the market over time. The Fund
focuses on companies with assets over $500 million. Selection criteria include
above average growth potential, solid financials, and above average return on
equity and earnings growth relative to the S&P 500 Index.
NATIONS EMERGING GROWTH FUND
Objective: To seek capital appreciation.
Approach: Invests in common stocks and convertible securities that are
expected to demonstrate superior earnings growth relative to most publicly
traded companies. Companies selected will have revenues of $50 million to $1.5
billion, a debt ratio of less than 50% of total capital, and generally less
than $2 billion in capitalization.
NATIONS EQUITY INDEX FUND*
Objective: To seek investment results that correspond, before fees and
expenses, to the total return of common stocks publicly traded in the U.S., as
represented by the S&P 500 Index.
Approach: Portfolio holdings are structured according to the S&P 500 Index in
an effort to duplicate the performance of the Index.
NATIONS DISCIPLINED EQUITY FUND (formerly Nations Special Equity Fund)
Objective: To seek long-term capital appreciation.
Approach: Invests primarily in common stocks of companies exhibiting the
potential for significant increases in their earnings per share.
NATIONS INTERNATIONAL
EQUITY FUND
Objective: To seek a high total return on its assets from long-term growth of
capital.
Approach: Invests primarily in an internationally diversified portfolio of
marketable equity securities of non-U.S. issuers. The Fund may invest in
countries located in the Far East, Western Europe, Australia and other
countries.
FOR GROWTH AND INCOME
(Investments primarily in stocks)
- -----------------------------------
NATIONS EQUITY INCOME FUND
Objective: To seek 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.
Approach: Invests in common stocks and convertible securities that together
exhibit above average current dividend yields relative to that of the S&P 500
Index. Selects stocks of companies exhibiting five years of stable or
increasing dividends, established operating histories, strong balance
sheets and other favorable financial characteristics.
NATIONS VALUE FUND
Objective: To seek long-term capital growth with income a secondary
consideration.
Approach: Utilizes a fundamental approach focusing on individual company value
and projected earnings per share. The Fund seeks to invest in companies with
above market dividend yield, low price-to-earnings ratios and more than $300
million in assets. Investments are diversified across all major industries and
economic sectors.
FOR GROWTH OF INCOME, CURRENT
INCOME AND GROWTH OF CAPITAL
(Investments in stocks, bonds and money markets)
- --------------------------------------------------
NATIONS BALANCED ASSETS FUND
Objective: Total investment return through a combination of growth of capital
and current income consistent with the preservation of capital.
Approach: Allocates assets among common stocks, bonds and money market
instruments. Seeks stocks of high quality companies with above average earnings
potential and return on equity. Potential volatility is reduced through
inclusion of investment grade bonds.
6
<PAGE>
FOR CURRENT INCOME
(Investments in fixed income obligations)
- -------------------------------------------
NATIONS
SHORT-INTERMEDIATE
GOVERNMENT FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: Invests in obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities, and repurchase agreements relating to such
obligations. Under normal market conditions, the Fund is expected to have an
average dollar weighted maturity of between two and seven years.#
NATIONS MANAGED BOND FUND++
Objective: To seek a high level of current income consistent with relative
stability of principal.
Approach: Invests primarily in investment grade corporate and government fixed
income and related securities. Under normal market conditions, the Fund is
expected to have an average weighted maturity of between five and fifteen
years.
NATIONS SHORT-TERM
INCOME FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: Invests primarily in investment grade corporate and mortgage-backed
bonds. Under normal market conditions, the Fund is expected to have an average
dollar weighted maturity of three years or less.
NATIONS DIVERSIFIED
INCOME FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: Invests in a broad range of corporate, government and agency fixed
income securities, and may include no more than 35% below investment grade.
NATIONS STRATEGIC
FIXED INCOME FUND
Objective: To maximize total investment return through the active management of
fixed income securities.
Approach: Invests primarily in a mix of investment grade corporate, government
and mortgage-backed securities.
NATIONS GOVERNMENT
SECURITIES FUND
Objective: To provide current income and preservation of capital.
Approach: Invests in obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities.#
FOR CURRENT INCOME
(Investments in fixed income obligations)
- -------------------------------------------
NATIONS ADJUSTABLE RATE
GOVERNMENT FUND
Objective: To seek a high level of current income consistent with minimum
fluctuation of share price.
Approach: Invests primarily in adjustable rate mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.#
NATIONS MORTGAGE-BACKED
SECURITIES FUND*
Objective: To seek as high a level of total investment return as is consistent
with prudent investment risk.
Approach: Invests primarily in mortgage-backed securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities.#
FOR TAX-EXEMPT INCOME
(Investments in municipal securities)
- -----------------------------------
NATIONS MUNICIPAL INCOME FUND+
Objective: To seek a high level of current interest income that is exempt from
federal income taxes.
Approach: Invests primarily in investment grade tax-exempt obligations across
a wide range of municipalities and geographic regions to add diversity to the
Fund.
NATIONS INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: To seek higher than money market yields.
Approach: Invests primarily in intermediate-term, investment grade municipal
securities which make interest payments that are exempt from federal income
taxes.
NATIONS SHORT-TERM
MUNICIPAL INCOME FUND+
Objective: To seek a high level of current interest income that is exempt from
federal income taxes.
Approach: Invests primarily in short-term (average weighted maturity 1 - 3
years) investment grade tax-exempt obligations across a wide range of
municipalities and geographic regions to add diversity to the Fund.
NATIONS FLORIDA
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in Florida intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
FOR TAX-EXEMPT INCOME
(Investments in municipal securities)
- -----------------------------------
NATIONS FLORIDA
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in Florida municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
NATIONS GEORGIA
INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in Georgia intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS GEORGIA
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in Georgia municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
NATIONS MARYLAND
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Maryland state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Maryland intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS MARYLAND
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Maryland state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Maryland municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
7
<PAGE>
FOR TAX-EXEMPT INCOME
(Investments in municipal securities)
- ---------------------------------------
NATIONS NORTH CAROLINA
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in North Carolina
intermediate municipal bonds, including those used to support projects that
benefit the public, such as roads, bridges, hospitals and schools.
NATIONS NORTH CAROLINA
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in North Carolina municipal
bonds, including those used to support projects that benefit the public, such
as roads, bridges, hospitals and schools.
NATIONS SOUTH CAROLINA
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in South Carolina
intermediate municipal bonds, including those used to support projects that
benefit the public, such as roads, bridges, hospitals and schools.
NATIONS SOUTH CAROLINA
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in South Carolina municipal
bonds, including those used to support projects that benefit the public, such
as roads, bridges, hospitals and schools.
NATIONS TENNESSEE
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Tennessee state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Tennessee intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
FOR TAX-EXEMPT INCOME
(Investments in municipal securities)
- ---------------------------------------
NATIONS TENNESSEE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Tennessee state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Tennessee municipal
bonds, including those used to support projects that benefit the public, such
as roads, bridges, hospitals and schools.
NATIONS TEXAS
INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from federal
income tax, consistent with the relative stability of principal.
Approach: Invests substantially all of its assets in Texas intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS TEXAS
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from federal
income tax, consistent with the relative stability of principal.
Approach: Invests substantially all of its assets in Texas municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
NATIONS VIRGINIA
INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Virginia state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Virginia intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS VIRGINIA
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Virginia state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Virginia municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
MONEY MARKET FUNDS
FOR CURRENT INCOME AND PRESERVATION
OF CAPITAL
(Investments in money market securities)
------------------------------------------
NATIONS PRIME FUND
Objective: To seek the maximization of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
Approach: Invests in high quality money market instruments including bank
certificates of deposit, banker's acceptances and commercial paper.
NATIONS TREASURY FUND
Objective: The maximization of current income to the extent consistent with
the preservation of capital and the maintenance of liquidity.
Approach: Invests in U.S. Treasury obligations and repurchase agreements
secured by such obligations.#
NATIONS GOVERNMENT
MONEY MARKET FUND
Objective: To seek as high a level of current income as is consistent with
liquidity and stability of principal.
Approach: Invests in U.S. government obligations and repurchase agreements
relating to such obligations.#
NATIONS TAX EXEMPT FUND+
Objective: To seek as high a level of current interest income exempt from
federal income taxes as is consistent with liquidity and stability of
principal.
Approach: Invests in municipal securities, the interest on which is exempt
from regular federal income tax.
# The portfolio securities held by these funds are guaranteed as to the timely
payment of principal and interest only. This is not a guarantee of market
value of the shares of the funds themselves.
* Offers Trust A Shares only.
++ Offers Trust A Shares, Investor A Shares and Investor C Shares only.
+ A portion of income, from municipal bonds, received by shareholders may be
subject to some federal income, state and/or local tax and/or the federal
alternative minimum tax.
8
<PAGE>
NATIONS FUND TRUST
NATIONS VALUE FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 92.1%
AEROSPACE AND DEFENSE -- 4.6%
275,600 Lockheed Martin Corporation+.......... $ 16,398,200
222,400 Raytheon Company...................... 17,236,000
239,000 Rockwell International Corporation.... 10,904,375
------------
44,538,575
------------
AUTOMOBILES -- 2.4%
115,700 Chrysler Corporation.................. 5,047,413
644,200 Ford Motor Company.................... 18,842,850
------------
23,890,263
------------
AUTOMOTIVE ACCESSORIES -- 0.7%
177,800 Echlin Inc. .......................... 6,400,800
------------
BEVERAGES -- 3.7%
307,700 Anheuser-Busch Companies, Inc. ....... 18,192,762
355,000 PepsiCo Inc. ......................... 17,395,000
------------
35,587,762
------------
BUSINESS EQUIPMENT AND
PERIPHERALS -- 2.1%
86,000 International Business Machines
Corporation......................... 8,019,500
107,800 Xerox Corporation..................... 12,221,825
------------
20,241,325
------------
CHEMICALS -- BASIC -- 0.8%
188,200 PPG Industries, Inc. ................. 7,833,825
------------
CHEMICALS -- SPECIALTY -- 1.4%
152,000 Georgia Gulf Corporation.............. 4,617,000
258,600 Lubrizol Corporation.................. 9,018,675
------------
13,635,675
------------
COMPUTER MANUFACTURER -- 1.8%
381,800 Sun Microsystems Inc.+................ 17,181,000
------------
DIVERSIFIED HEALTHCARE -- 1.0%
597,000 Tenet Healthcare Inc. ................ 9,925,125
------------
DRUGS -- 6.7%
48,100 American Home Products Corporation.... 3,541,363
239,000 Bristol-Meyers Squibb................. 15,863,625
400,000 Merck & Company Inc. ................. 18,850,000
164,500 Schering-Plough Corporation........... 12,954,375
392,000 Upjohn Company........................ 14,259,000
------------
65,468,363
------------
DRUGS -- MEDICAL SUPPLIES -- 0.8%
140,600 Becton Dickinson & Company............ 8,084,500
------------
ELECTRIC
UTILITIES -- NON-NUCLEAR -- 4.5%
555,061 CINergy Corporation................... 14,778,499
348,000 DPL Inc. ............................. 7,656,000
414,600 GTE Corporation....................... 13,837,275
263,500 PECO Energy Company................... 7,410,937
------------
43,682,711
------------
ELECTRICAL EQUIPMENT -- 2.1%
238,000 General Electric Company.............. 13,804,000
109,600 Johnson Controls Inc. ................ 6,274,600
------------
20,078,600
------------
ELECTRONIC COMPONENTS -- 4.6%
341,000 Arrow Electronics Inc.+............... 15,686,000
156,600 Avnet, Inc. .......................... 7,125,300
96,200 Intel Corporation..................... 10,798,450
101,000 Texas Instruments Inc. ............... 11,678,125
------------
45,287,875
------------
FINANCE -- MISCELLANEOUS -- 0.1%
25,000 Mercantile Bancorporation, Inc. ...... 996,875
------------
FINANCE -- SERVICES -- 1.1%
552,000 Paine Webber Group, Inc. ............. 10,902,000
------------
FOOD -- PACKAGED -- 1.3%
212,700 Hershey Foods Corporation............. 10,980,638
35,000 Pioneer Hi-Bred International......... 1,373,750
------------
12,354,388
------------
HOUSEHOLD PRODUCTS -- 3.4%
469,100 First Brands Corporation.............. 19,350,375
221,000 Premark International Inc. ........... 11,022,375
163,000 Sunbeam-Oster Corporation............. 2,954,375
------------
33,327,125
------------
INDUSTRIAL CONGLOMERATES -- 5.2%
326,600 AlliedSignal Inc. .................... 13,186,475
193,200 ITT Corporation....................... 21,614,250
99,000 Teradyne Inc.+........................ 5,358,375
135,000 TRW Inc. ............................. 10,648,125
------------
50,807,225
------------
INSURANCE -- 1.6%
98,000 Kemper Corporation.................... 4,618,250
141,000 Marsh & McLennan Companies Inc. ...... 11,227,125
------------
15,845,375
------------
LEISURE -- 1.1%
442,500 Mattel, Inc. ......................... 11,062,500
------------
LIFE AND SPECIALTY INSURANCE -- 2.9%
86,700 General Re Corporation................ 11,737,012
369,000 Lincoln National Corporation.......... 16,697,250
------------
28,434,262
------------
LONG DISTANCE -- 2.4%
254,600 AT&T Corporation...................... 12,920,950
319,500 Sprint Corporation.................... 10,703,250
------------
23,624,200
------------
MEDIA -- 0.9%
160,000 Gannett Company....................... 8,560,000
------------
METALS -- 2.3%
320,000 Aluminum Company of America........... 14,880,000
332,000 Bethlehem Steel Corporation+.......... 4,897,000
101,000 Inland Steel Industries Inc. ......... 2,840,625
------------
22,617,625
------------
MONEY CENTER BANKS -- 3.7%
343,000 Chemical Banking Corporation.......... 15,820,875
175,000 Citicorp.............................. 9,362,500
15,000 Cullen Frost Bankers, Inc. ........... 592,500
170,000 First Chicago Corporation............. 9,753,750
20,000 Union Planters Corporation............ 530,000
------------
36,059,625
------------
OIL SERVICES AND EQUIPMENT -- 1.0%
150,200 Schlumberger Ltd. .................... 9,763,000
------------
PACKAGING -- 0.9%
222,000 Bowater, Inc. plc., ADR............... 8,713,500
------------
PAPER AND FOREST PRODUCTS -- 1.7%
306,900 Mead Corporation...................... 16,534,238
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
NATIONS FUND TRUST
NATIONS VALUE FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
PETROLEUM -- DOMESTIC -- 1.4%
66,000 Ashland Inc. ......................... $ 2,450,250
309,000 Tosco Corporation..................... 10,969,500
------------
13,419,750
------------
PETROLEUM -- INTERNATIONAL -- 9.4%
151,000 Amoco Corporation..................... 10,324,625
215,000 Chevron Corporation................... 10,561,875
107,000 du Pont (E.I.) deNemours & Company.... 7,262,625
181,800 Exxon Corporation..................... 12,975,975
165,900 Mobil Corporation..................... 16,652,212
161,000 Philips Petroleum Company............. 5,836,250
137,600 Royal Dutch Petroleum Company, ADR.... 17,440,800
159,900 Texaco Inc. .......................... 10,953,150
------------
92,007,512
------------
PRODUCER GOODS -- MACHINERY -- 1.7%
139,000 Caterpillar Inc. ..................... 8,374,750
192,800 Varity Corporation+................... 8,314,500
------------
16,689,250
------------
REGIONAL BANKS AND THRIFTS -- 1.7%
232,300 Crestar Financial Corporation......... 10,685,800
145,000 Mellon Bank Corporation............... 6,198,750
------------
16,884,550
------------
RETAIL -- MAJOR -- 2.7%
362,000 Federated Department Stores Inc. ..... 8,326,000
292,000 May Department Stores Company......... 11,461,000
143,000 Penney (J.C.) Inc. ................... 6,738,875
------------
26,525,875
------------
RETAIL -- SPECIALTY -- 1.3%
456,500 Circuit City Stores Inc. ............. 12,553,750
------------
TELECOMMUNICATION SYSTEMS AND
SPECIALTY EQUIPMENT -- 1.6%
79,000 Comsat Corporation, Series 1.......... 1,540,500
269,000 Harris Corporation.................... 14,290,625
------------
15,831,125
------------
TELEPHONE -- BELL REGIONAL -- 1.8%
270,000 BellSouth Corporation................. 16,571,250
28,300 Pacific Telesis Group................. 757,025
------------
17,328,275
------------
TELEPHONE -- CABLE AND
CELLULAR -- 1.1%
59,600 British Telecommunications, ADR....... 3,762,250
145,000 SBC Communications Inc. .............. 6,525,000
------------
10,287,250
------------
TRANSPORTATION -- SURFACE -- 2.6%
173,000 Burlington Northern Inc. ............. 10,574,625
308,000 Consolidated Freightways Inc.+........ 7,315,000
312,000 Dial Corporation...................... 7,644,000
------------
25,533,625
------------
TOTAL COMMON STOCKS
(Cost $794,015,997)................. 898,499,299
===========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
REPURCHASE AGREEMENT -- 8.6%
(Cost $83,399,000)
$83,399,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995 to be repurchased at
$83,413,016 on 06/01/1995,
collateralized by, $85,484,658
market value of U.S. Treasury
Bonds at 7.625% and 11.750% with
maturities of 02/15/2025 and
02/15/2010, respectively.......... 83,399,000
===========
TOTAL INVESTMENTS
(Cost $877,414,997*)........................... 100.7% 981,898,299
OTHER ASSETS AND
LIABILITIES (NET).............................. (0.7) (6,991,658)
----- ------------
NET ASSETS....................................... 100.0% $974,906,641
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
ABBREVIATION:
ADR American Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
NATIONS FUND TRUST
NATIONS CAPITAL GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 90.2%
BEVERAGES -- 4.4%
350,000 Coca-Cola Company..................... $ 21,656,250
300,000 PepsiCo Inc. ......................... 14,700,000
------------
36,356,250
------------
BUSINESS EQUIPMENT AND
PERIPHERALS -- 4.9%
270,400 Bay Networks, Inc.+................... 9,869,600
82,500 Cabletron Systems Inc.+............... 4,413,750
344,300 Cisco Systems Inc.+................... 15,063,125
42,000 International Business Machines
Corporation......................... 3,916,500
65,000 Xerox Corporation..................... 7,369,375
------------
40,632,350
------------
CHEMICALS -- BASIC -- 3.7%
240,000 Dow Chemical Company.................. 17,610,000
215,000 Eastman Chemical Company.............. 12,900,000
------------
30,510,000
------------
COMPUTER MANUFACTURERS -- 4.7%
335,000 COMPAQ Computer Corporation+.......... 13,106,875
358,000 EMC Corporation+...................... 8,234,000
110,000 Hewlett Packard Company............... 7,273,750
198,000 Silicon Graphics Inc.+................ 7,697,250
60,000 Sun Microsystems Inc.+................ 2,700,000
------------
39,011,875
------------
DIVERSIFIED HEALTHCARE -- 3.4%
252,500 Columbia/HCA Healthcare Corporation... 10,320,938
359,000 HEALTHSOUTH Corporation+.............. 6,192,750
555,000 Humana Inc.+.......................... 11,724,375
------------
28,238,063
------------
DRUGS -- 5.4%
100,000 Amgen Inc.+........................... 7,250,000
140,000 Merck & Company Inc. ................. 6,597,500
175,000 Pfizer Inc. .......................... 15,421,875
200,000 Schering-Plough Corporation........... 15,750,000
------------
45,019,375
------------
DRUGS -- MEDICAL SUPPLIES -- 3.4%
198,500 Abbott Laboratories................... 7,940,000
145,000 Becton Dickinson & Company............ 8,337,500
160,700 Medtronic Inc. ....................... 12,092,675
------------
28,370,175
------------
ELECTRIC UTILITIES -- INDEPENDENT
POWER -- 0.2%
226,400 Sithe Energies Inc.+.................. 1,782,900
------------
ELECTRICAL EQUIPMENT -- 4.7%
245,000 Emerson Electric Company.............. 16,843,750
384,000 General Electric Company.............. 22,272,000
------------
39,115,750
------------
ELECTRONIC COMPONENTS -- 10.2%
300,000 AMP Inc. ............................. 12,787,500
237,000 Applied Materials Inc.+............... 18,249,000
224,000 Intel Corporation..................... 25,144,000
217,000 Motorola, Inc. ....................... 12,992,875
131,400 Texas Instruments Inc. ............... 15,193,125
------------
84,366,500
------------
ENGINEERING AND CONSTRUCTION -- 1.0%
159,600 Fluor Corporation..................... 7,900,200
------------
FINANCE -- SERVICES -- 2.3%
100,000 Morgan Stanley Group, Inc. ........... 7,612,500
600,000 Paine Webber Group, Inc. ............. 11,850,000
------------
19,462,500
------------
HEALTH AND BEAUTY -- 0.6%
60,000 Gillette Company...................... 5,062,500
------------
HOUSEHOLD PRODUCTS -- 3.0%
235,000 Procter & Gamble Company.............. 16,890,625
420,500 Sunbeam-Oster Corporation............. 7,621,562
------------
24,512,187
------------
INDUSTRIAL CONGLOMERATES -- 1.9%
400,000 AlliedSignal Inc. .................... 16,150,000
------------
INSURANCE -- 1.4%
40,000 Kemper Corporation.................... 1,885,000
750 Marsh & McLennan Companies Inc. ...... 59,719
200,000 MGIC Investment Corporation........... 9,400,000
------------
11,344,719
------------
LEISURE -- 0.6%
135,000 Time Warner Inc. ..................... 5,349,375
------------
LIFE AND SPECIALTY INSURANCE -- 3.7%
150,000 American International Group, Inc. ... 17,062,500
100,000 General Re Corporation................ 13,537,500
------------
30,600,000
------------
LONG DISTANCE -- 0.8%
135,800 AT&T Corporation...................... 6,891,850
------------
MEDIA -- 2.0%
175,000 Capital Cities/ABC Inc. .............. 16,887,500
------------
METALS -- 1.0%
175,000 Nucor Corporation..................... 8,356,250
------------
MONEY CENTER BANKS -- 0.6%
100,000 Citicorp.............................. 5,350,000
------------
PAPER AND FOREST PRODUCTS -- 2.2%
238,600 Georgia-Pacific Corporation........... 18,551,150
------------
PETROLEUM -- DOMESTIC -- 0.8%
227,600 Unocal Corporation.................... 6,742,650
------------
PETROLEUM -- INTERNATIONAL -- 6.0%
145,000 Amoco Corporation..................... 9,914,375
150,000 Chevron Corporation................... 7,368,750
200,000 Mobil Corporation..................... 20,075,000
100,000 Royal Dutch Petroleum Company, ADR.... 12,675,000
------------
50,033,125
------------
PRODUCER GOODS -- MACHINERY -- 0.9%
120,000 Caterpillar Inc. ..................... 7,230,000
------------
REGIONAL BANKS AND THRIFTS -- 1.0%
180,900 Crestar Financial Corporation......... 8,321,400
------------
RESTAURANTS -- 1.5%
325,600 McDonald's Corporation................ 12,332,100
------------
RETAIL -- MAJOR -- 0.6%
200,000 Wal-Mart Stores Inc. ................. 5,000,000
------------
RETAIL -- SPECIALTY -- 3.2%
70,000 Home Depot Inc. ...................... 2,913,750
525,000 Lowe's Companies Inc. ................ 14,306,250
170,000 Office Depot Inc.+.................... 4,080,000
200,000 OfficeMax Inc.+....................... 4,950,000
------------
26,250,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
NATIONS FUND TRUST
NATIONS CAPITAL GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
------------------------------------------------------------
COMMON STOCKS -- (CONTINUED)
SOFTWARE AND SERVICES -- 5.7%
258,700 Ceridian Corporation+................. $ 8,343,075
151,000 Computer Associates International
Inc. ............................... 9,890,500
195,300 First Data Corporation................ 11,278,575
48,000 Microsoft Corporation+................ 4,065,000
393,250 Oracle Systems Corporation+........... 13,665,437
------------
47,242,587
------------
TELECOMMUNICATION SYSTEMS AND
SPECIALTY EQUIPMENT -- 1.8%
425,000 General Instrument Corporation+....... 13,121,875
40,000 Tellabs Inc.+......................... 1,320,000
------------
14,441,875
============
TELEPHONE -- CABLE AND
CELLULAR -- 0.9%
69,000 Comcast Corporation, Class A,
Special............................. 1,207,500
300,000 Tele-Communications Inc., Class A+.... 6,337,500
------------
7,545,000
------------
TRANSPORTATION -- SURFACE -- 1.0%
320,000 Dial Corporation...................... 7,840,000
------------
WASTE MANAGEMENT -- 0.7%
171,200 Browning-Ferris Industries Inc. ...... 6,099,000
------------
TOTAL COMMON STOCKS
(Cost $621,363,658)................. 748,899,206
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 11.2%
(Cost $93,290,000)
$93,290,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995 to be repurchased at
$93,305,678 on 06/01/1995,
collateralized by, $95,623,014
market value of U.S. Treasury
Bonds at 7.625% and 11.750% with
maturities of 02/15/2025 and
02/15/2010, respectively.......... $ 93,290,000
============
TOTAL INVESTMENTS
(Cost $714,653,658*)................... 101.4% 842,189,206
OTHER ASSETS AND
LIABILITIES (NET)...................... (1.4) (11,941,426)
----- ------------
NET ASSETS............................... 100.0% $830,247,780
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
ABBREVIATION:
ADR American Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
NATIONS FUND TRUST
NATIONS EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 87.0%
APPAREL -- 3.1%
147,000 Lands End Inc.+....................... $ 2,260,125
107,000 Nautica Enterprises Inc.+............. 3,210,000
51,000 Nine West Group Inc.+................. 1,778,625
------------
7,248,750
------------
AUTOMOTIVE ACCESSORIES -- 1.1%
36,000 Discount Auto Parts Inc.+............. 967,500
60,000 Superior Industries International
Inc. ............................... 1,770,000
------------
2,737,500
------------
BUSINESS EQUIPMENT AND
PERIPHERALS -- 3.6%
22,000 Cabletron Systems Inc.+............... 1,177,000
133,000 Danka Business Systems Plc, ADR....... 3,275,125
63,000 3Com Corporation+..................... 4,032,000
------------
8,484,125
------------
CHEMICALS -- SPECIALTY -- 2.1%
103,000 Airgas Inc.+.......................... 2,678,000
77,000 Georgia Gulf Corporation.............. 2,338,875
------------
5,016,875
------------
COMPUTER MANUFACTURERS -- 1.3%
75,000 EMC Corporation+...................... 1,725,000
50,000 S3 Inc.+.............................. 1,356,250
------------
3,081,250
------------
DIVERSIFIED HEALTHCARE -- 11.9%
6,100 HCIA Inc.+............................ 179,188
32,000 Health Care and Retirement
Corporation+........................ 944,000
100,800 Health Management Association Inc.,
Class A+............................ 2,759,400
62,000 HealthCare COMPARE Corporation+....... 1,937,500
210,000 HEALTHSOUTH Corporation+.............. 3,622,500
48,000 Integrated Health Services Inc. ...... 1,602,000
114,000 Lincare Holdings Inc.+................ 3,021,000
16,000 Living Centers of America Inc.+....... 496,000
71,000 Manor Care Inc. ...................... 2,076,750
53,000 Medcath Inc.+......................... 622,750
13,300 MedPartners Inc.+..................... 256,025
120,000 Mid-Atlantic Medical Services Inc.+... 2,490,000
6,300 Occusystems Inc. ..................... 111,825
115,000 PhyCor Inc.+.......................... 3,464,375
136,000 Physicians Corporation of America+.... 2,992,000
33,000 Regency Health Services Inc.+......... 363,000
50,000 Sierra Health Services+............... 1,343,750
------------
28,282,063
------------
DRUGS -- 3.6%
95,000 Mylan Labs............................ 2,719,375
68,200 Teva Pharmaceutical Industries Ltd.,
ADR................................. 2,242,075
97,000 Watson Pharmaceuticals Inc.+.......... 3,564,750
------------
8,526,200
------------
DRUGS -- MEDICAL SUPPLIES -- 4.1%
150,000 Biomet Inc.+.......................... 2,231,250
125,000 IVAX Corporation...................... 3,234,375
30,000 Nellcor Inc.+......................... 1,305,000
50,000 Stryker Corporation................... 1,918,750
30,000 Sybron International Corporation+..... 1,165,500
------------
9,854,875
------------
ELECTRICAL EQUIPMENT -- 1.8%
7,100 Anadigics Inc. ....................... 122,475
18,000 Cidco Inc.+........................... 589,154
105,000 Input/Output Inc.+.................... 3,570,000
------------
4,281,629
------------
ELECTRONIC COMPONENTS -- 7.9%
77,000 Allen Group Inc. ..................... 1,799,875
141,000 Amphenol Corporation, Class A+........ 3,895,125
105,000 Analog Devices Inc.+.................. 3,268,125
137,000 Gentex Corporation+................... 2,500,250
28,000 Scientific-Atlanta Inc. .............. 521,500
88,000 Symbol Technologies Inc.+............. 2,970,000
90,000 VLSI Technology Inc.+................. 2,345,625
30,700 Watkins-Johnson Company............... 1,373,825
------------
18,674,325
------------
ENERGY EXPLORATION AND
PRODUCTION -- 1.2%
62,000 Pogo Producing Company................ 1,488,000
62,300 Union Texas Petroleum Holdings
Inc. ............................... 1,409,537
------------
2,897,537
------------
INSURANCE -- 2.4%
85,000 American Re Corporation+.............. 3,166,250
60,000 CMAC Investment Corporation........... 2,490,000
------------
5,656,250
------------
LEISURE -- 0.9%
58,000 Hollywood Entertainment
Corporation+........................ 2,073,500
------------
MEDIA -- 1.6%
100,500 Infinity Broadcasting Corporation,
Class A+............................ 2,826,562
68,000 Katz Media Group Inc.+................ 1,079,500
------------
3,906,062
------------
METALS -- 0.8%
47,800 Allegheny Ludlum Corporation.......... 944,050
35,000 Barrick Gold Corporation.............. 883,750
------------
1,827,800
------------
OIL SERVICES AND EQUIPMENT -- 2.5%
55,000 BJ Services Inc.+..................... 1,402,500
26,000 Camco International Companies Inc. ... 575,250
86,000 Parker & Parsley Petroleum Company.... 1,677,000
125,000 Smith International Inc.+............. 2,234,375
------------
5,889,125
------------
PRODUCER GOODS -- MACHINERY -- 1.1%
70,000 AGCO Corporation...................... 2,651,250
------------
PUBLISHING -- 1.1%
50,000 Houghton Mifflin Company.............. 2,568,750
------------
REGIONAL BANKS AND THRIFTS -- 3.0%
70,000 Boatmen's Bancshares Inc. ............ 2,283,750
30,000 Crestar Financial Corporation......... 1,380,000
58,000 Cullen Frost Bankers Inc. ............ 2,291,000
30,000 Mercantile Bancorporation Inc. ....... 1,196,250
------------
7,151,000
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
NATIONS FUND TRUST
NATIONS EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
RESTAURANTS AND LODGING -- 5.3%
160,000 Boston Chicken Inc. .................. $ 3,720,000
57,000 La Quinta Inns Inc. .................. 1,617,375
51,000 Lone Star Steakhouse/Saloon Inc. ..... 1,600,125
30,000 Luby's Cafeterias Inc. ............... 611,250
100,000 Morrison Restaurants Inc. ............ 2,150,000
97,000 Outback Steakhouse Inc.+.............. 2,897,875
------------
12,596,625
------------
RETAIL -- SPECIALTY -- 3.6%
52,000 AutoZone Inc. +....................... 1,209,000
93,000 General Nutrition Companies Inc.+..... 2,697,000
96,000 Gymboree Corporation+................. 2,340,000
79,000 Starbucks Corporation+................ 2,295,938
------------
8,541,938
------------
SERVICES -- 3.6%
46,000 Catalina Marketing Corporation+....... 2,041,250
88,000 Franklin Quest Company+............... 2,717,000
60,000 Interim Services Inc. ................ 1,485,000
76,500 Paychex, Inc. ........................ 2,256,750
------------
8,500,000
------------
SOFTWARE AND SERVICES -- 8.1%
19,000 Adobe Systems Inc.+................... 988,000
13,100 Baan Company NV....................... 307,850
55,000 Cadence Design Systems Inc.+.......... 1,636,250
65,000 Cerner Corporation+................... 3,705,000
74,000 Davidson and Associates Inc.+......... 2,146,000
40,000 Electronic Arts+...................... 1,030,000
35,000 FTP Software Company Inc. ............ 748,125
28,000 Intuit Inc.+.......................... 1,771,000
9,700 Maxis Inc. ........................... 189,150
45,000 Millipore Corporation................. 2,953,125
26,000 Parametric Technology Corporation+.... 1,105,000
33,600 SunGard Data Systems Inc.+............ 1,675,800
19,800 Transaction Systems Architects,
Class A+............................ 425,700
13,000 Uunet Technologies Inc. .............. 308,750
8,200 Videoserver Inc. ..................... 212,175
------------
19,201,925
------------
TELECOMMUNICATION SYSTEMS AND
SPECIALTY EQUIPMENT -- 9.3%
30,000 ADC Telecommunications Inc.+.......... 930,000
74,000 ALC Communications Corporation+....... 3,219,000
80,000 Aspect Telecommunications
Corporation+........................ 3,260,000
55,000 Franklin Resources Inc. .............. 2,406,250
39,000 Glenayre Technologies Inc.+........... 2,466,750
83,000 Nextel Communications Inc., Class
A+.................................. 1,120,500
113,000 Paging Network Inc.+.................. 3,135,750
113,300 Palmer Wireless Inc., Class A+........ 2,011,075
6,200 Premisys Communications Inc.+......... 314,650
15,000 QUALCOMM Inc.+........................ 384,375
43,000 Spectrian Corporation+................ 1,171,750
50,000 Tellabs, Inc.+........................ 1,650,000
------------
22,070,100
------------
TEXTILES -- 0.9%
88,000 Wellman Inc. ......................... 2,211,000
------------
TRANSPORTATION -- SURFACE -- 0.7%
72,000 TNT Freightways Corporation........... 1,638,000
------------
WASTE MANAGEMENT -- 0.4%
35,000 Sanifill Inc.+........................ 945,000
------------
TOTAL COMMON STOCKS
(Cost $183,397,293)................. 206,513,454
===========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
REPURCHASE AGREEMENT -- 11.2%
(Cost $26,609,000)
$26,609,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995 to be repurchased at
$26,613,472 on 06/01/1995,
collateralized by, $27,274,443
market value of U.S. Treasury
Bonds at 7.625% and 11.750% with
maturities of 02/15/2025 and
02/15/2010, respectively.......... 26,609,000
============
TOTAL INVESTMENTS
(Cost $210,006,293*)........................... 98.2% 233,122,454
OTHER ASSETS AND
LIABILITIES (NET).............................. 1.8 4,267,252
----- ------------
NET ASSETS....................................... 100.0% $237,389,706
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
ABBREVIATION:
ADR American Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
NATIONS FUND TRUST
NATIONS BALANCED ASSETS FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
<S> <C> <C>
------------------------------------------------------------
COMMON STOCKS -- 51.5%
BEVERAGES -- 2.5%
53,592 Coca-Cola Company................. $ 3,316,005
45,487 PepsiCo Inc. ..................... 2,228,862
------------
5,544,867
------------
BUSINESS EQUIPMENT AND
PERIPHERALS -- 3.5%
50,200 AMP Inc. ......................... 2,139,775
39,700 Cabletron Systems Inc.+........... 2,123,950
52,400 Cisco Systems Inc.+............... 2,292,500
10,115 Xerox Corporation................. 1,146,788
------------
7,703,013
------------
CHEMICALS -- BASIC -- 2.1%
36,513 Dow Chemical Company.............. 2,679,141
31,800 Eastman Chemical Company.......... 1,908,000
------------
4,587,141
------------
COMPUTER MANUFACTURERS -- 2.2%
71,383 COMPAQ Computer Corporation+...... 2,792,860
14,800 Silicon Graphics+................. 575,350
16,874 Hewlett Packard Company........... 1,115,793
8,000 Sun Microsystems Inc.+............ 360,000
------------
4,844,003
------------
DIVERSIFIED HEALTHCARE -- 2.1%
37,409 Columbia/HCA Healthcare
Corporation..................... 1,529,093
31,624 HEALTHSOUTH Corporation+.......... 545,514
118,800 Humana Inc.+...................... 2,509,650
------------
4,584,257
------------
DRUGS -- 3.6%
13,617 Amgen Inc.+....................... 987,232
29,918 Merck & Company Inc. ............. 1,409,886
28,253 Pfizer Inc. ...................... 2,489,796
38,465 Schering-Plough Corporation....... 3,029,119
------------
7,916,033
------------
DRUGS -- MEDICAL SUPPLIES -- 1.8%
30,152 Abbot Labs........................ 1,206,080
15,188 Becton Dickinson & Company........ 873,310
24,429 Medtronic Inc. ................... 1,838,282
------------
3,917,672
------------
ELECTRIC
UTILITIES -- NON-NUCLEAR -- 0.3%
26,000 PECO Energy Company............... 731,250
------------
ELECTRICAL EQUIPMENT -- 2.6%
31,300 Emerson Electric Company.......... 2,151,875
59,853 General Electric Company.......... 3,471,474
------------
5,623,349
------------
ELECTRONIC COMPONENTS -- 4.5%
31,100 Applied Materials Inc.+........... 2,394,700
52,000 EMC Corporation+.................. 1,196,000
27,200 Intel Corporation................. 3,053,200
27,600 Motorola, Inc. ................... 1,652,550
14,400 Texas Instruments Inc. ........... 1,665,000
------------
9,961,450
------------
ENGINEERING AND
CONSTRUCTION -- 0.5%
24,031 Fluor Corporation................. 1,189,535
------------
FINANCE -- SERVICES -- 1.2%
11,873 Morgan Stanley Group Inc.......... 903,832
89,300 Paine Webber Group Inc............ 1,763,675
------------
2,667,507
------------
HEALTH AND BEAUTY -- 0.4%
10,831 Gillette Company.................. 913,866
------------
HOUSEHOLD PRODUCTS -- 1.7%
36,400 Procter & Gamble Company.......... 2,616,250
60,710 Sunbeam-Oster Corporation......... 1,100,369
------------
3,716,619
------------
INDUSTRIAL CONGLOMERATE -- 0.6%
31,000 AlliedSignal Inc.................. 1,251,625
------------
INSURANCE -- 1.1%
11,500 Marsh & McLennan Companies Inc.... 915,688
30,700 MGIC Investment Corporation....... 1,442,900
------------
2,358,588
------------
LEISURE -- 0.4%
21,154 Time Warner Inc................... 838,227
------------
LIFE AND SPECIALTY
INSURANCE -- 2.2%
24,305 American International Group,
Inc............................. 2,764,694
16,137 General Re Corporation............ 2,184,546
------------
4,949,240
------------
LONG DISTANCE -- 0.6%
26,600 AT&T Corporation.................. 1,349,950
------------
MEDIA -- 1.0%
22,300 Capital Cities/ABC Inc............ 2,151,950
------------
METALS -- 0.9%
39,900 Nucor Corporation................. 1,905,225
------------
MONEY CENTER BANKS -- 0.3%
14,306 Citicorp.......................... 765,371
------------
PAPER AND FOREST PRODUCTS -- 1.1%
32,300 Georgia-Pacific Corporation....... 2,511,325
------------
PETROLEUM -- DOMESTIC -- 0.4%
29,300 Unocal Corporation................ 868,013
------------
PETROLEUM -- INTERNATIONAL -- 2.9%
21,877 Amoco Corporation................. 1,495,840
18,800 Chevron Corporation............... 923,550
21,100 Mobil Corporation................. 2,117,913
15,100 Royal Dutch Petroleum Company,
ADR............................. 1,913,925
------------
6,451,228
------------
PRODUCER GOODS --
MACHINERY -- 0.5%
20,000 Caterpillar Inc. ................. 1,205,000
------------
REGIONAL BANKS AND THRIFTS -- 0.5%
25,300 Crestar Financial Corporation..... 1,163,800
------------
RESTAURANTS -- 0.8%
48,326 McDonald's Corporation............ 1,830,347
------------
RETAIL -- SPECIALTY -- 2.1%
19,981 Home Depot Inc. .................. 831,709
109,800 Lowe's Companies Inc. ............ 2,992,050
31,600 OfficeMax Inc.+................... 782,100
------------
4,605,859
------------
SOFTWARE AND SERVICES -- 3.9%
39,166 Bay Networks Inc+................. 1,429,559
39,200 Ceridian Corporation+............. 1,264,200
20,800 Computer Associates International
Inc. ........................... 1,362,400
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
NATIONS FUND TRUST
NATIONS BALANCED ASSETS FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
SOFTWARE AND SERVICES -- (CONTINUED)
33,346 First Data Corporation............ $ 1,925,732
7,375 Microsoft Corporation+............ 624,570
57,291 Oracle Systems Corporation+....... 1,990,862
------------
8,597,323
------------
TELECOMMUNICATION SYSTEMS AND
SPECIALTY EQUIPMENT -- 1.9%
50,800 Communications Satellite
Corporation..................... 990,600
66,700 General Instrument Corporation+... 2,059,363
23,800 SBC Communications................ 1,071,000
------------
4,120,963
------------
TELEPHONE -- CABLE AND
CELLULAR -- 0.6%
14,200 Comcast Corporation, Class A,
Special......................... 248,500
49,800 Tele-Communications Inc., Class
A+.............................. 1,052,025
------------
1,300,525
------------
TRANSPORTATION -- SURFACE -- 0.7%
60,052 Dial Corporation.................. 1,471,274
------------
TOTAL COMMON STOCKS (Cost
$99,125,756).................... 113,596,395
===========
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
----------
ASSET-BACKED SECURITIES -- 3.3%
$ 2,000,000 Banc One Auto,
6.650% 05/15/1997............... 2,007,500
1,612,248 Daimler-Benz, Vehicle Trust 94,
Class A,
5.950% 12/15/2000............... 1,605,699
1,389,947 EQCC, Home Equity Loan,
Certificate 94-2, Class A,
6.350% 06/15/2014............... 1,381,259
1,250,000 General Motors Acceptance
Corporation,
5.000% 01/27/1997............... 1,223,713
994,359 Green Tree Financial Corporation,
Class A, Variable Rate Note,
6.55% 07/15/2019................ 996,219
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $7,204,771)............... 7,214,390
============
CORPORATE BONDS AND NOTES -- 4.8%
AUTOMOTIVE -- 0.9%
1,000,000 Ford Motor Credit Company, MTN,
7.450% 07/12/1999............... 1,029,190
1,000,000 Ford Motor Tranche, MTN,
5.750% 05/14/1998............... 981,620
------------
2,010,810
------------
BANKING AND FINANCE -- 2.9%
1,250,000 Ahmanson and Company, MTN,
6.530% 06/01/1998............... 1,249,609
1,000,000 BanPonce Finance Corporation, MTN,
7.650% 05/03/2000............... 1,032,800
1,000,000 Beneficial Corporation, MTN,
8.100% 11/23/1998............... 1,047,330
1,000,000 Capital One Bank, MTN,
8.125% due 02/27/1998........... 1,027,370
1,900,000 Standard Credit Corporation, MTN,
7.850% 02/07/2002............... 2,005,089
------------
6,362,198
------------
INDUSTRIAL -- 0.5%
1,000,000 TKR Cable 1, Inc., Debenture,
10.500% 10/30/2007.............. 1,142,500
------------
TRANSPORTATION -- AIRLINE -- 0.5%
1,000,000 Quantas Airways Ltd., Sr. Note,
6.625% 06/30/1998++............. 995,470
------------
TOTAL CORPORATE BONDS
AND NOTES
(Cost $10,308,347).............. 10,510,978
===========
FOREIGN BOND -- 0.3%
(Cost $720,009)
750,000 Skandia Capital,
6.000% 11/02/1998............... 732,900
===========
MORTGAGE-BACKED SECURITIES -- 6.1%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 2.4%
2,000,000 Pass Through Certificates,
7.500% 02/01/2024**............. 2,008,740
2,300,000 Pass Through Certificates,
7.000% 01/25/2025**............. 2,262,625
877,695 8.500% 03/01/2010 (1 Pool)........ 910,327
------------
5,181,692
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA)
CERTIFICATES -- 3.7%
500,000 Commitment to Purchase,
7.000% 12/21/2009**............. 503,435
2,300,000 Commitment to Purchase, 30 yr.,
8.000% 06/01/2024**............. 2,356,764
5,227,973 8.000% 06/15/2022 - 03/15/2025 (3
Pools).......................... 5,356,998
------------
8,217,197
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $13,217,868).............. 13,398,889
===========
U.S. TREASURY SECURITIES -- 28.7%
U.S. TREASURY BONDS -- 15.5%
7,500,000 10.750% 08/15/2005................ 9,919,950
6,400,000 12.750% 11/15/2010................ 9,406,976
6,000,000 8.875% 08/15/2017................. 7,421,220
5,975,000 8.750% 08/15/2020................. 7,363,232
------------
34,111,378
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
NATIONS FUND TRUST
NATIONS BALANCED ASSETS FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY SECURITIES -- (CONTINUED)
U.S. TREASURY NOTES -- 13.2%
$ 3,775,000 5.500% 04/30/1996................. $ 3,762,014
11,250,000 7.375% 05/15/1996................. 11,401,200
2,000,000 6.000% 11/30/1997................. 2,003,440
12,175,000 5.125% 04/30/1998................. 11,910,558
------------
29,077,212
------------
TOTAL U.S. TREASURY
SECURITIES
(Cost $59,284,082).............. 63,188,590
============
TOTAL SECURITIES
(Cost $189,860,833)........................... 208,642,142
============
REPURCHASE AGREEMENT -- 13.7%
(Cost $30,294,000)
30,294,000 Agreement with CS First Boston
Corporation, 6.050% dated
5/31/1995 to be repurchased at
$30,299,091 on 06/01/1995,
collateralized by, $31,051,598
market value of U.S. Treasury
Bonds at 7.625% and 11.750% with
maturities of 02/15/2025 and
02/15/2010, respectively........ 30,294,000
===========
TOTAL 108.4%
INVESTMENTS
(Cost $220,154,833*)................. 238,936,142
OTHER ASSETS AND
LIABILITIES (NET).................... (8.4) (18,466,214)
----- ------------
NET ASSETS............................. 100.0% $220,469,928
----- ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
** Security purchased on a when-issued or delayed delivery basis (Note 1).
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registration
to qualified institutional buyers.
ABBREVIATIONS:
ADR American Depositary Receipt
MTN Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
NATIONS FUND TRUST
NATIONS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 92.9%
AEROSPACE AND DEFENSE -- 2.1%
10,400 Boeing Company........................ $ 612,300
1,800 General Dynamics Corporation.......... 78,750
7,097 Lockheed Martin Corporation........... 422,272
2,500 Loral Corporation..................... 119,687
3,400 McDonnell Douglas Corporation......... 245,650
1,500 Northrop Grumman Corporation.......... 78,562
1,300 Ogden Corporation..................... 28,600
3,900 Raytheon Company...................... 302,250
6,700 Rockwell International Corporation.... 305,688
2,600 Rowan Companies Inc.+................. 19,500
2,900 Textron Inc. ......................... 176,538
4,700 Unisys Corporation+................... 49,937
3,800 United Technologies Corporation....... 288,325
------------
2,728,059
------------
APPAREL AND TEXTILE -- 0.9%
1,000 Armstrong World Industries Inc. ...... 51,625
300 Brown Group Inc. ..................... 6,562
3,200 Charming Shoppes Inc. ................ 14,000
2,200 Fruit of the Loom Inc., Class A+...... 58,575
4,700 Gap Inc. ............................. 161,563
11,500 Limited Inc. ......................... 255,875
2,700 Liz Claiborne Inc. ................... 47,925
1,900 National Services Industries Inc. .... 54,863
2,400 Nike Inc., Class B.................... 189,300
3,000 Reebok International, Ltd. ........... 100,500
1,150 Russell Corporation................... 33,350
400 Springs Industries Inc. .............. 15,750
1,500 Stride Rite Corporation............... 16,875
1,900 V. F. Corporation..................... 101,175
------------
1,107,938
------------
AUTOMOBILES -- 2.0%
11,050 Chrysler Corporation.................. 482,055
30,900 Ford Motor Company.................... 903,825
23,150 General Motors Corporation............ 1,111,200
1,220 Paccar, Inc. ......................... 58,713
------------
2,555,793
------------
AUTOMOTIVE ACCESSORIES -- 0.6%
2,800 Cooper Tire & Rubber Company.......... 67,900
3,000 Dana Corporation...................... 84,750
2,600 Eaton Corporation..................... 158,925
1,800 Echlin Inc. .......................... 64,800
3,725 Genuine Parts Company................. 146,206
4,530 Goodyear Tire & Rubber Company........ 191,392
1,300 Snap On Tools Inc. ................... 46,150
------------
760,123
------------
BEVERAGES -- 3.6%
8,000 Anheuser-Busch Companies, Inc. ....... 473,000
2,100 Brown-Forman Corporation, Class B..... 69,825
39,600 Coca-Cola Company..................... 2,450,250
1,300 Coors (Adolph) Company, Class B....... 22,425
24,300 PepsiCo Inc. ......................... 1,190,700
11,700 Seagram Company, Ltd.................. 351,000
3,400 Whitman Corporation................... 61,625
------------
4,618,825
------------
BUILDING AND CONSTRUCTION -- 0.4%
3,000 Black & Decker Corporation............ 99,000
1,000 Centex Corporation.................... 28,750
900 Foster Wheeler Corporation............ 29,587
900 Kaufman & Broad Home Corporation...... 12,712
4,800 Masco Corporation..................... 138,600
700 Pulte Corporation..................... 19,162
3,000 Sherwin-Williams Company.............. 110,250
1,300 Stanley Works......................... 52,000
------------
490,061
------------
BUSINESS EQUIPMENT AND
PERIPHERALS -- 2.2%
1,700 Avery Dennison Corporation............ 70,125
7,600 Cisco Systems Inc.+................... 332,500
5,000 Donnelley (R.R.) & Sons Company....... 182,500
18,100 International Business Machines
Corporation......................... 1,687,825
5,000 Pitney Bowes Inc. .................... 185,000
3,300 Xerox Corporation..................... 374,138
------------
2,832,088
------------
CHEMICALS -- BASIC -- 1.3%
3,375 Coastal Corporation+.................. 105,891
8,250 Dow Chemical Company.................. 605,344
2,687 Eastman Chemical Company.............. 161,220
300 First Mississippi Corporation......... 6,938
3,500 Hercules Inc. ........................ 183,750
1,200 Owens Corning Fiberglass
Corporation+........................ 43,500
1,500 Perkin Elmer Corporation.............. 52,125
6,400 PPG Industries, Inc. ................. 266,400
2,100 Rohm & Haas Company................... 123,638
4,900 Union Carbide Corporation............. 143,325
------------
1,692,131
------------
CHEMICALS -- SPECIALTY -- 1.6%
3,600 Air Products & Chemicals Inc. ........ 191,250
1,300 Bemis Inc. ........................... 37,050
10,350 Eastman Kodak Company................. 624,880
2,825.. Engelhard Corporation................. 117,591
900 Goodrich (B.F.) Company............... 44,662
3,000 Grace (W.R.) & Company................ 192,750
1,600 Great Lakes Chemical Corporation...... 97,600
3,700 Monsanto Company...................... 308,025
4,500 Morton International Inc.,
Industries.......................... 142,874
2,400 Nalco Chemical Company................ 90,600
3,900 Praxair Inc. ......................... 97,011
1,300 Sigma-Aldrich Corporation............. 57,200
------------
2,001,493
------------
COMPUTER MANUFACTURERS -- 1.9%
3,700 Apple Computer Inc. .................. 153,781
2,100 Cabletron Systems Inc.+............... 112,350
8,300 COMPAQ Computer Corporation+.......... 324,737
800 Data General Corporation+............. 6,400
4,600 Digital Equipment Corporation+........ 205,275
15,600 Hewlett Packard Company............... 1,031,550
4,300 Honeywell Inc. ....................... 170,387
1,700 Parker Hannifin Corporation........... 97,112
4,300 Silicon Graphics Inc.+................ 167,163
3,300 Sun Microsystems Inc.+................ 148,500
------------
2,417,255
------------
DIVERSIFIED HEALTHCARE -- 1.0%
2,700 Beverly Enterprises Inc.+............. 30,713
13,666 Columbia/HCA Healthcare Corporation... 558,598
1,100 Community Psychiatric Centers......... 13,612
1,800 Ecolab Inc............................ 45,675
2,500 Mallinckrodt Group Inc................ 90,938
2,000 Manor Care Inc........................ 58,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
NATIONS FUND TRUST
NATIONS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
DIVERSIFIED HEALTHCARE -- (CONTINUED)
6,400 National Medical Enterprises Inc...... $ 106,400
3,599 Pall Corporation...................... 79,177
4,900 United Healthcare Corporation......... 182,525
5,100 U.S. Healthcare Inc................... 158,419
------------
1,324,557
------------
DRUGS -- 4.1%
2,000 ALZA Corporation+..................... 41,750
9,300 American Home Products Corporation.... 684,712
4,000 Amgen Inc.+........................... 290,000
9,000 Lilly (Eli) & Company................. 671,625
38,900 Merck & Company Inc................... 1,833,163
9,600 Pfizer Inc............................ 846,000
5,800 Schering-Plough Corporation........... 456,750
5,200 Upjohn Company........................ 189,150
4,100 Warner Lambert Company................ 339,787
------------
5,352,937
------------
DRUGS -- MEDICAL SUPPLIES -- 2.5%
25,200 Abbott Laboratories................... 1,008,000
2,200 Allergan Inc.......................... 58,575
1,600 Bard (C.R.) Inc....................... 47,200
1,800 Bausch & Lomb Inc..................... 73,125
8,800 Baxter International Inc.............. 306,900
2,300 Becton Dickinson & Company............ 132,250
3,000 Biomet Inc.+.......................... 44,625
4,500 Boston Scientific Corporation+........ 129,375
15,640 Bristol-Myers Squibb.................. 1,038,105
3,500 Medtronic Inc......................... 263,375
1,300 St. Jude Medical Inc.................. 58,825
1,800 United States Surgical Corporation.... 37,125
------------
3,197,480
------------
ELECTRIC
UTILITIES -- NON-NUCLEAR -- 4.0%
6,200 American Electric Power Inc........... 212,350
4,400 Baltimore Gas & Electric Company...... 114,400
4,600 Carolina Power & Light Company........ 137,425
5,900 Central & South West Corporation...... 151,925
3,643 CINergy Corporation................... 96,995
7,400 Consolidated Edison Company
New York Inc........................ 221,075
4,800 Dominion Resources Inc................ 178,200
6,500 Duke Power Company.................... 271,375
7,600 Entergy Corporation, New.............. 188,100
5,400 FPL Group Inc......................... 211,950
3,700 General Public Utilities
Corporation......................... 111,000
30,200 GTE Corporation....................... 1,007,925
5,000 Niagara Mohawk Power Corporation...... 73,750
1,700 Nicor Inc............................. 45,262
2,000 Northern States Power Corporation..... 94,750
4,800 Ohio Edison Company................... 105,000
14,000 Pacific Gas & Electric Company........ 406,000
8,600 PacifiCorp............................ 169,850
7,100 PECO Energy Company................... 199,688
14,000 SCEcorp............................... 243,250
20,300 Southern Company...................... 449,138
6,800 Texas Utilities Company............... 245,650
6,800 Unicom Corporation.................... 185,300
2,800 Union Electric Company................ 106,050
------------
5,226,408
------------
ELECTRIC UTILITIES -- NUCLEAR -- 0.2%
4,800 Detroit Edison Company................ 144,600
3,700 Houston Industries Inc................ 159,563
------------
304,163
------------
ELECTRICAL EQUIPMENT -- 4.0%
3,200 Advanced Micro Devices Inc.+.......... 105,200
3,500 Cooper Industries Inc................. 129,500
7,100 Emerson Electric Company.............. 488,125
52,900 General Electric Company.............. 3,068,200
1,200 General Signal Corporation............ 44,400
1,000 Johnson Controls Inc.................. 57,250
800 JWP Inc............................... 0
6,400 Micron Technology, Inc................ 285,600
13,200 Minnesota Mining & Manufacturing
Company............................. 790,350
1,800 Scientific Atlanta Inc................ 33,525
1,200 Tektronix Inc......................... 55,200
1,400 Teledyne Inc.......................... 34,125
11,000 Westinghouse Electric Corporation..... 159,500
------------
5,250,975
------------
ELECTRONIC COMPONENTS -- 2.8%
2,900 Amdahl Corporation.................... 37,700
6,600 AMP Inc............................... 281,325
2,700 Applied Materials Inc.+............... 207,900
1,400 E.G. & G. Inc......................... 25,375
1,400 Grainger (W.W.) Inc................... 83,825
12,700 Intel Corporation..................... 1,425,575
18,100 Motorola, Inc......................... 1,083,736
3,700 National Semiconductor Corporation+... 92,500
2,859 Texas Instruments Inc................. 330,571
400 Thomas & Betts Corporation............ 26,950
500 Zenith Electronics Corporation+....... 3,875
------------
3,599,332
------------
ENGINEERING AND CONSTRUCTION -- 0.2%
2,800 Fluor Corporation..................... 138,600
3,400 Halliburton Company................... 132,600
------------
271,200
------------
FINANCE -- SERVICES -- 2.5%
15,300 American Express Company.............. 545,063
1,700 Beneficial Corporation................ 75,650
5,168 Dean Witter, Discover & Company....... 246,126
3,300 Dow Jones & Company Inc............... 120,450
5,600 Federal Home Loan Mortgage
Corporation......................... 381,500
8,300 Federal National Mortgage
Association......................... 771,900
2,500 Household International Inc........... 123,438
7,543 KeyCorp (New)......................... 231,003
5,000 MBNA Corporation...................... 168,750
5,800 Merrill Lynch & Company Inc........... 272,600
10,200 Norwest Corporation................... 289,425
2,100 USF&G Corporation..................... 36,225
------------
3,262,130
------------
FOOD -- PACKAGED -- 3.2%
15,689 Archer-Daniels-Midland Company........ 290,246
7,200 Campbell Soup Company................. 353,700
7,900 ConAgra Inc........................... 263,663
4,400 CPC International Inc................. 267,300
900 Fleming Companies Inc................. 23,288
4,900 General Mills Inc..................... 254,188
7,700 Heinz (H.J.) Company.................. 348,425
2,800 Hershey Foods Corporation............. 144,550
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
NATIONS FUND TRUST
NATIONS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
FOOD -- PACKAGED -- (CONTINUED)
6,800 Kellogg Company....................... $ 456,450
2,400 Pioneer Hi-Bred International......... 94,200
4,000 Quaker Oats Company................... 139,500
3,200 Ralston Purina Group.................. 160,800
14,700 Sara Lee Corporation.................. 409,762
6,000 Sysco Corporation..................... 162,750
5,000 Unilever N.V., ADR.................... 636,250
3,700 Wrigley, (Wm) Jr. Company............. 167,425
------------
4,172,497
------------
HEALTH AND BEAUTY -- 1.8%
800 Alberto-Culver Company, Class B....... 25,800
1,800 Avon Products Inc..................... 121,275
6,800 Gillette Company...................... 573,750
3,400 International Flavors & Fragrances
Inc................................. 167,450
19,600 Johnson & Johnson..................... 1,298,500
4,300 Newell Company........................ 106,962
------------
2,293,737
------------
HOUSEHOLD PRODUCTS -- 2.0%
1,600 Clorox Company........................ 95,800
4,600 Colgate Palmolive Company............. 354,200
6,400 Corning Inc........................... 204,800
3,400 Maytag Corporation.................... 55,250
21,300 Procter & Gamble Company.............. 1,530,938
5,100 Rubbermaid Inc........................ 162,563
2,350 Whirlpool Corporation................. 134,244
------------
2,537,795
------------
IMAGING -- 0.0%#
1,434 Polaroid Corporation.................. 52,878
------------
INDUSTRIAL CONGLOMERATES -- 0.9%
1,500 Alco Standard Corporation............. 107,437
9,000 AlliedSignal Inc...................... 363,375
800 Ball Corporation...................... 26,600
3,500 Illinois Tool Works Inc............... 174,125
3,200 ITT Corporation....................... 358,000
2,100 TRW Inc............................... 165,638
------------
1,195,175
------------
INSURANCE -- 1.3%
900 Alexander & Alexander Services
Inc. ............................... 22,838
2,900 Chubb Corporation..................... 238,888
2,100 CIGNA Corporation..................... 156,975
1,200 Jefferson-Pilot Corporation........... 63,300
1,800 Loews Corporation..................... 213,975
2,400 Marsh & McLennan Companies Inc. ...... 191,100
3,100 Providian Corporation................. 112,763
2,800 St. Paul Companies Inc. .............. 142,450
1,800 Torchmark Corporation................. 71,775
9,699 Travelers Inc. (New).................. 409,783
------------
1,623,847
------------
JEWELRY -- 0.0%#
1,400 Jostens, Inc. ........................ 28,175
------------
LEISURE -- 1.8%
1,000 Bally Entertainment Corporation+...... 10,375
3,200 Brunswick Corporation................. 58,800
16,600 Disney (Walt) Company................. 923,375
1,200 Fleetwood Enterprises Inc. ........... 24,900
2,800 Hasbro Inc. .......................... 98,700
6,920 Mattel, Inc. ......................... 173,000
300 Skyline Corporation................... 5,475
12,100 Time Warner Inc. ..................... 479,463
11,131 Viacom Inc., Class B+................. 518,983
200 Zurn Industries Inc. ................. 4,025
------------
2,297,096
------------
LIFE AND SPECIALTY INSURANCE -- 1.8%
3,400 Aetna Life & Casualty Company......... 202,725
6,400 American General Corporation.......... 220,800
9,837 American International Group, Inc. ... 1,118,959
2,500 General Re Corporation................ 338,438
3,000 Lincoln National Corporation.......... 135,750
1,900 SAFECO Corporation.................... 111,625
2,300 Transamerica Corporation.............. 137,425
2,200 UNUM Corporation...................... 94,050
800 USLIFE Corporation.................... 32,200
------------
2,391,972
------------
LONG DISTANCE -- 2.2%
48,177 AT&T Corporation...................... 2,444,983
10,500 Sprint Corporation.................... 351,750
------------
2,796,733
------------
MEDIA -- 1.3%
4,700 Capital Cities/ABC Inc. .............. 453,550
1,800 CBS Inc. ............................. 120,600
4,880 Dun & Bradstreet Corporation.......... 258,640
4,400 Gannett Inc. ......................... 235,400
1,000 Handleman Company..................... 11,625
2,300 Interpublic Group Companies Inc. ..... 84,812
1,250 King World Productions Inc.+.......... 51,875
1,300 Knight-Ridder Inc. ................... 71,825
1,300 McGraw-Hill Inc. ..................... 96,200
600 Meredith Corporation.................. 15,750
2,900 New York Times Company, Class A....... 65,613
4,200 Times Mirror Company.................. 97,650
1,900 Tribune Company....................... 113,288
------------
1,676,828
------------
METALS -- 1.6%
7,750 Alcan Aluminum Ltd.................... 229,594
5,000 Aluminum Company of America........... 232,500
2,400 Armco Inc.+........................... 15,300
1,100 ASARCO Inc. .......................... 31,763
10,000 Barrick Gold Corporation.............. 252,500
3,300 Bethlehem Steel Corporation+.......... 48,675
2,900 Crown Cork & Seal Inc.+............... 136,300
2,950 Cyprus Amax Minerals Company.......... 78,175
3,200 Echo Bay Mines Ltd. .................. 28,600
3,300 Inco Ltd. ............................ 82,500
1,400 Inland Steel Industries Inc. ......... 39,375
2,596 Newmont Mining Corporation............ 108,383
2,700 Nucor Corporation..................... 128,925
2,300 Phelps Dodge Corporation.............. 126,788
7,500 Placer Dome Inc. ..................... 189,375
1,900 Reynolds Metals Company............... 93,812
4,507 Santa Fe Pacific Gold Corporation+.... 110,422
900 Timken Company........................ 37,913
2,420 USX-U.S. Steel Group.................. 77,440
2,425 Worthington Industries Inc. .......... 50,622
------------
2,098,962
------------
MONEY CENTER BANKS -- 1.4%
2,500 Bankers Trust N.Y. Corporation........ 156,875
6,400 Chase Manhattan Corporation........... 296,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
NATIONS FUND TRUST
NATIONS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
MONEY CENTER BANKS -- (CONTINUED)
8,090 Chemical Banking Corporation.......... $ 373,151
12,600 Citicorp.............................. 674,100
3,400 First Chicago Corporation............. 195,075
5,300 National City Corporation............. 160,988
------------
1,856,189
------------
OIL SERVICES AND EQUIPMENT -- 0.5%
4,400 Baker Hughes Inc. .................... 99,000
4,800 Dresser Industries Inc. .............. 109,800
7,400 Schlumberger Ltd. .................... 481,000
------------
689,800
------------
PAPER AND FOREST PRODUCTS -- 2.0%
2,200 American Greetings Corporation,
Class A............................. 62,150
212 Bassett Furniture Industries Inc. .... 5,724
1,900 Boise Cascade Corporation............. 62,700
4,200 Burlington Resources Inc. ............ 174,300
3,100 Champion International Corporation.... 143,762
2,500 Deluxe Corporation.................... 79,688
1,100 Federal Paper Board Inc. ............. 35,750
2,900 Georgia-Pacific Corporation........... 225,475
1,100 Harland (John H.) Company............. 25,988
700 Harnischfeger Industries Inc. ........ 24,325
3,900 International Paper Company........... 306,638
2,750 James River Corporation............... 74,250
4,900 Kimberly Clark Corporation............ 294,000
3,600 Louisiana Pacific Corporation......... 80,100
1,600 Mead Corporation...................... 86,200
2,800 Moore Corporation Ltd. ............... 61,250
900 Potlatch Corporation.................. 38,588
4,600 Scott Paper Company................... 199,525
2,032 Stone Container Corporation........... 35,560
1,600 Temple-Inland Inc. ................... 69,200
2,250 Union Camp Corporation................ 116,718
2,375 Westvaco Corporation.................. 101,530
6,350 Weyerhaeuser Company.................. 278,606
------------
2,582,027
------------
PETROLEUM -- DOMESTIC -- 3.0%
3,000 Amerada Hess Corporation.............. 152,250
1,900 Ashland, Inc. ........................ 70,538
20,100 Chevron Corporation................... 987,413
1,400 Columbia Gas Systems Inc.+............ 42,000
2,800 Consolidated Natural Gas Company...... 111,650
600 Eastern Enterprises................... 18,000
7,600 Enron Corporation..................... 277,400
2,500 ENSERCH Corporation................... 43,438
600 Helmerich & Payne Inc. ............... 17,925
4,300 Homestake Mining Company.............. 72,563
1,600 Kerr McGee Corporation................ 89,200
1,000 Louisiana Land & Exploration
Company............................. 38,750
1,500 McDermott International Inc. ......... 39,375
4,100 Noram Energy Corporation.............. 27,161
10,000 Occidental Petroleum Corporation...... 230,000
800 ONEOK Inc. ........................... 15,200
3,000 Oryx Energy Company................... 43,125
2,500 Pacific Enterprises................... 63,125
3,800 Panhandle Eastern Corporation......... 95,475
1,200 Pennzoil Company...................... 59,250
1,000 Peoples Energy Corporation............ 26,750
8,400 Phillips Petroleum Company............ 304,500
7,700 Public Service Enterprise Group....... 229,075
2,600 Santa Fe Energy Resources............. 25,350
4,364 Santa Fe Pacific Corporation.......... 54,550
2,900 Sonat Inc. ........................... 95,337
3,200 Sun Company, Inc. .................... 100,800
7,300 Unocal Corporation.................... 216,263
8,800 USX-Marathon Group.................... 174,900
1,600 Western Atlas Inc.+................... 72,200
2,800 Williams Companies Inc. .............. 95,200
------------
3,888,763
------------
PETROLEUM -- INTERNATIONAL -- 7.2%
15,200 Amoco Corporation..................... 1,039,300
5,000 Atlantic Richfield Company............ 580,625
17,000 du Pont (E.I.) deNemours & Company.... 1,153,875
38,150 Exxon Corporation..................... 2,722,956
12,300 Mobil Corporation..................... 1,234,613
16,400 Royal Dutch Petroleum Company, ADR.... 2,078,700
7,900 Texaco Inc. .......................... 541,150
------------
9,351,219
------------
PLASTICS -- 0.1%
2,300 Premark International Inc. ........... 114,713
1,000 Raychem Corporation................... 36,375
------------
151,088
------------
PRODUCER GOODS -- MACHINERY -- 1.2%
1,000 Briggs & Stratton Corporation......... 35,500
6,200 Caterpillar Inc. ..................... 373,550
800 Cincinnati Milacron Inc. ............. 21,600
500 Clark Equipment Company+.............. 43,000
900 Crane Company......................... 30,825
1,800 Cummins Engine Inc. .................. 81,900
2,800 Deere & Company....................... 242,200
1,800 Dover Corporation..................... 118,125
1,100 FMC Corporation, New+................. 70,813
1,200 Giddings & Lewis Inc. ................ 20,850
3,300 Ingersoll Rand Company................ 122,925
800 Morrison Knudsen Corporation.......... 4,400
200 Nacco Industries Inc., Class A........ 12,000
400 Outboard Marine Corporation........... 8,050
300 SPX Corporation....................... 3,937
5,300 Tenneco Inc. ......................... 254,400
1,100 Trinova Corporation................... 37,400
1,200 Varity Corporation+................... 51,750
------------
1,533,225
------------
REGIONAL BANKS AND THRIFTS -- 3.9%
3,600 Ahmanson (H.F.) & Company............. 81,900
11,766 Banc One Corporation.................. 408,868
4,000 Bank of Boston Corporation............ 146,000
6,800 Bank of New York Inc. ................ 277,100
11,792 BankAmerica Corporation............... 616,132
3,150 Barnett Banks Inc. ................... 156,319
4,000 Boatmen's Bancshares Inc. ............ 130,500
4,000 CoreStates Financial Corporation...... 133,000
2,600 First Fidelity Bancorporation......... 138,125
2,800 First Interstate Bancorp.............. 235,200
6,000 First Union Corporation............... 294,000
5,200 Fleet Financial Group Inc............. 181,350
1,800 Golden West Financial Corporation..... 88,425
3,950 Great Western Financial Corporation... 86,406
4,900 Mellon Bank Corporation............... 209,475
5,900 Morgan (J.P.) & Company Inc. ......... 418,163
5,750 NBD Bancorp Inc. ..................... 189,031
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
NATIONS FUND TRUST
NATIONS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
REGIONAL BANKS AND
THRIFTS -- (CONTINUED)
7,500 PNC Bank Corporation.................. $ 202,500
3,300 Salomon Inc. ......................... 135,300
3,600 Shawmut National Corporation.......... 104,400
4,100 SunTrust Banks Inc. .................. 237,800
3,250 U.S. Bancorp.......................... 80,031
6,300 Wachovia Corporation.................. 238,613
1,700 Wells Fargo & Company................. 312,800
------------
5,101,438
------------
RESTAURANTS AND LODGINGS -- 1.0%
4,900 Darden Restaurants Inc. .............. 53,900
1,400 Hilton Hotels Corporation............. 93,800
650 Luby's Cafeterias Inc. ............... 13,242
3,500 Marriott International Inc............ 118,563
21,700 McDonald's Corporation................ 821,888
2,950 Promus Companies Inc.+................ 123,531
1,400 Ryans Family Steak Houses Inc.+....... 9,800
1,300 Shoneys Inc.+......................... 14,137
3,900 Wendy's International Inc. ........... 66,788
------------
1,315,649
------------
RETAIL -- FOOD AND DRUGS -- 0.6%
8,200 Albertsons Inc. ...................... 229,600
4,300 American Stores Company............... 112,338
2,200 Bruno's, Inc. ........................ 25,438
1,900 Giant Food Inc., Class A.............. 54,625
1,100 Great Atlantic & Pacific Tea Inc. .... 27,363
2,800 Kroger Company+....................... 72,800
400 Longs Drug Stores Corporation......... 14,050
2,800 Rite Aid Corporation.................. 66,500
2,300 Supervalu Inc. ....................... 65,263
2,200 Winn-Dixie Stores Inc. ............... 126,225
------------
794,202
------------
RETAIL -- MAJOR -- 2.6%
3,000 Harcourt General Inc. ................ 126,375
12,500 Kmart Corporation..................... 159,375
1,000 Mercantile Stores Inc. ............... 46,875
7,200 Penney (J.C.) Inc. ................... 339,300
11,800 Sears, Roebuck & Company.............. 665,225
69,600 Wal-Mart Stores Inc. ................. 1,740,000
4,100 Walgreen Company...................... 197,313
4,100 Woolworth Corporation................. 63,037
------------
3,337,500
------------
RETAIL -- SPECIALTY -- 1.6%
3,300 Circuit City Stores Inc. ............. 90,750
2,100 Dayton Hudson Corporation............. 148,838
3,500 Dillard Department Stores Inc.,
Class A............................. 100,625
13,672 Home Depot Inc. ...................... 569,096
4,900 Lowe's Companies Inc. ................ 133,525
7,900 May Department Stores Company......... 310,075
3,200 Melville Corporation.................. 127,200
2,400 Nordstrom Inc. ....................... 99,600
1,800 Pep Boys - Manny, Moe & Jack.......... 50,175
6,504 Price/Costco Inc.+.................... 91,869
2,000 Tandy Corporation..................... 93,500
2,200 TJX Companies Inc. ................... 29,425
9,187 Toys R Us Inc.+....................... 231,972
------------
2,076,650
------------
SERVICES -- 0.1%
3,000 CUC International Inc.+............... 110,250
2,450 Service Corporation International..... 70,130
------------
180,380
------------
SOFTWARE AND SERVICES -- 2.7%
1,800 Autodesk Inc. ........................ 66,600
4,500 Automatic Data Processing Inc. ....... 280,125
2,700 Block (H & R) Inc. ................... 97,538
1,300 Ceridian Corporation+................. 41,925
5,100 Computer Associates International
Inc. ............................... 334,050
1,800 Computer Sciences Corporation+........ 95,400
700 Cray Research Inc.+................... 16,013
3,500 First Data Corporation................ 202,125
1,000 Intergraph Corporation+............... 13,500
1,300 Lotus Development Corporation......... 39,650
18,000 Microsoft Corporation+................ 1,524,375
900 Millipore Corporation................. 59,063
11,300 Novell Inc.+.......................... 218,231
13,550 Oracle Systems Corporation+........... 470,863
700 Shared Medical Systems Corporation.... 23,363
3,300 Tandem Computers Inc.+................ 43,725
------------
3,526,546
------------
TELECOMMUNICATION SYSTEMS AND
SPECIALTY EQUIPMENT -- 1.2%
14,800 AirTouch Communications+.............. 403,300
5,800 ALLTEL Corporation.................... 142,825
1,275 Andrew Corporation+................... 62,156
1 Cox Communications Inc., Class A...... 6
3,100 DSC Communications Corporation+....... 114,700
1,300 Harris Corporation.................... 69,063
200 M/A-Com, Inc.+........................ 2,375
20,000 MCI Communications Corporation........ 405,000
7,800 Northern Telecommunications, Ltd. .... 299,325
------------
1,498,750
------------
TELEPHONE -- BELL REGIONAL -- 2.4%
13,400 Bell Atlantic Corporation............. 747,050
15,650 BellSouth Corporation................. 960,519
13,000 NYNEX Corporation..................... 542,750
12,900 Pacific Telesis Group................. 345,075
13,700 US West Inc. ......................... 565,125
------------
3,160,519
------------
TELEPHONE -- CABLE AND
CELLULAR -- 1.7%
17,000 Ameritech Corporation................. 754,375
6,850 Comcast Corporation, Class A.......... 119,875
18,600 SBC Communications Inc. .............. 837,000
18,400 Tele-Communications Inc., Class A+.... 388,700
2,600 Tyco International Ltd. .............. 140,725
------------
2,240,675
------------
TOBACCO -- 1.8%
5,900 American Brands Inc. ................. 238,212
26,100 Philip Morris Companies Inc. ......... 1,902,038
6,000 UST Inc. ............................. 179,250
------------
2,319,500
------------
TRANSPORTATION -- AIRLINES -- 0.3%
2,400 AMR Corporation+...................... 163,800
1,500 Delta Air Lines Inc................... 97,688
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
NATIONS FUND TRUST
NATIONS EQUITY INDEX FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- (CONTINUED)
TRANSPORTATION -- AIRLINES -- (CONTINUED)
3,900 Southwest Airlines Company............ $ 86,287
1,600 USAir Group Inc. ..................... 14,200
------------
361,975
------------
TRANSPORTATION -- SURFACE -- 1.2%
2,800 Burlington Northern Inc. ............. 171,150
2,400 Conrail Inc. ......................... 129,600
1,500 Consolidated Freightways Inc.+........ 35,625
3,200 CSX Corporation....................... 244,000
2,700 Dial Corporation...................... 66,150
1,600 Federal Express Corporation+.......... 95,800
1,990 Navistar International Corporation+... 30,845
4,400 Norfolk Southern Corporation.......... 301,400
2,200 Pittston Services Group............... 53,075
1,100 Roadway Services Inc. ................ 51,425
3,200 Ryder Systems Inc. ................... 81,200
6,200 Union Pacific Corporation............. 343,325
800 Yellow Corporation.................... 15,200
------------
1,618,795
------------
WASTE MANAGEMENT -- 0.6%
5,500 Browning-Ferris Industries Inc. ...... 195,937
8,000 Laidlaw Inc., Class B................. 74,000
1,650 Safety-Kleen Corporation.............. 28,050
15,500 WMX Technologies Inc. ................ 422,376
------------
720,363
------------
TOTAL COMMON STOCKS (Cost
$104,149,336)....................... 120,463,896
============
COMMON STOCK RIGHTS -- 0.0%#
(Cost $0)
69 Allergan Ligano Retinoid, Rights,
expire 06/02/1995+.................. 60
============
PREFERRED STOCK -- 0.0%#
(Cost $170)
14 Teledyne Inc., Series E............... 194
============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
------------------------------------------------------------
U. S. TREASURY BILLS -- 0.5%
$ 400,000 5.690% 07/27/1995++................ $ 396,459
200,000 5.570% 08/03/1995++................ 198,050
100,000 5.685% 08/17/1995++................ 98,784
------------
TOTAL U.S. TREASURY BILLS (Cost
$693,293)........................ 693,293
============
TOTAL SECURITIES
(Cost $104,842,799)........................... 121,157,443
============
REPURCHASE AGREEMENT -- 12.5%
(Cost $16,229,000)
16,229,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995 to be repurchased at
$16,231,727 on 06/01/1995,
collaterized by, $16,634,858
market value of U.S. Treasury
Bonds at 7.625% and 11.750% with
maturities of 02/15/2025 and
02/15/2010, respectively......... 16,229,000
============
TOTAL INVESTMENTS 105.9%
(Cost $121,071,799*)................... 137,386,443
============
OTHER ASSETS AND
LIABILITIES (NET)...................... (5.9) (7,680,333)
----- ------------
NET ASSETS............................... 100.0% $129,706,110
===== ============
</TABLE>
<TABLE>
<CAPTION>
NET
NUMBER OF UNREALIZED
CONTRACTS APPRECIATION
- --------------------------------------------------------------
<S> <C> <C>
FUTURES CONTRACTS -- LONG POSITION
33 S&P 500 Index Futures, June 1995... $ 517,450
===========
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
++ Security segregated as collateral for Futures Contracts.
# Amount represents less than 0.1% of net assets.
ABBREVIATION:
ADR American Depositary Receipt
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
NATIONS FUND TRUST
NATIONS DISCIPLINED EQUITY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS -- 94.9%
AEROSPACE AND DEFENSE -- 2.3%
15,500 McDonnell Douglas Corporation.......... $ 1,119,875
-----------
APPAREL AND TEXTILE -- 2.2%
13,500 Nike Inc., Class B..................... 1,064,812
-----------
AUTOMOTIVE ACCESSORIES -- 2.4%
19,200 Eaton Corporation...................... 1,173,600
-----------
BUSINESS EQUIPMENT AND
PERIPHERALS -- 4.3%
10,700 International Business Machines
Corporation.......................... 997,775
17,400 3Com Corporation+...................... 1,113,600
-----------
2,111,375
-----------
CHEMICALS -- BASIC -- 2.4%
19,900 Eastman Chemical Company............... 1,194,000
-----------
COMPUTER MANUFACTURERS -- 7.0%
16,400 LSI Logic Corporation+................. 1,102,900
27,200 Silicon Graphics Inc.+................. 1,057,400
27,700 Sun Microsystems Inc.+................. 1,246,500
-----------
3,406,800
-----------
DRUGS -- 2.1%
36,100 Mylan Labs............................. 1,033,363
-----------
DRUGS -- MEDICAL SUPPLIES -- 2.1%
17,600 Becton Dickinson & Company............. 1,012,000
-----------
ELECTRIC UTILITIES --
NON-NUCLEAR -- 4.5%
64,100 SCEcorp................................ 1,113,737
39,500 Unicom Corporation..................... 1,076,375
-----------
2,190,112
-----------
ELECTRICAL EQUIPMENT -- 2.4%
26,000 Micron Technology, Inc. ............... 1,160,250
-----------
ENGINEERING AND CONSTRUCTION -- 2.1%
26,100 Halliburton Company.................... 1,017,900
-----------
ENERGY EXPLORATION AND
PRODUCTION -- 2.5%
21,700 Parker-Hannifin........................ 1,239,613
-----------
FINANCE -- SERVICES -- 2.1%
8,700 UAL Corporation........................ 1,000,500
-----------
FOOD -- PACKAGED -- 4.6%
55,600 Archer-Daniels-Midland Company......... 1,028,600
32,200 IBP Inc. .............................. 1,207,500
-----------
2,236,100
-----------
HEALTH AND BEAUTY -- 2.2%
15,900 Johnson & Johnson...................... 1,053,375
-----------
INDUSTRIAL CONGLOMERATES -- 4.6%
33,000 Ball Corporation....................... 1,097,250
14,100 TRW Inc. .............................. 1,112,138
-----------
2,209,388
-----------
INSURANCE -- 4.4%
13,900 CIGNA Corporation...................... 1,039,025
9,100 Loews Corporation...................... 1,081,763
-----------
2,120,788
-----------
MEDIA -- 4.9%
18,500 Belo (A.H.), Class A................... 1,160,875
12,600 Capital Cities/ABC Inc. ............... 1,215,900
-----------
2,376,775
-----------
METALS -- 6.4%
23,200 Aluminum Company of America............ 1,078,800
26,100 Norsk Hydro, A.S., ADR................. 1,076,625
17,100 Phelps Dodge Corporation............... 942,637
-----------
3,098,062
-----------
OIL SERVICES AND EQUIPMENT -- 2.2%
42,100 Lyondell Petrochemical Company......... 1,052,500
-----------
PAPER AND FOREST PRODUCTS -- 2.9%
32,800 Scott Paper Company.................... 1,422,700
-----------
PETROLEUM -- INTERNATIONAL -- 4.6%
12,700 British Petroleum, ADS................. 1,084,262
16,900 duPont (E.I.) deNemours & Company...... 1,147,088
-----------
2,231,350
-----------
PRODUCER GOODS -- MACHINERY -- 2.2%
23,300 Cummins Engine Inc. ................... 1,060,150
-----------
REGIONAL BANKS AND THRIFTS -- 6.4%
29,900 Bank of Boston Corporation............. 1,091,350
24,600 Midlantic Corporation.................. 931,725
5,800 Wells Fargo & Company.................. 1,067,200
-----------
3,090,275
-----------
RETAIL -- FOOD AND DRUGS -- 2.3%
30,800 Safeway Inc.+.......................... 1,124,200
-----------
TELEPHONE -- BELL REGIONAL -- 2.6%
50,400 Cincinnati Bell Inc. .................. 1,253,700
-----------
TELEPHONE -- CABLE AND CELLULAR -- 2.2%
23,700 Ameritech Corporation.................. 1,051,687
-----------
TEXTILES -- 2.0%
37,800 Wellman Inc. .......................... 949,725
-----------
TRANSPORTATION -- SURFACE -- 2.0%
40,200 Pittston Services Group................ 969,825
-----------
TOTAL COMMON STOCKS (Cost
$44,274,036)......................... 46,024,800
===========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- 5.6%
(Cost $2,721,000)
$2,721,000 Agreement with CS First
Boston Corporation, 6.050%
dated 5/31/1995 to be
repurchased at $2,721,457
on 06/01/1995,
collateralized by,
$2,789,047 market value of
U.S. Treasury Bonds at
7.625% and 11.750% with
maturities of 02/15/2025
and 02/15/2010, respectively......... 2,721,000
===========
TOTAL INVESTMENTS
(Cost $46,995,036*).................. 100.5% 48,745,800
OTHER ASSETS AND
LIABILITIES (NET).................... (0.5) (242,162)
-----------
NET ASSETS............................. 100.0% $48,503,638
===== ===========
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
ABBREVIATIONS:
ADR American Depositary Receipt
ADS American Depositary Share
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS NATIONS
NATIONS CAPITAL EMERGING BALANCED EQUITY DISCIPLINED
VALUE GROWTH GROWTH ASSETS INDEX EQUITY
FUND FUND FUND FUND FUND FUND
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value
See accompanying schedules:
Securities............................. $898,499,299 $748,899,206 $206,513,454 $208,642,142 $121,157,443 $46,024,800
Repurchase Agreements.................. 83,399,000 93,290,000 26,609,000 30,294,000 16,229,000 2,721,000
------------ ------------ ------------ ------------ ------------ -----------
Total Investments.................... 981,898,299 842,189,206 233,122,454 238,936,142 137,386,443 48,745,800
Cash..................................... 335 444 22 -- 148 175
Variation margin/receivable from broker
(Note 1)............................... -- -- -- -- 314,425 --
Dividends receivable..................... 3,228,868 1,404,241 66,863 198,151 413,004 83,395
Interest receivable...................... 14,016 15,678 4,472 1,019,605 2,727 457
Receivable for Fund shares sold.......... 1,915,239 2,847,080 547,474 88,995 51,575 250,640
Receivable from investment adviser....... -- -- -- -- -- 32,018
Receivable for investment securities
sold................................... -- 4,157,101 8,752,275 5,698,567 57,881 --
Unamortized organization costs
(Note 6)............................... -- 9,416 11,397 9,409 5,250 --
Prepaid expenses and other assets........ 1,134 7,809 629 11,285 -- 58,743
------------ ------------ ------------ ------------ ------------ -----------
Total Assets......................... 987,057,891 850,630,975 242,505,586 245,962,154 138,231,453 49,171,228
------------ ------------ ------------ ------------ ------------ -----------
LIABILITIES:
Payable for Fund shares redeemed......... 3,065,144 15,922,935 39,352 -- 8,099,888 655,297
Payable for investment securities
purchased.............................. 8,266,417 3,962,278 4,812,030 17,723,591 375,047 --
Investment advisory fee payable
(Note 2)............................... 606,287 323,343 149,191 138,890 11,319 --
Administration fee payable (Note 2)...... 81,475 70,703 19,892 18,519 11,319 3,235
Transfer agent fee payable (Note 2)...... 23,470 23,934 21,962 14,946 550 726
Custodian fees payable (Note 2).......... 10,475 9,759 3,789 3,668 7,539 3,389
Shareholder servicing and distribution
fees payable
(Note 3)............................... 44,746 28,755 18,501 35,620 -- 608
Accrued Trustees' fees and expenses
(Note 2)............................... 3,691 3,203 901 839 513 147
Due to custodian......................... -- -- -- 7,518,123 -- --
Accrued expenses and other payables...... 49,545 38,285 50,262 38,030 19,168 4,188
------------ ------------ ------------ ------------ ------------ -----------
Total Liabilities.................... 12,151,250 20,383,195 5,115,880 25,492,226 8,525,343 667,590
------------ ------------ ------------ ------------ ------------ -----------
NET ASSETS............................... $974,906,641 $830,247,780 $237,389,706 $220,469,928 $129,706,110 $48,503,638
============ ============ ============ ============ ============ ===========
Investments at cost (Note 1)............. $877,414,997 $714,653,658 $210,006,293 $220,154,833 $121,071,799 $46,995,036
============ ============ ============ ============ ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS NATIONS
NATIONS CAPITAL EMERGING BALANCED EQUITY DISCIPLINED
VALUE GROWTH GROWTH ASSETS INDEX EQUITY
FUND FUND FUND FUND FUND FUND
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net investment
income....................... $ 4,334,680 $ 1,805,285 $ 11,863 $ 1,181,027 $ 691,265 $ 94,960
Accumulated net realized
gain/(loss) on securities and
futures contracts. .......... 4,008,946 24,931,374 6,352,331 3,910,136 (1,252,815) 414,808
Net unrealized appreciation on
securities and futures
contracts.................... 104,483,302 127,535,548 23,116,161 18,781,309 16,832,094 1,750,764
Paid-in capital................ 862,079,713 675,975,573 207,909,351 196,597,456 113,435,566 46,243,106
------------ ------------ ------------ ------------ ------------ -----------
$974,906,641 $830,247,780 $237,389,706 $220,469,928 $129,706,110 $48,503,638
============ ============ ============ ============ ============ ===========
NET ASSETS:
Trust A Shares................. $872,043,770 $783,103,243 $210,202,654 $157,580,500 $129,706,110 $47,076,811
============ ============ ============ ============ ============ ===========
Investor A Shares.............. $ 40,060,898 $ 13,368,633 $ 4,211,853 $ 5,006,422 -- $ 501,962
============ ============ ============ ============ ============ ===========
Investor C Shares.............. $ 3,570,559 $ 2,921,044 $ 648,996 $ 797,858 -- $ 7,149
============ ============ ============ ============ ============ ===========
Investor N Shares.............. $ 59,231,414 $ 30,854,860 $ 22,326,203 $ 57,085,148 -- $ 917,716
============ ============ ============ ============ ============ ===========
SHARES OUTSTANDING:
Trust A Shares................. 60,434,207 63,392,253 17,536,781 13,612,568 11,366,708 3,247,155
============ ============ ============ ============ ============ ===========
Investor A Shares.............. 2,776,324 1,083,852 353,552 432,966 -- 34,664
============ ============ ============ ============ ============ ===========
Investor C Shares.............. 249,162 238,551 55,460 69,272 -- 495
============ ============ ============ ============ ============ ===========
Investor N Shares.............. 4,119,066 2,511,811 1,900,131 4,947,158 -- 63,777
============ ============ ============ ============ ============ ===========
TRUST A SHARES:
Net asset value, offering price
and redemption price per
share........................ $14.43 $12.35 $11.99 $11.58 $11.41 $14.50
====== ====== ====== ====== ====== ======
INVESTOR A SHARES:
Net asset value and redemption
price per share.............. $14.43 $12.33 $11.91 $11.56 -- $14.48
====== ====== ====== ====== ====== ======
Maximum sales charge......... 5.75% 5.75% 5.75% 5.75% -- 5.75%
Maximum offering price per
share...................... $15.31 $13.08 $12.64 $12.27 -- $15.36
====== ====== ====== ====== ====== ======
INVESTOR C SHARES:
Net asset value per share*..... $14.33 $12.24 $11.70 $11.52 -- $14.44
====== ====== ====== ====== ====== ======
INVESTOR N SHARES:
Net asset value per share*..... $14.38 $12.28 $11.75 $11.54 -- $14.39
====== ====== ====== ====== ====== ======
</TABLE>
- ---------------
* Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS NATIONS
NATIONS CAPITAL EMERGING BALANCED EQUITY DISCIPLINED
VALUE GROWTH GROWTH ASSETS INDEX EQUITY
FUND FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes
of $1,463, $17,824, $2,763, $0, $12,246 and
$0, respectively).......................... $ 11,883,214 $ 5,463,079 $ 382,267 $ 815,270 $ 1,562,240 $ 115,791
Interest..................................... 1,786,715 2,073,453 776,705 3,549,040 271,440 67,774
------------ ----------- ----------- ----------- ----------- -----------
Total investment income.............. 13,669,929 7,536,532 1,158,972 4,364,310 1,833,680 183,565
------------ ----------- ----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fee (Note 2)............. 3,306,377 2,906,437 806,744 797,829 302,740 11,929
Sub-advisory fee (Note 2).................... -- -- -- -- -- 47,718
Administration fee (Note 2).................. 444,230 387,525 107,566 106,377 60,548 7,953
Registration and filing fees................. 4,254 51,938 -- 1,954 34,679 32,233
Transfer agent fees (Note 2)................. 206,908 212,287 61,978 73,892 3,300 2,360
Custodian fees (Note 2)...................... 63,344 56,795 22,590 22,213 29,328 14,013
Legal and audit fees......................... 18,140 79,123 30,026 17,159 10,843 7,452
Trustees' fees and expenses (Note 2)......... 7,854 7,092 2,068 1,718 1,079 203
Amortization of organization costs
(Note 6)................................... -- 2,018 2,280 2,016 750 --
Other........................................ 823 60,174 19,280 32,474 12,336 7,212
------------ ----------- ----------- ----------- ----------- -----------
Subtotal............................. 4,051,930 3,763,389 1,052,532 1,055,632 455,603 131,073
Shareholder servicing and distribution fee
(Note 3):
Investor A shares........................ 46,216 14,614 4,278 5,859 -- 129
Investor C shares........................ 16,228 13,001 3,092 4,023 -- --
Investor N shares........................ 183,889 132,352 93,431 196,482 -- 1,600
Fees waived by investment adviser and
administrators and expenses reimbursed by
investment adviser (Note 2)................ (17,023) (217,683) (6,224) (3,017) (243,968) (56,438 )
------------ ----------- ----------- ----------- ----------- -----------
Total expenses....................... 4,281,240 3,705,673 1,147,109 1,258,979 211,635 76,364
------------ ----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME........................ 9,388,689 3,830,859 11,863 3,105,331 1,622,045 107,201
------------ ----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS (NOTES 1 AND 4):
Net realized gain/(loss) on investments:
Securities............................... 6,056,426 25,214,562 6,621,247 5,121,043 (1,507,588) 828,202
Futures contracts........................ -- -- -- -- 694,954 --
Net change in unrealized
appreciation/depreciation of investments:
Securities............................... 137,592,341 69,108,951 12,524,635 17,520,286 19,487,379 1,309,712
Futures contracts........................ -- -- -- -- 693,125 --
Net realized and unrealized gain on
investments................................ 143,648,767 94,323,513 19,145,882 22,641,329 19,367,870 2,137,914
------------ ----------- ----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS............................ $153,037,456 $98,154,372 $19,157,745 $25,746,660 $20,989,915 $2,245,115
============ =========== =========== =========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS NATIONS
NATIONS CAPITAL EMERGING BALANCED EQUITY DISCIPLINED
VALUE GROWTH GROWTH ASSETS INDEX EQUITY
FUND FUND FUND FUND FUND FUND
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income.......... $ 9,388,689 $ 3,830,859 $ 11,863 $ 3,105,331 $ 1,622,045 $ 107,201
Net realized gain/(loss) on
securities and futures
contracts.................... 6,056,426 25,214,562 6,621,247 5,121,043 (812,634) 828,202
Change in unrealized
appreciation/depreciation
on securities and futures
contracts.................... 137,592,341 69,108,951 12,524,635 17,520,286 20,180,504 1,309,712
------------ ------------ ------------ ------------ ------------ -----------
Net increase in net assets
resulting from operations.... 153,037,456 98,154,372 19,157,745 25,746,660 20,989,915 2,245,115
Distributions to shareholders
from net investment income:
Trust A Shares............. (8,344,881) (3,429,103) -- (2,074,911) (1,568,914) (12,084)
Investor A Shares.......... (333,597) (40,277) -- (56,100) -- (157)
Investor C Shares.......... (17,978) -- -- (5,991) -- --
Investor N Shares.......... (323,041) -- -- (492,432) -- --
Distributions to shareholders
from net realized gain on
investments:
Trust A Shares............. (41,049,376) (16,868,479) (6,438,849) (310,575) (1,600,973) --
Investor A Shares.......... (1,840,132) (256,975) (114,779) (9,212) -- --
Investor C Shares.......... (155,670) (56,236) (19,503) (1,861) -- --
Investor N Shares.......... (2,225,890) (556,449) (574,543) (102,838) -- --
Net increase/(decrease) in net
assets from:
Trust A transactions....... (15,956,046) (7,557,567) 17,001,563 (21,106,742) (11,260,672) 34,969,023
Investor A transactions.... 440,011 1,147,295 792,983 (375,326) -- 218,919
Investor C transactions.... 211,642 264,923 73,628 (236,661) -- 7,010
Investor N transactions.... 10,763,296 4,509,370 5,368,704 (1,455,672) -- 699,259
------------ ------------ ------------ ------------ ------------ -----------
Net increase/(decrease) in net
assets....................... 94,205,794 75,310,874 35,246,949 (481,661) 6,559,356 38,127,085
NET ASSETS:
Beginning of period............ 880,700,847 754,936,906 202,142,757 220,951,589 123,146,754 10,376,553
------------ ------------ ------------ ------------ ------------ -----------
End of period (including
undistributed net investment
income of $4,334,680,
$1,805,285, $11,863,
$1,181,027, $691,265 and
$94,960, respectively)....... $974,906,641 $830,247,780 $237,389,706 $220,469,928 $129,706,110 $48,503,638
============ ============ ============ ============ ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS NATIONS
NATIONS CAPITAL EMERGING BALANCED EQUITY DISCIPLINED
VALUE GROWTH GROWTH ASSETS INDEX EQUITY
FUND FUND FUND FUND FUND* FUND**
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income/(loss)... $ 15,905,183 $ 5,874,211 $ (602,199) $ 5,186,951 $ 2,704,429 $ 6,240
Net realized gain/(loss) on
securities and futures
contracts.................... 44,428,639 20,667,121 7,614,329 2,124,345 1,160,792 (413,394)
Change in unrealized
appreciation/
depreciation on securities
and futures contracts........ (68,927,667) (15,641,309) 2,098,503 (12,250,587) (3,348,410) 441,052
------------ ------------ ------------ ------------ ------------ -----------
Net increase/(decrease) in net
assets resulting from
operations................... (8,593,845) 10,900,023 9,110,633 (4,939,291) 516,811 33,898
Distributions to shareholders
from net investment income:
Trust A Shares............. (13,766,977) (5,028,665) -- (4,292,175) (2,066,295) (6,113)
Investor A Shares.......... (517,366) (58,336) -- (107,313) -- (116)
Investor C Shares.......... (24,215) -- -- (15,801) -- --
Investor N Shares.......... (309,175) -- -- (769,113) -- (11)
Distributions to shareholders
from net realized gain on
investments:
Trust A Shares............. (28,230,888) (235,983) (1,722,720) -- -- --
Investor A Shares.......... (1,320,383) (4,039) (27,035) -- -- --
Investor C Shares.......... (119,312) (1,055) (6,038) -- -- --
Investor N Shares.......... (467,946) (3,860) (52,823) -- -- --
Return of capital (Note 1):
Trust A Shares............. -- -- -- -- -- (3,133)
Investor A Shares.......... -- -- -- -- -- (60)
Investor C Shares.......... -- -- -- -- -- --
Investor N Shares.......... -- -- -- -- -- (6)
Net increase/(decrease) in net
assets from:
Trust A transactions....... 141,823,408 65,765,165 54,250,065 (8,681,327) 124,696,238 1,818,607
Investor A transactions.... 4,789,875 (304,011) 1,052,641 (90,193) -- 111,006
Investor C transactions.... 173,989 (575,658) 47,602 (198,022) -- --
Investor N transactions.... 34,026,771 14,210,525 12,051,030 27,406,781 -- 178,688
------------ ------------ ------------ ------------ ------------ -----------
Net increase in net assets..... 127,463,936 84,664,106 74,703,355 8,313,546 123,146,754 2,132,760
NET ASSETS:
Beginning of year.............. 753,236,911 670,272,800 127,439,402 212,638,043 -- 8,243,793
------------ ------------ ------------ ------------ ------------ -----------
End of year (including
undistributed net investment
income of $3,965,488,
$1,443,806, $0, $705,130,
$638,134 and $0,
respectively)................ $880,700,847 $754,936,906 $202,142,757 $220,951,589 $123,146,754 $10,376,553
============ ============ ============ ============ ============ ===========
</TABLE>
- ---------------
* The Nations Equity Index Fund commenced operations on December 16, 1993.
** The period for the Nations Disciplined Equity Fund reflects operations from
April 30, 1994 through November 30, 1994. (Note 9)
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
NATIONS VALUE FUND
--------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRUST A SHARES:
Sold............................ 8,767,945 $ 114,354,101 24,151,217 $ 330,303,535
Issued in exchange for
Class A Shares of The
Capitol Mutual Funds
Equity Portfolio.............. -- -- 2,139,143 28,600,342
Issued as reinvestment
of dividends.................. 1,863,320 22,656,729 373,924 5,070,322
Redeemed........................ (11,786,818) (152,966,876) (16,543,074) (222,150,791)
----------- ------------- ----------- -------------
Net increase/(decrease)......... (1,155,553) $ (15,956,046) 10,121,210 $ 141,823,408
=========== ============= =========== =============
INVESTOR A SHARES:
Sold............................ 235,019 $ 3,083,632 660,750 $ 8,920,870
Issued in exchange for
Class B Shares of The
Capitol Mutual Funds
Equity Portfolio.............. -- -- 19,677 262,688
Issued as reinvestment
of dividends.................. 173,486 2,113,300 266,697 3,629,175
Redeemed........................ (361,885) (4,756,921) (593,790) (8,022,858)
----------- ------------- ----------- -------------
Net increase/(decrease)......... 46,620 $ 440,011 353,334 $ 4,789,875
=========== ============= =========== =============
INVESTOR C SHARES:
Sold............................ 21,021 $ 266,903 82,153 $ 1,124,360
Issued as reinvestment
of dividends.................. 14,379 173,477 19,831 268,695
Redeemed........................ (17,397) (228,738) (90,540) (1,219,066)
----------- ------------- ----------- -------------
Net increase/(decrease)......... 18,003 $ 211,642 11,444 $ 173,989
=========== ============= =========== =============
INVESTOR N SHARES:
Sold............................ 952,106 $ 12,526,903 2,674,590 $ 36,038,535
Issued as reinvestment
of dividends................. 205,703 2,494,057 100,887 1,372,747
Redeemed........................ (324,149) (4,257,664) (252,251) (3,384,511)
----------- ------------- ----------- -------------
Net increase/(decrease)......... 833,660 $ 10,763,296 2,523,226 $ 34,026,771
=========== ============= =========== =============
<CAPTION>
NATIONS CAPITAL GROWTH FUND
--------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
TRUST A SHARES:
Sold............................ 11,252,902 $ 127,636,935 27,082,507 $ 309,813,478
Issued in exchange for
Class A Shares of The
Capitol Mutual Funds
Equity Portfolio.............. -- -- -- --
Issued as reinvestment
of dividends.................. 347,745 3,816,887 33,231 378,603
Redeemed........................ (12,135,630) (139,011,389) (21,559,659) (244,426,916)
----------- -------------- ----------- -------------
Net increase/(decrease)......... (534,983) $ (7,557,567) 5,556,079 $ 65,765,165
=========== ============== =========== =============
INVESTOR A SHARES:
Sold............................ 205,177 $ 2,373,917 227,329 $ 2,590,259
Issued in exchange for
Class B Shares of The
Capitol Mutual Funds
Equity Portfolio.............. -- -- -- --
Issued as reinvestment
of dividends.................. 27,078 291,679 3,414 39,004
Redeemed........................ (132,867) (1,518,301) (257,065) (2,933,274)
----------- -------------- ----------- -------------
Net increase/(decrease)......... 99,388 $ 1,147,295 (26,322) $ (304,011)
=========== ============== =========== =============
INVESTOR C SHARES:
Sold............................ 25,172 $ 287,508 18,705 $ 214,035
Issued as reinvestment
of dividends.................. 5,293 56,108 92 1,049
Redeemed........................ (6,890) (78,693) (68,832) (790,742)
----------- -------------- ----------- -------------
Net increase/(decrease)......... 23,575 $ 264,923 (50,035) $ (575,658)
=========== ============== =========== =============
INVESTOR N SHARES:
Sold............................ 574,074 $ 6,528,739 1,415,969 $ 16,069,390
Issued as reinvestment
of dividends................. 50,490 537,215 331 3,783
Redeemed........................ (224,300) (2,556,584) (165,619) (1,862,648)
----------- -------------- ----------- -------------
Net increase/(decrease)......... 400,264 $ 4,509,370 1,250,681 $ 14,210,525
=========== ============== =========== =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
NATIONS EMERGING GROWTH FUND
--------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994
SHARES DOLLARS SHARES DOLLARS
---------------------------------------------------------
<S> <C> <C> <C>
TRUST A SHARES:
Sold............................ 2,547,982 $ 28,797,331 8,166,260 $ 91,682,920
Issued in exchange for
Class A Shares of The
Capitol Mutual Funds
Equity Portfolio.............. -- -- -- --
Issued as reinvestment
of dividends.................. 425,966 4,485,418 7,836 87,526
Redeemed........................ (1,430,995) (16,281,186) (3,334,666) (37,520,381)
---------- ------------ ---------- ------------
Net increase/(decrease)......... 1,542,953 $ 17,001,563 4,839,430 $ 54,250,065
========== ============ ========== ============
INVESTOR A SHARES:
Sold............................ 113,852 $ 1,304,388 142,784 $ 1,612,909
Issued in exchange for
Class B Shares of The
Capitol Mutual Funds
Equity Portfolio.............. -- -- -- --
Issued as reinvestment
of dividends.................. 10,673 111,756 2,397 26,701
Redeemed........................ (55,794) (623,161) (53,510) (586,969)
---------- ----------- ---------- ------------
Net increase/(decrease)......... 68,731 $ 792,983 91,671 $ 1,052,641
========== ============ ========== ============
INVESTOR C SHARES:
Sold............................ 11,509 $ 123,851 13,151 $ 142,722
Issued as reinvestment
of dividends.................. 1,887 19,492 543 6,007
Redeemed........................ (6,280) (69,715) (8,860) (101,127)
---------- ------------ ---------- ------------
Net increase/(decrease)......... 7,116 $ 73,628 4,834 $ 47,602
========== ============ ========== ============
INVESTOR N SHARES:
Sold............................ 580,446 $ 6,457,360 1,154,104 $ 12,845,956
Issued as reinvestment
of dividends................. 53,315 552,848 4,623 51,365
Redeemed........................ (148,392) (1,641,504) (76,006) (846,291)
---------- ------------ ---------- ------------
Net increase/(decrease)......... 485,369 $ 5,368,704 1,082,721 $ 12,051,030
========== ============ ========== ============
<CAPTION>
NATIONS BALANCED ASSETS FUND
--------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994
SHARES DOLLARS SHARES DOLLARS
---------------------------------------------------------
<S> <C> <C> <C>
TRUST A SHARES:
Sold............................ 2,174,643 $ 23,463,642 8,751,677 $ 94,454,382
Issued in exchange for
Class A Shares of The
Capitol Mutual Funds
Equity Portfolio.............. -- -- -- --
Issued as reinvestment
of dividends.................. 146,782 1,574,152 150,747 1,604,956
Redeemed........................ (4,247,081) (46,144,536) (9,759,219) (104,740,665)
---------- ------------ ---------- ------------
Net increase/(decrease)......... 1,925,656 $ 21,106,742 (856,795) $ 8,681,327
========== ============ ========== ============
INVESTOR A SHARES:
Sold............................ 35,468 $ 383,852 145,010 $ 1,578,550
Issued in exchange for
Class B Shares of The
Capitol Mutual Funds
Equity Portfolio.............. -- -- -- --
Issued as reinvestment
of dividends.................. 5,999 64,102 9,967 106,366
Redeemed........................ (76,737) (823,280) (164,673) (1,775,109)
---------- ------------ ---------- ------------
Net increase/(decrease)......... (35,270) $ (375,326) (9,696) $ (90,193)
========== ============ ========== ============
INVESTOR C SHARES:
Sold............................ 189 $ 2,037 3,080 $ 33,089
Issued as reinvestment
of dividends.................. 707 7,516 1,450 15,444
Redeemed........................ (23,302) (246,214) (23,352) (246,555)
---------- ------------ ---------- ------------
Net increase/(decrease)......... (22,406) $ (236,661) (18,822) $ (198,022)
========== ============ ========== ============
INVESTOR N SHARES:
Sold............................ 349,115 $ 3,785,570 3,187,761 $ 34,643,155
Issued as reinvestment
of dividends................. 53,639 571,806 69,311 735,874
Redeemed........................ (541,627) (5,813,048) (750,078) (7,972,248)
---------- ------------ ---------- ------------
Net increase/(decrease)......... (138,873) $ (1,455,672) 2,506,994 $ 27,406,781
========== ============ ========== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
NATIONS EQUITY INDEX FUND
----------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994*
SHARES DOLLARS SHARES DOLLARS
-----------------------------------------------------------
<S> <C> <C> <C> <C>
TRUST A SHARES:
Sold.......................... 2,913,671 $ 30,664,432 19,980,612 $ 198,737,016
Issued as reinvestment
of dividends................ 114,804 1,156,372 56,290 554,406
Redeemed...................... (4,173,003) (43,081,476) (7,525,666) (74,595,184)
----------- ------------ ----------- -------------
Net increase/(decrease)....... (1,144,528) $(11,260,672) 12,511,236 $ 124,696,238
=========== ============ =========== =============
INVESTOR A
Sold..........................
Issued as reinvestment
of dividends................
Redeemed......................
Net increase..................
INVESTOR C SHARES:
Sold..........................
Issued as reinvestment
of dividends................
Redeeme.......................
Net increase..................
INVESTOR N SHARES:
Sold..........................
Issued as reinvestment
of dividends................
Redeemed......................
Net increase..................
<CAPTION>
NATIONS DISCIPLINED EQUITY FUND
--------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994**
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------------------
<S> <C> <C> <C> <C>
TRUST A
SHARES:
Sold.......................... 2,883,036 $40,328,865 245,701 $ 3,008,180
Issued as reinvestment
of dividends................ 546 7,291 446 5,571
Redeemed...................... (397,121) (5,367,133) (92,387) (1,195,144)
--------- ----------- ------- -----------
Net increase/(decrease)....... 2,486,461 $34,969,023 153,760 $ 1,818,607
========= =========== ======= ===========
INVESTOR A
Sold.......................... 18,736 $ 264,459 8,031 $ 124,695
Issued as reinvestment
of dividends................ 12 157 14 177
Redeemed...................... (3,413) (45,697) (1,093) (13,866)
--------- ----------- ------- -----------
Net increase.................. 15,335 $ 218,919 6,952 $ 111,006
========= =========== ======= ===========
<CAPTION>
PERIOD ENDED
MAY 31, 1995
(UNAUDITED)***
--------------------
<S> <C> <C>
INVESTOR C SHARES:
Sold.......................... 495 $7,010
Issued as reinvestment
of dividends................ -- --
Redeeme....................... -- --
Net increase.................. --- ------
495 $7,010
=== ======
<CAPTION>
SIX MONTHS ENDED
MAY 31, 1995 PERIOD ENDED
(UNAUDITED) NOVEMBER 30, 1994****
----------------------- --------------------
<S> <C> <C> <C> <C>
INVESTOR N SHARES:
Sold.......................... 53,450 $743,464 13,625 $178,688
Issued as reinvestment
of dividends................ -- -- -- --
Redeemed...................... (3,298) (44,205) -- --
------ -------- ------ --------
Net increase.................. 50,152 $699,259 13,625 $178,688
====== ======== ====== ========
</TABLE>
- ---------------
* The Nations Equity Index Funds Trust A Shares commenced operations on
December 16, 1993.
** This period reflects operations from April 30, 1994 through November 30,
1994. (Note 9)
*** The Nations Disciplined Equity Fund Investor C Shares Commenced operations
on May 10, 1995.
**** The Nations Disciplined Equity Fund Investor N Shares Commenced operations
on May 20, 1994.
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
(This Page Intentionally Left Blank)
33
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
TRUST A SHARES
---------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91 11/30/90 11/30/89*#
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NATIONS VALUE FUND
Operating performance:
Net asset value, beginning of
period........................... $ 12.98 $ 13.74 $ 12.45 $ 11.16 $ 9.71 $ 10.04 $10.00
-------- -------- -------- -------- ------- ------- ------
Net investment income.............. 0.14 0.24 0.24 0.28 0.34 0.35 0.08
Net realized and unrealized
gain/(loss) on investments....... 2.12 (0.23) 1.38 1.57 1.47 (0.36) (0.04)
-------- -------- -------- -------- ------- ------- ------
Net increase/(decrease) in net
assets resulting from investment
operations....................... 2.26 0.01 1.62 1.85 1.81 (0.01) 0.04
Distributions:
Dividends from net investment
income........................... (0.14) (0.23) (0.24) (0.27) (0.36) (0.32) --
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) (0.32) --
-------- -------- -------- -------- ------- ------- ------
Net asset value, end of period..... $ 14.43 $ 12.98 $ 13.74 $ 12.45 $ 11.16 $ 9.71 $10.04
======== ======== ======== ======== ======= ======= ======
Total return++..................... 18.64% (0.08)% 13.19% 17.00%+++ 18.79%+++ (0.16)%+++ 0.40%+++
======== ======== ======== ======== ======= ======= ======
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 $19,769 $5,161
Ratio of operating expenses to
average net assets............... 0.91%+ 0.93% 0.96% 0.90% 0.53% 0.21% 0.49%+
Ratio of net investment income to
average net assets............... 2.17%+ 1.85% 1.98% 2.31% 3.33% 4.19% 4.41%+
Portfolio turnover rate............ 36% 75% 64% 60% 51% 24% --
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% 1.11% 1.41%+
Net investment income per share
before fee waivers and/or
expense reimbursements........... $ 0.14 $ 0.24 $ 0.24 $ 0.27 $ 0.30 $ 0.26 $ 0.06
</TABLE>
- ---------------
* The Nations Value Fund Trust A, Investor A, Investor C Shares and Investor N
Shares commenced operations on September 19, 1989, December 6, 1989, June
17, 1992 and June 7, 1993, respectively.
+ 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 monthly 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.
<TABLE>
<CAPTION>
TRUST A SHARES
--------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92
--------------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS CAPITAL GROWTH FUND
Operating performance:
Net asset value, beginning of period................................. $ 11.23 $ 11.08 $ 10.68 $ 10.00
-------- -------- -------- --------
Net investment income/(loss)......................................... 0.06 0.09 0.09 0.02
Net realized and unrealized gain on investments...................... 1.37 0.14 0.42 0.66 ##
-------- -------- -------- --------
Net increase in net assets resulting from investment operations...... 1.43 0.23 0.51 0.68
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 $ 10.68
======== ======== ======== ========
Total return++....................................................... 13.19% 2.14% 4.84% 6.80%+++
======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................................. $783,103 $717,914 $646,661 $728,629
Ratio of operating expenses to average net assets.................... 0.91%+ 0.90% 0.80% 0.30%+
Ratio of net investment income/(loss) to average net assets.......... 1.03%+ 0.85% 0.84% 1.33%+
Portfolio turnover rate.............................................. 43% 56% 81% 7%
Ratio of operating expenses to average net assets before fee
waivers............................................................ 0.97%+ 0.91% 0.89% 1.05%+
Net investment income/(loss) per share before fee waivers............ $ 0.06 $ 0.09 $ 0.08 $ 0.01
</TABLE>
- ---------------
* The Nations Capital Growth Fund Trust A Shares, Investor A Shares,
Investor C Shares and Investor N Shares commenced operations on
September 30, 1992, October 2, 1992, October 2, 1992 and June 7, 1993,
respectively.
+ 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.
(a) Value represents less than $0.01 per share.
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
NATIONS FUND TRUST
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTOR A SHARES
----------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91 11/30/90*
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 12.98 $ 13.72 $ 12.45 $ 11.16 $ 9.71 $ 10.04
-------- ------- ------- ------- ------- --------
0.13 0.20 0.22 0.26 0.34 0.35
2.11 (0.20) 1.35 1.59 1.47 (0.36)
-------- ------- ------- ------- ------- --------
2.24 0.00 1.57 1.85 1.81 (0.01)
(0.12) (0.20) (0.21) (0.27) (0.36) (0.32)
(0.67) (0.54) (0.09) (0.29) -- --
-------- ------- ------- ------- ------- --------
(0.79) (0.74) (0.30) (0.56) (0.36) (0.32)
-------- ------- ------- ------- ------- --------
$ 14.43 $ 12.98 $ 13.72 $ 12.45 $ 11.16 $ 9.71
======== ======= ======= ======== ======= =======
18.50% (0.17)% 12.80% 16.96%+++ 18.79%+++ (0.16)%+++
======== ======= ======= ======== ======= =======
$ 40,061 $35,445 $32,607 $24,536 $13,514 $ 7,020
1.16%+ 1.18% 1.21% 1.06% 0.53% 0.21%+
1.92%+ 1.60% 1.73% 2.15% 3.33% 4.19%+
36% 75% 64% 60% 51% 24%
1.16%+ 1.18% 1.22% 1.15% 0.99% 1.11%+
$ 0.13 $ 0.20 $ 0.22 $ 0.25 $ 0.30 $ 0.26
<CAPTION>
INVESTOR C SHARES INVESTOR N SHARES
------------------------------------ ------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR YEAR PERIOD ENDED YEAR PERIOD
05/31/95 ENDED ENDED ENDED 05/31/95 ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92* (UNAUDITED) 11/30/94 11/30/93*
------------------------------------ ----------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
$12.90 $13.64 $12.41 $ 11.63 $ 12.94 $ 13.71 $ 13.08
------ ------ ------ ------- -------- ------- -------
0.08 0.12 0.13 0.07 0.10 0.15 0.11
2.10 (0.22) 1.32 0.78 2.10 (0.2 ) 0.63
------ ------ ------ ------- -------- ------- -------
2.18 (0.10) 1.45 0.85 2.20 (0.07) 0.74
(0.08) (0.10) (0.13) (0.07) (0.09) (0.16) (0.11)
(0.67) (0.54) (0.09) -- (0.67) (0.54 ) --
------ ------ ------ ------- -------- ------- -------
(0.75) (0.64) (0.22) (0.07) (0.76) (0.70 ) (0.11)
------ ------ ------ ------- -------- ------- -------
$14.33 $12.90 $13.64 $ 12.41 $ 14.38 $ 12.94 $ 13.71
====== ====== ====== ======= ======== ======= =======
18.03% (0.92)% 11.85% 7.33%+++ 18.20% (0.69)% 5.65%
====== ====== ====== ======= ======== ======= =======
$3,571 $2,983 $2,997 $ 1,286 $ 59,231 $42,530 $10,449
1.91%+ 1.93% 1.96% 1.98%+ 1.66%+ 1.68% 1.71%+
1.17%+ 0.85% 0.98% 1.22%+ 1.42%+ 1.10% 1.23%+
36% 75% 64% 60% 36% 75% 64%
1.91%+ 1.93% 1.97% 1.98%+ 1.66%+ 1.68% 1.72%+
$ 0.08 $ 0.12 $ 0.13 $ 0.07 $ 0.10 $ 0.15 $ 0.11
<CAPTION>
INVESTOR A SHARES INVESTOR C SHARES
-------------------------------------------------- --------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR YEAR PERIOD ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED 05/31/95 ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92* (UNAUDITED) 11/30/94 11/30/93 11/30/92*
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 11.21 $ 11.06 $ 10.67 $ 10.00 $11.14 $11.01 $10.67 $ 10.00
-------- ------- ------- ------- ------ ------ ------ -------
0.04 0.07 0.07 0.01 0.01 (0.02) 0.00(a) 0.00(a)
1.38 0.14 0.41 0.66## 1.35 0.15 0.38 0.67##
-------- ------- ------- ------- ------ ------ ------ -------
1.42 0.21 0.48 0.67 1.36 0.13 0.38 0.67
(0.04) (0.06) (0.08) -- -- -- (0.03) --
(0.26) (0.00)(a) (0.01) -- (0.26) (0.00)(a) (0.01) --
-------- ------- ------- ------- ------ ------ ------ -------
(0.30) (0.06) (0.09) -- (0.26) (0.00)(a) (0.04) 0.00(a)
-------- ------- ------- ------- ------ ------ ------ -------
$ 12.33 $ 11.21 $ 11.06 $ 10.67 $12.24 $11.14 $11.01 $ 10.67
======== ======= ======= ======== ======== ======= ====== =======
13.07% 1.93% 4.56% 6.70%+++ 12.59% 1.22% 3.61% 6.70%+++
======== ======= ======= ======== ======== ======= ====== =======
$ 13,369 $11,038 $11,182 $ 1,225 $2,921 $2,394 $2,919 $ 406
1.16%+ 1.15% 1.05% 0.55%+ 1.91%+ 1.90% 1.80% 1.30%+
0.78%+ 0.60% 0.59% 1.08%+ 0.03%+ (0.15)% (0.16)% 0.33%+
43% 56% 81% 7% 43% 56% 81% 7%
1.22%+ 1.16% 1.14% 1.30%+ 1.97%+ 1.91% 1.89% 2.05%+
$ 0.04 $ 0.07 $ 0.06 $ 0.00(a) $(0.01) $(0.02) $ 0.00(a) $ 0.00(a)
<CAPTION>
INVESTOR N
SHARES
----------
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93*
- ----------- ------------------------
<C> <S> <C>
$ 11.17 $ 11.05 $ 10.55
--------- ------- --------
0.00(a) (0.01) (0.01)
1.37 0.13 0.53
--------- ------- --------
1.37 0.12 0.52
-- -- (0.02)
(0.26) (0.00)(a) --
--------- ------- --------
(0.26) (0.00)(a) (0.02)
--------- ------- --------
$ 12.28 $ 11.17 $ 11.05
======== ======= =======
12.64% 1.12% 4.95%
======== ======= =======
$ 30,855 $23,591 $ 9,511
1.91%+ 1.90% 1.80%+
0.03%+ (0.15)% (0.16)%+
43% 56% 81%
1.97%+ 1.91% 1.89%+
$ (0.03) $ (0.01) $ (0.02)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
TRUST A SHARES
------------------------------------------
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
(UNAUDITED) 11/30/94# 11/30/93*
------------------------------------------
<S> <C> <C> <C>
NATIONS EMERGING GROWTH FUND
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(b) $ (0.03) $ (0.03)
</TABLE>
- ---------------
* The Nations Emerging Growth Fund Trust A Shares, Investor A Shares, Investor
C Shares and Investor N Shares commenced operations on December 4, 1992,
December 10, 1992, December 18, 1992 and June 7, 1993, respectively.
+ 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.
<TABLE>
<CAPTION>
TRUST A SHARES
--------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92*
--------------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS BALANCED ASSETS FUND
Operating performance:
Net asset value, beginning of period................................. $ 10.44 $ 10.87 $ 10.24 $ 10.00
--------- -------- -------- --------
Net investment income................................................ 0.17 0.25 0.29 0.06
Net realized and unrealized gain/(loss) on investments............... 1.13 (0.43) 0.64 0.18 ##
--------- -------- -------- --------
Net increase/(decrease) in net assets resulting from investment
operations......................................................... 1.30 (0.18) 0.93 0.24
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 $ 10.24
======== ======== ======== ========
Total return++....................................................... 12.59% (1.73)% 9.22% 2.40%+++
======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................................. $157,581 $162,215 $178,270 $111,953
Ratio of operating expenses to average net assets.................... 0.99%+ 0.98% 0.90% 0.30%+
Ratio of net investment income to average net assets................. 3.11%+ 2.31% 2.82% 3.85%+
Portfolio turnover rate.............................................. 101% 156% 50% 79%
Ratio of operating expenses to average net assets before fee
waivers............................................................ 0.99%+ 0.99% 0.97% 1.05%+
Net investment income per share before fee waivers................... $ 0.17 $ 0.25 $ 0.29 $ 0.05
</TABLE>
- ---------------
* The Nations Balanced Assets Fund Trust A Shares, Investor A Shares,
Investor C Shares and Investor N Shares commenced operations on September
30, 1992, October 2, 1992, October 2, 1992 and June 7, 1993, respectively.
+ 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.
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTOR A SHARES
--------------------------------------
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
(UNAUDITED) 11/30/94# 11/30/93*
--------------------------------------
<S> <C> <C> <C>
NATIONS EMERGING GROWTH FUND
Operating performance:
Net asset value, beginning of period................................... $11.35 $ 10.85 $ 9.87
------ ------- -------
Net investment income/(loss)........................................... 0.00(a) (0.06) (0.03)
Net realized and unrealized gain on investments........................ 0.96 0.70 1.02
------ ------- -------
Net increase in net assets resulting from investment operations........ 0.96 0.64 0.99
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......................................... $11.91 $ 11.35 $ 10.85
====== ======= =======
Total return++......................................................... 8.98% 5.90% 9.99%
====== ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................................... $4,212 $ 3,234 $ 2,095
Ratio of operating expenses to average net assets...................... 1.22%+ 1.26% 1.05%+
Ratio of net investment income/(loss) to average net assets............ (0.15)%+ (0.54)% (0.40)%+
Portfolio turnover rate................................................ 69% 129% 159%
Ratio of operating expenses to average net assets before fee waivers... 1.23%+ 1.26% 1.26%+
Net investment income/(loss) per share before fee waivers.............. $ 0.00(b) $ (0.06) $ (0.04)
<CAPTION>
INVESTOR C SHARES
--------------------------------------
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
(UNAUDITED) 11/30/94# 11/30/93*
--------------------------------------
<S> <C> <C> <C>
NATIONS EMERGING GROWTH FUND
Operating performance:
Net asset value, beginning of period................................... $11.20 $ 10.78 $ 9.89
------- ------- -------
Net investment income/(loss)........................................... (0.03) (0.14) (0.09)
Net realized and unrealized gain on investments........................ 0.93 0.70 0.98
------- ------- -------
Net increase in net assets resulting from investment operations........ 0.90 0.56 0.89
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 $ 10.78
======= ======= =======
Total return++......................................................... 8.54% 5.19% 9.00%
======= ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................................... $ 649 $ 542 $ 469
Ratio of operating expenses to average net assets...................... 1.97%+ 2.01% 1.80%+
Ratio of net investment income/(loss) to average net assets............ (0.90)%+ (1.29)% (1.15)%+
Portfolio turnover rate................................................ 69% 129% 159%
Ratio of operating expenses to average net assets before fee waivers... 1.98%+ 2.01% 2.01%+
Net investment income/(loss) per share before fee waivers.............. $(0.03) $ (0.14) $ (0.11)
<CAPTION>
INVESTOR N SHARES
--------------------------------------
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
(UNAUDITED) 11/30/94# 11/30/93*
--------------------------------------
<S> <C> <C> <C>
NATIONS EMERGING GROWTH FUND
Operating performance:
Net asset value, beginning of period................................... $ 11.24 $ 10.82 $ 9.88
-------- ------- -------
Net investment income/(loss)........................................... (0.03) (0.14) (0.02)
Net realized and unrealized gain on investments........................ 0.94 0.70 0.96
-------- ------- -------
Net increase in net assets resulting from investment operations........ 0.91 0.56 0.94
Distributions:
Distributions from net realized gains.................................. (0.40) (0.14) --
------- ------- -------
Total distributions.................................................... (0.40) (0.14) --
-------- ------- -------
Net asset value, end of period......................................... $ 11.75 $ 11.24 $ 10.82
======== ======= =======
Total return++......................................................... 8.60% 5.17% 9.51%
======== ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................................... $ 22,326 $15,909 $ 3,594
Ratio of operating expenses to average net assets...................... 1.97%+ 2.01% 1.80%+
Ratio of net investment income/(loss) to average net assets............ (0.90)%+ (1.29)% (1.15)%+
Portfolio turnover rate................................................ 69% 129% 159%
Ratio of operating expenses to average net assets before fee waivers... 1.98%+ 2.01% 2.01%+
Net investment income/(loss) per share before fee waivers.............. $ (0.03) $ (0.14) $ (0.03)
</TABLE>
<TABLE>
<CAPTION>
INVESTOR A SHARES
--------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92*
--------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS BALANCED ASSETS FUND
Operating performance:
Net asset value, beginning of period................................. $10.42 $10.86 $10.24 $ 10.00
------ ------ ------ -------
Net investment income................................................ 0.15 0.22 0.29 0.01
Net realized and unrealized gain/(loss) on investments............... 1.14 (0.44) 0.62 0.23##
------ ------ ------ -------
Net increase/(decrease) in net assets resulting from investment
operations......................................................... 1.29 (0.22) 0.91 0.24
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 $ 10.24
====== ====== ====== =======
Total return++....................................................... 12.47% (2.02)% 8.93% 2.40%+++
====== ====== ====== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................................. $5,006 $4,881 $5,191 $ 547
Ratio of operating expenses to average net assets.................... 1.24%+ 1.23% 1.15% 0.55%+
Ratio of net investment income to average net assets................. 2.86%+ 2.06% 2.57% 3.60%+
Portfolio turnover rate.............................................. 101% 156% 50% 79%
Ratio of operating expenses to average net assets before fee
waivers............................................................ 1.24%+ 1.24% 1.22% 1.30%+
Net investment income per share before fee waivers................... $ 0.15 $ 0.22 $ 0.28 $ 0.01
<CAPTION>
INVESTOR C SHARES
--------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92*
--------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS BALANCED ASSETS FUND $10.38 $10.82 $10.23 $ 10.00
Operating performance: ------ ------ ------- -------
Net asset value, beginning of period................................. 0.11 0.14 0.23 0.01
Net investment income................................................ 1.13 (0.43) 0.59 0.22##
Net realized and unrealized gain/(loss) on investments............... ------ ------ ------- -------
Net increase/(decrease) in net assets resulting from investment
operations......................................................... 1.24 (0.29) 0.82 0.23
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 $ 10.23
====== ====== ====== =======
Total return++....................................................... 11.93% (2.72)% 8.06% 2.30%+++
====== ====== ====== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................................. $ 798 $ 951 $1,196 $ 156
Ratio of operating expenses to average net assets.................... 1.99%+ 1.98% 1.90% 1.30%+
Ratio of net investment income to average net assets................. 2.11%+ 1.31% 1.82% 2.85%+
Portfolio turnover rate.............................................. 101% 156% 50% 79%
Ratio of operating expenses to average net assets before fee
waivers............................................................ 1.99%+ 1.99% 1.97% 2.05%+
Net investment income per share before fee waivers................... $ 0.11 $ 0.14 $ 0.22 $ 0.01
<CAPTION>
INVESTOR N SHARES
-----------------------------------------
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93*
-----------------------------------------
<S> <C> <C> <C>
NATIONS BALANCED ASSETS FUND
Operating performance:
Net asset value, beginning of period................................. $ 10.40 $ 10.85 $ 10.61
-------- -------- -------
Net investment income................................................ 0.12 0.17 0.14
Net realized and unrealized gain/(loss) on investments............... 1.14 (0.44) 0.23
-------- -------- -------
Net increase/(decrease) in net assets resulting from investment
operations......................................................... 1.26 (0.27) 0.37
Distributions:
Dividends from net investment income................................. (0.10) (0.18) (0.13)
Distributions from net realized gains................................ (0.02) -- --
-------- -------- -------
Total distributions.................................................. (0.12) (0.18) (0.13)
-------- -------- -------
Net asset value, end of period....................................... $ 11.54 $ 10.40 $ 10.85
======== ======= =======
Total return++....................................................... 12.21% (2.51)% 3.45%
======== ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)................................. $ 57,085 $52,905 $27,982
Ratio of operating expenses to average net assets.................... 1.74%+ 1.73% 1.65%+
Ratio of net investment income to average net assets................. 2.36%+ 1.56% 2.07%+
Portfolio turnover rate.............................................. 101% 156% 50%
Ratio of operating expenses to average net assets before fee
waivers............................................................ 1.74%+ 1.74% 1.72%+
Net investment income per share before fee waivers................... $ 0.12 $ 0.17 $ 0.14
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A TRUST A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
05/31/95 ENDED
(UNAUDITED) 11/30/94*
--------------------------
<S> <C> <C>
NATIONS EQUITY INDEX FUND
TRUST A SHARES
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 periods indicated.
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
(This Page Intentionally Left Blank)
39
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
TRUST A SHARES
------------------------------------------------------
SIX MONTHS
ENDED PERIOD PERIOD PERIOD
05/31/95 ENDED ENDED ENDED
(UNAUDITED)# 11/30/94* 04/29/94* 04/30/93*
------------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS DISCIPLINED EQUITY FUND
Operating performance:
Net asset value, beginning of period...................................... $ 13.08 $ 13.31 $ 13.65 $ 10.00
-------- ------- ------- -------
Net investment income/(loss).............................................. 0.09 0.01 (0.05) (0.03)
Net realized and unrealized gain/(loss) on investments.................... 1.35 (0.23)## 2.66 3.74
-------- ------- ------- -------
Net increase/(decrease) in net assets resulting from investment
operations.............................................................. 1.44 (0.22) 2.61 3.71
Distributions:
Dividends from net investment income...................................... (0.02) (0.01) -- --
Distributions from net realized gains..................................... -- -- (2.95) (0.06)
Return of capital......................................................... -- (0.00)(a) -- --
-------- ------- ------- -------
Total distributions....................................................... (0.02) (0.01) (2.95) (0.06)
-------- ------- ------- -------
Net asset value, end of period............................................ $ 14.50 $ 13.08 $ 13.31 $ 13.65
======== ======= ======= =======
Total return++............................................................ 11.01% (1.62)% 18.79% 37.13%
======== ======= ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...................................... $ 47,077 $ 9,947 $ 8,079 $ 4,638
Ratio of operating expenses to average net assets......................... 0.94%+ 1.13%+ 1.20%+ 1.20%+
Ratio of net investment income/(loss) to average net assets............... 1.37%+ 0.12%+ (0.60)%+ (0.58)%+
Portfolio turnover rate................................................... 98% 177% 475% 203%
Ratio of operating expenses to average net assets before fee waivers...... 1.65%+ 1.56%+ 1.53%+ 1.31%+
Net investment income/(loss) per share before fee waivers................. $ 0.04 $ (0.03) $ (0.08) $ (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. (Note 9).
** The period for the Nations Disciplined Equity Fund 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. (Note 9).
*** The Nations Disciplined Equity Fund Investor C Shares commenced
operations on May 10, 1995.
**** The Nations Disciplined Equity Fund Investor N Shares commenced
operations on May 20, 1994.
+ 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.
40
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTOR A SHARES
------------------------------------------
SIX MONTHS
ENDED PERIOD PERIOD
05/31/95 ENDED ENDED
(UNAUDITED)# 11/30/94** 04/29/94**
------------------------------------------
<S> <C> <C> <C>
NATIONS DISCIPLINED EQUITY FUND
Operating performance:
Net asset value, beginning of period...................................... $13.06 $13.30 $14.94
------ ------ ------
Net investment income/(loss).............................................. 0.08 0.00(a) (0.04)
Net realized and unrealized gain/(loss) on investments.................... 1.35 (0.23)## 1.35
------ ------ ------
Net increase/(decrease) in net assets resulting from investment
operations.............................................................. 1.43 (0.23) 1.31
Distributions:
Dividends from net investment income...................................... (0.01) (0.01) --
Distributions from net realized gains..................................... -- -- (2.95)
Return of capital......................................................... -- (0.00)(a) --
------ ------ ------
Total distributions....................................................... (0.01) (0.01) (2.95)
------ ------ ------
Net asset value, end of period............................................ $14.48 $13.06 $13.30
====== ====== ======
Total return++............................................................ 10.95% (1.71)% 8.31%
====== ====== ======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...................................... $ 502 $ 252 $ 165
Ratio of operating expenses to average net assets......................... 1.04%+ 1.23%+ 1.30%+
Ratio of net investment income/(loss) to average net assets............... 1.27%+ 0.02%+ (0.62)%+
Portfolio turnover rate................................................... 98% 177% 475%
Ratio of operating expenses to average net assets before fee waivers...... 1.75%+ 1.66%+ 1.74%+
Net investment income/(loss) per share before fee waivers................. $ 0.04 $(0.07) $(0.07)
<CAPTION>
INVESTOR C
SHARES INVESTOR N SHARES
--------------- -----------------------------
PERIOD SIX MONTHS
ENDED ENDED PERIOD
05/31/95 05/31/95 ENDED
(UNAUDITED)***# (UNAUDITED)# 11/30/94****
-------------------------------------------------
<S> <C> <C> <C>
NATIONS DISCIPLINED EQUITY FUND
Operating performance:
Net asset value, beginning of period...................................... $ 14.08 $13.02 $12.77
------ ------ ------
Net investment income/(loss).............................................. 0.01 0.02 (0.02)
Net realized and unrealized gain/(loss) on investments.................... 0.35 1.35 0.28
------ ------ ------
Net increase/(decrease) in net assets resulting from investment
operations.............................................................. 0.36 1.37 0.26
Distributions:
Dividends from net investment income...................................... -- -- (0.01)
Distributions from net realized gains..................................... -- -- --
Return of capital......................................................... -- -- (0.00)(a)
------ ------ ------
Total distributions....................................................... -- -- (0.01)
------ ------ ------
Net asset value, end of period............................................ $ 14.44 $14.39 $13.02
======= ====== ======
Total return++............................................................ 2.56% 10.52% (2.02)%
======= ====== ======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...................................... $ 7 $ 918 $ 177
Ratio of operating expenses to average net assets......................... 0.94%+ 1.94%+ 2.09%+
Ratio of net investment income/(loss) to average net assets............... 1.37%+ 0.37%+ (0.84)%+
Portfolio turnover rate................................................... 98% 98% 177%
Ratio of operating expenses to average net assets before fee waivers...... 1.65%+ 2.65%+ 2.52%+
Net investment income/(loss) per share before fee waivers................. $ 0.01 $(0.02) $(0.03)
</TABLE>
41
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES.
Nations Fund Trust (the "Trust") is registered under the Investment Company Act
of 1940, as amended, (the "1940 Act"), as an open-end management investment
company. As of the date of this report, the Trust offers thirty-four separate
portfolios. Information presented in these financial statements pertains only to
Nations Value Fund ("Value Fund"), Nations Capital Growth Fund ("Capital Growth
Fund"), Nations Balanced Assets Fund ("Balanced Assets Fund"), Nations Emerging
Growth Fund ("Emerging Growth Fund"), Nations Equity Index Fund ("Equity Index
Fund") and Nations Disciplined Equity Fund ("Disciplined Equity Fund") (formerly
Nations Special Equity Fund) (collectively the "Funds"). The financial
statements for the remaining funds are presented under separate cover. Each Fund
(except Equity Index Fund) currently offers four classes of shares: Trust A
Shares, Investor A Shares, Investor C Shares and Investor N Shares. The Equity
Index Fund currently offers only Trust A Shares. The Board of Trustees has
authorized each Fund to issue Trust B Shares. As of May 31, 1995, no Trust B
Shares have been issued. Shareholders of a Fund have equal voting rights on
matters affecting all shareholders of the Fund equally. In addition, each class
of shares of a Fund has exclusive voting rights on matters that relate solely to
the class, and separate voting rights on matters in which the interests of one
class of shares differ from the interests of any other class. The following is a
summary of significant accounting policies consistently followed by the Funds in
the preparation of their financial statements.
Securities Valuation: The Funds' portfolio securities which are traded on a
recognized stock exchange are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sale price
on the national securities market. Securities traded only on over-the-counter
markets are valued on the basis of the closing over-the-counter bid prices or if
no sale occurred on such day at the mean of the current bid and ask prices.
Certain securities may be valued by one or more principal market makers.
Restricted securities, securities for which market quotations are not readily
available and other assets are valued under the supervision of the Board of
Trustees. Short-term investments that mature in 60 days or less are valued at
amortized cost.
Repurchase Agreements: Each Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. Generally, in the event of counterparty default, the Fund
has the right to use the collateral to offset losses incurred. There is
potential loss to the Fund in the event the Fund is delayed or prevented from
exercising its rights to dispose of the collateral securities, including the
risk of a possible decline in the value of the underlying securities during the
period while the Fund seeks to assert its rights. Unless permitted by the
Securities and Exchange Commission, the Fund will not enter into repurchase
agreements with the investment adviser, the distributor or any of their
affiliates. The Funds' investment adviser, under the supervision of the Board of
Trustees, monitors the value of collateral received as well as the
creditworthiness of those banks and dealers with which the Funds enter into
repurchase agreements to evaluate potential risks.
Dollar Roll Transactions: Certain Funds may enter into dollar roll transactions
with financial institutions to take advantage of opportunities in the mortgage
market. 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. The fee is accrued as income over the life of the dollar roll
contract. If the broker/dealer to whom the 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.
Futures Contracts: The Equity Index Fund engages in futures contracts for the
purpose of hedging against changes in values of the Fund's securities or changes
in the prevailing levels of interest rates or currency exchange rates. Upon
entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin." Subsequent payments
42
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
("variation margin") are made or received by the Fund each day, depending on the
daily fluctuation of the value of the contract.
For long futures positions, the asset is marked-to-market daily to reflect the
current market value of the futures contract. The daily changes in the contract
are recorded as unrealized gains or losses. The Fund recognizes a realized gain
or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
Securities Transactions and Investment Income: Securities transactions are
accounted for on a trade date basis. Realized gains and losses are computed on
the specific identification of the securities sold. Interest income adjusted for
amortization of market discounts and premiums on investments on the
straight-line method and of original issue discounts on the effective yield
method, is earned from settlement date and is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date. Each Fund's investment
income and realized and unrealized gains and losses are allocated among the
classes based upon the relative average net assets of each class.
Dividends and Distributions to Shareholders: It is the policy of the Funds to
declare and pay dividends from net investment income each calendar quarter. Each
Fund will distribute net realized capital gains (including net short-term
capital gains), unless offset by any available capital loss carryforward,
annually after the fiscal year in which earned. Additional distributions of net
investment income and capital gains may be made at the discretion of the Board
of Trustees in order to avoid application of the 4% non-deductible Federal
excise tax. Income distributions and capital gain distributions on a Fund level
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Fund, timing differences and differing characterization of distributions
made by the Fund as a whole.
Federal Income Taxes: Each Fund intends to qualify as a regulated investment
company, by complying with the requirements of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders. Therefore,
no Federal income or excise tax provision is required.
Expenses: General expenses of the Trust are allocated to all the Funds based
upon relative net assets. Operating expenses directly attributable to a class of
shares are charged to that class's operations. Expenses of each Fund not
directly attributable to the operations of any class of shares are prorated
among the classes based on the relative average net assets of each class.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS.
The Trust has entered into an Investment Advisory Agreement with NationsBank,
N.A. (Carolinas) ("NationsBank"), as successor to NationsBank of North Carolina,
N.A., an indirect wholly-owned subsidiary of NationsBank Corporation, with
respect to each Fund.
Under the terms of the Investment Advisory Agreement, the Funds pay a fee at the
following annual rates of average daily net assets:
<TABLE>
<CAPTION>
ANNUAL RATE
----------
<S> <C>
Value Fund, Capital Growth Fund, Emerging Growth Fund,
Balanced Assets Fund and Disciplined Equity Fund................... 0.75%
Equity Index Fund.................................................... 0.50%
</TABLE>
Prior to April 1, 1995, the Disciplined Equity Fund paid an advisory fee at the
annual rate of 0.15% of average daily net
assets.
43
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Prior to April 1, 1995, ASB Capital Management, Inc. ("ASBCM"), an indirect,
wholly-owned subsidiary of NationsBank Corporation, served as the sub-investment
advisor to the Disciplined Equity Fund, pursuant to a Sub-Investment Advisory
Agreement, and was entitled to receive a fee at the annual rate of 0.60% of
average daily net assets.
Stephens Inc. ("Stephens") serves as the Trust's administrator pursuant to an
Administration Agreement. The Shareholder Services Group, Inc. ("TSSG"), a
wholly owned subsidiary of First Data Corporation, serves as the Trust's
co-administrator pursuant to a Co-Administration Agreement. Pursuant to the
Administration and Co-Administration Agreements, the administrator and the
co-administrator are entitled to receive a combined fee, computed daily and paid
monthly, at the annual rate of 0.10% of average daily net assets of the Trust
and the investment portfolios of Nations Fund, Inc. (another registered open-end
investment company that is part of the Nations Fund Family) on a combined basis.
For the six months ended May 31, 1995, Stephens earned $640,764 (after fee
waivers) for their services.
The investment adviser, administrator and co-administrator may, from time to
time, reduce their fees payable by each Fund (either voluntarily or pursuant to
applicable state limitations). For the six months ended May 31, 1995, the
investment adviser, administrator and/or co-administrator voluntarily waived
fees and reimbursed expenses as follows:
<TABLE>
<CAPTION>
FEES WAIVED EXPENSES FEES WAIVED BY
BY REIMBURSED BY ADMINISTRATOR/
NATIONSBANK NATIONSBANK CO-ADMINISTRATOR
<S> <C> <C> <C>
-------------------------------------------
Value Fund............................................. $ 4,777 -- $ 12,246
Capital Growth Fund.................................... 206,934 -- 10,749
Emerging Growth Fund................................... 3,328 -- 2,896
Balanced Assets Fund................................... -- -- 3,017
Equity Index Fund...................................... 242,192 -- 1,776
Disciplined Equity Fund................................ 24,265 $32,018 155
</TABLE>
No officer, director or employee of NationsBank, Stephens or TSSG, or any
affiliate thereof, receives any compensation from the Trust for serving as
Trustee or officer of the Trust. The Trust pays each Trustee an annual fee of
$1,000 ($3,000 for the Chairman of the Board), plus $500 per fund and an
additional $1,000 for each in-person board meeting, and $500 for each telephonic
board meeting, attended. The Trust also reimburses expenses incurred by the
Trustees in attending such meetings.
Each Fund's eligible Trustees may participate in a nonqualified deferred
compensation and retirement plan which may be terminated at any time. All
benefits provided under these plans are unfunded and any payments to plan
participants are paid solely out of the Funds' assets. If approved by the
Securities and Exchange Commission ("SEC"), income earned on each plan
participant's deferral account will be tied to the rate of return of the
eligible mutual funds selected by the participants or, if no funds are selected,
to the rate of return of the Nations Treasury Fund. Until SEC approval is
received, the rate of return will be tied to the yield on 90-day U.S. Treasury
Bills.
NationsBank of Texas, N.A. acts as the Funds' custodian. For the six months
ended May 31, 1995, NationsBank of Texas, N.A. earned $208,283 for providing
custody services. TSSG serves as transfer agent for the Funds' Investor A, C and
N shares. NationsBank of Texas, N.A. acts as the sub-transfer agent for the
Trust A Shares of the Funds.
Stephens acts as the distributor of the Funds' shares. For the six months ended
May 31, 1995, the Funds were informed that the distributor received $47,736,
representing commissions (sales charges) on sales of Investor A Shares of the
Funds. For the six months ended May 31, 1995, the Funds were informed that the
distributor received $338,673 in contingent deferred sales charges from Investor
A, Investor C and Investor N Shareholders of the Funds. A substantial portion of
these fees are paid to affiliates of NationsBank.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS.
The Trust has adopted a shareholder servicing and distribution plan ("Investor A
Plan") pursuant to Rule 12b-1 under the 1940 Act for Investor A Shares of each
Fund. Fees payable under the Investor A Plan may not exceed 0.25%, on an
annualized basis, of the average daily net assets of the Investor A Shares of a
Fund. The Funds pay fees under the Investor A Plan directly to the distributor.
Fees paid pursuant to the Investor A Plan are charged as expenses of Investor A
Shares of a Fund as accrued.
44
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Trust has adopted distribution plans pursuant to Rule 12b-1 under the 1940
Act with respect to Investor C Shares ("Investor C Plan") and Investor N Shares
("Investor N Plan") of each Fund. Pursuant to the Plans, the Funds pay fees
directly to the distributor for certain expenses that are incurred in connection
with the support and distribution of Investor C or Investor N Shares of the
Funds. Payments under the Investor C Plan and Investor N Plan are accrued daily
and paid monthly at a rate that will not exceed 0.75%, on an annualized basis,
of the average daily net assets of the Investor C and Investor N Shares,
respectively, of each Fund. Fees paid pursuant to the Investor C Plan and
Investor N Plan are charged as expenses of Investor C or Investor N Shares of a
Fund, respectively, as accrued.
The Trust also has adopted shareholder servicing plans with respect to Investor
C Shares ("Investor C Servicing Plan") and Investor N Shares ("Investor N
Servicing Plan") of each Fund. Under the Plans, the Funds may pay for certain
shareholder support services that are provided to holders of Investor C and
Investor N Shares by the servicing agents that have entered into a shareholder
servicing agreement with the Trust. Payments under the Investor C Servicing Plan
and Investor N Servicing Plan are accrued daily and paid monthly at a rate that
will not exceed 0.25% of the average daily net assets of the Investor C or
Investor N Shares of the Fund, respectively. Fees paid pursuant to the Investor
C Servicing Plan and Investor N Servicing Plan are charged as expenses of
Investor C or Investor N Shares of a Fund, respectively as accrued.
A substantial portion of the fees paid, pursuant to the Plans described above,
are paid to affiliates of NationsBank.
For the six months ended May 31, 1995, the Funds incurred the following amounts
pursuant to the above Plans:
<TABLE>
<CAPTION>
FEES PAID PURSUANT TO
-----------------------------------------------------------------------
INVESTOR A INVESTOR C INVESTOR C INVESTOR N INVESTOR N
PLAN PLAN SERVICING PLAN PLAN SERVICING PLAN
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------
Value Fund...................................... $ 46,216 $ 12,171 $4,057 $ 122,593 $ 61,296
Capital Growth Fund............................. 14,614 9,751 3,250 99,264 33,088
Emerging Growth Fund............................ 4,278 2,319 773 70,073 23,358
Balanced Assets Fund............................ 5,859 3,017 1,006 130,989 65,493
Disciplined Equity Fund......................... 129 N/A N/A 1,200 400
</TABLE>
The chart below shows the effective rates, expressed as a percentage of average
daily net assets, paid by the Funds under the shareholder servicing and
distribution plans for the six months ended May 31, 1995:
<TABLE>
<CAPTION>
INVESTOR A INVESTOR C INVESTOR C INVESTOR N INVESTOR N
PLAN PLAN SERVICING PLAN PLAN SERVICING PLAN
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------
Value Fund...................................... 0.25% 0.75% 0.25% 0.50% 0.25%
Capital Growth Fund............................. 0.25 0.75 0.25 0.75 0.25
Emerging Growth Fund............................ 0.25 0.75 0.25 0.75 0.25
Balanced Assets Fund............................ 0.25 0.75 0.25 0.50 0.25
Disciplined Equity Fund......................... 0.10 N/A N/A 0.75 0.25
</TABLE>
4. PURCHASES AND SALES OF SECURITIES.
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. government securities and short-term investments, for the six months ended
May 31, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
---------------------------
Value Fund................................................... $301,460,917 $361,509,787
Capital Growth Fund.......................................... 307,278,595 319,365,815
Emerging Growth Fund......................................... 137,274,607 133,778,752
Balanced Assets Fund......................................... 45,368,328 67,513,384
Equity Index Fund............................................ 8,316,544 21,179,007
Disciplined Equity Fund...................................... 50,008,616 14,835,687
</TABLE>
45
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The aggregate cost of purchases and proceeds from sales of securities of
long-term U.S. government securities for the six months ended May 31, 1995 were
as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
<S> <C> <C>
---------------------------
Balanced Assets Fund......................................... $174,858,389 $180,968,047
</TABLE>
At May 31, 1995, aggregate gross unrealized appreciation and unrealized
depreciation for tax purposes were as follows:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION
<S> <C> <C>
---------------------------
Value Fund..................................................... $109,752,608 $5,269,306
Capital Growth Fund............................................ 136,024,365 8,488,817
Emerging Growth Fund........................................... 28,235,450 5,119,289
Balanced Assets Fund........................................... 20,412,728 1,631,419
Equity Index Fund.............................................. 18,488,090 2,173,446
Disciplined Equity Fund........................................ 2,055,706 304,942
</TABLE>
5. SHARES OF BENEFICIAL INTEREST.
As of May 31, 1995, an unlimited number of shares without par value were
authorized for the Trust. The Trust's Declaration of Trust authorizes the Board
of Trustees to classify or reclassify any authorized, but unissued shares into
one or more additional classes or series of shares. See Schedule of Capital
Stock Activity.
6. ORGANIZATION COSTS.
The Funds bear all costs in connection with their organization, including the
fees and expenses of registering and qualifying their shares for distribution
under Federal and state securities regulations. All such costs are being
amortized on the straight-line method over a period of five years from
commencement of operations. In the event that any of the shares issued by the
Funds to their sponsor prior to the commencement of the Funds' public offering
("initial shares") are redeemed during such amortization period by any holder
thereof, the Funds will be reimbursed by the holder for any unamortized
organization costs in the same proportion as the number of initial shares
redeemed bears to the number of initial shares outstanding at the time of
redemption.
7. LINE OF CREDIT.
The Trust and Nations Fund, Inc. participate in a $25 million line of credit
provided by Mellon Bank, N.A. (the "Bank") under a Line of Credit Agreement (the
"Agreement") dated March 17, 1994. 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. Under the Agreement, each Fund may borrow up to the lesser of $10
million or 5% of its net assets. Interest on borrowings is payable either at the
Bank's Money Market Rate or the London Interbank Offered Rate (LIBOR) plus 0.25%
on an annualized basis. The Funds and the other affiliated entities are charged
an aggregate commitment fee of 0.25% per annum on the amount of the credit. Each
Fund is liable only for any commitment with respect to such Fund and is not be
liable for the portion of the commitment fee of any other fund. The Agreement
requires, among other things, that each participating Fund maintain a ratio of
net assets (not including funds borrowed pursuant to the Agreement) to aggregate
amount of indebtedness pursuant to the Agreement of no less than 4 to 1.
46
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
During the six months ended May 31, 1995, the Disciplined Equity Fund had the
following borrowings under the Agreement;
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING AT MAXIMUM AVERAGE AVERAGE INTEREST RATE
NOVEMBER 30, AMOUNT AMOUNT AVERAGE DEBT --------------- INTEREST
1994 OUTSTANDING OUTSTANDING SHARES PER SHARE HIGH LOW EXPENSE
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
-- $ 400,000 $ 3,846 1,212,142 $0.00(a) 6.50% 6.38% $ 125
</TABLE>
- ---------------
(a) Value represents less than $0.01 per share.
The average amount outstanding was calculated by summing the borrowings at the
end of each day and dividing the sum by the number of days in the period ended
May 31, 1995.
8. CAPITAL LOSS CARRYFORWARD.
At November 30, 1994, the Balanced Assets Fund had a capital loss carryforward
of $(367,963), which will expire on November 30, 2002.
9. REORGANIZATION.
On April 29, 1994, the Value Fund (Acquiring Fund) acquired the assets and
certain liabilities of The Capitol Mutual Fund's Equity Portfolio (Acquired
Fund), in exchange for shares of the Acquiring Fund, pursuant to a plan of
tax-free reorganization approved by the Acquired Fund's shareholders on March
31, 1994. Total shares issued by the Acquired Fund, the value of the shares
issued by the Acquiring Fund, the total net assets of the Acquired Fund and the
Acquiring Fund and any unrealized depreciation included in the Acquired Fund's
total net assets at the acquiring date were as follows:
<TABLE>
<CAPTION>
VALUE OF
SHARES SHARES TOTAL NET TOTAL NET ACQUIRED
ISSUED BY ISSUED BY ASSETS OF ASSETS OF FUND
ACQUIRING ACQUIRING ACQUIRING ACQUIRED ACQUIRING UNREALIZED
FUND ACQUIRED FUND FUND FUND FUND FUND* DEPRECIATION
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Nations Value The Capitol Mutual
Fund Funds Equity
Portfolio 2,158,820 $28,863,030 $28,863,030 $867,890,020 $ 1,410,132
</TABLE>
- ---------------
* The value of the net assets of the Acquiring Fund immediately after the
acquisition was $896,753,050.
Effective April 30, 1994, substantially all of the assets and liabilities of The
Capitol Mutual Funds Special Equity Portfolio were reorganized, in a tax-free
exchange, into Nations Special Equity Fund, which is now named Nations
Disciplined Equity Fund. Shares of beneficial interest exchanged were on a one
for one basis.
10. SUBSEQUENT EVENT.
Each Fund's eligible Trustees may participate in a deferred compensation plan
and a retirement plan which may be terminated at any time. All benefits provided
under these plans are unfunded and any payments to plan participants are paid
solely out of the Funds' assets. Pursuant to an exemptive order granted by the
Securities and Exchange Commission on June 20, 1995, income earned on each plan
participant's deferral account is tied to the rate of return of the eligible
mutual funds selected by the participants or, if no funds are selected, to the
rate of return of the Nations Treasury Fund.
47
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
MEETING OF SHAREHOLDERS
On March 31, 1995, a Special Meeting of shareholders of Nations Special Equity
Fund (subsequently renamed Nations Disciplined Equity Fund)(the "Fund") was
held. The purpose of the meeting was to seek shareholder approval of an
amendment to the Investment Advisory Agreement between NationsBank and Nations
Fund, on behalf of the Fund, pursuant to which NationsBank would assume sole
responsibility for managing the portfolio of investments of the Fund. This
arrangement was proposed to replace the existing advisory arrangement under
which NationsBank served as the Fund's investment adviser and ASB Capital
Management Inc. served as the Fund's subadviser. At the meeting, 702,015 votes
were cast in favor of approval of the proposal, 5,000 votes were cast against
the proposal and 17,293 votes were withheld. In addition, there were 8
abstentions.
48
<PAGE>
THE NATIONS FUND FAMILY
EQUITY FUNDS
GROWTH
Nations Capital Growth Fund
Nations Disciplined Equity Fund
Nations Emerging Growth Fund
Nations Equity Index Fund*
Nations International Equity Fund
GROWTH AND INCOME
Nations Balanced Assets Fund
Nations Equity Income Fund
Nations Value Fund
BOND FUNDS
INCOME
Nations Adjustable Rate Government Fund
Nations Diversified Income Fund
Nations Government Securities Fund
Nations Managed Bond Fund
Nations Short-Intermediate Government Fund
Nations Short-Term Income Fund
Nations Strategic Fixed Income Fund
Nations Mortgage-Backed Securities Fund*
TAX-EXEMPT INCOME
Nations Florida Municipal Bond Fund
Nations Florida Intermediate Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Georgia Intermediate Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations Maryland Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Tennessee Intermediate Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Texas Intermediate Municipal Bond Fund
Nations Virginia Municipal Bond Fund
Nations Virginia Intermediate Municipal Bond Fund
Nations Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Short-Term Municipal Income Fund
MONEY MARKET FUNDS
Nations Government Money Market Fund
Nations Prime Fund
Nations Tax Exempt Fund
Nations Treasury Fund
*Trust classes only
<PAGE>
This report is submitted for the general information of shareholders of Nations
Fund Trust. For more detailed information about Nations Fund Trust, including
fees and expenses, please see the prospectus and statement of additional
information of Nations Fund Trust.
<PAGE>
[NATIONS FUND LOGO] BULK RATE
PO Box 9654 U.S. POSTAGE
Providence, RI 02940-9654 PAID
Toll Free 1-800-982-2271 BOSTON, MA
PERMIT NO.
54201
SAR1-5/95
<PAGE>
[NATIONS FUND LOGO]
S E M I
A N N U A L
For the Period Ended May 31, 1995
R E P O R T
NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND
NATIONS MANAGED
BOND FUND
NATIONS SHORT-TERM
INCOME FUND
NATIONS ADJUSTABLE RATE
GOVERNMENT FUND
NATIONS DIVERSIFIED
INCOME FUND
NATIONS STRATEGIC FIXED
INCOME FUND
NATIONS MORTGAGE-BACKED
SECURITIES FUND
<PAGE>
NATIONS FUND AND OTHER MUTUAL FUNDS ARE NOT FDIC INSURED AND ARE NOT OBLIGA-
TIONS OF, ENDORSED BY, DEPOSITS IN, OR GUARANTEED BY NATIONSBANK, N.A.
(CAROLINAS) ("NATIONSBANK") OR ANY OF ITS AFFILIATES. INVESTMENTS IN MUTUAL
FUNDS AND OTHER INVESTMENT PRODUCTS INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL INVESTED.
NATIONS FUND DISTRIBUTOR: STEPHENS INC. STEPHENS INC., WHICH IS NOT AFFILIATED
WITH NATIONSBANK, IS NOT A BANK AND SECURITIES OFFERED BY IT ARE NOT GUARANTEED
BY ANY BANK OR INSURED BY THE FDIC. STEPHENS INC., MEMBER NYSE-SIPC.
NATIONS FUND INVESTMENT ADVISER: NATIONSBANK
<PAGE>
NATIONS FUND TRUST
DEAR SHAREHOLDER:
We are pleased to present the semi-annual results for Nations Fund Trust for the
period ended May 31, 1995. During this period, the assets in the Nations Fund
family of funds continued to grow, recently surpassing the $16 billion level. We
are pleased with this growth and feel it is only appropriate to thank our
shareholders for placing their confidence in our portfolios.
FINANCIAL MARKETS SUMMARY
The complexion of financial markets can change rapidly in today's investment
world. Through the second half of 1994, the stock and bond markets struggled
with a variety of tough financial issues. However, as the new year unfolded,
investors suddenly discovered a near-ideal world for the investment of financial
assets. As we look forward to the remainder of 1995 and begin to anticipate
1996, it is important to draw some lessons from the past twelve months. It is
interesting to note that most of the lessons derived from last year's activity
are not new. Past economic and credit cycles have presented investors with
similar opportunities and pitfalls as we discuss below.
As a result of the rise in interest rates in the summer and fall of 1994, many
investors learned painful lessons in financial speculation. Examples include the
significant losses in hedge funds, the Orange County, California bankruptcy
filing, and the demise of United Kingdom-based Barings Securities Plc. All three
situations produced serious losses for those who chose to reach for additional
return without paying proper attention to risk. Many of these losses could be
directly attributed to the speculative use of derivative securities.
The term "derivative" is used to describe a wide range and variety of financial
instruments. Derivatives include any security whose performance is linked to the
behavior of another security or market index. Traditional derivatives include
exchange-traded options and futures contracts. While derivative securities
inherently are neither good nor bad, they can be used in ways that lead to
greater losses, as seen in the case of Orange County and Barings Securities Plc.
Derivatives, however, can be effectively used.
Perhaps this lesson taught us something even more important -- that our
financial system is sound. While these episodes initially created great
discomfort, our capital markets proved they could absorb the blows.
Late in 1994, the devaluation of the Mexican peso introduced another element of
uncertainty into the financial markets. Although the decline in Mexican stock
prices was dramatic and the financial pain in Mexico continues to be real, our
financial markets and institutions were able to withstand the crisis. In
addition, the problem in Mexico helped to drive a great deal of excess out of
the emerging markets sector, which helped to adjust stock prices to more
realistic levels and create a more favorable environment for foreign investment.
The U.S. economy experienced strong growth in 1994 with little in the way of
inflationary pressure. Throughout 1994, and into early 1995, the Federal Reserve
Board repeatedly raised short-term interest rates in order to control inflation.
As we prepare to move into the second half of 1995, we can see that this policy
has clearly produced positive results for investors. Slow economic growth and
low inflation are ideal conditions for maximizing the potential of your
financial assets.
Those investors who had the courage to resist doing the wrong thing at the wrong
time earlier in the year are in the best position to reap the benefits of the
present environment. At various points in 1994, many investors were tempted to
sell financial assets because they believed that the economy might overheat or
that inflation might suddenly accelerate. However, a sound investment strategy
requires a steady hand and a long-term perspective. By early 1995, the benefits
of patience and conviction were already being reflected in the performance of
many stock and bond portfolios.
FINANCIAL OUTLOOK
We expect the investment environment to remain positive over the next twelve
months. The economy, in our view, will continue to slow. However, continued
corporate investment in productivity and technology, combined with modest
consumer spending, should produce a pattern of moderate economic growth. As we
speculate on events yet to take place in Washington, we see a major shift toward
downsizing in government, which should be received favorably by the financial
markets.
Unquestionably, we will experience setbacks in stock and bond prices.
Volatility, after all, is an essential component of any financial market.
However, investors who shun speculation, believe in the soundness of our
financial system, build diversified investment portfolios and act with
conviction on their long-term beliefs may be well positioned to reap potential
market rewards. It is our belief that an investment philosophy built on these
principles should serve us well in the years to come. We remain committed to
meeting the investment challenges that lie ahead.
1
<PAGE>
WHAT SHOULD STOCK MUTUAL FUND INVESTORS CONSIDER DOING?
While we are not in a position to recommend specific steps that an individual
investor should take, the following represent general information and investment
strategies that stock mutual fund investors may want to consider. Remember,
specific investment recommendations should always be based on an analysis of
your individual financial goals, tolerance for risk, and investment time frame.
Your investment representative can best help you develop a strategy reflecting
your needs and goals.
DIVERSIFY YOUR INVESTMENT PORTFOLIO. A well-diversified investment portfolio
can help establish a level of risk and potential reward in line with your
investment time frame and goals. To do so, you should allocate assets among
stock, bond and money market investments.
MAINTAIN A LONG-TERM PERSPECTIVE. While stock prices may rise and fall over the
short term, stocks historically have offered the greatest potential for
long-term gains among the traditional investment classes.
As the chart below shows, since 1926, a period which includes the Great
Depression, wars and recessions, stocks have historically outperformed all other
types of financial assets.
[BAR GRAPH]
SMALL COMPANY STOCKS: Small company stocks are units of ownership of publicly
traded corporations, generally with a market capitalization of $50 million to
$1.5 billion as measured by the total value of outstanding stock.
COMMON STOCKS: Common stocks are units of ownership of a public corporation.
Prices fluctuate with market conditions and there is no guaranteed rate of
return. Performance of common stocks is measured by the S&P 500, a weighted
index which measures the aggregate change in the market value of 400 industrial,
60 transportation and utility company stocks and 40 financial issues. The S&P
500 is an unmanaged index.
LONG-TERM CORPORATE BONDS: Long-term corporate bonds are debt instruments
issued by public and private corporations. They are usually taxable and
typically have a par value of $1,000.
LONG-TERM GOVERNMENT BONDS: Long-term government bonds are debt securities
issued or guaranteed by the U.S. government, its agencies and instrumentalities
and backed by its full faith and credit. They offer stable principal value if
held to maturity. Long-term bonds have maturities of ten years or longer. While
long-term government bonds offer fixed rates of return, their prices will
fluctuate with market conditions.
TREASURY BILLS: U.S. Treasury bills are also debt securities issued by the U.S.
government and backed by its full faith and credit. U.S. Treasury bills offer
stable principal value if held to maturity which is one-year or less. While U.S.
Treasury bills offer fixed rates of return, their prices will fluctuate with
market conditions.
INFLATION: Inflation is the rise in the prices of goods and services that takes
place when spending increases relative to the supply of goods and services on
the market. Inflation is measured by the Consumer Price Index (CPI), which is
also known as the Cost of Living Index and is determined by the U.S. Bureau of
Labor Statistics.
*Source: STOCKS, BONDS, BILLS AND INFLATION 1995 YEARBOOK(TM), Ibbotson
Associates, Chicago (annually updates work by Roger G. Ibbotson and Rex A.
Sinquefield). Used with permission. All rights reserved.
This chart represents historical performance. It is intended for illustrative
purposes only and is not intended to be representative of the past or future
performance of any particular investment. Performance of investments in each of
these types of securities may differ for future periods and will vary with
market conditions.
2
<PAGE>
CONSIDER A SYSTEMATIC INVESTMENT STRATEGY. Investing regularly through a method
called "dollar cost averaging" involves investing a consistent dollar amount at
regular intervals. Using this method, you will buy fewer shares when prices are
high and more shares when prices are low. As a long-term investment strategy,
dollar cost averaging may help you average down the overall cost of your shares
over time. Please note that while a program of regular investing can help reduce
risk, it cannot assure a profit or protect against a loss in a declining market.
Since such a program involves continuous investment regardless of fluctuating
share values, investors should consider their financial ability to continue the
program through periods of low share prices.
CONSULT AN INVESTMENT REPRESENTATIVE. A professional investment representative
can help you to develop a long-term investment strategy that reflects your
goals, time frame and tolerance for risk. He or she is available to provide
information on allocating investment assets, or answer questions about specific
investments.
There are many factors that will affect a stock's share price -- from changes in
supply and demand for a particular company's products or services, to overall
economic and financial market conditions.
When held for long periods of time -- five years or more -- stock market
investments will generally experience a series of ups and downs. In determining
the level of investment risk you are comfortable with, there are several key
points to consider:
- - Stocks can be unpredictable. Stock market investments are generally not
suitable for pursuing your short-term investment goals. It is rare that an
investor would be in a position to buy and sell a particular stock in a short
period of time and make a substantial profit.
- - Invest for the long term. The longer your investment time frame, the better
your chances are of weathering stock market downturns.
- - Avoid placing all of your eggs in one basket. Spread your investment dollars
among several different stock market investments or among different types of
securities to seek to reduce the risk of principal loss should a particular
investment perform poorly.
WHAT SHOULD BOND MUTUAL FUND INVESTORS CONSIDER DOING?
Again, while we are not in a position to recommend specific steps that an
individual investor should take, the following represent general information and
investment strategies that bond mutual fund investors may want to consider.
Remember, specific investment recommendations should always be based on an
analysis of your individual financial goals, tolerance for risk, and investment
time frame. Your investment representative can best help you develop a strategy
reflecting your needs and goals.
Bond funds offer the potential to receive regular dividend income -- usually on
a monthly basis. Like stocks, bond prices may fluctuate as market conditions and
interest rates change. The highest yields are generally found in funds that
invest in long-term bonds or in lower quality bonds where share prices tend to
fluctuate more. High quality short-term bonds generally offer the least price
fluctuation.
HOW INTEREST RATES AFFECT BONDS. As market interest rates fall, bond prices
rise. As market interest rates rise, bond prices fall. One type of risk that
bond investors face is that the price of a bond will decline in a rising
interest rate environment. For instance, an investor holding a U.S. Treasury
bond earning 7% annually may have difficulty selling that bond in a rising
interest rate environment. A 7% bond becomes less attractive when newly issued
bonds offering 8% annually can be purchased.
Longer-term bonds are more sensitive to interest rate changes than short- or
intermediate-term bonds. The longer the time period until your investment
matures, the more price fluctuation the investment may incur. Many investors
choose to invest in short- or intermediate-term bonds to seek to reduce interest
rate risk.
HOW TAXES AFFECT BOND RETURNS. Municipal bonds provide investors the option to
earn a portion of their bond returns through tax-exempt coupon payments. Unlike
other bond coupons, which would be subject to federal, state and perhaps local
income taxes, the coupons paid by municipal bonds are exempt from some or all of
these taxes. While investors could earn taxable gains or losses on the price
change due to interest rate changes on their municipal bonds, the exempt feature
of the income stream is of considerable benefit to many investors. Investors
should consider the potential federal and state tax advantages of municipal bond
mutual funds when assessing their overall investment portfolio needs. Nations
Fund offers 19 different municipal bond funds to serve a variety of taxpayer
needs.
3
<PAGE>
INTEREST RATE PROTECTION THROUGH PORTFOLIO LADDERING.(1) Portfolio laddering is
the process of investing in securities with different maturity dates to seek to
reduce a portfolio's overall price fluctuation and provide protection regardless
of the direction of interest rate movements. To build a portfolio ladder,
investments can be divided among bond mutual funds with short-, intermediate-
and long-term maturities. The exact mix will depend upon your investment
objectives and the current interest rate environment. Nations Fund offers a
comprehensive selection of fixed-income investment portfolios for this purpose.
UNDERSTANDING CREDIT RISK. One of the difficulties many investors face in
selecting individual bonds is judging credit quality. Bond ratings are based on
the bond issuer's ability to make interest payments and to repay the loan.
Ratings are typically determined by one or more highly-regarded rating services
such as Moody's Investor Service, Inc. or Standard & Poor's Corporation. While
bond ratings are based on in-depth research and analysis, and careful
examination of the issuer's financial situation, they are not a guarantee of
repayment of the loan at maturity.
MUTUAL FUNDS PROVIDE ACCESS TO IN-DEPTH CREDIT RESEARCH AND ANALYSIS. The
selection of quality bonds for your portfolio is dependent upon in-depth
research and credit analysis. For most investors, this can be difficult and time
consuming. Mutual funds offer the advantage of professional research, analysis
and portfolio management. Experienced investment managers are dedicated to
selecting appropriate investments and managing portfolios to pursue specific
investment goals.
THE NATIONS FUND ADVANTAGE
A family of mutual funds provides investors with a number of advantages,
including the ability to shift investment assets among funds as your financial
objectives or market conditions change.(2) Nations Fund provides a broad array
of professionally managed stock, bond and money market mutual funds advised by
NationsBank. The Nations Fund family of mutual funds was designed to accommodate
a wide variety of investment objectives across the risk/reward spectrum.
For specific information on allocating assets to more closely target your
investment objectives, contact your investment representative. He or she can
provide additional information, including fund prospectuses. Prospectuses
contain more complete information on the funds, including charges and expenses.
Always read a fund's prospectus carefully before investing or sending money.
We hope this information proves valuable in the development of your investment
strategy. We look forward to helping you pursue your investment goals.
Sincerely,
/s/ A. Max Walker
- --------------------------------
A. Max Walker
President and Chairman
of the Board
May 31, 1995
(1) Portfolio laddering does not reduce market risk and the principal and
yield of investment securities will fluctuate with changes in market
conditions.
(2) Exchange privileges may be amended with 60-days written notice from
the Fund.
4
<PAGE>
Effective Asset Allocation Through The Nations Fund Family
Nations Fund portfolios span the risk/reward spectrum providing investors with
the ability to pursue a wide range of objectives within a single fund family.
Stock, bond and money market portfolios allow investors to pursue short-,
intermediate-, and long-term investment goals ranging from preservation of
principal to capital accumulation.*
[LINE GRAPH]
* Mutual fund investment returns will fluctuate with market conditions so that
shares, when redeemed, may be worth more or less than original cost. Money
market instruments are neither insured nor guaranteed by the U.S. government.
While money market funds strive to maintain a constant $1.00 per share, there
can be no assurance that the funds will be able to maintain a stable net
asset value.
** Trust classes only.
5
<PAGE>
NATIONS FUND
A PORTFOLIO FOR EVERY INVESTOR
Since 1874, NationsBank, investment adviser to the Nations Fund family of mutual
funds, has built its success upon a long-standing commitment of quality service
to customers. Conditions change rapidly in the financial world, but the
requirements for sustained success remain constant: quality products and
services; a responsible investment philosophy; and a wealth of knowledge and
resources.
These characteristics are the guiding principles behind a family of mutual funds
with you, the Nations Fund investor, in mind. All of the funds are advised by
and made available through NationsBank, which, with its affiliates, has more
than $171 billion in assets, over seven million clients, and one of the
country's largest branch systems.
As investment adviser, NationsBank provides professional management of your
money which parallels the approach that has established NationsBank and its
affiliates as leaders in trust and institutional investment services, currently
managing over $57 billion.
A responsible investment approach guides every decision within the Nations Fund
family, whether the goal is based on long-term growth or current income. These
decisions are backed by substantial professional resources consisting of
experienced equity and fixed income analysts, researchers and portfolio
managers.
There are currently 39 funds in the Nations Fund family, with assets totaling
over $16 billion, to help you with retirement planning, college savings or any
other long-range financial goal.
FOR GROWTH OF CAPITAL
(Investments primarily in stocks)
- -----------------------------------
NATIONS CAPITAL GROWTH FUND
Objective: To seek long-term capital appreciation.
Approach: Invests in stocks with superior growth characteristics, selling at
reasonable prices, that should outperform the market over time. The Fund
focuses on companies with assets over $500 million. Selection criteria include
above average growth potential, solid financials, and above average return on
equity and earnings growth relative to the S&P 500 Index.
NATIONS EMERGING GROWTH FUND
Objective: To seek capital appreciation.
Approach: Invests in common stocks and convertible securities that are
expected to demonstrate superior earnings growth relative to most publicly
traded companies. Companies selected will have revenues of $50 million to $1.5
billion, a debt ratio of less than 50% of total capital, and generally less
than $2 billion in capitalization.
NATIONS EQUITY INDEX FUND*
Objective: To seek investment results that correspond, before fees and
expenses, to the total return of common stocks publicly traded in the U.S., as
represented by the S&P 500 Index.
Approach: Portfolio holdings are structured according to the S&P 500 Index in
an effort to duplicate the performance of the Index.
NATIONS DISCIPLINED EQUITY FUND (formerly Nations Special Equity Fund)
Objective: To seek long-term capital appreciation.
Approach: Invests primarily in common stocks of companies exhibiting the
potential for significant increases in their earnings per share.
NATIONS INTERNATIONAL
EQUITY FUND
Objective: To seek a high total return on its assets from long-term growth of
capital.
Approach: Invests primarily in an internationally diversified portfolio of
marketable equity securities of non-U.S. issuers. The Fund may invest in
countries located in the Far East, Western Europe, Australia and other
countries.
FOR GROWTH AND INCOME
(Investments primarily in stocks)
- -----------------------------------
NATIONS EQUITY INCOME FUND
Objective: To seek 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.
Approach: Invests in common stocks
and convertible securities that together exhibit above average current dividend
yields relative to that of the S&P 500 Index. Selects stocks of companies
exhibiting five years of stable or increasing dividends, established operating
histories, strong balance sheets and other favorable financial characteristics.
NATIONS VALUE FUND
Objective: To seek long-term capital growth with income a secondary
consideration.
Approach: Utilizes a fundamental approach focusing on individual company value
and projected earnings per share. The Fund seeks to invest in companies with
above market dividend yield, low price-to-earnings ratios and more than $300
million in assets. Investments are diversified across all major industries and
economic sectors.
FOR GROWTH OF INCOME, CURRENT
INCOME AND GROWTH OF CAPITAL
(Investments in stocks, bonds and money markets)
- -----------------------------------
NATIONS BALANCED ASSETS FUND
Objective: Total investment return
through a combination of growth of capital and current income consistent with
the preservation of capital.
Approach: Allocates assets among common stocks, bonds and money market
instruments. Seeks stocks of high quality companies with above average earnings
potential and return on equity. Potential volatility is reduced through
inclusion of investment grade bonds.
6
<PAGE>
FOR CURRENT INCOME
(Investments in fixed income obligations)
- -----------------------------------
NATIONS
SHORT-INTERMEDIATE
GOVERNMENT FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: Invests in obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities, and repurchase agreements relating to such
obligations. Under normal market conditions, the Fund is expected to have an
average dollar weighted maturity of between two and seven years.#
NATIONS MANAGED BOND FUND
Objective: To seek a high level of current income consistent with relative
stability of principal.
Approach: Invests primarily in investment grade corporate and government fixed
income and related securities. Under normal market conditions, the Fund is
expected to have an average weighted maturity of between five and fifteen
years.
NATIONS SHORT-TERM
INCOME FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: Invests primarily in investment grade corporate and mortgage-backed
bonds. Under normal market conditions, the Fund is expected to have an average
dollar weighted maturity of three years or less.
NATIONS DIVERSIFIED
INCOME FUND
Objective: To seek as high a level of current income as is consistent with
prudent investment risk.
Approach: Invests in a broad range of corporate, government and agency fixed
income securities, and may include no more than 35% below investment grade.
NATIONS STRATEGIC
FIXED INCOME FUND
Objective: To maximize total investment return through the active management of
fixed income securities.
Approach: Invests primarily in a mix of investment grade corporate, government
and mortgage-backed securities.
NATIONS GOVERNMENT
SECURITIES FUND
Objective: To provide current income and preservation of capital.
Approach: Invests in obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities.#
FOR CURRENT INCOME
(Investments in fixed income obligations)
- -----------------------------------
NATIONS ADJUSTABLE RATE
GOVERNMENT FUND
Objective: To seek a high level of current income consistent with minimum
fluctuation of share price.
Approach: Invests primarily in adjustable rate mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.#
NATIONS MORTGAGE-BACKED
SECURITIES FUND*
Objective: To seek as high a level of total investment return as is consistent
with prudent investment risk.
Approach: Invests primarily in mortgage-backed securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities.#
FOR TAX-EXEMPT INCOME
(Investments in municipal securities)
- -----------------------------------
NATIONS MUNICIPAL INCOME FUND+
Objective: To seek a high level of current interest income that is exempt from
federal income taxes.
Approach: Invests primarily in investment grade tax-exempt obligations across
a wide range of municipalities and geographic regions to add diversity to the
Fund.
NATIONS INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: To seek higher than money market yields.
Approach: Invests primarily in intermediate-term, investment grade municipal
securities which make interest payments that are exempt from federal income
taxes.
NATIONS SHORT-TERM
MUNICIPAL INCOME FUND+
Objective: To seek a high level of current interest income that is exempt from
federal income taxes.
Approach: Invests primarily in short-term (average weighted maturity 1 - 3
years) investment grade tax-exempt obligations across a wide range of
municipalities and geographic regions to add diversity to the Fund.
NATIONS FLORIDA
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in Florida intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
FOR TAX-EXEMPT INCOME
(Investments in municipal securities)
- -----------------------------------
NATIONS FLORIDA
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in Florida municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
NATIONS GEORGIA
INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in Georgia intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS GEORGIA
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in Georgia municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
NATIONS MARYLAND
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Maryland state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Maryland intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS MARYLAND
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Maryland state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Maryland municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
7
<PAGE>
FOR TAX-EXEMPT INCOME
(Investments in municipal securities)
- -----------------------------------
NATIONS NORTH CAROLINA
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in North Carolina
intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS NORTH CAROLINA
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in North Carolina municipal
bonds, including those used to support projects that benefit the public, such
as roads, bridges, hospitals and schools.
NATIONS SOUTH CAROLINA
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in South Carolina
intermediate municipal bonds, including those used to support projects that
benefit the public, such as roads, bridges, hospitals and schools.
NATIONS SOUTH CAROLINA
MUNICIPAL BOND FUND+
Objective: 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.
Approach: Invests substantially all of its assets in South Carolina municipal
bonds, including those used to support projects that benefit the public, such
as roads, bridges, hospitals and schools.
NATIONS TENNESSEE
INTERMEDIATE MUNICIPAL
BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Tennessee state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Tennessee intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
FOR TAX-EXEMPT INCOME
(Investments in municipal securities)
- -----------------------------------
NATIONS TENNESSEE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Tennessee state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Tennessee municipal
bonds,
including those used to support projects
that benefit the public, such as roads,
bridges, hospitals and schools.
NATIONS TEXAS
INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from federal
income tax, consistent with the relative
stability of principal.
Approach: Invests substantially all of its assets in Texas intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS TEXAS
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from federal
income tax, consistent with the relative
stability of principal.
Approach: Invests substantially all of its assets in Texas municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
NATIONS VIRGINIA
INTERMEDIATE
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Virginia state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Virginia intermediate
municipal bonds, including those used to support projects that benefit the
public, such as roads, bridges, hospitals and schools.
NATIONS VIRGINIA
MUNICIPAL BOND FUND+
Objective: To seek a high level of current interest income exempt from both
federal and Virginia state income taxes, consistent with relative stability of
principal.
Approach: Invests substantially all of its assets in Virginia municipal bonds,
including those used to support projects that benefit the public, such as
roads, bridges, hospitals and schools.
MONEY MARKET FUNDS
FOR CURRENT INCOME AND PRESERVATION
OF CAPITAL
(Investments in money market securities)
------------------------------------
NATIONS PRIME FUND
Objective: To seek the maximization of current income to the extent consistent
with the preservation of capital and the maintenance of liquidity.
Approach: Invests in high quality money market instruments including bank
certificates of deposit, banker's acceptances and commercial paper.
NATIONS TREASURY FUND
Objective: The maximization of current income to the extent consistent with
the preservation of capital and the maintenance of liquidity.
Approach: Invests in U.S. Treasury obligations and repurchase agreements
secured by such obligations.#
NATIONS GOVERNMENT
MONEY MARKET FUND
Objective: To seek as high a level of current income as is consistent with
liquidity and stability of principal.
Approach: Invests in U.S. government obligations and repurchase agreements
relating to such obligations.#
NATIONS TAX EXEMPT FUND+
Objective: To seek as high a level of current interest income exempt from
federal income taxes as is consistent with liquidity and stability of
principal.
Approach: Invests in municipal securities, the interest on which is exempt
from
regular federal income tax.
# The portfolio securities held by these funds are guaranteed as to the timely
payment of principal and interest only. This is not a guarantee of market
value of the shares of the funds themselves.
* Offers Trust A Shares only.
Offers Trust A Shares, Investor A Shares and Investor C Shares only.
+ A portion of income, from municipal bonds, received by shareholders may be
subject to some federal income, state and/or local tax and/or the federal
alternative minimum tax.
8
<PAGE>
NATIONS FUND TRUST
Nations Short-Intermediate Government Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
ASSET-BACKED SECURITY -- 0.5%
(Cost $2,631,687)
$ 2,663,697 Collateralized Mortgage Securities
Corporation, Series 1992-1,
Class C,
6.750% 06/20/2017............... $ 2,657,864
-----------
GOVERNMENT GUARANTEED BONDS -- 1.1%
3,636,000 Second Attransco Trailer
Corporation, Series A,
8.500% 06/15/2002............... 3,794,588
1,838,000 Third Attransco Trailer
Corporation,
8.200% 11/01/1997............... 1,906,208
------------
TOTAL GOVERNMENT GUARANTEED BONDS
(Cost $5,547,859)............... 5,700,796
-----------
MORTGAGE-BACKED SECURITIES -- 32.3%
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC) CERTIFICATES -- 2.1%
819,045 Gold 5 Year Balloon,
8.500% 01/01/1996............... 843,616
Multiclass:
2,000,000 Series 77, Class F,
8.500% 06/15/2017............... 2,036,240
2,855,465 Series 105, Class D,
6.000% 01/15/2019............... 2,823,341
2,139,424 Series 1188, Class E,
7.000% 12/15/2014............... 2,136,749
2,907,369 Series 1202, Class C,
6.000% 12/15/2001............... 2,897,368
------------
10,737,314
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 15.6%
5,000,000 6.200% 01/10/1997................. 4,996,100
1,700,000 8.150% 05/11/1998................. 1,789,522
15,000,000 7.900% 04/10/2002................. 15,246,150
8,000,000 7.550% 06/10/2004................. 7,974,960
5,874,595 8.000% 06/01/2008................. 6,039,495
15,603,456 8.500% 11/01/2009................. 16,183,593
6,305,076 9.000% 04/01/2016................. 6,602,801
REMIC:
429,233 Series 1989-81D,
9.000% 06/25/2016............... 434,731
11,000,000 Series 1992-171PD,
6.300% 04/25/2017............... 10,852,160
8,000,000 Series 1992-G31-G,
7.000% 09/25/2018............... 8,017,440
------------
78,136,952
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) CERTIFICATES -- 14.6%
6,086,598 8.500% 02/15/2005 - 08/15/2008 (27
Pools).......................... 6,400,466
10,306,078 8.000% 05/15/2022................. 10,560,432
10,000,000 7.500% 10/01/2024, TBA++.......... 10,062,500
45,000,000 8.000% 01/15/2025, TBA++.......... 46,110,600
------------
73,133,998
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $160,564,948)............. 162,008,264
-----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT AGENCY SECURITY -- 3.8%
(Cost $18,455,964)
$20,000,000 Federal Home Loan Bank,
4.550% 10/20/2000............... $ 19,017,000
-----------
U.S. TREASURY OBLIGATIONS -- 70.7%
U.S. TREASURY BILL -- 5.9%
30,000,000 5.760% + 09/21/1995............... 29,472,200
------------
U.S. TREASURY BOND -- 0.9%
3,500,000 10.375% 11/15/2012................ 4,606,315
------------
U.S. TREASURY NOTES -- 63.9%
30,000,000 9.250% 01/15/1996................. 30,595,200
63,000,000 7.750% 03/31/1996................. 63,915,390
60,000,000 7.625% 04/30/1996................. 60,890,400
41,000,000 7.375% 05/15/1996................. 41,551,040
10,000,000 8.000% 10/15/1996................. 10,275,000
5,000,000 6.875% 10/31/1996................. 5,067,200
25,000,000 7.250% 11/15/1996................. 25,476,500
25,000,000 6.750% 02/28/1997................. 25,367,250
15,000,000 7.500% 02/15/2005................. 16,260,900
40,000,000 6.500% 05/15/2005................. 40,612,400
------------
320,011,280
------------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $352,144,422)............. 354,089,795
-----------
TOTAL SECURITIES
(Cost $539,344,880)........................... 543,473,719
-----------
REPURCHASE AGREEMENT -- 2.2%
(Cost $10,755,000)
10,755,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995, to be repurchased at
$10,756,807 on 06/01/1995,
collateralized by $11,023,963
market value of U.S. Treasury
Bonds at 7.625% and 11.750%,
with maturities of 02/15/2025
and 02/15/2010, respectively.... 10,755,000
-----------
TOTAL
INVESTMENTS
(Cost $550,099,880*)............ 110.6% 554,228,719
OTHER ASSETS AND
LIABILITIES (NET)................ (10.6) (53,147,829)
---- ------------
NET ASSETS......................... 100.0% $501,080,890
---- ------------
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
+ Rate represents annualized yield at date of purchase.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATIONS:
<TABLE>
<S> <C>
BALLOON 5 and 7 year mortgages with larger dollar
amounts of payments falling due in the later
years of the obligation.
GOLD Payments are on accelerated 45 day payment cycle
instead of regular 75 day cycle.
REMIC Real Estate Mortgage Investment Conduit
TBA To Be Announced
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
NATIONS FUND TRUST
Nations Managed Bond Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
ASSET-BACKED SECURITIES -- 10.3%
$ 3,250,000 Banc One Auto Trust, Series
1995-A, Class A2,
6.650% 05/15/1997............... $ 3,262,187
2,902,047 Daimler-Benz Auto Grantor Trust,
Series 1994-A, Class A,
5.950% 12/15/2000............... 2,890,257
2,779,893 EQCC Home Equity Loan Trust,
Series 1994-2, Class A1,
6.350% 06/15/2014............... 2,762,519
1,988,719 Green Tree Financial Corporation,
Series 1994-4, Class A-1,
6.550% 07/15/2019+.............. 1,992,438
45,174 Morgan Stanley Mortgage, CMO,
8.000% 07/20/2017............... 45,329
4,500,000 Standard Credit Card Master Trust,
Series 1995-3, Class A,
7.850% 02/07/2002............... 4,748,895
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $15,446,254).............. 15,701,625
-----------
CORPORATE NOTES -- 9.2%
BANKING AND FINANCE -- 6.3%
2,000,000 Beneficial Corporation, MTN,
8.100% 11/23/1998............... 2,094,660
1,750,000 Capital One Bank,
8.125% 02/27/1998............... 1,797,897
Ford Motor Credit Corporation,
MTN:
2,000,000 5.750% 05/14/1998................. 1,963,240
2,000,000 7.450% 07/12/1999................. 2,058,380
1,750,000 General Motors Acceptance
Corporation, MTN,
5.000% 01/27/1997............... 1,713,197
------------
9,627,374
------------
TELECOMMUNICATIONS -- 1.9%
2,500,000 TKR Cable 1, Inc., Sr. Deb.,
10.500% 10/30/2007.............. 2,856,250
------------
TRANSPORTATION -- 1.0%
1,500,000 Quantas Airways Limited, Sr. Note,
6.625% 06/30/1998**............. 1,493,205
------------
TOTAL CORPORATE NOTES
(Cost $13,882,014).............. 13,976,829
-----------
FOREIGN BONDS AND NOTES -- 1.7%
1,500,000 Banponce Financial Corporation,
MTN,
7.650% 05/03/2000............... 1,549,200
1,000,000 Skandia Capital AB, Guaranteed
Eurobonds,
6.000% 02/11/1998............... 977,200
------------
TOTAL FOREIGN BONDS
AND NOTES
(Cost $2,457,895)............... 2,526,400
-----------
MORTGAGE-BACKED SECURITIES -- 16.4%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 6.1%
1,462,824 8.500% 11/01/2009................. 1,517,212
3,400,000 7.500% 01/01/2024, TBA++.......... 3,414,858
4,500,000 7.000% 06/15/2024, TBA++.......... 4,426,875
------------
9,358,945
------------
MORTGAGE-BACKED SECURITIES -- (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) CERTIFICATES -- 10.3%
$ 8,989,056 8.000% 06/15/2022 - 03/15/2025,
(3 Pools)....................... $ 9,210,906
808,682 9.000% 04/15/2020 - 11/15/2027,
(3 Pools)....................... 837,111
1,500,000 7.000% 12/21/2009, TBA++.......... 1,510,305
4,000,000 8.000% 06/01/2024, TBA++.......... 4,098,720
------------
15,657,042
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $24,656,858)............ 25,015,987
-----------
U.S. TREASURY OBLIGATIONS -- 69.8%
U.S. TREASURY BONDS -- 36.5%
12,050,000 10.750% 08/15/2005................ 15,938,053
11,000,000 12.750% 11/15/2010................ 16,168,240
18,000,000 8.875% 08/15/2017................. 22,263,660
1,000,000 8.750% 08/15/2020................. 1,232,340
------------
55,602,293
------------
U.S. TREASURY NOTES -- 33.3%
13,500,000 5.500% 04/30/1996................. 13,453,560
13,650,000 7.375% 05/15/1996................. 13,833,456
4,000,000 6.000% 11/30/1997................. 4,006,880
19,900,000 5.125% 04/30/1998................. 19,467,772
------------
50,761,668
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $101,083,728)............. 106,363,961
-----------
TOTAL SECURITIES
(Cost $157,526,749)........................... 163,584,802
-----------
REPURCHASE AGREEMENT -- 3.8%
(Cost $5,831,000)
5,831,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995, to be repurchased at
$5,831,980 on 06/01/1995,
collateralized by $5,976,823
market value of U.S. Treasury
Bonds at 7.625% and 11.750% with
maturities of 02/15/2025 and
02/15/2010, respectively........ 5,831,000
-----------
TOTAL INVESTMENTS
(Cost $163,357,749*)................. 111.2% 169,415,802
OTHER ASSETS AND
LIABILITIES (NET).................... (11.2) (17,070,844)
----- ------------
NET ASSETS............................. 100.0% $152,344,958
---- -----------
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATIONS:
<TABLE>
<S> <C>
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
TBA To Be Announced
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
NATIONS FUND TRUST
Nations Short-Term Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
ASSET-BACKED SECURITIES -- 19.2%
$ 3,177,021 EQCC Home Equity Loan Trust, Series
1994-2, Class A1,
6.350% 06/15/2014................ $ 3,157,164
4,451,875 First Bank Automobile Receivables
Grantor Trust, Series 1995-A,
Class A,
8.000% 01/15/2000................ 4,538,130
2,000,000 Ford Credit Auto Lease Trust,
Series 1995-1, Class A2,
6.350% 10/15/1998................ 2,001,240
3,000,000 Ford Credit Auto Loan Master Trust,
Series 1992-2, 7.375%
04/15/1999....................... 3,060,000
4,365,000 National Credit Card Trust
Certificates, Series 1989-4,
9.450% 12/31/1997................ 4,500,010
5,500,000 Olympic Automobile Receivables
Trust, Series 1995-B, Class A2,
7.350% 10/15/2001................ 5,603,125
3,000,000 Premier Auto Trust, Series 1994-3,
Class A3,
6.500% 11/02/1997................ 3,010,290
2,247,465 SCFC Recreation Vehicle Loan,
1991-1, 7.250% 09/15/2006........ 2,260,095
4,000,000 Sears Credit Account Master Trust
II, Series 1994-2, Class A,
7.250% 02/15/1998................ 4,090,000
4,000,000 Standard Credit Card Master Trust,
Series 1990-6, Class A,
9.375% 09/10/1998................ 4,242,480
-----------
TOTAL ASSET-BACKED SECURITIES
(Cost $36,024,299)............... 36,462,534
----------
CORPORATE NOTES -- 51.1%
BANK -- 4.6%
1,000,000 Capital One Bank,
8.125% 02/27/1998................ 1,027,370
3,000,000 Citicorp, 8.750% 11/01/1996........ 3,091,860
1,102 Home Savings & Loan Association of
California, MTN,
8.920% 03/01/2008+............... 1,097
4,500,000 Home Savings of America,
California, Sub. Note,
10.500% 06/12/1997............... 4,635,045
-----------
8,755,372
-----------
BEVERAGES -- 1.9%
4,000,000 Dr. Pepper/Seven-Up Companies, Sr.
Sub. Note, Zero Coupon through
11/01/1997 then
11.500% 11/01/2002............... 3,579,680
-----------
BROKERAGE -- 4.7%
4,000,000 Morgan Stanley Group Inc., MTN,
7.790% 02/03/1997................ 4,093,360
5,000,000 Paine Webber Group Inc., Sr. Note,
6.250% 06/15/1998................ 4,882,750
-----------
8,976,110
-----------
CAPTIVE FINANCE -- 17.0%
4,000,000 AT&T Capital Corporation, MTN,
7.720% 01/31/1997................ 4,092,600
4,000,000 Florida Progress Capital Holding,
MTN,
8.250% 09/05/1996**.............. 4,146,650
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
CORPORATE NOTES -- (CONTINUED)
CAPTIVE FINANCE -- (CONTINUED)
Ford Motor Credit Corporation, MTN:
$ 1,000,000 9.200% 05/07/1997.................. $ 1,052,230
4,250,000 6.050% 03/31/1998.................. 4,208,520
4,000,000 General Electric Capital
Corporation, MTN,
6.891% 04/07/1997................ 4,045,760
7,000,000 General Motors Acceptance
Corporation, MTN,
7.500% 03/16/1998................ 7,164,570
4,500,000 Potomac Capital Investment Company,
MTN,
6.190% 04/28/1997**.............. 4,428,873
3,000,000 Textron Financial Corporation, MTN,
7.380% 08/30/1998**.............. 3,065,250
-----------
32,204,453
-----------
ENERGY -- 4.6%
2,300,000 Occidental Petroleum Corporation,
Sr. Deb.,
11.750% 03/15/2011............... 2,492,096
6,000,000 Tennessee Gas Pipeline
Company, Deb.,
9.250% 05/15/1996................ 6,145,440
-----------
8,637,536
-----------
INDEPENDENT FINANCE -- 9.2%
5,000,000 ADVANTA Corporation, MTN,
7.400% 11/04/1996................ 5,056,700
3,000,000 CIT Group Holdings Inc., MTN,
7.625% 12/05/1996................ 3,058,860
2,750,000 Greyhound Financial Corporation,
8.250% 03/11/1997................ 2,830,465
4,000,000 Household Finance Corporation, Sr.
Note,
7.625% 12/15/1996................ 4,074,120
2,500,000 North American Mortgage Company,
MTN,
5.800% 11/02/1998................ 2,420,875
-----------
17,441,020
-----------
INDUSTRIAL -- 3.5%
3,500,000 Comdisco, Inc., MTN,
7.730% 02/18/1997................ 3,561,040
3,000,000 Whitman Corporation, MTN,
8.120% 01/27/1997................ 3,071,310
-----------
6,632,350
-----------
INSURANCE -- 2.6%
5,000,000 Unum Corporation, MTN,
6.160% 05/01/1996................ 4,996,600
-----------
RETAIL -- 2.9%
Sears, Roebuck & Company, MTN:
4,000,000 7.690% 02/27/1998.................. 4,204,250
1,130,000 9.230% 08/06/1998.................. 1,217,767
-----------
5,422,017
-----------
TELECOMMUNICATIONS -- 0.1%
250,000 Bell Atlantic Tricon Corporation,
8.000% 03/03/1997................ 257,260
-----------
TOTAL CORPORATE NOTES
(Cost $95,695,140)............... 96,902,398
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
NATIONS FUND TRUST
Nations Short-Term Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
FOREIGN BONDS AND NOTES -- 13.2%
Banponce Financial Corporation,
MTN:
$ 5,000,000 5.450% 01/07/1997.................. $ 4,924,500
2,000,000 8.320% 01/30/1997.................. 2,056,600
3,000,000 Boral Limited, Note,
7.340% 06/20/1997................ 3,031,500
5,680,000 Equitable-Lord Realty
Corporation, Euronote,
10.500% 12/30/1997............... 6,088,960
1,950,000 Fletcher Challenge, Deb.,
9.800% 06/15/1998................ 2,113,722
7,000,000 Skandia Capital AB, Guaranteed
Eurobonds,
6.000% 02/11/1998................ 6,840,400
-----------
TOTAL FOREIGN BONDS
AND NOTES
(Cost $24,870,840)............... 25,055,682
----------
U.S. GOVERNMENT AGENCY -- 1.1%
(Cost $2,038,291)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATE -- 1.1%
2,000,000 8.632% 01/01/1996.................. 2,025,880
----------
U.S. TREASURY NOTES -- 13.7%
5,500,000 8.500% 04/15/1997.................. 5,753,495
18,500,000 9.250% 08/15/1998.................. 20,234,375
-----------
TOTAL U.S. TREASURY NOTES (Cost
$25,561,403)..................... 25,987,870
----------
TOTAL SECURITIES
(Cost $184,189,973)............................ 186,434,364
----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
REPURCHASE AGREEMENT -- 0.1%
(Cost $238,000)
$ 238,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995, to be repurchased at
$238,040 on 06/01/1995,
collateralized by $243,952 market
value of U.S. Treasury Bonds at
7.625% and 11.750%, with
maturities of 02/15/2025 and
02/15/2010, respectively......... $ 238,000
----------
TOTAL INVESTMENTS
(Cost $184,427,973*)................. 98.4% 186,672,364
OTHER ASSETS AND
LIABILITIES (NET).................... 1.6 2,970,117
----- ------------
NET ASSETS............................. 100.0% $189,642,481
---- -----------
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
ABBREVIATION:
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
NATIONS FUND TRUST
Nations Adjustable Rate Government Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
ASSET-BACKED SECURITY -- 1.7%
(Cost $784,313)
$ 737,178 Drexel Burnham Lambert, Series S-2,
9.000% 08/01/2018................. $ 786,937
----------
MORTGAGE-BACKED SECURITIES -- 77.4%
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC) CERTIFICATES -- 11.1%
150,775 6.500% 09/01/2003................... 148,439
878,565 8.500% 04/01/2008................... 907,207
265,674 7.312% 06/01/2016+.................. 267,969
252,106 7.309% 07/01/2022+.................. 259,079
144,650 7.688% 12/01/2022+.................. 148,357
1,206,178 6.366% 04/01/2023+.................. 1,244,245
1,991,755 5.293% 11/01/2024+.................. 2,019,759
-----------
4,995,055
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 54.0%
315,580 9.000% 04/01/2016................... 330,482
952,330 7.214% 07/01/2017+.................. 976,586
3,423,464 7.445% 06/01/2018+.................. 3,547,565
2,947,909 6.907% 11/01/2018+.................. 3,025,292
2,858,279 7.503% 12/01/2020+.................. 2,969,923
1,769,666 7.189% 12/01/2021+.................. 1,814,191
582,823 7.288% 08/01/2022+.................. 590,472
805,126 6.630% 11/01/2022+.................. 804,989
312,710 7.605% 11/01/2022+.................. 319,746
2,010,450 8.009% 03/01/2023+.................. 2,090,868
3,901,692 5.250% 08/01/2024+.................. 4,043,129
4,000,000 REMIC, Certificate 1992-204FG,
6.090% 01/25/2022+................ 3,712,480
-----------
24,225,723
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA II) CERTIFICATES -- 12.3%
1,599,098 6.000% 04/20/2022+.................. 1,627,338
1,139,911 6.500% 02/20/2023+ (2 Pools)........ 1,154,524
2,691,668 6.000% 05/20/2023+.................. 2,736,242
-----------
5,518,104
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $34,882,925)................ 34,738,882
----------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT AGENCY
SECURITIES -- 3.3%
STUDENT LOAN MARKETING ASSOCIATION
(SLMA) CERTIFICATES -- 3.3%
$1,000,000 6.040% 08/02/1999+.................. $ 993,470
500,000 Series 10-J,
5.180% 06/01/1998+................ 480,135
-----------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES
(Cost $1,498,696)................. 1,473,605
----------
U.S. TREASURY NOTES -- 6.7%
1,000,000 5.125% 03/31/1996................... 993,910
74,000 7.250% 11/15/1996................... 75,410
2,000,000 4.750% 09/30/1998................... 1,925,320
-----------
TOTAL U.S. TREASURY NOTES
(Cost $3,082,265)................. 2,994,640
----------
TOTAL SECURITIES
(Cost $40,248,199)............................. 39,994,064
----------
REPURCHASE AGREEMENT -- 10.9%
(Cost $4,896,000)
4,896,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995, to be repurchased at
$4,896,823 on 06/01/1995,
collateralized by $5,018,440
market value of U.S. Treasury
Bonds at 7.625% and 11.750% with
maturities of 02/15/2025 and
02/15/2010, respectively.......... 4,896,000
----------
TOTAL 100.0%
INVESTMENTS
(Cost
$45,144,199*)... 44,890,064
OTHER ASSETS AND LIABILITIES
(NET)........................... (0.0) (6,250)
---- ----------
NET ASSETS........................ 100.0% $44,883,814
---- ----------
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
+ Variable rate security. The interest rate shown reflects the rate currently in
effect.
ABBREVIATION:
REMIC Real Estate Mortgage Investment Conduit
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
NATIONS FUND TRUST
Nations Diversified Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES -- 46.1%
BANKING AND FINANCE -- 8.1%
$ 2,000,000 General Motors Acceptance
Corporation, MTN,
7.500% 07/24/2000............... $ 2,057,040
1,499,370 G.P.A. Leasing USA, Series BN-5,
9.125% 12/02/1996**............. 1,404,055
2,000,000 Paine Webber Group, Inc., Sr.
Note, Shelf 9,
8.875% 03/15/2005............... 2,152,320
1,500,000 SunAmerica Inc., Sr. Note,
9.000% 01/15/1999............... 1,600,245
2,000,000 TIG Holdings, Inc., Note,
8.125% 04/15/2005............... 2,092,260
------------
9,305,920
------------
COMPUTER -- 1.4%
1,500,000 Unisys Corporation, Sr. Note,
10.625% 10/01/1999.............. 1,605,000
------------
ENERGY -- 6.5%
2,000,000 Clark Oil & Refining Corporation,
Sr. Note,
9.500% 09/15/2004............... 2,050,000
1,500,000 Coastal Corporation, Sr. Deb.,
11.750% 06/15/2006.............. 1,612,500
2,000,000 Cogentrix Energy, Inc., Sr. Note,
8.100% 03/15/2004............... 2,006,260
1,500,000 USX-Marathon Group, Deb.,
9.625% 08/15/2003............... 1,677,660
------------
7,346,420
------------
ENTERTAINMENT -- 1.4%
1,500,000 Time Warner Inc., Deb.,
9.150% 02/01/2023............... 1,535,085
------------
FOOD -- 2.2%
1,500,000 Borden, Inc., Sinking Fund Deb.,
9.250% 06/15/2019............... 1,502,205
1,000,000 Chiquita Brands International
Inc., Sub. Note,
11.500% 06/01/2001.............. 1,035,000
------------
2,537,205
------------
GAS -- 1.8%
2,000,000 Louis Dreyfus Natural Gas
Corporation, Sr. Sub. Note,
9.250% 06/15/2004............... 2,100,800
------------
INDUSTRIAL -- 14.0%
1,000,000 Auburn Hills Trust Certificates,
Deb.,
12.000% 05/01/2020+............. 1,452,420
2,000,000 B.A.T. Capital Corporation, MTN,
6.500% 11/24/2003............... 1,915,440
1,000,000 Bowater Inc., Deb.,
9.500% 10/15/2012............... 1,157,250
1,500,000 Domtar, Inc., Sr. Note,
12.000% 04/15/2001.............. 1,732,500
1,500,000 Inland Steel Company, First
Mortgage, Series T,
12.000% 12/01/1998.............. 1,635,000
2,000,000 Stone Container Corporation, Sr.
Note,
11.875% 12/01/1998.............. 2,155,000
1,500,000 United States Can Company,
Sr. Sub. Note,
13.500% 01/15/2002.............. 1,668,750
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
INDUSTRIAL -- (CONTINUED)
$ 2,000,000 Valassis Inserts Inc., Sr. Note,
9.375% 03/15/1999............... $ 2,092,840
2,000,000 Warren (SD) Company, Sr. Sub Note,
12.000% 12/15/2004**............ 2,190,000
------------
15,999,200
------------
LEISURE -- 0.7%
1,000,000 Bally Health & Tennis Corporation,
13.000% 01/15/2003.............. 840,000
------------
PUBLISHING -- 2.0%
2,000,000 News America Holdings Inc., Deb.,
10.125% 10/15/2012.............. 2,276,640
------------
RETAIL -- 0.9%
1,000,000 Hechinger Company, Sr. Deb.,
9.450% 11/15/2012............... 1,023,480
------------
TELECOMMUNICATIONS -- 3.3%
2,000,000 Jones Intercable, Inc., Sr. Note,
9.625% 03/15/2002............... 2,055,000
1,500,000 TKR Cable 1, Inc., Sr. Deb.,
10.500% 10/30/2007.............. 1,713,750
------------
3,768,750
------------
TRANSPORTATION -- 1.3%
1,500,000 Quantas Airways Limited, Sr. Note,
6.625% 06/30/1998**............. 1,493,205
------------
UTILITIES -- 2.5%
1,000,000 Commonwealth Edison Company, First
Mortgage,
8.625% 02/01/2022............... 1,032,290
750,000 GTE Corporation, Deb.,
7.830% 05/01/2023............... 741,840
1,000,000 Texas Utilities Electric Company,
First Mortgage & Collateral,
9.750% 05/01/2021............... 1,126,420
------------
2,900,550
------------
TOTAL CORPORATE BONDS
AND NOTES
(Cost $51,681,521).............. 52,732,255
-----------
FOREIGN BONDS AND NOTES -- 2.6%
1,000,000 Hydro-Quebec, Deb., Series H,
9.400% 02/01/2021............... 1,178,710
1,500,000 Nova Scotia Province (of Canada),
9.125% 05/01/2021............... 1,785,495
------------
TOTAL FOREIGN BONDS
AND NOTES
(Cost $2,861,440)............... 2,964,205
-----------
MORTGAGE-BACKED SECURITIES -- 12.4%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 3.9%
4,500,000 7.000% 06/15/2024, TBA++.......... 4,426,875
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) CERTIFICATES -- 8.5%
9,550,094 8.000% 06/15/2022 - 08/15/2024,
(3 Pools)....................... 9,785,792
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $13,808,986).............. 14,212,667
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
NATIONS FUND TRUST
Nations Diversified Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
U.S. TREASURY OBLIGATIONS -- 37.5%
U. S. TREASURY BONDS -- 19.1%
$ 6,500,000 12.750% 11/15/2010................ $ 9,553,960
10,000,000 8.750% 08/15/2020................. 12,323,400
------------
21,877,360
------------
U. S. TREASURY NOTES -- 18.4%
4,500,000 7.625% 04/30/1996................. 4,566,780
17,000,000 5.750% 08/15/2003................. 16,423,530
------------
20,990,310
------------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $39,485,924).............. 42,867,670
-----------
TOTAL SECURITIES
(Cost $107,837,871)........................... 112,776,797
-----------
REPURCHASE AGREEMENT -- 3.0%
(Cost $3,385,000)
3,385,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995, to be repurchased at
$3,385,569 on 06/01/1995,
collateralized by $3,469,663
market value of U.S. Treasury
Bonds at 7.625% and 11.750% with
maturities of 02/15/2025 and
02/15/2010, respectively........ 3,385,000
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
- ------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $111,222,871*)................. 101.6% $116,161,797
OTHER ASSETS AND
LIABILITIES (NET).................... (1.6) (1,805,538)
----- ------------
NET ASSETS............................. 100.0% $114,356,259
---- -----------
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATIONS:
MTN Medium Term Note
TBA To Be Announced
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
NATIONS FUND TRUST
Nations Strategic Fixed Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
ASSET-BACKED SECURITIES -- 7.4%
$11,500,000 Banc One Auto Trust,
Series 1995-A, Class A2,
6.650% 05/15/1997............... $ 11,543,125
8,061,242 Daimler-Benz, Auto Grantor Trust,
Series 1994-A, Class A,
5.950% 12/15/2000............... 8,028,493
7,942,552.. EQCC Home Equity Loan Trust,
Series 1994-2, Class A1,
6.350% 06/15/2014............... 7,892,911
5,568,415 Green Tree Financial Corporation,
Series 1994-4, Class A-1,
6.550% 07/15/2019+.............. 5,578,828
12,000,000 Standard Credit Card Master Trust,
Series 1995-3, Class A,
7.850% 02/07/2002............... 12,663,720
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $45,015,523).............. 45,707,077
-----------
CORPORATE NOTES -- 8.0%
BANKING AND FINANCE -- 6.2%
8,500,000 Ahmanson (HF) & Company, MTN,
6.530% 06/01/1998............... 8,497,344
5,500,000 Beneficial Corporation, MTN,
8.100% 11/23/1998............... 5,760,315
5,500,000 Capital One Bank,
8.125% 02/27/1998............... 5,650,535
Ford Motor Credit Corporation,
MTN:
5,500,000 5.750% 05/14/1998................. 5,398,910
6,725,000 7.450% 07/12/1999................. 6,921,303
6,000,000 General Motors Acceptance
Corporation, MTN,
5.000% 01/27/1997............... 5,873,820
------------
38,102,227
------------
TELECOMMUNICATIONS -- 1.0%
5,500,000 TKR Cable 1, Inc., Sr. Deb.,
10.500% 10/30/2007.............. 6,283,750
------------
TRANSPORTATION -- 0.8%
4,500,000 Quantas Airways Limited, Sr. Note,
6.625% 06/30/1998**............. 4,479,615
------------
TOTAL CORPORATE NOTES
(Cost $48,457,164).............. 48,865,592
-----------
FOREIGN BONDS AND NOTES -- 1.4%
5,000,000 Banponce Financial Corporation,
MTN,
7.650% 05/03/2000............... 5,164,000
3,500,000 Skandia Capital AB, Guaranteed
Eurobonds,
6.000% 02/11/1998............... 3,420,200
------------
TOTAL FOREIGN BONDS
AND NOTES
(Cost $8,352,985)............... 8,584,200
-----------
MORTGAGE-BACKED SECURITIES -- 17.1%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 5.0%
13,800,000 7.000% 06/15/2024, TBA++.......... 13,575,750
11,260,000 7.500% 02/01/2024, TBA++.......... 11,309,206
5,363,688 8.500% 11/01/2009, TBA++.......... 5,563,110
------------
30,448,066
------------
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
MORTGAGE-BACKED SECURITIES -- (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA)
CERTIFICATES -- 12.1%
$ 4,000,000 7.000% 12/21/2009................. $ 4,027,480
8,324,179 8.000% 06/15/2022................. 8,529,620
8,556,338 8.000% 07/15/2022................. 8,767,509
14,145,214 8.000% 03/15/2025................. 14,494,317
25,000,000 7.000% 03/01/2024, TBA++.......... 24,601,500
13,100,000 8.000% 06/01/2024, TBA++.......... 13,423,308
------------
73,843,734
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $103,015,507)............. 104,291,800
-----------
U.S. TREASURY OBLIGATIONS -- 71.7%
U.S. TREASURY BONDS -- 35.8%
43,500,000 10.750% 08/15/2005................ 57,535,710
41,250,000 12.750% 11/15/2010................ 60,630,900
40,000,000 8.875% 08/15/2017................. 49,474,800
41,505,000 8.750% 08/15/2020................. 51,148,271
------------
218,789,681
------------
U.S. TREASURY NOTES -- 35.9%
68,000,000 7.625% 04/30/1996................. 69,009,120
54,225,000 7.375% 05/15/1996................. 54,953,784
11,750,000 6.000% 11/30/1997................. 11,770,210
85,975,000 5.125% 04/30/1998................. 84,107,623
------------
219,840,737
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $414,149,266)............. 438,630,418
-----------
TOTAL SECURITIES
(Cost $618,990,445)........................... 646,079,087
-----------
REPURCHASE AGREEMENT -- 8.3%
(Cost $50,848,000)
50,848,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995, to be repurchased at
$50,856,545 on 06/01/1995,
collateralized by $52,119,616
market value of U.S. Treasury
Bonds at 7.625% and 11.750%,
with maturities of 02/15/2025
and 02/15/2010, respectively.... 50,848,000
-----------
TOTAL INVESTMENTS
(Cost $669,838,445*)................ 113.9% 696,927,087
OTHER ASSETS AND
LIABILITIES (NET)................... (13.9) (84,995,461)
----- -------------
NET ASSETS............................ 100.0% $ 611,931,626
---- ------------
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATIONS:
MTN Medium Term Note
TBA To Be Announced
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
NATIONS FUND TRUST
Nations Mortgage-Backed Securities Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
MORTGAGE-BACKED SECURITIES -- 90.6%
COLLATERALIZED MORTGAGE OBLIGATIONS
(CMO) -- 2.6%
$ 667,438 First Boston Mortgage Securities,
CMO, Series 1989-5, Class A-1,
7.500% 12/25/2019................ $ 677,761
778,853 Resolution Trust Corporation,
Series 91-3, Class A-2,
10.399% 08/25/2021+.............. 814,145
-----------
1,491,906
-----------
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC) CERTIFICATES - 18.9%
366,601 7.500% 08/01/2008 - 06/01/2009,
(2 Pools)........................ 366,848
4,516,619 8.000% 08/01/2007 - 05/01/2017,
(7 Pools)........................ 4,615,780
4,819,587 8.500% 02/01/2008 - 05/01/2017,
(3 Pools)........................ 4,970,942
1,077,418 9.500% 04/01/2018 - 06/01/2021,
(4 Pools)........................ 1,130,438
-----------
11,084,008
-----------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 32.9%
8,464,484 7.500% 08/01/2022 - 06/01/2023,
(13 Pools)....................... 8,501,474
817,212 8.000% 05/01/2009 - 07/01/2017,
(3 Pools)........................ 839,887
279,159 8.250% 04/01/2009, (2 Pools)..... 286,994
3,878,749 8.500% 11/01/2009 - 02/01/2017,
(3 Pools)........................ 4,026,472
3,925,791 9.000% 10/01/2019................ 4,102,452
1,500,000 7.500% 02/01/2024, TBA++......... 1,506,555
-----------
19,263,834
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) CERTIFICATES -- 36.2%
1,706,881 7.000% 06/15/2023, (3 Pools)..... 1,679,674
926,474 8.000% 09/15/2006 - 12/15/2007,
(5 Pools)........................ 960,957
1,221,711 8.500% 07/15/2016 - 07/15/2021,
(10 Pools)....................... 1,277,206
6,843,338 9.000% 11/15/2008 - 07/15/2017,
(17 Pools)....................... 7,240,561
804,991 9.500% 06/15/2009 - 07/15/2018,
(5 Pools)........................ 853,709
1,304,689 10.000% 11/15/2009 - 08/15/2020,
(13 Pools)....................... 1,415,481
297,233 11.750% 09/15/2000 - 12/15/2000,
(2 Pools)........................ 318,783
52,311 12.750% 12/15/1997............... 56,136
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
MORTGAGE-BACKED SECURITIES -- (CONTINUED)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA)
CERTIFICATES -- (CONTINUED)
$ 2,500,000 6.500% 05/15/2025, TBA++......... $ 2,399,200
5,000,000 7.000% 12/21/2009, TBA++......... 5,034,350
-----------
21,236,057
-----------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $52,967,889)............... 53,075,805
----------
U.S. TREASURY OBLIGATIONS -- 20.7%
U.S. TREASURY BOND -- 0.2%
100,000 8.500% 02/15/2020................ 120,109
-----------
U.S. TREASURY NOTES -- 20.5%
4,000,000 7.625% 04/30/1996................ 4,059,360
5,000,000 7.500% 02/15/2005................ 5,420,300
2,500,000 6.500% 05/15/2005................ 2,538,275
-----------
12,017,935
-----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $11,813,895)............... 12,138,044
----------
TOTAL SECURITIES
(Cost $64,781,784)............................. 65,213,849
----------
REPURCHASE AGREEMENT -- 3.5%
(Cost $2,025,000)
2,025,000 Agreement with CS First Boston
Corporation, 6.050% dated
05/31/1995, to be repurchased at
$2,025,340 on 06/01/1995,
collateralized by $2,075,642
market value of U.S. Treasury
Bonds at 7.625% and 11.750% with
maturities of 02/15/2025 and
02/15/2010, respectively......... 2,025,000
----------
TOTAL INVESTMENTS
(Cost $66,806,784*)................... 114.8% 67,238,849
OTHER ASSETS AND
LIABILITIES (NET)..................... (14.8) (8,650,508)
----- -----------
NET ASSETS.............................. 100.0% $58,588,341
---- ----------
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
+ Variable rate security. The interest rate shown reflects the rate currently
in effect.
++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATION:
TBA To Be Announced
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
SHORT- NATIONS NATIONS ADJUSTABLE NATIONS STRATEGIC MORTGAGE-
INTERMEDIATE MANAGED SHORT-TERM RATE DIVERSIFIED FIXED BACKED
GOVERNMENT BOND INCOME GOVERNMENT INCOME INCOME SECURITIES
FUND FUND FUND FUND FUND FUND FUND
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value.
See accompanying
schedules:
Securities............... $543,473,719 $163,584,802 $186,434,364 $39,994,064 $112,776,797 $646,079,087 $65,213,849
Repurchase Agreements.... 10,755,000 5,831,000 238,000 4,896,000 3,385,000 50,848,000 2,025,000
------------ ------------ ------------ ----------- ------------ ------------ -----------
Total Investments...... 554,228,719 169,415,802 186,672,364 44,890,064 116,161,797 696,927,087 67,238,849
Cash....................... 638 519 340 976 110 680 125
Interest receivable........ 4,880,271 1,625,182 3,645,195 235,190 2,154,127 6,174,200 516,622
Receivable for investment
securities sold.......... -- 7,834,750 -- -- 1,749,000 407,000 2,028,750
Receivable for Fund shares
sold..................... 1,114,804 146,452 742,299 52,232 745,384 2,659,460 98,647
Unamortized organization
costs (Note 6)........... 8,161 -- 9,409 9,409 9,747 9,747 --
Dollar roll fee income
receivable
(Notes 1 and 4).......... 911 -- -- -- -- -- --
Prepaid expenses and other
assets................... -- -- 37,866 1,913 29,056 -- --
------------ ------------ ------------ ----------- ------------ ------------ -----------
Total Assets........... 560,233,504 179,022,705 191,107,473 45,189,784 120,849,221 706,178,174 69,882,993
------------ ------------ ------------ ----------- ------------ ------------ -----------
LIABILITIES:
Payable for Fund shares
redeemed................. 901,672 492,586 420,326 99,733 82,325 1,392,995 --
Payable for investment
securities purchased
(Notes 1 and 4).......... 55,857,812 25,285,301 -- -- 5,956,094 89,583,862 10,864,531
Investment advisory fee
payable (Note 2)......... 169,935 64,747 5,639 7,893 19,430 229,901 25,067
Administration fee payable
(Note 2)................. 42,484 12,949 -- 3,946 9,392 51,199 5,013
Shareholder servicing and
distribution fee payable
(Note 3)................. 22,459 762 13,219 3,362 45,874 1,380 --
Transfer agent fee payable
(Note 2)................. 12,328 18,388 2,635 2,935 6,848 9,408 550
Custodian fees payable
(Note 2)................. 6,028 2,562 15,996 1,075 1,795 6,972 1,341
Dividends payable.......... 2,091,654 742,180 990,608 182,280 363,755 2,931,753 341,014
Accrued Trustees' fees and
expenses (Note 2)........ 1,925 587 725 179 425 2,319 227
Accrued expenses and other
payables................. 46,317 57,685 15,844 4,567 7,024 36,759 56,909
------------ ------------ ------------ ----------- ------------ ------------ -----------
Total Liabilities...... 59,152,614 26,677,747 1,464,992 305,970 6,492,962 94,246,548 11,294,652
------------ ------------ ------------ ----------- ------------ ------------ -----------
NET ASSETS................. $501,080,890 $152,344,958 $189,642,481 $44,883,814 $114,356,259 $611,931,626 $58,588,341
----------- ----------- ----------- ----------- ----------- ----------- ----------
Investments, at cost (Note
1)....................... $550,099,880 $163,357,749 $184,427,973 $45,144,199 $111,222,871 $669,838,445 $66,806,784
----------- ----------- ----------- ----------- ----------- ----------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
SHORT- NATIONS NATIONS ADJUSTABLE NATIONS STRATEGIC MORTGAGE-
INTERMEDIATE MANAGED SHORT-TERM RATE DIVERSIFIED FIXED BACKED
GOVERNMENT BOND INCOME GOVERNMENT INCOME INCOME SECURITIES
FUND FUND FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net investment
income/ (distributions in
excess of net investment
income)................... $ (2,239,557) $ 1,402,225 $ (920,474) $ (193,709) $ (138,327) $ (1,351,845) $ (358,275)
Accumulated net realized
loss on investments sold
and futures contracts..... (19,382,542) (5,647,265) (8,637,703) (2,554,147) (2,686,102) (24,783,186) (3,412,490)
Net unrealized
appreciation/depreciation
of investments and futures
contracts................. 4,128,839 6,058,053 2,244,391 (254,135) 4,938,926 27,088,642 432,065
Paid-in capital............. 518,574,150 150,531,945 196,956,267 47,885,805 112,241,762 610,978,015 61,927,041
------------ ------------ ------------ ----------- ------------ ------------ -----------
$501,080,890 $152,344,958 $189,642,481 $44,883,814 $114,356,259 $611,931,626 $58,588,341
----------- ----------- ----------- ---------- ----------- ----------- ----------
NET ASSETS:
Trust A Shares.............. $411,934,270 $148,014,620 $169,616,124 $32,030,902 $ 24,598,032 $608,173,377 $58,588,341
----------- ----------- ----------- ---------- ----------- ----------- ----------
Investor A Shares........... $ 64,633,639 $ 4,253,120 $ 2,509,921 $ 6,136,745 $ 12,632,754 $ 1,472,355 $ N/A
----------- ----------- ----------- ---------- ----------- ----------- ----------
Investor C Shares (formerly
Investor B Shares)........ $ 13,742,362 $ 77,218 $ 6,963,753 $ 1,922,301 $ 3,153,376 $ 39,017 $ N/A
----------- ----------- ----------- ---------- ----------- ----------- ----------
Investor N Shares (formerly
Investor C Shares)........ $ 10,770,619 $ N/A $ 10,552,683 $ 4,793,866 $ 73,972,097 $ 2,246,877 $ N/A
----------- ----------- ----------- ---------- ----------- ----------- ----------
SHARES OUTSTANDING:
Trust A Shares.............. 100,695,757 14,217,000 17,369,908 3,314,346 2,334,938 60,705,253 6,136,218
----------- ----------- ----------- ---------- ----------- ----------- ----------
Investor A Shares........... 15,801,118 408,525 257,033 635,022 1,199,157 146,964 N/A
----------- ----------- ----------- ---------- ----------- ----------- ----------
Investor C Shares........... 3,359,427 7,417 713,139 198,904 299,334 3,894 N/A
----------- ----------- ----------- ---------- ----------- ----------- ----------
Investor N Shares........... 2,632,900 N/A 1,080,680 496,040 7,021,798 224,274 N/A
----------- ----------- ----------- ---------- ----------- ----------- ----------
TRUST A SHARES:
Net asset value, offering
price and redemption price
per share................. $4.09 $10.41 $9.76 $9.66 $10.53 $10.02 $9.55
---- ----- ---- ---- ----- ----- ----
INVESTOR A SHARES:
Net asset value and
redemption price per
share..................... $4.09 $10.41 $9.76 $9.66 $10.53 $10.02 N/A
---- ----- ---- ---- ----- ----- ----
Maximum sales charge........ 3.25% 3.25% 1.50% 3.25% 4.75% 3.25%
Maximum offering price per
share..................... $4.23 $10.76 $9.91 $9.98 $11.06 $10.36 N/A
---- ----- ---- ---- ----- ----- ----
INVESTOR C SHARES:
Net asset value and offering
price per share*.......... $4.09 $10.41 $9.76 $9.66 $10.53 $10.02 N/A
---- ----- ---- ---- ----- ----- ----
INVESTOR N SHARES:
Net asset value and offering
price per share*.......... $4.09 N/A $9.76 $9.66 $10.53 $10.02 N/A
---- ----- ---- ---- ----- ----- ----
</TABLE>
- ---------------
* Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge ("CDSC") for all Funds except Nations
Short-Term Income Fund for which there is no CDSC.
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
SHORT- NATIONS NATIONS ADJUSTABLE NATIONS STRATEGIC MORTGAGE-
INTERMEDIATE MANAGED SHORT-TERM RATE DIVERSIFIED FIXED BACKED
GOVERNMENT BOND INCOME GOVERNMENT INCOME INCOME SECURITIES
FUND FUND FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 4)................ $ 16,582,340 $ 5,559,084 $ 6,451,167 $1,572,932 $ 4,124,963 $19,419,750 $2,281,542
Dividends........................ 15,194 -- -- -- -- -- --
Dollar roll fee income (Note
4)............................. 239,291 -- -- -- 7,955 -- 22,292
------------ ----------- ----------- ---------- ----------- ----------- ----------
Total investment income...... 16,836,825 5,559,084 6,451,167 1,572,932 4,132,918 19,419,750 2,303,834
------------ ----------- ----------- ---------- ----------- ----------- ----------
EXPENSES:
Investment advisory fee (Note
2)............................. 1,519,210 480,183 564,623 150,216 298,542 1,700,596 182,425
Administration fee (Note 2)...... 253,201 80,030 94,104 25,036 49,757 283,433 30,404
Transfer agent fees (Note 2)..... 120,644 36,212 53,101 15,131 47,400 107,353 3,300
Custodian fees (Note 2).......... 36,446 16,315 16,658 7,049 10,174 42,339 8,548
Trustees' fees and expenses (Note
2)............................. 3,971 1,264 1,516 376 890 4,980 451
Amortization of organization
costs (Note 6)................. 3,498 -- 2,016 2,016 2,016 2,016 --
Interest expense (Note 7)........ -- -- 121 -- -- 198 --
Other............................ 53,202 20,881 74,878 36,777 53,253 93,649 22,090
------------ ----------- ----------- ---------- ----------- ----------- ----------
Subtotal..................... 1,990,172 634,885 807,017 236,601 462,032 2,234,564 247,218
Shareholder servicing and
distribution fee (Note 3):
Investor A Shares............ 70,593 4,802 2,510 6,983 14,153 1,132 --
Investor C Shares............ 37,227 236 12,180 3,790 10,522 93 --
Investor N Shares............ 31,501 -- 21,626 12,343 233,920 6,920 --
Fees waived by investment adviser
and administrators (Note 2).... (513,900) (82,450) (327,447) (100,916) (78,630) (317,417) (30,478)
------------ ----------- ----------- ---------- ----------- ----------- ----------
Total expenses............... 1,615,593 557,473 515,886 158,801 641,997 1,925,292 216,740
------------ ----------- ----------- ---------- ----------- ----------- ----------
NET INVESTMENT INCOME............ 15,221,232 5,001,611 5,935,281 1,414,131 3,490,921 17,494,458 2,087,094
------------ ----------- ----------- ---------- ----------- ----------- ----------
NET REALIZED AND UNREALIZED
GAIN/(LOSS) ON INVESTMENTS
(NOTES 1 AND 4):
Realized gain/(loss) on:
Securities................... 6,950,934 (58,887) (1,346,388) (395,827) (49,055) (2,207,388) 1,192,107
Futures contracts............ -- -- -- -- (65,288) (217,615) --
Change in unrealized
appreciation/depreciation of:
Securities................... 13,515,803 12,020,569 6,904,471 1,665,135 9,019,062 44,076,996 2,581,380
Futures contracts............ -- -- -- -- (59,250) -- --
------------ ----------- ----------- ---------- ----------- ----------- ----------
Net realized and unrealized gain
on investments................. 20,466,737 11,961,682 5,558,083 1,269,308 8,845,469 41,651,993 3,773,487
------------ ----------- ----------- ---------- ----------- ----------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS...... $ 35,687,969 $16,963,293 $11,493,364 $2,683,439 $12,336,390 $59,146,451 $5,860,581
---------- ---------- ---------- --------- ---------- ---------- ---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
SHORT- NATIONS NATIONS ADJUSTABLE NATIONS STRATEGIC MORTGAGE-
INTERMEDIATE MANAGED SHORT-TERM RATE DIVERSIFIED FIXED BACKED
GOVERNMENT BOND INCOME GOVERNMENT INCOME INCOME SECURITIES
FUND FUND FUND FUND FUND FUND FUND
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income.... $ 15,221,232 $ 5,001,611 $ 5,935,281 $ 1,414,131 $ 3,490,921 $ 17,494,458 $ 2,087,094
Net realized gain/(loss)
on investments sold and
futures contracts
during the period...... 6,950,934 (58,887) (1,346,388) (395,827) (114,343) (2,425,003) 1,192,107
Change in unrealized
appreciation/
depreciation of
investments during the
period................. 13,515,803 12,020,569 6,904,471 1,665,135 8,959,812 44,076,996 2,581,380
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase in net
assets resulting
from operations........ 35,687,969 16,963,293 11,493,364 2,683,439 12,336,390 59,146,451 5,860,581
Distributions to
shareholders from net
investment income:
Trust A Shares....... (12,464,205) (4,854,332) (5,285,830) (1,033,162) (872,543) (17,400,440) (2,087,094)
Investor A Shares.... (2,051,505) (144,541) (76,970) (193,026) (414,377) (33,763) --
Investor C Shares.... (417,047) (2,738) (207,421) (58,453) (95,634) (1,059) --
Investor N Shares.... (288,475) -- (365,060) (129,490) (2,108,367) (59,196) --
Net increase/(decrease)
in net assets from Fund
share transactions
(Note 5):
Trust A.............. (38,000,866) (28,597,754) (12,039,846) (6,409,477) 297,184 16,072,985 (7,131,388)
Investor A........... (15,280,886) (1,620,412) (56,316) (3,445,826) 818,765 416,312 --
Investor C........... (3,577,460) (49,320) (1,335,502) (655,392) 268,390 (5,074) --
Investor N........... (632,793) -- (6,337,826) (456,805) 13,315,523 (53,797) --
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase/(decrease)
in net assets.......... (37,025,268) (18,305,804) (14,211,407) (9,698,192) 23,545,331 58,082,419 (3,357,901)
NET ASSETS:
Beginning of period...... 538,106,158 170,650,762 203,853,888 54,582,006 90,810,928 553,849,207 61,946,242
------------ ------------ ------------ ------------ ------------ ------------ ------------
End of period............ $501,080,890 $152,344,958 $189,642,481 $ 44,883,814 $114,356,259 $611,931,626 $ 58,588,341
----------- ----------- ----------- ----------- ----------- ----------- -----------
Undistributed net
investment income/
(distributions in
excess of net
investment income)..... $ (2,239,557) $ 1,402,225 $ (920,474) $ (193,709) $ (138,327) $ (1,351,845) $ (358,275)
----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<CAPTION>
NATIONS NATIONS NATIONS NATIONS
SHORT- NATIONS NATIONS ADJUSTABLE NATIONS STRATEGIC MORTGAGE-
INTERMEDIATE MANAGED SHORT-TERM RATE DIVERSIFIED FIXED BACKED
GOVERNMENT BOND INCOME GOVERNMENT INCOME INCOME SECURITIES
FUND FUND FUND FUND FUND FUND FUND
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income...... $ 36,410,192 $ 10,824,750 $ 12,574,660 $ 3,576,290 $ 5,724,450 $ 30,140,360 $ 4,872,857
Net realized loss on
investments sold and
futures contracts during
the year................. (28,549,654) (5,692,171) (7,691,096) (2,438,655) (2,707,354) (21,688,157) (5,031,029)
Change in unrealized
appreciation/depreciation
of investments during the
year..................... (24,476,389) (12,966,429) (5,441,726) (1,410,042) (5,881,446) (29,605,380) (2,364,621)
------------ ------------ ------------ ----------- ------------ ------------ -----------
Net decrease in net assets
resulting
from operations.......... (16,615,851) (7,833,850) (558,162) (272,407) (2,864,350) (21,153,177) (2,522,793)
Distributions to
shareholders from
net investment income:
Trust A Shares......... (27,184,146) (10,551,102) (9,632,385) (2,158,005) (1,931,956) (29,201,850) (4,260,311)
Investor A Shares...... (6,359,840) (345,269) (260,874) (744,045) (843,251) (57,573) --
Investor C Shares...... (1,158,627) (9,531) (597,428) (138,975) (208,437) (2,272) --
Investor N Shares...... (567,087) -- (1,271,197) (181,086) (2,740,806) (90,250) --
Distributions to
shareholders in excess of
net investment income:
Trust A Shares......... (608,559) -- (417,856) -- (1,077) (989,071) --
Investor A Shares...... (142,373) -- (12,497) -- (496) (2,013) --
Investor C Shares...... (25,939) -- (28,534) -- (135) (182) --
Investor N Shares...... (12,695) -- (61,806) -- (1,024) (3,397) --
Distributions to
shareholders from net
realized gains on
investments:
Trust A Shares......... (2,862,616) (3,140,770) -- (91,521) (389,055) (17,655,811) --
Investor A Shares...... (691,160) (113,147) -- (32,841) (179,394) (37,550) --
Investor C Shares...... (136,409) (3,388) -- (6,624) (48,931) (2,083) --
Investor N Shares...... (66,609) -- -- (8,604) (369,942) (54,901) --
Distributions from capital
(Note 1):
Trust A Shares......... -- -- (336,576) (140,298) -- -- (663,165)
Investor A Shares...... -- -- (12,733) (50,986) -- -- --
Investor C Shares...... -- -- (24,695) (10,129) -- -- --
Investor N Shares...... -- -- (54,839) (13,176) -- -- --
Net increase/(decrease) in
net assets from Fund
share transactions (Note
5):
Trust A................ 32,833,999 (21,384,855) (14,463,998) (18,984,287) (3,157,987) 74,025,010 (3,203,096)
Investor A............. (85,905,643) (1,189,546) (8,389,118) (16,607,124) (1,029,274) (26,909) --
Investor C............. (12,682,260) (79,717) (11,014,290) (1,434,706) (597,232) (15,871) --
Investor N............. 3,129,388 -- (21,665,080) 2,438,342 35,066,952 755,895 --
------------ ------------ ------------ ----------- ------------ ------------ -----------
Net increase/(decrease) in
net assets............... (119,056,427) (44,651,175) (68,802,068) (38,436,472) 20,703,605 5,487,995 (10,649,365)
NET ASSETS:
Beginning of year.......... 657,162,585 215,301,937 272,655,956 93,018,478 70,107,323 548,361,212 72,595,607
------------ ------------ ------------ ----------- ------------ ------------ -----------
End of year................ $538,106,158 $170,650,762 $203,853,888 $54,582,006 $ 90,810,928 $553,849,207 $61,946,242
----------- ----------- ----------- ---------- ----------- ----------- ----------
Undistributed net
investment income/
(distributions in excess
of net
investment income)....... $ (2,239,557) $ 1,402,225 $ (920,474) $ (193,709) $ (138,327) $ (1,351,845) $ (358,275)
----------- ----------- ----------- ---------- ----------- ----------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
(This Page Intentionally Left Blank)
23
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
--------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994
---------------------------- -----------------------------
SHARES DOLLARS SHARES DOLLARS
-------------------------------------------------------
<S> <C> <C> <C> <C>
TRUST A SHARES:
Sold............................................................ 12,418,375 $ 49,531,390 63,710,168 $ 266,160,158
Issued as reinvestment of dividends............................. 140,966 563,865 1,726,591 7,134,660
Redeemed........................................................ (22,184,808) (88,096,121) (58,620,856) (240,460,819)
----------- ------------ ----------- -------------
Net increase/(decrease)......................................... (9,625,467) $(38,000,866) 6,815,903 $ 32,833,999
---------- ----------- ---------- ------------
INVESTOR A SHARES:
Sold............................................................ 1,402,080 $ 5,553,810 2,977,983 $ 12,430,201
Issued as reinvestment of dividends............................. 357,198 1,427,932 1,356,282 5,604,186
Redeemed........................................................ (5,597,111) (22,262,628) (25,182,476) (103,940,030)
----------- ------------ ----------- -------------
Net decrease.................................................... (3,837,833) $(15,280,886) (20,848,211) $ (85,905,643)
---------- ----------- ---------- ------------
INVESTOR C SHARES:
Sold............................................................ 37,321 $ 146,511 201,361 $ 843,418
Issued as reinvestment of dividends............................. 74,438 297,610 252,433 1,039,833
Redeemed........................................................ (1,010,988) (4,021,581) (3,533,774) (14,565,511)
----------- ------------ ----------- -------------
Net decrease.................................................... (899,229) $ (3,577,460) (3,079,980) $ (12,682,260)
---------- ----------- ---------- ------------
INVESTOR N SHARES:
Sold............................................................ 244,413 $ 977,122 1,500,229 $ 6,262,021
Issued as reinvestment of dividends............................. 44,122 176,648 106,509 436,013
Redeemed........................................................ (449,780) (1,786,563) (877,675) (3,568,646)
----------- ------------ ----------- -------------
Net increase/(decrease)......................................... (161,245) $ (632,793) 729,063 $ 3,129,388
---------- ----------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
NATIONS ADJUSTABLE RATE GOVERNMENT FUND
--------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994
---------------------------- -----------------------------
SHARES DOLLARS SHARES DOLLARS
-------------------------------------------------------
<S> <C> <C> <C> <C>
TRUST A SHARES:
Sold............................................................ 313,018 $ 2,951,049 2,326,217 $ 22,954,107
Issued in exchange for Class A Shares of the Capitol Mutual
Funds Fixed Income Portfolio (Note 9)......................... -- -- -- --
Issued as reinvestment of dividends............................. 1,352 12,810 39,778 388,602
Redeemed........................................................ (983,948) (9,373,336) (4,319,675) (42,326,996)
----------- ----------- ----------- ------------
Net increase/(decrease)......................................... (669,578) $(6,409,477) (1,953,680) $(18,984,287)
---------- ---------- ---------- -----------
INVESTOR A SHARES:
Sold............................................................ 130,193 $ 1,246,399 1,476,472 $ 14,594,656
Issued in exchange for Class A Shares of the Capitol Mutual
Funds Fixed Income Portfolio (Note 9)......................... -- -- -- --
Issued as reinvestment of dividends............................. 13,688 130,185 66,372 646,618
Redeemed........................................................ (508,882) (4,822,410) (3,246,749) (31,848,398)
----------- ----------- ----------- ------------
Net increase/(decrease)......................................... (365,001) $(3,445,826) (1,703,905) $(16,607,124)
---------- ---------- ---------- -----------
INVESTOR C SHARES:
Sold............................................................ 11,529 $ 109,995 1,814 $ 17,261
Issued as reinvestment of dividends............................. 4,224 40,229 12,689 123,394
Redeemed........................................................ (84,715) (805,616) (162,436) (1,575,361)
----------- ----------- ----------- ------------
Net increase/(decrease)......................................... (68,962) $ (655,392) (147,933) $ (1,434,706)
---------- ---------- ---------- -----------
INVESTOR N SHARES:
Sold............................................................ 37,195 $ 353,482 310,597 $ 3,033,329
Issued as reinvestment of dividends............................. 7,250 69,020 13,888 134,366
Redeemed........................................................ (92,452) (879,307) (75,588) (729,353)
----------- ----------- ----------- ------------
Net increase/(decrease)......................................... (48,007) $ (456,805) 248,897 $ 2,438,342
---------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
NATIONS MORTGAGE-BACKED SECURITIES FUND
-------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994
---------------------------- ----------------------------
SHARES DOLLARS SHARES DOLLARS
------------------------------------------------------
<S> <C> <C> <C> <C>
TRUST A SHARES:
Sold............................................................. 586,837 $ 5,385,173 2,680,779 $ 26,217,285
Issued as reinvestment of dividends.............................. -- -- 11,435 108,433
Redeemed......................................................... (1,353,904) (12,516,561) (3,085,142) (29,528,814)
---------- ------------ ---------- ------------
Net decrease..................................................... (767,067) $ (7,131,388) (392,928) $ (3,203,096)
--------- ----------- --------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
NATIONS MANAGED BOND FUND NATIONS SHORT-TERM INCOME FUND
------------------------------------------------------------- -----------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994 MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994
--------------------------- ----------------------------- --------------------------- ---------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
2,201,414 $ 21,616,203 3,747,250 $ 38,604,168 2,893,598 $ 27,776,433 7,757,098 $ 75,869,101
19,726 196,891 197,589 2,030,462 5,956 57,160 46,721 456,621
(5,101,287) (50,410,848) (6,130,848) (62,019,485) (4,177,206) (39,873,439) (9,318,440) (90,789,720)
---------- ------------ ------------ ------------ ---------- ------------ ---------- ------------
(2,880,147) $(28,597,754) (2,186,009) $(21,384,855) (1,277,652) $(12,039,846) (1,514,621) $(14,463,998)
--------- ----------- ----------- ----------- --------- ----------- --------- -----------
47,350 $ 459,191 203,173 $ 2,035,869 34,054 $ 323,296 194,250 $ 1,910,089
10,707 106,762 35,077 359,685 6,972 66,878 25,830 253,013
(222,033) (2,186,365) (355,374) (3,585,100) (46,771) (446,490) (1,077,216) (10,552,220)
---------- ------------ ------------ ------------ ---------- ------------ ---------- ------------
(163,976) $ (1,620,412) (117,124) $ (1,189,546) (5,745) $ (56,316) (857,136) $ (8,389,118)
--------- ----------- ----------- ----------- --------- ----------- --------- -----------
-- $ -- -- $ -- 60,607 $ 588,096 581,753 $ 5,697,406
60 590 606 6,217 16,655 159,764 55,070 536,756
(5,061) (49,910) (8,741) (85,934) (219,034) (2,083,362) (1,765,994) (17,248,452)
---------- ------------ ------------ ------------ ---------- ------------ ---------- ------------
(5,001) $ (49,320) (8,135) $ (79,717) (141,772) $ (1,335,502) (1,129,171) $(11,014,290)
--------- ----------- ----------- ----------- --------- ----------- --------- -----------
156,731 $ 1,500,162 2,699,703 $ 26,797,836
32,989 316,216 124,814 1,218,040
(855,468) (8,154,204) (5,061,930) (49,680,956)
---------- ------------ ---------- ------------
(665,748) $ (6,337,826) (2,237,413) $(21,665,080)
--------- ----------- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
NATIONS DIVERSIFIED INCOME FUND NATIONS STRATEGIC FIXED INCOME FUND
----------------------------------------------------------- ------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994 MAY 31, 1995 (UNAUDITED) NOVEMBER 30, 1994
-------------------------- ---------------------------- --------------------------- ----------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
88,668 $ 884,969 427,988 $ 4,350,216 11,454,162 $109,640,343 27,421,382 $ 272,058,507
-- -- -- -- -- -- 2,135,389 20,649,210
1,494 14,966 3,140 32,035 123,777 1,188,452 356,632 3,520,081
(60,992) (602,751) (748,696) (7,540,238) (9,954,633) (94,755,810) (22,556,971) (222,202,788)
---------- ----------- ------------ ----------- ---------- ------------ ---------- -------------
29,170 $ 297,184 (317,568) $(3,157,987) 1,623,306 $ 16,072,985 7,356,432 $ 74,025,010
--------- ---------- ----------- ---------- --------- ----------- --------- ------------
145,899 $ 1,464,300 245,670 $ 2,515,124 88,726 $ 851,319 98,950 $ 969,620
-- -- -- -- -- -- 1,482 14,327
19,553 196,211 52,214 537,364 2,670 25,784 5,956 59,039
(85,090) (841,746) (400,519) (4,081,762) (48,141) (460,791) (110,593) (1,069,895)
---------- ----------- ------------ ----------- ---------- ------------ ---------- -------------
80,362 $ 818,765 (102,635) $(1,029,274) 43,255 $ 416,312 (4,205) $ (26,909)
--------- ---------- ----------- ---------- --------- ----------- --------- ------------
63,707 $ 637,904 53,170 $ 553,692 -- $ -- 487 $ 5,002
5,056 50,741 15,493 159,534 107 1,043 333 3,302
(42,044) (420,255) (129,826) (1,310,458) (654) (6,117) (2,503) (24,175)
---------- ----------- ------------ ----------- ---------- ------------ ---------- -------------
26,719 $ 268,390 (61,163) $ (597,232) (547) $ (5,074) (1,683) $ (15,871)
--------- ---------- ----------- ---------- --------- ----------- --------- ------------
1,727,577 $17,272,115 4,005,665 $40,841,538 4,129 $ 39,500 104,746 $ 1,031,340
112,159 1,125,937 174,145 1,763,664 4,760 45,823 11,648 115,227
(511,410) (5,082,529) (749,173) (7,538,250) (14,705) (139,120) (39,953) (390,672)
---------- ----------- ------------ ----------- ---------- ------------ ---------- -------------
1,328,326 $13,315,523 3,430,637 $35,066,952 (5,816) $ (53,797) 76,441 $ 755,895
--------- ---------- ----------- ---------- --------- ----------- --------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
TRUST A SHARES
------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91*
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
Operating performance:
Net asset value, beginning of period.......................... $ 3.93 $ 4.28 $ 4.16 $ 4.17 $ 4.00
---------- -------- -------- -------- --------
Net investment income......................................... 0.12 0.23 0.23 0.28 0.10
Net realized and unrealized gain/(loss) on investments........ 0.16 (0.33) 0.14 (0.01) 0.17
---------- -------- -------- -------- --------
Net increase/(decrease) in net assets resulting from
investment operations....................................... 0.28 (0.10) 0.37 0.27 0.27
Distributions:
Dividends from net investment income.......................... (0.12) (0.23) (0.23) (0.28) (0.10)
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) (0.10)
---------- -------- -------- -------- --------
Net asset value, end of period................................ $ 4.09 $ 3.93 $ 4.28 $ 4.16 $ 4.17
-------- ------- ------- ------- -------
Total return++................................................ 7.25% (2.23)% 9.03% 6.70%+++ 6.81%+++
-------- ------- ------- ------- -------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's).......................... $411,934 $433,278 $443,426 $360,497 $158,435
Ratio of operating expenses to average net assets............. 0.58%+ 0.59% 0.55% 0.37% 0.08%+
Ratio of net investment income to average net assets.......... 6.07%+ 5.76% 5.40% 6.48% 7.21%+
Portfolio turnover rate....................................... 130% 133% 92% 25% 11%
Ratio of operating expenses to average net assets before fee
waivers
and/or expense reimbursements............................... 0.79%+ 0.80% 0.79% 0.77% 0.82%+
Net investment income per share before fee waivers and/or
expense reimbursements...................................... $ 0.11 $ 0.22 $ 0.22 $ 0.26 $ 0.00
</TABLE>
- ---------------
* The Nations Short-Intermediate Government Fund Trust A Shares, Investor A
Shares, Investor C Shares and Investor N Shares commenced operations on
August 1, 1991, August 5, 1991, June 17, 1992 and June 7, 1993, respectively.
+ 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).
<TABLE>
<CAPTION>
TRUST A SHARES
-------------------------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED ENDED ENDED ENDED
(UNAUDITED)# 11/30/94# 11/30/93 11/30/92 11/30/91 11/30/90 11/30/89**
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NATIONS MANAGED BOND FUND
Operating performance:
Net asset value, beginning of
period........................ $ 9.65 $ 10.77 $ 10.37 $ 10.27 $ 9.87 $ 10.13 $10.00
----------- --------- -------- -------- -------- ------- ----------
Net investment income........... 0.31 0.56 0.62 0.69 0.77 0.81 0.15
Net realized and unrealized
gain/(loss) on investments.... 0.76 (0.95) 0.58 0.14 0.40 (0.19) 0.06
----------- --------- -------- -------- -------- ------- ----------
Net increase/(decrease) in net
assets resulting from
investment operations......... 1.07 (0.39) 1.20 0.83 1.17 0.62 0.21
Distributions:
Dividends from net investment
income........................ (0.31) (0.56) (0.62) (0.69) (0.77) (0.88) (0.08)
Distributions from net realized
capital gains................. -- (0.17) (0.18) (0.04) -- -- --
----------- --------- -------- -------- -------- ------- ----------
Total distributions............. (0.31) (0.73) (0.80) (0.73) (0.77) (0.88) (0.08)
----------- --------- -------- -------- -------- ------- ----------
Net asset value, end of
period........................ $ 10.41 $ 9.65 $ 10.77 $ 10.37 $ 10.27 $ 9.87 $10.13
-------- --------- ------- ------- ------- ------ -------
Total return++.................. 11.27% (3.79)% 11.98% 8.35%+++ 12.36%+++ 6.51%+++ 2.13%+++
-------- --------- ------- ------- ------- ------ -------
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's)........................ $ 148,015 $ 165,006 $207,654 $174,615 $115,641 $28,987 $9,865
Ratio of operating expenses to
average net assets............ 0.69%+ 0.72% 0.67% 0.55% 0.40% 0.17% 0.28%+
Ratio of net investment income
to average net assets......... 6.26%+ 5.53% 5.79% 6.62% 7.44% 8.33% 8.11%+
Portfolio turnover rate......... 158% 246% 60% 79% 74% 98% 116%
Ratio of operating expenses to
average net assets before fee
waivers and/or expense
reimbursements................ 0.79%+ 0.81% 0.79% 0.82% 0.84% 0.92% 1.08%+
Net investment income per share
before fee waivers and/or
expense reimbursements........ $ 0.31 $ 0.55 $ 0.61 $ 0.64 $ 0.73 $ 0.72 $ 0.08
</TABLE>
- ---------------
* The Nations Managed Bond Fund Trust A Shares, Investor A Shares and Investor
C Shares commenced operations on September 19, 1989, December 8, 1989 and
June 17, 1992, respectively.
+ 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 share method, which
more appropriately represents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTOR A SHARES INVESTOR C SHARES
------------------------------------------------------------- ----------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR PERIOD ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED ENDED 05/31/95 ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92 11/30/91* (UNAUDITED) 11/30/94 11/30/93 11/30/92*
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 3.93 $ 4.28 $ 4.16 $ 4.17 $ 4.00## $ 3.93 $ 4.28 $ 4.16 $ 4.19
---------- ------- -------- -------- ------- --------- ------- ------- -------
0.12 0.22 0.22 0.27 0.10 0.11 0.20 0.20 0.10
0.16 (0.33) 0.14 (0.01) 0.17 0.16 (0.33) 0.14 (0.03)
---------- ------- -------- -------- ------- --------- ------- ------- -------
0.28 (0.11) 0.36 0.26 0.27 0.27 (0.13) 0.34 0.07
(0.12) (0.22) (0.22) (0.27) (0.10) (0.11) (0.20) (0.20) (0.10)
-- (0.00)# -- -- -- -- (0.00)# -- --
-- (0.02) (0.02) -- -- -- (0.02) (0.02) --
---------- ------- -------- -------- ------- --------- ------- ------- -------
(0.12) (0.24) (0.24) (0.27) (0.10) (0.11) (0.22) (0.22) (0.10)
---------- ------- -------- -------- ------- --------- ------- ------- -------
$ 4.09 $ 3.93 $ 4.28 $ 4.16 $ 4.17 $ 4.09 $ 3.93 $ 4.28 $ 4.16
-------- ------ ------- ------- ------ -------- ------ ------ ------
7.14% (2.41)% 8.85% 6.61%+++ 6.81%+++ 6.98% (2.80)% 8.20% 1.64%++
-------- ------ ------- ------- ------ -------- ------ ------ ------
$ 64,634 $77,128 $173,449 $188,624 $53,874 $ 13,742 $16,725 $31,440 $24,352
0.78%+ 0.77% 0.70% 0.48% 0.08%+ 1.08%+ 1.17% 1.30% 1.18%+
5.87%+ 5.58% 5.25% 6.34% 7.21%+ 5.57%+ 5.18% 4.65% 4.80%+
130% 133% 92% 25% 11% 130% 133% 92% 25%
%+
0.99 0.98% 0.94% 0.88% 0.82%+ 1.29%+ 1.38% 1.54% 1.44%+
0.11
$ $ 0.21 $ 0.21 $ 0.25 $ 0.00 $ 0.10 $ 0.19 $ 0.19 $ 0.09
<CAPTION>
INVESTOR N
SHARES
-----------
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93*
----------- -------- ---------
<S> <C> <C> <C>
$ 3.93 $ 4.28 $ 4.26
---------- ------- ---------
0.11 0.20 0.09
0.16 (0.33) 0.02
---------- ------- ---------
0.27 (0.13) 0.11
(0.11) (0.20) (0.09)
-- (0.00)# --
-- (0.02) --
---------- ------- ---------
(0.11) (0.22) (0.09)
---------- ------- ---------
$ 4.09 $ 3.93 $ 4.28
-------- ------ ------
6.93% (2.81)% 2.65%
-------- ------ ------
$ 10,771 $10,974 $ 8,847
1.18%+ 1.19% 1.15%+
5.47%+ 5.16% 4.80%+
130% 133% 92%
1.39%+ 1.40% 1.39%+
$ 0.10 $ 0.19 $ 0.09
</TABLE>
<TABLE>
<CAPTION>
INVESTOR A SHARES INVESTOR C SHARES
------------------------------------------------------------------------------- ---------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR YEAR YEAR YEAR PERIOD ENDED YEAR YEAR
05/31/95 ENDED ENDED ENDED ENDED ENDED 05/31/95 ENDED ENDED
(UNAUDITED)# 11/30/94# 11/30/93 11/30/92 11/30/91 11/30/90* (UNAUDITED)# 11/30/94# 11/30/93
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.65 $ 10.77 $10.37 $10.27 $ 9.87 $ 10.13 $ 9.65 $ 10.77 $10.36
------ --------- -------- -------- -------- --------- ------ --------- --------
0.30 0.54 0.60 0.68 0.77 0.81 0.28 0.50 0.54
0.76 (0.95) 0.58 0.14 0.40 (0.19) 0.76 (0.95) 0.59
------ --------- -------- -------- -------- --------- ------ --------- --------
1.06 (0.41) 1.18 0.82 1.17 0.62 1.04 (0.45) 1.13
(0.30) (0.54) (0.60) (0.68) (0.77 ) (0.88) (0.28) (0.50) (0.54)
-- (0.17) (0.18) (0.04) -- -- -- (0.17) (0.18)
------ --------- -------- -------- -------- --------- ------ --------- --------
(0.30) (0.71) (0.78) (0.72) (0.77 ) (0.88) (0.28) (0.67) (0.72)
------ --------- -------- -------- -------- --------- ------ --------- --------
$10.41 $ 9.65 $10.77 $10.37 $ 10.27 $ 9.87 $10.41 $ 9.65 $10.77
-------- ------ ------ ------ ------- ------ -------- ------ ------
11.16% (3.98)% 11.82% 8.27%+++ 12.36%+++ 6.51%+++ 10.99% (4.35)% 11.26%
-------- ------ ------ ------ ------- ------ -------- ------ ------
$4,253 $ 5,525 $7,426 $8,352 $10,469 $ 2,471 $ 77 $ 120 $ 221
%+
0.89 0.90% 0.82% 0.63% 0.40% 0.17%+ 1.19%+ 1.30% 1.42%
%+
6.06 5.35% 5.64% 6.54% 7.44% 8.33%+ 5.76%+ 4.95% 5.04%
158% 246% 60% 79% 74% 98% 158% 246% 60%
%+
0.99 0.99% 0.94% 0.96% 0.84% 0.92%+ 1.29%+ 1.39% 1.54%
0.30
$ $ 0.53 $ 0.59 $ 0.65 $ 0.73 $ 0.72 $ 0.28 $ 0.49 $ 0.53
<CAPTION>
PERIOD
ENDED
11/30/92*
----------------------------------------------------------------------------------------
<S> <C> <C>
$ 10.32
---------
0.24
0.04
---------
0.28
(0.24)
--
---------
(0.24)
---------
$ 10.36
------
2.71%+++
------
$ 79
1.28%+
5.49%+
79%
1.78%+
$ 0.22
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
TRUST A SHARES
---------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED
(UNAUDITED)# 11/30/94# 11/30/93 11/30/92*
---------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS SHORT-TERM INCOME FUND
Operating performance:
Net asset value, beginning of period...................................... $ 9.48 $ 10.01 $ 9.75 $ 10.00
------------ -------- -------- --------
Net investment income..................................................... 0.30 0.50 0.53 0.09
Net realized and unrealized gain/(loss) on investments.................... 0.28 (0.51) 0.26 (0.25)
------------- -------- -------- --------
Net increase/(decrease) in net assets resulting from investment
operations.............................................................. 0.58 (0.01) 0.79 (0.16)
Distributions:
Dividends from net investment income...................................... (0.30) (0.48) (0.53) (0.09)
Distributions in excess of net investment income.......................... -- (0.02) -- --
Distributions from capital (Note 1)....................................... -- (0.02) -- --
------------ -------- -------- --------
Total distributions....................................................... (0.30) (0.52) (0.53) (0.09)
------------ -------- -------- --------
Net asset value, end of period............................................ $ 9.76 $ 9.48 $ 10.01 $ 9.75
---------- -------- -------- --------
Total return++............................................................ 6.25% (0.11)% 8.26% (1.58)%+++
--------- ------- ------- -------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...................................... $169,616 $176,712 $201,738 $190,680
Ratio of operating expenses to average net assets......................... 0.51%+ 0.50% 0.37% 0.30%+
Ratio of net investment income to average net assets...................... 6.35%+ 5.23% 5.27% 5.54%+
Portfolio turnover rate................................................... 145% 293% 121% 45%
Ratio of operating expenses to average net assets before fee waivers and/or
expense
reimbursements.......................................................... 0.86%+ 0.82% 0.79% 0.90%+
Net investment income per share before fee waivers and/or expense
reimbursements.......................................................... $ 0.29 $ 0.47 $ 0.48 $ 0.08
</TABLE>
- ---------------
* The Nations Short-Term Income Fund Trust A Shares, Investor A Shares,
Investor C Shares and Investor N Shares commenced operations on September
30, 1992, October 2, 1992, October 2, 1992 and June 7, 1993, respectively.
+ 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 share method, which
more appropriately represents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
<TABLE>
<CAPTION>
TRUST A SHARES
---------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED
(UNAUDITED)# 11/30/94# 11/30/93 11/30/92*
---------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS ADJUSTABLE RATE GOVERNMENT FUND
Operating performance:
Net asset value, beginning of period...................................... $ 9.42 $ 9.95 $ 9.92 $10.00
------------ -------- -------- --------
Net investment income..................................................... 0.27 0.50 0.48 0.06
Net realized and unrealized gain/(loss) on investments.................... 0.24 (0.53 ) 0.03 (0.08)
------------ -------- -------- --------
Net increase/(decrease) in net assets resulting from investment
operations.............................................................. 0.51 (0.03 ) 0.51 (0.02)
Distributions:
Dividends from net investment income...................................... (0.27) (0.45 ) (0.48 ) (0.06)
Distributions from net realized capital gains............................. -- (0.02 ) -- --
Distributions from capital (Note 1)....................................... -- (0.03 ) -- --
------------ -------- -------- --------
Total distributions....................................................... (0.27) (0.50 ) (0.48 ) (0.06)
------------ -------- -------- --------
Net asset value, end of period............................................ $ 9.66 $ 9.42 $ 9.95 $ 9.92
-------- ------- ------- ------
Total return++............................................................ 5.51% (0.34 )% 5.24% (0.17)%+++
-------- ------- ------- ------
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)...................................... $ 32,031 $37,518 $59,055 $4,989
Ratio of operating expenses to average net assets......................... 0.55%+ 0.55% 0.36% 0.00%+
Ratio of net investment income to average net assets...................... 5.74%+ 5.10% 4.70% 4.79%+
Portfolio turnover rate................................................... 22% 176% 212% 0%
Ratio of operating expenses to average net assets before fee waivers and/or
expense
reimbursements.......................................................... 0.95%+ 0.99% 0.97% 0.94%+
Net investment income per share before fee waivers and/or expense
reimbursements.......................................................... $ 0.25 $ 0.46 $ 0.42 $ 0.05
</TABLE>
- ---------------
* The Nations Adjustable Rate Government Fund Trust A Shares, Investor A
Shares, Investor C Shares and Investor N Shares commenced operations on
October 13, 1992, October 20, 1992, October 19, 1992 and June 7, 1993,
respectively.
+ 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 share method, which
more appropriately represents the per share data for the period since the use
of the undistributed method did not accord with the results of operations.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTOR N
INVESTOR A SHARES INVESTOR C SHARES SHARES
----------------------------------------------------- ----------------------------------------------------- ------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR PERIOD ENDED YEAR YEAR PERIOD ENDED
05/31/95 ENDED ENDED ENDED 05/31/95 ENDED ENDED ENDED 05/31/95
(UNAUDITED)# 11/30/94# 11/30/93 11/30/92* (UNAUDITED)# 11/30/94# 11/30/93 11/30/92* (UNAUDITED)#
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.48 $ 10.01 $ 9.75 $ 10.00 $ 9.48 $ 10.01 $ 9.75 $ 10.00 $ 9.48
------ --------- -------- -------- ------ -------- -------- --------- ------------
0.30 0.48 0.51 0.08 0.28 0.46 0.48 0.08 0.29
0.28 (0.51) 0.26 (0.26) 0.28 (0.51) 0.26 (0.26) 0.28
------ --------- -------- -------- ------ -------- -------- --------- ------------
0.58 (0.03) 0.77 (0.18) 0.56 (0.05) 0.74 (0.18) 0.57
(0.30) (0.46) (0.51) (0.07) (0.28) (0.44) (0.48) (0.07) (0.29)
-- (0.02) -- -- -- (0.02) -- -- --
-- (0.02) -- -- -- (0.02) -- -- --
------ --------- -------- -------- ------ -------- -------- --------- ------------
(0.30) (0.50) (0.51) (0.07) (0.28) (0.48) (0.48) (0.07) (0.29)
------ --------- -------- -------- ------ -------- -------- --------- ------------
$ 9.76 $ 9.48 $ 10.01 $ 9.75 $ 9.76 $ 9.48 $ 10.01 $ 9.75 $ 9.76
====== ======= ======= ======= ====== ======= ======== ========= ============
6.17% (0.33)% 8.03% (1.81)%+++ 6.05% (0.51)% 7.73% (1.82)%+++ 6.07%
====== ======= ======= ======= ====== ======= ======== ========= ============
$2,510 $ 2,490 $11,205 $ 254 $6,964 $ 8,102 $19,851 $ 6,747 $ 10,553
0.71%+ 0.71% 0.57% 0.45%+ 0.86%+ 0.89% 0.87% 0.80%+ 0.86%+
6.15%+ 5.02% 5.07% 5.39%+ 6.00%+ 4.84% 4.77% 5.04%+ 6.00%+
145% 293% 121% 45% 145% 293% 121% 45% 145%
1.06%+ 1.03% 0.99% 1.05%+ 1.21%+ 1.21% 1.29% 1.40%+ 1.21%+
$ 0.28 $ 0.45 $ 0.48 $ 0.07 $ 0.26 $ 0.43 $ 0.45 $ 0.07 $ 0.26
<CAPTION>
------------------------
YEAR PERIOD
ENDED ENDED
11/30/94# 11/30/93*
------------------------
<S> <C> <C>
$ 10.01 $ 9.94
--------- ---------
0.47 0.22
(0.51) 0.07
--------- ---------
(0.04) 0.29
(0.45) (0.22)
(0.02) --
(0.02) --
--------- ---------
(0.49) (0.22)
--------- ---------
$ 9.48 $ 10.01
========= =========
(0.46)% 2.96%
========= =========
$16,550 $39,861
0.85% 0.72%+
4.88% 4.92%+
293% 121%
1.17% 1.14%+
$ 0.44 $ 0.21
</TABLE>
<TABLE>
<CAPTION>
INVESTOR A SHARES INVESTOR C SHARES
----------------------------------------------------- -----------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR YEAR PERIOD ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED 05/31/95 ENDED ENDED ENDED
(UNAUDITED)# 11/30/94# 11/30/93 11/30/92* (UNAUDITED)# 11/30/94# 11/30/93 11/30/92*
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.42 $ 9.95 $ 9.92 $ 10.01 $ 9.42 $ 9.95 $ 9.91 $ 10.02
------ --------- -------- --------- ------ --------- -------- ---------
0.26 0.48 0.47 0.06 0.26 0.45 0.41 0.05
0.24 (0.53) 0.03 (0.09) 0.24 (0.53) 0.04 (0.11)
------ --------- -------- --------- ------ --------- -------- ---------
0.50 (0.05) 0.50 (0.03) 0.50 (0.08) 0.45 (0.06)
(0.26) (0.43) (0.47) (0.06) (0.26) (0.40) (0.41) (0.05)
-- (0.02) -- -- -- (0.02) -- --
-- (0.03) -- -- -- (0.03) -- --
------ --------- -------- --------- ------ --------- -------- ---------
(0.26) (0.48) (0.47) (0.06) (0.26) (0.45) (0.41) (0.05)
------ --------- -------- --------- ------ --------- -------- ---------
$ 9.66 $ 9.42 $ 9.95 $ 9.92 $ 9.66 $ 9.42 $ 9.95 $ 9.91
====== ========= ======== ========= ====== ========= ======== =========
5.41% (0.52)% 5.10 % (0.35)%+++ 5.33% (0.82)% 4.56% (0.65)%+++
====== ========= ======== ========= ====== ========= ======== =========
$6,137 $ 9,418 $26,893 $ 2,100 $1,922 $ 2,523 $4,136 $ 1,024
0.71%+ 0.73% 0.51% 0.15%+ 0.90%+ 1.03% 1.11% 0.75%+
5.58%+ 4.92% 4.55% 4.64%+ 5.39%+ 4.62% 3.95% 4.04%+
22% 176% 212% 0% 22% 176% 212% 0%
1.11%+ 1.17% 1.12% 1.09%+ 1.30%+ 1.47% 1.72% 1.69%+
$ 0.22 $ 0.44 $ 0.42 $ 0.05 $ 0.23 $ 0.41 $ 0.34 $ 0.04
<CAPTION>
INVESTOR N SHARES
----------------------------------------
SIX MONTHS
ENDED YEAR PERIOD
05/31/95 ENDED ENDED
(UNAUDITED)# 11/30/94# 11/30/93*
--------------------------------------
<S> <C> <C> <C>
$ 9.42 $ 9.95 $ 9.99
------ --------- ---------
0.25 0.45 0.19
0.24 (0.53) (0.04)
------ --------- ---------
0.49 (0.08) 0.15
(0.25) (0.40) (0.19)
-- (0.02) --
-- (0.03) --
------ --------- ---------
(0.25) (0.45) (0.19)
------ --------- ---------
$ 9.66 $ 9.42 $ 9.95
====== ========= =========
5.26% (0.84)% 1.53%
====== ========= =========
$4,794 $ 5,124 $ 2,936
1.05%+ 1.05% 0.86%+
5.24%+ 4.60% 4.20%+
22% 176% 212%
1.45%+ 1.49% 1.47%+
$ 0.23 $ 0.41 $ 0.16
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
TRUST A SHARES
---------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED
(UNAUDITED) 11/30/94# 11/30/93# 11/30/92*
---------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS DIVERSIFIED INCOME FUND
Operating performance:
Net asset value, beginning of period....................................... $ 9.67 $ 10.88 $ 9.97 $ 10.00
-------- ------- ------- -------
Net investment income...................................................... 0.38 0.74 0.78 0.06
Net realized and unrealized gain/(loss) on investments..................... 0.86 (1.06) 0.91 (0.03)
-------- ------- -------- -------
Net increase/(decrease) in net assets resulting from investment
operations............................................................... 1.24 (0.32) 1.69 0.03
Distributions:
Dividends from net investment income....................................... (0.38) (0.74) (0.78) (0.06)
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) (0.06)
-------- ------- -------- -------
Net asset value, end of period............................................. $ 10.53 $ 9.67 $ 10.88 $ 9.97
======== ======= ======== =======
Total return++............................................................. 13.05% (3.05)% 17.40% 0.32%+++
======== ======= ======== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)....................................... $ 24,598 $22,298 $28,553 $23,962
Ratio of operating expenses to average net assets.......................... 0.77%+ 0.74% 0.55% 0.25%+
Ratio of net investment income to average net assets....................... 7.53%+ 7.31% 7.02% 7.76%+
Portfolio turnover rate.................................................... 67% 144% 86% 46%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements................................................... 0.93%+ 0.95% 0.95% 0.85%+
Net investment income per share before fee waivers and/or expense
reimbursements........................................................... $ 0.37 $ 0.72 $ 0.70 $ 0.05
</TABLE>
- ---------------
* The Nations Diversified Income Fund Trust A Shares, Investor A Shares,
Investor C Shares and Investor N Shares commenced operations on October 30,
1992, November 25, 1992, November 9, 1992 and June 7, 1993, respectively.
+ 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 share method, which
more appropriately represents 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.
<TABLE>
<CAPTION>
TRUST A SHARES
---------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92*
---------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS STRATEGIC FIXED INCOME FUND
Operating performance:
Net asset value, beginning of period....................................... $ 9.32 $ 10.55 $ 9.94 $ 10.00
-------- -------- -------- --------
Net investment income...................................................... 0.29 0.53 0.56 0.05
Net realized and unrealized gain/(loss) on investments..................... 0.70 (0.89) 0.62 (0.06)
-------- -------- -------- --------
Net increase/(decrease) in net assets resulting from investment
operations............................................................... 0.99 (0.36) 1.18 (0.01)
Distributions:
Dividends from net investment income....................................... (0.29) (0.51) (0.56) (0.05)
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) (0.05)
--------- -------- -------- --------
Net asset value, end of period............................................. $ 10.02 $ 9.32 $ 10.55 $ 9.94
======== ======== ======== ========
Total return++............................................................. 10.85% (3.58)% 12.05% (0.11)%+++
======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)....................................... $608,173 $550,697 $545,538 $581,329
Ratio of operating expenses to average net assets.......................... 0.68%+ 0.68% 0.61% 0.26%+
Ratio of net investment income to average net assets....................... 6.18%+ 5.43% 5.40% 6.15%+
Portfolio turnover rate.................................................... 155% 307% 161% 12%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements................................................... 0.79%+ 0.76% 0.77% 0.86%+
Net investment income per share before fee waivers and/or expense
reimbursements........................................................... $ 0.29 $ 0.52 $ 0.55 $ 0.04
</TABLE>
- ---------------
* The Nations Strategic Fixed Income Fund Trust A Shares, Investor A Shares,
Investor C Shares and Investor N Shares commenced operations on October 30,
1992, November 19, 1992, November 16, 1992 and June 7, 1993, respectively.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
INVESTOR N
INVESTOR A SHARES INVESTOR C SHARES SHARES
- -------------------------------------------------------- ---------------------------------------------------- ----------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR PERIOD ENDED YEAR YEAR PERIOD ENDED
05/31/95 ENDED ENDED ENDED 05/31/95 ENDED ENDED ENDED 05/31/95
(UNAUDITED) 11/30/94# 11/30/93# 11/30/92* (UNAUDITED) 11/30/94# 11/30/93# 11/30/92* (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.67 $ 10.88 $ 9.96 $ 10.02 $ 9.67 $ 10.88 $ 9.96 $ 9.93 $ 9.67
-------- ------- ------- ------- ------ ------- ------- ------- --------
0.36 0.72 0.76 0.01 0.34 0.67 0.70 0.03 0.34
0.86 (1.06) 0.92 (0.06) 0.86 (1.06) 0.92 0.02 0.86
-------- ------- ------- ------- ------ ------- ------- ------- --------
1.22 (0.34) 1.68 (0.05) 1.20 (0.39) 1.62 0.05 1.20
(0.36) (0.72) (0.76) (0.01) (0.34) (0.67) (0.70) (0.02) (0.34)
-- (0.00)## -- -- -- (0.00)## -- -- --
-- (0.15) -- -- -- (0.15) -- -- --
-------- ------- ------- ------- ------ ------- ------- ------- --------
(0.36) (0.87) (0.76) (0.01) (0.34) (0.82) (0.70) (0.02) (0.34)
-------- ------- ------- ------- ------ ------- ------- ------- --------
$ 10.53 $ 9.67 $ 10.88 $ 9.96 $10.53 $ 9.67 $ 10.88 $ 9.96 $ 10.53
========= ======= ======= ======= ====== ======= ======= ======= ========
12.92% (3.26)% 17.32% (0.49)%+++ 12.64% (3.77)% 16.65% 0.54%+++ 12.64%
========= ======= ======= ======= ====== ======= ======= ======= ========
$ 12,633 $10,819 $13,291 $ 18 $3,153 $ 2,636 $ 3,633 $ 149 $ 73,972
1.02%+ 0.96% 0.70% 0.40%+ 1.52%+ 1.49% 1.30% 1.00%+ 1.52%+
7.28%+ 7.09% 6.87% 7.61%+ 6.78%+ 6.56% 6.27% 7.01%+ 6.78%+
67% 144% 86% 46% 67% 144% 86% 46% 67%
1.18%+ 1.17% 1.10% 1.00%+ 1.68%+ 1.70% 1.70% 1.60%+ 1.68%+
$ 0.35 $ 0.70 $ 0.70 $ 0.01 $ 0.33 $ 0.65 $ 0.64 $ 0.03 $ 0.33
<CAPTION>
- ----------------------------------
YEAR PERIOD
ENDED ENDED
11/30/94# 11/30/93#*
- ----------------------------------
<S> <C>
$ 10.88 $ 10.59
------- -------
0.67 0.30
(1.06) 0.29
------- -------
(0.39) 0.59
(0.67) (0.30)
(0.00)## --
(0.15) --
------- -------
(0.82) (0.30)
------- -------
$ 9.67 $ 10.88
======= =======
(3.77)% 5.58%
======= =======
$55,058 $24,630
1.49% 1.30%+
6.56% 6.27%+
144% 86%
1.70% 1.70%
$ 0.65 $ 0.27
</TABLE>
<TABLE>
<CAPTION>
INVESTOR N
INVESTOR A SHARES INVESTOR C SHARES SHARES
- -------------------------------------------------------- ---------------------------------------------------- ----------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR YEAR PERIOD ENDED YEAR YEAR PERIOD ENDED
05/31/95 ENDED ENDED ENDED 05/31/95 ENDED ENDED ENDED 05/31/95
(UNAUDITED) 11/30/94 11/30/93 11/30/92* (UNAUDITED) 11/30/94 11/30/93 11/30/92* (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 9.32 $ 10.55 $ 9.94 $ 9.99 $ 9.32 $ 10.55 $ 9.94 $ 9.97 $ 9.32
------ ------- ------- ------- ------ ------- ------- ------- ------
0.29 0.51 0.54 0.01 0.27 0.47 0.48 0.02 0.26
0.70 (0.89) 0.62 (0.06) 0.70 (0.89) 0.62 (0.04) 0.70
------ ------- ------- ------- ------ ------- ------- ------- ------
0.99 (0.38) 1.16 (0.05) 0.97 (0.42) 1.10 (0.02) 0.96
(0.29) (0.49) (0.54) -- (0.27) (0.45) (0.48) (0.01) (0.26)
-- (0.02) -- -- -- (0.02) -- -- --
-- (0.34) (0.01) -- -- (0.34) (0.01) -- --
------ ------- ------- ------- ------ ------- ------- ------- ------
(0.29) (0.85) (0.55) -- (0.27) (0.81) (0.49) (0.01) (0.26)
------ ------- ------- ------- ------ ------- ------- ------- ------
$10.02 $ 9.32 $ 10.55 $ 9.94 $10.02 $ 9.32 $ 10.55 $ 9.94 $10.02
======== ======= ======= ======= ====== ======= ======= ======= ========
10.74% (3.76)% 11.88% (0.49)%+++ 10.57% (4.14)% 11.20% (0.22) +++ 10.49%
======== ======= ======= ======= ====== ======= ======= ======= ========
$1,472 $ 967 $ 1,138 $ 113 $ 39 $ 41 $ 65 $ 84 $2,247
0.88%+ 0.86% 0.76% 0.40%+ 1.18%+ 1.43% 1.36% 1.03%+ 1.33%+
5.98%+ 5.25% 5.25% 6.00%+ 5.68%+ 4.68% 4.65% 5.40%+ 5.53%+
155% 307% 161% 12% 155% 307% 161% 12% 155%
0.99%+ 0.94% 0.92% 1.00%+ 1.29%+ 1.51% 1.52% 1.63%+ 1.44%+
$ 0.28 $ 0.50 $ 0.53 $ 0.01 $ 0.26 $ 0.46 $ 0.47 $ 0.02 $ 0.26
<CAPTION>
- ----------------------------------
YEAR PERIOD
ENDED ENDED
11/30/94 11/30/93*
- ----------------------------------
<S> <C>
$ 10.55 $ 10.39
------- -------
0.47 0.21
(0.89) 0.17
------- -------
(0.42) 0.38
(0.45) (0.21)
(0.02) --
(0.34) (0.01)
------- -------
(0.81) (0.22)
------- -------
$ 9.32 $ 10.55
======= =======
(4.21)% 3.64%
======= =======
$ 2,145 $ 1,620
1.33% 1.26%+
4.78% 4.75%+
307% 161%
1.41% 1.42%+
$ 0.46 $ 0.21
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
TRUST A SHARES
---------------------------------------------------
SIX MONTHS
ENDED YEAR YEAR PERIOD
05/31/95 ENDED ENDED ENDED
(UNAUDITED) 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C>
---------------------------------------------------
NATIONS MORTGAGE-BACKED SECURITIES FUND
Operating performance:
Net asset value, beginning of period........................................ $ 8.97 $ 9.95 $ 9.97 $ 10.00
--------- ------- ------- -------
Net investment income....................................................... 0.31 0.65 0.68 0.06
Net realized and unrealized gain/(loss) on investments...................... 0.59 (0.97) (0.02) (0.03)
----------- -------- -------- -------
Net increase/(decrease) in net assets resulting from investment
operations................................................................ 0.90 (0.32) 0.66 0.03
Distributions:
Dividends from net investment income........................................ (0.32) (0.57) (0.68) (0.06)
Distributions from capital (Note 1)......................................... -- (0.09) -- --
----------- -------- -------- ---------
Total distributions......................................................... (0.32) (0.66) (0.68) (0.06)
----------- -------- -------- ---------
Net asset value, end of period.............................................. $ 9.55 $ 8.97 $ 9.95 $ 9.97
=========== ======== ======== ========
Total return++.............................................................. 10.14% (3.41)% 6.73% 0.35%+++
=========== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's)........................................ $58,588 $61,946 $72,596 $63,583
Ratio of operating expenses to average net assets........................... 0.71%+ 0.75% 0.67% 0.25%+
Ratio of net investment income to average net assets........................ 6.86%+ 6.81% 6.70% 8.16%+
Portfolio turnover rate..................................................... 199% 207% 167% 4%
Ratio of operating expenses to average net assets before fee waivers and/or
expense reimbursements.................................................... 0.81%+ 0.86% 0.86% 0.85%+
Net investment income per share before fee waivers and/or expense
reimbursements............................................................ $ 0.30 $ 0.64 $ 0.66 $ 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 period indicated and
does not reflect any applicable sales charges.
+++ Unaudited.
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES.
Nations Fund Trust (the "Trust") is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company. As of the date of this report, the Trust offers thirty-four separate
portfolios. Information presented in these financial statements pertains only to
the following funds: Nations Short-Intermediate Government Fund, Nations Managed
Bond Fund, Nations Short-Term Income Fund, Nations Adjustable Rate Government
Fund, Nations Diversified Income Fund, Nations Strategic Fixed Income Fund and
Nations Mortgage-Backed Securities Fund (the "Funds"). The financial statements
for the remaining funds are presented under separate cover. The Funds, except
for Managed Bond Fund and Mortgage-Backed Securities Fund, currently offer four
classes of shares: Trust A Shares, Investor A Shares, Investor C Shares
(formerly Investor B Shares) and Investor N Shares (formerly Investor C Shares).
The Managed Bond Fund currently offers three classes of shares: Trust A Shares,
Investor A Shares and Investor C Shares (formerly Investor B Shares).
Mortgage-Backed Securities Fund currently offers only one class of shares: Trust
A Shares. The Board of Trustees has authorized the issuance of Trust B Shares of
all Funds. As of May 31, 1995, no Trust B Shares have been issued by the Funds.
Shareholders of a Fund have equal voting rights on matters affecting all
shareholders of the Fund equally. In addition, each class of shares of a Fund
has exclusive voting rights on matters that relate solely to the class and
separate voting rights on matters in which the interests of one class of shares
differ from the interests of any other class. The following is a summary of
significant accounting policies consistently followed by the Funds in the
preparation of their financial statements.
Securities Valuation: The Funds' portfolio securities which are traded on a
recognized stock exchange are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sale price
on the national securities market. Securities traded only on over-the-counter
markets are valued on the basis of the closing over-the-counter bid prices or if
no sale occurred on such day at the mean of the current bid and asked prices.
Certain securities may be valued by one or more principal market makers.
Restricted securities, securities for which market quotations are not readily
available and other assets are valued at fair value under the supervision of the
Board of Trustees. Short-term investments that mature in 60 days or less are
valued at amortized cost.
Repurchase Agreements: Each Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, a Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. Generally, in the event of counterparty default, the Fund
has the right to use the collateral to offset losses incurred. There is
potential loss to the Fund in the event the Fund is delayed or prevented from
exercising its rights to dispose of the collateral securities, including the
risk of a possible decline in the value of the underlying securities during the
period while the Fund seeks to assert its rights. Unless permitted by the
Securities and Exchange Commission, the Fund will not enter into repurchase
agreements with the investment adviser, the distributor or any of their
affiliates. The Funds' investment adviser, under the supervision of the Board of
Trustees, monitors the value of collateral received as well as the
creditworthiness of those banks and dealers with which the Funds enter into
repurchase agreements to evaluate potential risks.
Dollar Roll Transactions: Certain Funds may enter into dollar roll transactions
with financial institutions to take advantage of opportunities in the mortgage
market. 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. This fee is accrued as income over the life of the dollar roll
contract. Risks associated with dollar roll transactions include, the Fund's
commitment to purchase or repurchase the security may be restricted if the
broker/dealer to whom a Fund sells the security becomes insolvent; 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.
Option Contracts: The Funds may engage in options contracts for hedging the
value of a Fund's portfolio and in an effort to increase current income. Upon
the purchase of a put option or a call option by the Fund, the premium paid is
recorded as an investment, the value of which is marked-to-market daily to
reflect the current market value. When a purchased option expires, the Fund will
realize a loss in the amount of the cost of the option. When the Fund enters
into a closing
33
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
sale transaction, the Fund will realize a gain or loss depending on whether the
sales proceeds from the closing sale transaction are greater or less than the
cost of the option. When the Fund exercises a put option, it will realize a gain
or loss from the sale of the underlying security and the proceeds from such sale
will be decreased by the premium originally paid. When the Fund exercises a call
option, the cost of the security which the Fund purchases upon exercise will be
increased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. In addition, there is the risk the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market.
Futures Contracts: Certain of the Funds may engage in futures contracts 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. Upon
entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin." Subsequent payments
("variation margin") are made or received by the Fund each day, depending on the
daily fluctuation of the value of the contract.
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking-to-market" on
a daily basis to reflect the market value of the contract at the end of each
day. The Fund recognizes a realized gain or loss when the contract is closed
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Fund's basis in the contract.
Risks arise in the possible movement of the securities or indices underlying
those investments. Risks also include the possibility that there may not be a
liquid secondary market for these contracts, that a change in the value of the
contract may not correlate with changes in the value of the underlying
securities or that the counterparty to a contract may default on its obligation
to perform.
Securities Transactions and Investment Income: Securities transactions are
accounted for on a trade date basis. Realized gains and losses are computed on
the specific identification of the securities sold. Interest income, adjusted
for amortization of market discounts and premiums on investments on the
straight-line method, is earned from settlement date and is recorded on the
accrual basis (amortization of discounts and premiums on stripped
mortgage-backed securities and zero coupon bonds is accounted for using the
effective yield method). Dividend income is recorded on the ex-dividend date.
Each Fund's investment income and realized and unrealized gains and losses are
allocated among the classes based upon the relative net assets of each class.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income is not accrued
until settlement date.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities structured so that one class receives most, if not all, of the
principal from the mortgage assets, while the other class receives most, if not
all, of the interest and the remainder of the principal. If the underlying
mortgage assets experience greater than anticipated repayments of principal, a
Fund may fail to fully recoup its initial investment in these securities. The
market value of these securities is unusually volatile in response to changes in
interest rates.
Dividends and Distributions to Shareholders: It is the policy of the Funds to
declare dividends daily from net investment income and to pay such dividends
monthly. The Funds will distribute net realized capital gains (including
short-term capital gains), unless offset by any available capital loss
carryforward, annually after the fiscal year in which earned. Additional
distributions of net investment income and capital gains may be made at the
discretion of the Board of Trustees in order to avoid application of the 4%
non-deductible Federal excise tax. Income distributions and capital gain
distributions on a Fund level are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to timing differences and differing
characterization of distributions made by the Fund as a whole.
Federal Income Taxes: Each Fund intends to qualify as a regulated investment
company by complying with the requirements of the Internal Revenue Code of 1986,
as amended, applicable to regulated investment companies and by distributing
substantially all of its earnings to its shareholders. Therefore, no Federal
income or excise tax provision is required.
34
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Expenses: General expenses of the Trust are allocated to the Funds based upon
relative net assets. Operating expenses directly attributable to a class of
shares are charged to that class's operations. Expenses of each Fund not
directly attributable to the operations of any class of shares are prorated
among the classes based on the relative average net assets of each class.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND RELATED PARTY TRANSACTIONS.
The Trust has entered into an Investment Advisory Agreement with NationsBank,
N.A. (Carolinas) ("NationsBank"), as successor to NationsBank of North Carolina,
N.A., an indirect wholly-owned subsidiary of NationsBank Corporation, with
respect to the Funds. Under the terms of this Investment Advisory Agreement,
NationsBank is entitled to advisory fees from each Fund equal to 0.60%, on an
annualized basis, of the average daily net assets of each Fund.
Stephens Inc. ("Stephens") serves as the Trust's administrator pursuant to an
Administration Agreement. The Shareholder Services Group, Inc. ("TSSG"), a
wholly-owned subsidiary of First Data Corporation, serves as the Trust's
co-administrator pursuant to a Co-Administration Agreement. Pursuant to the
Administration and Co-Administration Agreements, the administrator and the
co-administrator are entitled to receive a combined fee, computed daily and paid
monthly, at the annual rate of 0.10% of average daily net assets of the Trust
and the investment portfolios of Nations Fund, Inc. (another registered open-end
investment company that is part of the Nations Fund Family) on a combined basis.
For the six months ended May 31, 1995, the administrator earned $468,525 (after
fee waivers) for its services.
The investment adviser, administrator and co-administrator may, from time to
time, reduce their fees payable by each Fund (either voluntarily or pursuant to
applicable state limitations). For the six months ended May 31, 1995, the
investment adviser, administrator and/or co-administrator voluntarily waived
fees as follows:
<TABLE>
<CAPTION>
FEES WAIVED FEES WAIVED BY
BY ADMINISTRATOR/
ADVISER CO-ADMINISTRATOR
---------------------------------
<S> <C> <C>
Short-Intermediate Government Fund........................ $ 506,403 $7,497
Managed Bond Fund......................................... 80,030 2,420
Short-Term Income Fund.................................... 324,659 2,788
Adjustable Rate Government Fund........................... 100,144 772
Diversified Income Fund................................... 77,289 1,341
Strategic Fixed Income Fund............................... 309,525 7,892
Mortgage-Backed Securities Fund........................... 30,404 74
</TABLE>
No officer, director or employee of NationsBank, Stephens or TSSG, or any
affiliate thereof, receives any compensation from the Trust for serving as a
trustee or officer of the Trust. The Trust pays each Trustee an annual fee of
$1,000 ($3,000 for the Chairman of the Board), plus $500 per Fund and an
additional $1,000 for each in-person board meeting, and $500 for each telephonic
board meeting, attended. The Trust also reimburses expenses incurred by the
Trustees in attending such meetings.
Each Fund's eligible Trustees may participate in a nonqualified deferred
compensation and retirement plan which may be terminated at any time. All
benefits provided under these plans are unfunded and any payments to plan
participants are paid solely out of the Funds' assets. If approved by the
Securities and Exchange Commission ("SEC"), income earned on each plan
participant's deferral account will be tied to the rate of return of the
eligible mutual funds selected by the participants or, if no funds are selected,
to the rate of return of the Nations Treasury Fund. Until SEC approval is
received, the rate of return will be tied to the yield on 90-day U.S. Treasury
Bills.
NationsBank of Texas, N.A., acts as the Trust's custodian and earned $137,529
for its services during the six months ended May 31, 1995. TSSG serves as
transfer agent for the Funds' Investor Class Shares. NationsBank of Texas, N.A.
acts as the subtransfer agent for the Trust A Shares of the Funds.
Stephens, acts as the distributor of the Funds' shares. For the six months ended
May 31, 1995, the Funds were informed that the distributor received $27,677
representing commission (sales charges) on sales of Investor A Shares of the
Funds. For the six months ended May 31, 1995, the Funds were informed that the
distributor received $192,164 in contingent
35
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
deferred sales charges from Investor C and Investor N Shares of the Funds. A
substantial portion of these fees are paid to affiliates of NationsBank.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS.
The Trust has adopted a shareholder servicing and distribution plan ("Investor A
Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor A Shares of
the Funds. Under the Investor A Plan, the Funds pay fees directly to the
distributor. Payments by a Fund under the Investor A Plan may not exceed 0.25%,
on an annualized basis, of the average daily net assets of the Fund's Investor A
Shares. Fees paid pursuant to the Investor A Plan are charged as expenses of the
Investor A Shares of a Fund as accrued.
The Trust also has adopted a shareholder servicing plan ("Investor A Servicing
Plan") with respect to Investor A Shares of the Short-Term Income Fund. Under
the Investor A Servicing Plan, the Short-Term Income Fund may pay for
shareholder services provided by institutions to shareholders of Investor A
Shares of the Fund. Payments by the Short-Term Income Fund under the Investor A
Servicing Plan may not exceed 0.25%, on an annualized basis, of the average
daily net assets of Investor A Shares of the Fund.
The Trust also has adopted distribution plans pursuant to Rule 12b-1 under the
1940 Act with respect to Investor C ("Investor C Plan") and Investor N
("Investor N Plan") Shares of each Fund. Pursuant to the Plans, fees for each
Fund are paid directly to the distributor. Payments under the Plans are accrued
daily and paid monthly at a rate that will not exceed 0.75%, on an annualized
basis, of the average daily net assets of the Investor C or Investor N Shares,
respectively, of a Fund. Fees paid pursuant to the Plans are charged as expenses
of Investor C or Investor N Shares of a Fund as accrued.
The Trust also has adopted shareholder servicing plans with respect to Investor
C ("Investor C Servicing Plan") and Investor N ("Investor N Servicing Plan")
Shares of the Funds. Pursuant to the Plans, each Fund pays for certain
shareholder support services that are provided to the owners of Investor C or
Investor N Shares by the servicing agents that have entered into a shareholder
servicing agreement with the Trust. Payments under the Plans are accrued daily
and paid monthly at a rate that will not exceed 0.25%, on an annualized basis,
of the average daily net assets of the Investor C or Investor N Shares,
respectively, of a Fund. Fees paid pursuant to the Plans are charged as expenses
of Investor C or Investor N Shares of a Fund as accrued.
A substantial portion of the fees, paid pursuant to the Plans described above,
are paid to affiliates of NationsBank.
For the six months ended May 31, 1995, the Funds incurred the following amounts
pursuant to the above plans:
<TABLE>
<CAPTION>
FEES PAID PURSUANT TO:
----------------------------------------------------------------------------------
INVESTOR A INVESTOR A INVESTOR C INVESTOR C INVESTOR N INVESTOR N
PLAN SERVICING PLAN PLAN SERVICING PLAN PLAN SERVICING PLAN
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Intermediate
Government Fund............. $ 70,593 N/A $ 37,227 -- $ 18,519 $ 12,982
Managed Bond Fund............. 4,802 N/A 236 -- N/A N/A
Short-Term Income Fund........ -- $2,510 12,180 -- 6,179 15,447
Adjustable Rate
Government Fund............. 6,983 N/A 3,790 -- 9,874 2,469
Diversified Income Fund....... 14,153 N/A 10,522 -- 155,947 77,973
Strategic Fixed Income Fund... 1,132 N/A 93 -- 4,258 2,662
</TABLE>
36
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The chart below shows the effective rates, expressed as a percentage of average
daily net assets, paid by the Funds under the shareholder servicing and
distribution plans for the six months ended May 31, 1995:
<TABLE>
<CAPTION>
INVESTOR A INVESTOR A INVESTOR C INVESTOR C INVESTOR N INVESTOR N
PLAN SERVICING PLAN PLAN SERVICING PLAN PLAN SERVICING PLAN
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Intermediate
Government Fund............. 0.20% N/A 0.50% -- 0.35% 0.25%
Managed Bond Fund............. 0.20% N/A 0.50% -- N/A N/A
Short-Term Income Fund........ -- 0.20% 0.35% -- 0.10% 0.25%
Adjustable Rate
Government Fund............. 0.20% N/A 0.35% -- 0.40% 0.10%
Diversified Income Fund....... 0.25% N/A 0.75% -- 0.50% 0.25%
Strategic Fixed Income Fund... 0.20% N/A 0.50% -- 0.40% 0.25%
</TABLE>
4. PURCHASES AND SALES OF SECURITIES.
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. government securities and short-term investments, for the six months ended
May 31, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-----------------------------
<S> <C> <C>
Short-Intermediate Government Fund..................................... $ -- $ 1,439,000
Managed Bond Fund...................................................... 26,276,636 43,945,271
Short-Term Income Fund................................................. 103,082,642 153,023,899
Adjustable Rate Government Fund........................................ -- 55,141
Diversified Income Fund................................................ 15,834,425 12,395,645
Strategic Fixed Income Fund............................................ 94,176,328 137,812,068
Mortgage-Backed Securities Fund........................................ -- 572,449
</TABLE>
The aggregate cost of purchases and proceeds from sales of long-term U.S.
government securities for the six months ended May 31, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-----------------------------
<S> <C> <C>
Short-Intermediate Government Fund..................................... $705,000,017 $689,820,477
Managed Bond Fund...................................................... 257,163,397 281,580,051
Short-Term Income Fund................................................. 165,363,203 133,500,745
Adjustable Rate Government Fund........................................ 10,037,552 29,133,275
Diversified Income Fund................................................ 69,401,652 56,779,976
Strategic Fixed Income Fund............................................ 850,024,141 797,226,155
Mortgage-Backed Securities Fund........................................ 130,181,245 128,358,686
</TABLE>
At May 31, 1995, aggregate gross unrealized appreciation and unrealized
depreciation for tax purposes were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION
----------------------------
<S> <C> <C>
Short-Intermediate Government Fund......................................... $ 4,614,801 $485,962
Managed Bond Fund.......................................................... 6,387,826 329,773
Short-Term Income Fund..................................................... 2,539,215 294,824
Adjustable Rate Government Fund............................................ 295,886 550,021
Diversified Income Fund.................................................... 5,457,746 518,820
Strategic Fixed Income Fund................................................ 27,953,091 864,449
Mortgage-Backed Securities Fund............................................ 754,910 322,845
</TABLE>
37
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
During the six months ended May 31, 1995, activity in written options for the
Strategic Fixed Income Fund was as follows:
<TABLE>
<CAPTION>
NUMBER
OF CONTRACTS PREMIUM
----------------------------
<S> <C> <C>
Options beginning of period................................................ -- $ --
Options written............................................................ 1,434 1,253,064
Options closed............................................................. (1,434) (1,253,064)
------- -----------
Options outstanding at May 31, 1995........................................ -- $ --
======= ===========
</TABLE>
Information regarding dollar roll transactions by the Funds is as follows:
<TABLE>
<CAPTION>
AVERAGE AVERAGE
MAXIMUM AVERAGE AMOUNT FUND SHARES AMOUNT
OUTSTANDING OUTSTANDING FEE INCOME OUTSTANDING OUTSTANDING
DURING THE PERIOD DURING THE PERIOD EARNED DURING THE PERIOD PER SHARE
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Intermediate Government Fund......... $95,044,763 $16,827,876 $239,291 127,648,118 $0.13
Diversified Income Fund.................... 8,670,870 568,385 7,955 10,036,289 0.06
Mortgage-Backed Securities Fund............ 9,006,250 2,144,362 22,292 6,519,752 0.33
</TABLE>
The average amount outstanding during the period was calculated by summing the
borrowings at the end of each day and dividing the sum by the number of days in
the six months ended May 31, 1995.
5. SHARES OF BENEFICIAL INTEREST.
As of May 31, 1995, an unlimited number of shares without par value were
authorized for the Trust. The Trust's Declaration of Trust authorizes the Board
of Trustees to classify or reclassify any authorized, but unissued shares into
one or more additional classes or series of shares. See Schedule of Capital
Stock Activity.
6. ORGANIZATION COSTS.
The Funds bear all costs in connection with their organization, including the
fees and expenses of registering and qualifying their shares for distribution
under Federal and state securities regulations. All such costs are being
amortized on the straight-line method over a period of five years from
commencement of operations. In the event that any of the shares issued by the
Funds to their sponsor prior to the commencement of the Funds' public offering
("initial shares") are redeemed during such amortization period by any holder
thereof, the Funds will be reimbursed by the holder for any unamortized
organization costs in the same proportion as the number of initial shares
redeemed bears to the number of initial shares outstanding at the time of
redemption.
7. LINE OF CREDIT.
The Trust and Nations Fund, Inc. participate in a $25 million line of credit
provided by Mellon Bank, N.A. (the "Bank") under a Line of Credit Agreement (the
"Agreement") dated March 17, 1994. Advances under the Agreement are taken
primarily for temporary or emergency purposes, including the meeting of
redemption requests. Under the Agreement, a Fund may borrow up to the lesser of
$10 million or 5% of its net assets. Interest on borrowings is payable either at
the Bank's Money Market Rate or the London Interbank Offered Rate (LIBOR) plus
0.25% on an annualized basis. The Funds and the other affiliated entities are
charged an aggregate commitment fee of 0.25% per annum on the amount of the
credit. Each Fund is liable only for that portion of any commitment with respect
to such Fund and shall not be liable for the portion of the commitment fee of
any other fund. The Agreement requires, among other things, that each
participating Fund maintain a ratio of net assets (not including funds borrowed
pursuant to the Agreement) to aggregate amount of indebtedness pursuant to the
Agreement of no less than 4 to 1.
38
<PAGE>
NATIONS FUND TRUST
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
During the six months ended May 31, 1995, the Funds had the following borrowings
under the Agreement:
<TABLE>
<CAPTION>
AVERAGE
BORROWINGS OUTSTANDING OUTSTANDING INTEREST INTEREST
FUND AT END OF PERIOD BALANCE RATE EXPENSE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Income Fund........................... -- $ 3,846 6.20% $ 121
Strategic Fixed Income Fund...................... -- 6,593 5.95% 198
</TABLE>
8. CAPITAL LOSS CARRYFORWARD.
As of November 30 1994, the funds listed below had available for Federal income
tax purposes the following unused capital losses:
<TABLE>
<CAPTION>
NAME OF FUND EXPIRING IN 2002
- ------------------------------------------------------------------------------------------------------
<S> <C>
Short-Intermediate Government Fund............................................... $ 22,968,237
Managed Bond Fund................................................................ 4,599,700
Adjustable Rate Government Fund.................................................. 2,087,054
Diversified Income Fund.......................................................... 2,249,163
Strategic Fixed Income Fund...................................................... 11,546,423
Mortgage-Backed Securities Fund.................................................. 4,229,412
</TABLE>
9. REORGANIZATION.
On April 29, 1994, the Strategic Fixed Income Fund (Acquiring Fund) acquired the
assets and certain liabilities of The Capitol Mutual Funds Fixed Income
Portfolio (Acquired Fund), in a tax-free exchange for shares of the Acquiring
Fund, pursuant to a plan of reorganization approved by the Acquired Fund's
shareholders on March 31, 1994. Total shares issued by the Acquiring Fund, the
value of the shares issued by the Acquiring Fund, the total net assets of the
Acquired Fund and the Acquiring Fund and any unrealized depreciation included in
the Acquired Fund's total net assets at the acquisition date are as follows:
<TABLE>
<CAPTION>
SHARES VALUE OF TOTAL NET TOTAL NET ACQUIRED
ISSUED BY SHARES ISSUED ASSETS OF ASSETS OF FUND
ACQUIRING BY ACQUIRING ACQUIRED ACQUIRING UNREALIZED
ACQUIRING FUND ACQUIRED FUND FUND FUND FUND* FUND DEPRECIATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Strategic Fixed The Capitol Mutual Funds
Income Fund Fixed Income Portfolio 2,136,871 $ 20,663,537 $20,663,537 $553,906,019 $311,904
</TABLE>
- ---------------
* The net assets of the Acquiring Fund immediately after the acquisition were
$574,569,556.
10. SUBSEQUENT EVENT.
Each Fund's eligible Trustees may participate in a deferred compensation plan
and a retirement plan which may be terminated at any time. All benefits provided
under these plans are unfunded and any payments to plan participants are paid
solely out of the Funds' assets. Pursuant to an exemptive order granted by the
Securities and Exchange Commission on June 20, 1995, income earned on each plan
participant's deferral account is tied to the rate of return of the eligible
mutual funds selected by the participants or, if no funds are selected, to the
rate of return of the Nations Treasury Fund.
If approved by the shareholders of the Adjustable Rate Government Fund, the
assets of the Adjustable Rate Government Fund will merge into the
Short-Intermediate Government Fund on August 18, 1995. In addition, if approved
by the shareholders of the Managed Bond Fund, the assets of the Managed Bond
Fund will merge into the Strategic Fixed Income Fund on September 22, 1995.
39
<PAGE>
THE NATIONS FUND FAMILY
EQUITY FUNDS
GROWTH
Nations Capital Growth Fund
Nations Disciplined Equity Fund
Nations Emerging Growth Fund
Nations Equity Index Fund*
Nations International Equity Fund
GROWTH AND INCOME
Nations Balanced Assets Fund
Nations Equity Income Fund
Nations Value Fund
BOND FUNDS
INCOME
Nations Adjustable Rate Government Fund
Nations Diversified Income Fund
Nations Government Securities Fund
Nations Managed Bond Fund
Nations Short-Intermediate Government Fund
Nations Short-Term Income Fund
Nations Strategic Fixed Income Fund
Nations Mortgage-Backed Securities Fund*
TAX-EXEMPT INCOME
Nations Florida Municipal Bond Fund
Nations Florida Intermediate Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Georgia Intermediate Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations Maryland Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Tennessee Intermediate Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Texas Intermediate Municipal Bond Fund
Nations Virginia Municipal Bond Fund
Nations Virginia Intermediate Municipal Bond Fund
Nations Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Short-Term Municipal Income Fund
MONEY MARKET FUNDS
Nations Government Money Market Fund
Nations Prime Fund
Nations Tax Exempt Fund
Nations Treasury Fund
*Trust classes only
<PAGE>
This report is submitted for the general information of shareholders of Nations
Fund Trust. For more detailed information about Nations Fund Trust, including
fees and expenses, please see the prospectus and statement of additional
information of Nations Fund Trust.
<PAGE>
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[NATIONS FUND LOGO] BULK RATE
PO Box 9564 U.S. POSTAGE
Providence, RI 02940-9654 PAID
Toll Free 1-800-982-2271 BOSTON, MA
PERMIT NO.
54201
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SAR3-5/95
<PAGE>
NATIONS FUND TRUST
FORM N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Per Share Income and Capital Changes
Included in Part B:
Audited Financial Statements for the Nations Government Money Market,
Nations Tax Exempt, Nations Value, Nations Capital Growth, Nations
Emerging Growth, Nations Disciplined Equity, Nations Equity Index
Fund, Nations Balanced Assets, Nations Short-Intermediate Government,
Nations Managed Bond, Nations Short-Term Income, Nations Diversified
Income, Nations Strategic Fixed Income, Nations Adjustable Rate
Government, Nations Mortgage-Backed Securities, Nations Short-Term
Municipal Income, Nations Municipal Income, Nations Intermediate
Municipal Bond, Nations Florida Intermediate Municipal Bond, Nations
Georgia Intermediate Municipal Bond, Nations Maryland Intermediate
Municipal Bond, Nations North Carolina Intermediate Municipal Bond,
Nations South Carolina Intermediate Municipal Bond, Nations Tennessee
Intermediate Municipal Bond, Nations Texas Intermediate Municipal
Bond, Nations Virginia Intermediate Municipal Bond, Nations Florida
Municipal Bond, Nations Georgia Municipal Bond, Nations Maryland
Municipal Bond, Nations North Carolina Municipal Bond, Nations South
Carolina Municipal Bond, Nations Tennessee Municipal Bond, Nations
Texas Municipal Bond Fund and Nations Virginia Municipal Bond Funds:
Schedule of Investments for November 30, 1994
Statements of Assets and Liabilities for November 30, 1994
Statements of Operations for the year ended November 30, 1994
Statements of Changes in Net Assets for the years ended
November 30, 1994 and November 30, 1993
Schedule of Capital Stock Activity for the years ended
November 30, 1994 and November 30, 1993
Financial Highlights
Notes to Financial Statements
Report of Independent Accountants, dated January 19, 1995
Unaudited Financial Statements for the above mentioned Funds:
Schedule of Investments for May 31, 1995
Statement of Assets and Liabilities for May 31, 1995
1
<PAGE>
Statement of Operations for the year ended May 31, 1995
Statement of Changes in Net Assets for the years ended May 31, 1994
Schedule of Capital Stock Activity for May 31, 1995
Financial Highlights
Notes to Financial Statements
Included in Part C:
Consent of Independent Accountants
(b) Exhibits
Exhibit
Number
(1)(a) Declaration of Trust dated May 6, 1985, is incorporated by
reference to its Registration Statement, filed May 17, 1985.
(1)(b) Certificate pertaining to classification of shares dated May
17, 1985, is incorporated by reference to its Registration
Statement, filed May 17, 1985.
(1)(c) Amendment dated July 27, 1987 to Declaration of Trust is
incorporated by reference to Post-Effective Amendment No. 4
to its Registration Statement filed January 29, 1988.
(1)(d) Amendment dated September 13, 1989 to Declaration of Trust is
incorporated by reference to Post-Effective Amendment No. 8
to its Registration Statement filed March 16, 1990.
(1)(e) Certificate pertaining to classification of shares dated
August 24, 1990, is incorporated by Post-Effective Amendment
No. 11, filed September 26, 1990.
(1)(f) Certificate and Amendment to Declaration of Trust dated
November 26, 1990 is incorporated by reference to
Post-Effective Amendment No. 13, filed January 18, 1991.
(1)(g) Certificate pertaining to classification of shares dated July
18, 1991 is incorporated by reference to Post-Effective
Amendment No. 16, filed July 23, 1991.
(1)(h) Amendment dated March 26, 1992 to Declaration of Trust is
incorporated by reference to Post-Effective Amendment No. 19,
filed March 30, 1992.
(1)(i) Certificate relating to classification of shares is
incorporated by reference to Amendment No. 19, filed March
30, 1992.
2
<PAGE>
(1)(j) Amendment to Declaration of Trust dated September 21, 1992,
is incorporated by reference to Post-Effective Amendment No.
23, filed December 23, 1992.
(1)(k) Certificate relating to the classification of shares and an
Amendment to the Declaration of Trust dated March 26, 1993,
is incorporated by reference to Post-Effective Amendment No.
27, filed May 27, 1993.
(1)(l) Certificate relating to the establishment of money market
funds' Investor C shares dated July 8, 1993, is incorporated
by reference to Post-Effective Amendment No. 29, filed
September 30, 1993.
(1)(m) Certificate relating to the establishment of Equity Index,
Short-Term Municipal Income, Florida Municipal Bond, Georgia
Municipal Bond, North Carolina Municipal Bond, South Carolina
Municipal Bond, Tennessee Municipal Bond, Texas Municipal
Bond and Virginia Municipal Bond Funds dated September 22,
1993, is incorporated by reference to Post-Effective
Amendment No. 29, filed September 30, 1993.
(1)(n) Form of Certificate relating to the establishment of the
Special Equity Fund is incorporated by reference to
Post-Effective Amendment No. 30, filed, December 1, 1993.
(1)(o) Certificate relating to the redesignation of Investor B
Shares and Investor C Shares of the non-money market funds to
"Investor C Shares" and "Investor N Shares," respectively, is
incorporated by reference by Post-Effective Amendment No. 32,
filed March 29, 1994.
(1)(p) Certificate relating to the Classification of Shares of the
Money Market Fund and the Tax Exempt Fund creating "Investor
D Shares", is incorporated by reference to Post-Effective
Amendment No. 36, filed January 31, 1995.
(1)(q) Form of Classification of Shares relating to the renaming of
the Nations Special Equity Fund is incorporated by reference
to Post-Effective Amendment No. 36, filed January 31, 1995.
(1)(r) Certificate relating to the establishment of the Nations
Tax-Managed Equity Fund's Series of Shares is incorporated by
reference to Post-Effective Amendment No. 40, filed October
20, 1995.
(2)(a) Amended and Restated Code of Regulations as approved and
adopted by Registrant's Board of Trustees is incorporated by
reference to Pre-Effective Amendment No. 2, filed October 4,
1985.
3
<PAGE>
(2)(b) Amendment to the Code of Regulations as approved and adopted
by Registrant's Board of Trustees on June 24, 1992, is
incorporated by reference to Post-Effective Amendment No. 22,
filed July 30, 1992.
(3) None.
(4)(a) Specimen copies of share certificates, to be filed by amendment.
(5)(a) Master Investment Advisory Agreement between Registrant and
C&S/Sovran Trust Company (Georgia), N.A., dated December 20,
1991, relating to the Money Market Fund, Government Fund, Tax
Exempt Fund, Value Fund, Income Equity Fund,
Short-Intermediate Government Fund, Managed Bond Fund,
Municipal Income Fund, Georgia Municipal Bond Fund, Maryland
Municipal Bond Fund, South Carolina Municipal Bond Fund, and
Virginia Municipal Bond Fund, is incorporated by reference to
Post-Effective Amendment No. 19, filed March 30, 1992.
(5)(b) Amendment to the Master Investment Advisory Agreement, dated
June 30, 1992, among Registrant and NationsBank of Georgia,
N.A. ("NationsBank Georgia"), and NationsBank of North
Carolina, N.A. ("NationsBank North Carolina"), is
incorporated by reference to Post-Effective Amendment No. 23,
filed December 23, 1992.
(5)(c) Investment Advisory Agreement between Registrant and
NationsBank North Carolina, dated September 28, 1992,
relating to the Capital Growth Fund, Emerging Growth Fund,
Balanced Assets Fund, Short-Term Income Fund, Adjustable Rate
Government Fund, Diversified Income Fund, Strategic Fixed
Income Fund, Mortgage-Backed Securities Fund, Florida
Municipal Bond Fund, North Carolina Municipal Bond Fund and
Texas Municipal Bond Fund, is incorporated by reference to
Post-Effective Amendment No. 23, filed December 23, 1992.
(5)(d) Amendment No. 1 dated February 3, 1993, to the Investment
Advisory Agreement between Registrant and NationsBank North
Carolina dated September 28, 1992, relating to the Tennessee
Municipal Bond Fund and Intermediate Municipal Bond Fund,
incorporated by reference to its Registration Statement,
filed March 26, 1993.
(5)(e) Form of Amendment No. 2 to the Investment Advisory Agreement
between Registrant and NationsBank relating to the Equity
Index Fund, Florida Municipal Bond Fund, Georgia Municipal
Bond Fund, Maryland Municipal Bond Fund, North Carolina
Municipal Bond Fund, South Carolina Municipal Bond Fund,
Tennessee Municipal Bond Fund, Texas Municipal Bond Fund and
Virginia Municipal Bond Fund, is incorporated by reference to
Post-Effective Amendment No. 29, filed September 30, 1993.
5
<PAGE>
(5)(f) Form of Amendment No. 3 to the Investment Advisory Agreement
between Registrant and NationsBank relating to the Special
Equity Fund is incorporated by reference to Post-Effective
Amendment No. 30, filed December 1, 1993.
(5)(g) Form of Amendment No. 4 to the Investment Advisory Agreement
relating to Nations Disciplined Equity Fund is incorporated
by reference to Post-Effective Amendment No. 37, filed March
31, 1995.
(5)(h) Form of Amendment No. 5 to the Investment Advisory Agreement
relating to Nations Tax-Managed Equity Fund is incorporated
by reference to Post-Effective Amendment No. 40, filed
October 20, 1995.
(5)(i) Investment Advisory Agreement between NationsBanc Advisors,
Inc., ("NBAI") and the Registrant is filed herewith.
(5)(j) Sub-Investment Advisory Agreement between TradeStreet
Investment Associates, Inc. ("TradeStreet") and the
Registrant is filed herewith.
(6)(a) Amended and Restated Distribution Agreement, dated March 19,
1992, between Registrant and TBC Funds Distributor, Inc.
relating to the Money Market Fund, Government Fund, Tax
Exempt Fund, Value Fund, Income Equity Fund, Managed Bond
Fund, Short-Intermediate Government Fund, Municipal Income
Fund, Virginia Municipal Bond Fund, Georgia Municipal Bond
Fund, Maryland Municipal Bond Fund and South Carolina
Municipal Bond Fund with respect to Investor A Shares,
Investor B Shares, Trust A Shares and Trust B Shares, is
incorporated by reference to Post-Effective Amendment No. 22,
filed April 6, 1992.
(6)(b) Amendment No. 1 dated September 28, 1992 to the Amended and
Restated Distribution Agreement dated March 19, 1992, between
Registrant and Funds Distributor, Inc. regarding the addition
of the Nations Capital Growth Fund, Balanced Assets Fund,
Short-Term Income Fund, Adjustable Rate Government Fund,
Diversified Income Fund, Strategic Fixed Income Fund,
Mortgage-Backed Securities Fund, Florida Municipal Bond Fund,
North Carolina Municipal Bond Fund and Texas Municipal Bond
Fund, is incorporated by reference to Post-Effective
Amendment No. 26, filed March 26, 1993.
(6)(c) Amendment No. 2 dated February 3, 1993, to the Amended and
Restated Distribution Agreement dated March 19, 1992, between
Registrant and Funds Distributor, Inc. relating to the
Tennessee Municipal Bond Fund and Intermediate Municipal Bond
Fund and the Money Market Funds' Investor B Shares and
Non-Money Market Funds' Investor C Shares of the Registrant,
is incorporated by reference to Post-Effective Amendment No.
26, filed March 26, 1993.
5
<PAGE>
(6)(d) Distribution Agreement between Stephens Inc. and Registrant
for all classes of shares of Nations Fund Trust is
incorporated by reference to Post-Effective Amendment No. 37,
filed March 31, 1995, filed March 26, 1993.
(6)(e) Forms of Broker-Dealer and Bank Agreements with TBC Funds
Distributor, Inc. are incorporated by reference to
Post-Effective Amendment No. 19, filed March 30, 1992.
(6)(f) Shareholder Administration Agreement for Trust B Shares is
filed herewith.
(6)(g) Shareholder Administration Agreement for Trust B Shares for
the Registrant, Nations Fund, Inc. and Nations Portfolios,
Inc. is filed herewith.
(7) None.
8)(a) Custodian Services Agreement between Registrant and Provident
National Bank, dated December 3, 1990, is incorporated by
reference to Post-Effective Amendment No. 15, filed May 24,
1991.
(8)(b) Amendment dated July 11, 1991, to Custodian Services Agreement
dated December 3, 1990, between Registrant and Provident
National Bank to add the Short-Intermediate Government Fund,
is incorporated by reference to Post-Effective Amendment No.
22, filed April 6, 1992.
(8)(c) Amendment to Custodian Services Agreement between Registrant
and Provident National Bank to add the Georgia Municipal Bond
Fund and the South Carolina Municipal Bond Fund with related
fee letter is incorporated by reference to Post-Effective
Amendment No. 19, filed March 30, 1992.
(8)(d) Fee Letter dated July 1, 1992, with regard to the Custodian
Services Agreement between Registrant and Provident National
Bank relating to the Value Fund, Income Equity Fund,
Short-Intermediate Government Fund, Managed Bond Fund, Nations
Municipal Income Fund, Maryland Municipal Bond Fund, Virginia
Municipal Bond Fund, Georgia Municipal Bond Fund and South
Carolina Municipal Bond Fund, is incorporated by reference to
Post-Effective Amendment No. 23, filed December 23, 1992.
(8)(e) Mutual Fund Custody Agreement between Registrant and
NationsBank of Texas, N.A. ("NationsBank Texas"), dated June
26, 1992, relating to the Money Market Fund, Government Fund,
Tax Exempt Fund, Balanced Assets Fund, Short-Term Income Fund,
Diversified Income Fund, Capital Growth Fund, Emerging Growth
Fund, Adjustable Rate Government Fund, Strategic Fixed Income
Fund, Mortgage-Backed Securities Fund, North Carolina
Municipal Bond Fund, Florida Municipal Bond Fund and Texas
Municipal Bond Fund, is incorporated by reference to
Post-Effective Amendment No. 23, filed December 23, 1992.
6
<PAGE>
(8)(f) Amendment No. 1 dated February 3, 1993, to the Mutual Fund
Custody Agreement dated June 26, 1992 between Registrant and
NationsBank Texas, relating to the addition of Tennessee
Municipal Bond Fund and Intermediate Municipal Bond Fund, is
incorporated by reference to Post-Effective Amendment No. 26,
filed March 26, 1993.
(8)(f)(i) Amendment No. 2 to the Mutual Fund Custody Agreement between
Registrant and NationsBank relating to the Equity Index Fund,
Short-Term 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, Nations Virginia
Intermediate Municipal Bond Fund is incorporated by reference
to Post-Effective Amendment No. 32, filed March 29, 1994.
(8)(f)(ii) Form of Amendment No. 3 to the Mutual Fund Custody Agreement
between Registrant and NationsBank Texas relating to the
Special Equity Fund is incorporated by reference to
Post-Effective Amendment No. 31, filed January 31, 1994.
(8)(f)(iii) Form of Amendment No. 4 to the Mutual Fund Custody Agreement
between the Registrant and NationsBank Texas relating to the
Nations Tax-Managed Equity fund is incorporated by reference
to Post-Effective Amendment No. 40, filed October 20, 1995.
(8)(g) Form of Global Sub-Custody Agreement between Registrant,
The Chase Manhattan Bank and NationsBank Texas is
incorporated by reference to Post-Effective Amendment No.
31, filed January 31, 1994.
(9)(a) Amended and Restated Administration Agreement dated July 1,
1992, and related Fee Letter between Registrant and The
Boston Company Advisors, Inc., is incorporated by reference
to Post-Effective Amendment No. 23, filed December 23,
1992.
(9)(b) Amendment No. 1 dated February 3, 1993, to the Amended and
Restated Administration Agreement, dated July 1, 1992,
between Registrant and The Boston Company Advisors, Inc.
relating to the Tennessee Municipal Bond Fund and
Intermediate Municipal Bond Fund and the Money Market
Funds' Investor B Shares and the Non-Money Market Funds'
Investor C Shares of the Registrant, is incorporated by
reference to Post-Effective Amendment No. 26, filed March
26, 1993.
7
<PAGE>
(9)(c) Form of Amendment No. 2 to the Amended and Restated
Administration Agreement dated July 1, 1992, is
incorporated by reference to Post-Effective Amendment No.
31, filed January 31, 1994.
(9)(d) Administration Agreement between Stephens Inc. and
Registrant is incorporated by reference to Post-Effective
Amendment No. 37, filed March 31, 1995.
(9)(e) Co-Administration Agreement between The Boston Company
Advisors, Inc. and Registrant is incorporated by reference
to Post-Effective Amendment No. 37, filed March 31, 1995.
(9)(f) Amended Fee Letter dated December 1, 1992, among
Registrant, The Boston Company Advisors, Inc. and Nations
Fund, Inc., is incorporated by reference to Post-Effective
Amendment No. 26, filed March 26, 1993.
(9)(g) Transfer Agency and Registrar Agreement dated April 25,
1992, between Registrant and The Shareholder Services
Group, Inc., relating to the Investor Shares, is
incorporated by reference to Post-Effective Amendment No.
22, filed April 6, 1992.
(9)(h) Amendment No. 1 dated September 28, 1992, to the Transfer
Agency and Registrar Agreement between Registrant and The
Shareholder Services Group, Inc. dated April 25, 1992,
relating to the Investor Shares of Capital Growth Fund,
Emerging Growth Fund, Balanced Assets Fund, Short-Term
Income Fund, Diversified Income Fund, Strategic Fixed
Income Fund, Mortgage-Backed Securities Fund, Florida
Municipal Bond Fund, North Carolina Municipal Bond Fund and
Texas Municipal Bond Fund, is incorporated by reference to
Post-Effective Amendment No. 23, filed December 23, 1992.
(9)(i) Amendment No. 2 dated February 3, 1993, to the Transfer
Agency and Registrar Agreement between Registrant and The
Shareholder Services Group, Inc. dated April 25, 1992,
relating to the Tennessee Municipal Bond Fund, Intermediate
Municipal Bond Fund and the Money Market Funds' Investor B
Shares and the Non-Money Market Funds' Investor C Shares of
the Registrant, is incorporated by reference to
Post-Effective Amendment No. 26, filed March 26, 1993.
(9)(j) Amendment No. 3 to the Transfer Agency and Registrar
Agreement between Registrant and The Shareholder Services
Group, Inc. dated April 25, 1992, relating to the Money
Market Funds Investor C Shares of the Registrant, is
incorporated by reference to Post-Effective Amendment No.
37, filed March 31, 1995.
(9)(k) Amendment No. 4 to the Transfer Agency and Registrar
Agreement between Registrant and The Shareholder Services
Group, Inc., relating to the Equity Index Fund, the Florida
Municipal Bond Fund, the Georgia Municipal Bond Fund, the
Maryland Municipal Bond Fund, the North Carolina Municipal
Bond Fund, the South Carolina Municipal Bond Fund, the
Tennessee Municipal Bond Fund, the
8
<PAGE>
Texas Municipal Bond Fund and the Virginia Municipal Bond
Fund, is incorporated by reference to Post-Effective
Amendment No. 37, filed March 31, 1995.
(9)(l) Amendment No. 5 to the Transfer Agency and Registrar
Agreement between Registrant and The Shareholder Services
Group, Inc., relating to the Special Equity Fund, is
incorporated by reference to Post-Effective Amendment No.
37, filed March 31, 1995.
(9)(m) Amendment No. 6 to the Transfer Agency and Registrar
Agreement between Registrant and The Shareholder Services
Group, Inc., relating to the Nations Special Equity,
Intermediate Municipal Bond, Short-Term Municipal Income,
Tennessee Intermediate Municipal Bond, Texas Intermediate
Municipal Bond, Florida Municipal Bond, Georgia Municipal
Bond, Maryland Municipal Bond, North Carolina Municipal
Bond, South Carolina Municipal Bond, Tennessee Municipal
Bond, Texas Municipal Bond and Virginia Municipal Bond
Funds, is incorporated by reference to Post-Effective
Amendment No. 37, filed March 31, 1995.
(9)(m)(i) Form of Amendment No. 7 to the Transfer Agency and
Registrar Agreement between Registrant and The Shareholders
Services Group, Inc., relating to the Nations Tax-Managed
Equity Fund is incorporated by reference to Post-Effective
Amendment No. 40, filed on October 20, 1995.
(9)(n) Transfer Agency Agreement between Registrant and
NationsBank Texas, dated April 25, 1992, relating to the
Trust Shares of Government, Tax Exempt, Money Market,
Income, Equity, Value, Managed Bond, Municipal Income,
Georgia Municipal Bond, Maryland Municipal Bond, South
Carolina Municipal Bond, Virginia Municipal Bond and
Short-Intermediate Government Funds, is incorporated by
reference to Post-Effective Amendment No. 22, filed April
6, 1992.
(9)(o) Amendment No. 1 dated September 28, 1992, to the Transfer
Agency Agreement between Registrant and NationsBank Texas,
dated April 25, 1992, relating to the Trust Shares of
Capital Growth Fund Emerging Growth Fund, Balanced Assets
Fund, Short-Term Income Fund, Adjustable Rate Government
Fund, Diversified Income Fund, Strategic Fixed Income Fund,
Mortgage-Backed Securities Fund, Florida Municipal Bond
Fund, North Carolina Municipal Bond Fund and Texas
Municipal Bond Fund, is incorporated by reference to
Post-Effective Amendment No. 26, filed March 26, 1993.
(9)(p) Amendment No. 2 dated February 3, 1993, to the Transfer
Agency Agreement between Registrant and NationsBank Texas,
dated April 25, 1992, relating to the Tennessee Municipal
Bond Fund and Municipal Income Fund, is incorporated by
reference to Post-Effective Amendment No. 26, filed March
26, 1993.
(9)(q) Amendment No. 3 to the Transfer Agency Agreement relating
to Equity Index Fund, Florida Municipal Bond Fund, Georgia
Municipal Bond Fund, Maryland Municipal
9
<PAGE>
Bond Fund, North Carolina Municipal Bond Fund, South
Carolina Municipal Bond Fund, Tennessee Municipal Bond
Fund, Texas Municipal Bond Fund and Virginia Municipal Bond
Fund, is incorporated by reference to Post-Effective
Amendment No. 29, filed September 30, 1993.
(9)(q)(i) Amendment No. 4 to the Transfer Agency Agreement relating
to Nations Tax-Managed Equity Fund is incorporated by
reference to Post-Effective Amendment No. 40, filed October
20, 1995.
(9)(r) Cross Indemnification Agreement dated July 30, 1992, by and
between the Registrant and Hatteras Funds, Inc. d/b/a
Nations Fund Portfolios, is incorporated by reference to
Post-Effective Amendment No. 23, filed December 23, 1992.
(9)(r)(i) Cross Indemnification Agreement dated June 27, 1995,
between the Trust, Nations Fund, Inc. and Nations Fund
Portfolios, Inc. incorporated by reference to
Post-Effective Post-Effective Amendment No. 39, filed
September 28, 1995.
(9)(s) Amended and Restated Shareholder Services Plan relating to
Trust B Shares, is incorporated by reference to
Post-Effective Amendment No. 22, filed April 6, 1992.
(9)(t) Form of Shareholder Servicing Agreement relating to Trust B
Shares is incorporated by reference to Post-Effective
Amendment No. 27, filed May 27, 1993.
(9)(u) Shareholder Servicing Plan for Investor A Shares is
incorporated by reference to Post-Effective Amendment No.
32, filed March 29, 1994.
(9)(v) Forms of Shareholder Servicing Agreement for Investor A
Shares are incorporated by reference to Post-Effective
Amendment No. 32, filed March 29, 1994.
(9)(w) Shareholder Servicing Plan for Investor B Shares of the
money market funds and Investor C Shares (formerly Investor
B Shares) of the non-money market funds, is incorporated by
reference to Post-Effective Amendment No. 32, filed March
29, 1994.
(9)(x) Forms of Shareholder Servicing Agreement for Investor B
Shares of the money market funds and Investor C Shares
(formerly Investor B Shares) of the non-money market funds,
are incorporated by reference to Post-Effective Amendment
No. 32, filed March 29, 1994.
(9)(y) Shareholder Servicing Plan for Investor C Shares of the
money market funds and Investor N Shares (formerly Investor
C Shares) of the non-money market funds, is incorporated by
reference to Post-Effective Amendment No. 32, filed March
29, 1994.
10
<PAGE>
(9)(z) Forms of Shareholder Servicing Agreement for Investor C
Shares of the money market funds and Investor N Shares
(formerly Investor C Shares) of the non-money market funds
are incorporated by reference to Post-Effective Amendment
No. 32, filed March 29, 1994.
(10) Opinion and Consent of Counsel is filed herewith.
(11) Consent of Independent Accountant (Price Waterhouse LLP) is
filed herewith.
(12) N/A
(13) N/A
(14)(a) Prototype Individual Retirement Account Plan, is
incorporated by reference to Post-Effective Amendment No.
26, filed March 26, 1993.
(15)(a) Amended and Restated Shareholder Servicing and Distribution
Plan Pursuant to Rule 12b-1 for Investor A Shares is
incorporated by reference to Post-Effective Amendment No. 32,
filed March 29, 1994.
(15)(b) Form of Sales Support Agreement for Investor A Shares is
incorporated by reference to Post-Effective Amendment No. 32,
filed March 29, 1994.
(15)(c) Amended and Restated Distribution Plan for Investor B Shares of
the money market funds and Investor C Shares (formerly Investor
B Shares) of the non-money market funds, is incorporated by
reference to Post-Effective Amendment No. 32, filed March 29,
1994.
(15)(d) Form of Sales Support Agreement for Investor B Shares of the
money market funds and Investor C Shares (formerly Investor B
Shares) of the non-money market funds is incorporated by
reference to Post-Effective Amendment No. 32, filed March 29,
1994.
(15)(e) Distribution Plan for Investor N Shares (formerly Investor C
Shares) of the non-money market funds is incorporated by
reference to Post-Effective Amendment No. 32, filed March 29,
1994.
(15)(f) Form of Sales Support Agreement for Investor N Shares (formerly
Investor C Shares) of the non-money market funds) is
incorporated by reference to Post-Effective Amendment No. 32,
filed March 29, 1994.
(15)(g) Shareholder Administration Plan for Trust B Shares is filed
herewith.
(16)(a) Schedules for Computation of Trust A Shares is incorporated by
reference to Post-Effective Amendment No. 37, filed March 31,
1995.
11
<PAGE>
(16)(b) Schedules for Computation of Trust B Shares shall be filed by
Amendment.
(16)(c) Schedules for Computation of Investor A Shares is incorporated
by reference to Post-Effective Amendment No. 37, filed March
31, 1995.
(16)(d) Schedules for Computation of Investor C Shares (formerly
Investor B Shares) is incorporated by reference to
Post-Effective Amendment No. 37, filed March 31, 1995.
(16)(e) Schedules for Computation of Investor N Shares (formerly
Investor C Shares) is incorporated by reference to
Post-Effective Amendment No. 37, filed March 31, 1995.
(16)(f) Schedules for Computation of Investor D Shares to be filed by
amendment.
17 N/A
18 Revised Plan entered into by Registrant pursuant to Rule 18f-3
under the Investment Company Act of 1940 is incorporated by
reference to Post-Effective Amendment No. 39, filed September
28, 1995.
Item 25. Persons Controlled By or Under Common Control with Registrant
Registrant is controlled by its Board of Trustees.
Item 26. Number of Holders of Securities
The following information is as of: January 25, 1996
Number of
Title of Class Record Holders
Nations Government Money Market Fund - Investor A 219
- Investor B 36
- Investor C 24
- Investor D 0
- Trust A 3,568
- Trust B 0
Nations Tax Exempt Fund - Investor A 2,933
- Investor B 231
- Investor C 333
- Investor D 7
- Trust A 6,856
- Trust B 88
12
<PAGE>
Nations Value Fund - Investor A 2,679
- Investor C 234
- Investor N 7,755
- Trust A 205
- Trust B 0
Nations Capital Growth Fund - Investor A 1,467
- Investor C 200
- Investor N 4,269
- Trust A 2,915
- Trust B 0
Nations Emerging Growth Fund - Investor A 921
- Investor C 70
- Investor N 4,374
- Trust A 1,295
- Trust B 0
Nations Disciplined Equity Fund - Investor A 398
- Investor C 28
- Investor N 1,759
- Trust A 374
- Trust B 0
Nations Equity Index Fund - Trust A 205
- Trust B 0
- Investor A 74
Nations Managed Index Fund - Trust A 0
- Trust B 0
- Investor A 0
Nations Balanced Assets Fund - Investor A 518
- Investor C 70
- Investor N 4,269
- Trust A 166
- Trust B 0
Nations Short-Intermediate - Investor A 1,483
Government Fund - Investor C 452
- Investor N 667
- Trust A 2,046
- Trust B 0
13
<PAGE>
Nations Short-Term Income Fund - Investor A 115
- Investor C 147
- Investor N 554
- Trust A 1,056
- Trust B 0
Nations Diversified Income Fund - Investor A 515
- Investor C 162
- Investor N 4,511
- Trust A 91
- Trust B 0
Nations Strategic Fixed Income - Investor A 324
Fund - Investor C 13
- Investor N 142
- Trust A 2,939
- Trust B 0
Nations Municipal Income Fund - Investor A 300
- Investor C 75
- Investor N 445
- Trust A 487
- Trust B 0
Nations Intermediate Municipal - Investor A 33
Bond Fund - Investor C 9
- Investor N 44
- Trust A 504
- Trust B 0
Nations Short-Term Municipal - Investor A 24
Income Fund - Investor C 26
- Investor N 178
- Trust A 557
- Trust B 0
Nations Florida Intermediate - Investor A 60
Municipal Bond Fund - Investor C 11
- Investor N 139
- Trust A 297
- Trust B 0
Nations Georgia Intermediate - Investor A 199
Municipal Bond Fund - Investor C 53
- Investor N 189
14
- Trust A 238
- Trust B 0
Nations Maryland Intermediate - Investor A 355
Municipal Bond Fund - Investor C 73
- Investor N 232
- Trust A 362
- Trust B 0
Nations North Carolina Intermediate - Investor A 355
Municipal Bond Fund - Investor C 33
- Investor N 255
- Trust A 135
- Trust B 0
Nations South Carolina Intermediate - Investor A 194
Municipal Bond Fund - Investor C 121
- Investor N 226
- Trust A 246
- Trust B 0
Nations Tennessee Intermediate - Investor A 83
Municipal Bond Fund - Investor C 2
- Investor N 85
- Trust A 47
- Trust B 0
Nations Texas Intermediate - Investor A 23
Municipal Bond Fund - Investor C 3
- Investor N 108
- Trust A 183
- Trust B 0
Nations Virginia Intermediate - Investor A 976
Municipal Bond Fund - Investor C 141
- Investor N 439
- Trust A 776
- Trust B 0
Nations Virginia Municipal Bond - Investor A 25
Fund - Investor C 3
- Investor N 575
- Trust A 33
- Trust B 0
15
<PAGE>
Nations Maryland Municipal Bond - Investor A 18
Fund - Investor C 2
- Investor N 378
- Trust A 30
- Trust B 0
Nations North Carolina Municipal - Investor A 26
Bond Fund - Investor C 2
- Investor N 775
- Trust A 22
- Trust B 0
Nations South Carolina Municipal - Investor A 21
Bond Fund - Investor C 4
- Investor N 297
- Trust A 27
- Trust B 0
Nations Florida Municipal Bond Fund - Investor A 20
- Investor C 3
- Investor N 589
- Trust A 38
- Trust B
Nations Georgia Municipal Bond Fund - Investor A 12
- Investor C 3
- Investor N 355
- Trust A 25
- Trust B 0
Nations Tennessee Municipal Bond - Investor A 14
Fund - Investor C 4
- Investor N 183
- Trust A 8
- Trust B 0
Nations Texas Municipal Bond Fund - Investor A 20
- Investor C 3
- Investor N 331
- Trust A 36
- Trust B 0
Item 27. Indemnification
Article IX, Section 9.3 of Registrant's Declaration of Trust,
incorporated by reference as Exhibit (1)(a) hereto, provides for the
indemnification of Registrant's trustees and
16
<PAGE>
employees. Indemnification of Registrant's administrator, principal
underwriter, custodian, and transfer agent is provided for,
respectively, in:
1. Administration Agreement with Stephens Inc.;
2. Co-Administration Agreement with The Boston Company Advisors,
Inc.;
3. Distribution Agreement with Stephens Inc.;
4. Mutual Fund Custody Agreement with NationsBank Texas
5. Transfer Agency Agreement with NationsBank Texas; and
6. Transfer Agency and Registrar Agreement with the Shareholder
Services Group, Inc.
The Registrant has entered into a Cross Indemnification Agreement
with Nations Fund, Inc. (the "Company") and Nations Fund Portfolios,
Inc.("Portfolios"), dated June 27, 1995. The Company and or Portfolios
will indemnify and hold harmless the Trust against any losses, claims,
damages or liabilities, to which the Trust may become subject, under the
Securities Act of 1933 (the "Act") and the Investment Company Act of
1940 (the "1940 Act") insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Prospectuses, any Preliminary Prospectuses, the
Registration Statements, any other Prospectuses relating to the
securities, or any amendments or supplements to the foregoing
(hereinafter referred to collectively as the "Offering Documents"), or
arise out of or are based upon the omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Offering Documents in
reliance upon and in conformity with written information furnished to
the Trust by the Company and/or Portfolios expressly for use therein;
and will reimburse the Trust for any legal or other expenses reasonably
incurred by the Trust in connection with investigating or defending any
such action or claim; provided, however, that the Company and/or
Portfolios shall not be liable in any such case to the extent that any
such loss, claim, damage, or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in the Offering Documents in reliance upon and in
conformity with written information furnished to the Company and/or
Portfolios by the Trust expressly for use in the Offering Documents.
Promptly after receipt by an indemnified party above of notice of
the commencement of any action, such indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party under
such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission to so notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party otherwise than under such subsection. In case any
such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the
indemnifying party shall be
17
<PAGE>
entitled to participate therein and, to the extent that it shall wish,
to assume the defense thereof, with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under
such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party,
in connection with the defense thereof other than reasonable costs of
investigation.
Registrant has obtained from a major insurance carrier a
directors' and officers' liability policy covering certain types of
errors and omissions. In no event will Registrant indemnify any of its
trustees, officers, employees, or agents against any liability to which
such person would otherwise be subject by reason of his/her willful
misfeasance, bad faith, gross negligence in the performance of his/her
duties, or by reason of his reckless disregard of the duties involved in
the conduct of his/her office or arising under his/her agreement with
Registrant. Registrant will comply with Rule 484 under the Securities
Act of 1933 and Release No. 11330 under the 1940 Act, as amended, in
connection with any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933, as amended, may be permitted to trustees,
officers, and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of
expenses incurred or paid by a trustee, officer, or controlling person
of Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person
in connection with the securities being registered, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser
(a) To the knowledge of Registrant, none of the directors or
officers of "NBAI", the adviser to the Registrant's portfolios, or
TradeStreet, the sub-investment adviser, except those set forth below,
is or has been, at any time during the past two calendar years, engaged
in any other business, profession, vocation or employment of a
substantial nature, except that certain directors and officers also hold
various positions with, and engage in business for, the company that
owns all the outstanding stock (other than directors' qualifying shares)
of NBAI or TradeStreet, respectively, or other subsidiaries of
NationsBank Corporation.
(b) NBAI performs investment advisory services for the Registrant
and certain other customers. NBAI is a wholly owned subsidiary of
NationsBank, N.A. ("NationsBank"), which in turn is a wholly owned
banking subsidiary of NationsBank Corporation. Information with respect
to each director and officer of the investment adviser is incorporated
by reference to Form ADV filed by NBAI with the Securities and Exchange
Commission pursuant to the Investment Advisers Act of 1940 (file no.
801-49874).
18
<PAGE>
(c) TradeStreet performs sub-investment advisory services for the
Registrant and certain other customers. TradeStreet is a wholly owned
subsidiary of NationsBank, which in turn is a wholly owned banking
subsidiary of NationsBank Corporation. Information with respect to each
director and officer of the sub-investment adviser is incorporated by
reference to Form filed by TradeStreet with the Securities and Exchange
Commission pursuant to the Investment Advisers Act of 1940 (file no.
801-50372).
19
<PAGE>
Item 29. Principal Underwriter
(a) Stephens Inc., distributor for the Registrant, does not presently
act as investment adviser for any other registered investment companies,
but does act as principal underwriter for the Overland Express Funds,
Inc., Stagecoach Inc., Stagecoach Funds, Inc. and Stagecoach Trust and
is the exclusive placement agent for Master Investment Trust, Managed
Series Investment Trust, Life & Annuity Trust and Master Investment
Portfolio, all of which are registered open-end management investment
companies, and has acted as principal underwriter for the Liberty Term
Trust, Inc., the Nations Government Income Term Trust 2003, Inc., the
Nations Government Income Term Trust 2004, Inc. and the Managed Balanced
Target Maturity Fund, Inc., closed-end management investment companies.
(b) Information with respect to each director and officer of the
principal underwriter is incorporated by reference to Form ADV filed by
Stephens Inc. with the Securities and Exchange Commission pursuant to
the Investment Advisers Act of 1940 (file #501-15510).
(c) Not applicable.
Item 30. Location of Accounts and Records
(1) NBAI, One NationsBank Plaza, Charlotte, North Carolina 28255
(records relating to its function as Investment Adviser).
(2) TradeStreet, One NationsBank Plaza, Charlotte, North Carolina
28255 (records relating to its function as sub-adviser).
(3) Stephens Inc., 111 Center Street, Little Rock, Arkansas 72201
(records relating to its function as Distributor).
(4) Stephens Inc., 111 Center Street, Little Rock, Arkansas 72201
(records relating to its function as Administrator).
(5) The Shareholder Services Group, Inc. One Exchange Place,
Boston, Massachusetts 02109 (records relating to its function as
Co-Administrator and Transfer Agent).
(6) NationsBank Texas, 1401 Elm Street, Dallas, Texas 75202
(records relating to its function as Sub-Transfer Agent and
Custodian).
20
<PAGE>
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
(a) Registrant undertakes to call a meeting for the purpose of voting
upon the question or removal of a trustee or trustees when
requested in writing to do so by the holders of at least 10% of a
Fund's outstanding shares of beneficial interest and in
connection with such meeting to comply with the provisions of
Section 16(c) of the 1940 Act, as amended, relating to
shareholder communications.
(b) Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's most recent annual
report to shareholder upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Amendment to its Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Little Rock,
State of Arkansas on the 26th day of January, 1996.
NATIONS FUND TRUST
By: *
A. Max Walker
President and Chairman
of the Board of Trustees
By: /s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
*Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the date
indicated:
SIGNATURES TITLE DATE
* President and Chairman January 26, 1996
(A. Max Walker) of the Board of Trustees
(Principal Executive Officer)
* Treasurer January 26, 1996
(Richard H. Rose) Vice President
(Principal Financial and
Accounting Officer)
* Trustee January 26, 1996
(Edmund L. Benson, III)
* Trustee January 26, 1996
(James Ermer)
* Trustee January 26, 1996
(William H. Grigg)
* Trustee January 26, 1996
(Thomas F. Keller)
* Trustee January 26, 1996
(Carl E. Mundy, Jr.)
* Trustee January 26, 1996
(Charles B. Walker)
* Trustee January 26, 1996
(Thomas S. Word)
/s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
*Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description Number
EX-99B.5(i) Investment Advisory Agreement
EX-99B.5(j) Sub-Investment Advisory Agreement
EX-99B.6(f) Shareholder Administration Agreement for Trust B
Shares -- Nations Fund Trust
EX-99B.6(g) Shareholder Administration Agreement for Trust B
Shares -- Nations Fund Trust, Nations Fund, Inc. and
Nations Fund Portfolios, Inc.
EX-99B.10 Opinion and Consent of Counsel
EX-99B.11 Consent of Independent Accountant
EX-99B.15(g) Shareholder Administration Plan - Trust B Shares
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 1st day of January, 1996, by
and between Nations Fund Trust, a Massachusetts business trust (the
"Trust"), and NationsBanc Advisors, Inc., a North Carolina corporation
(the "Adviser"), on behalf of those portfolios of the Trust now or
hereafter identified on Schedule I hereto (each a "Fund" and,
collectively, the "Funds").
RECITALS
WHEREAS, the Trust is registered with the Securities and Exchange
Commission ("Commission") under the Investment Company Act of 1940, as
amended (the "1940 Act") as an open-end, series management investment
company; and
WHEREAS, the Adviser is registered with the Commission under the
Investment Advisers Act of 1940, as amended (the "Advisers Act") as an
investment adviser; and
WHEREAS, the Trust and the Adviser desire to enter into an
agreement to provide for investment advisory services to the Trust upon
the terms and conditions hereinafter set forth; and
WHEREAS, the Trust and the Adviser contemplate that certain
duties of the Adviser under this Agreement will be delegated to one or
more sub-investment adviser(s) (the "Sub-Adviser(s)") pursuant to
separate sub-advisory agreement(s) (the "Sub-Advisory Agreement(s)");
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Advisory Services. The Adviser shall act as investment
adviser for the Funds and shall, in such capacity, manage and supervise
the investment and reinvestment of the cash, securities or other
properties comprising the Funds' assets, subject at all times to the
policies and control of the Trust's Board of Trustees. The Adviser
shall give the Funds the benefit of its best judgment, efforts and
facilities in rendering its services as investment adviser.
2. Investment Analysis and Implementation. In carrying out its
obligations under paragraph 1 hereof, the Adviser shall:
(a) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial
data, domestic, foreign or otherwise, whether affecting the
economy generally or the Funds specifically, and whether
concerning the individual issuers whose securities are included
in the Funds or the activities in which such issuers engage, or
with respect to securities which the Adviser considers desirable
for inclusion in the Funds;
<PAGE>
(b) invest and reinvest, on an ongoing basis, assets
held in the Funds in strict accordance with the investment
policies of the Funds as set forth in the registration statement
of the Trust with respect to the Funds, as the same may be
amended from time to time;
(c) in accordance with policies and procedures
established by the Trust's Board of Trustees, select brokers and
dealers to execute portfolio transactions for the Funds and
select the markets on or in which the transactions will be
executed;
(d) vote, either in person or by general or limited
proxy, or refrain from voting, any securities held in the Funds
for any purposes; exercise or sell any subscription or conversion
rights; consent to and join in or oppose any voting trusts,
reorganizations, consolidations, mergers, foreclosures and
liquidations and in connection therewith, deposit securities, and
accept and hold other property received therefor;
(e) determine on an ongoing basis the overall
investment strategy with respect to the Funds, and ensure on an
ongoing basis adherence to such strategy;
(f) use the same skill and care in providing services
to the Funds as it uses in providing services to fiduciary
accounts for which it has investment responsibilities;
(g) furnish the Trust's Board of Trustees with such
periodic and special reports as the Board of Trustees may
request; and
(h) take, on behalf of the Funds, all actions which
appear necessary to carry into effect such purchase and sale
programs and supervisory functions set forth in this Paragraph 2.
3. Delegation of Responsibilities. Subject to the
approval of the Trust's Board of Trustees and, if required, the
shareholders of the Funds, the Adviser may, pursuant to the Sub-Advisory
Agreement(s), delegate to the Sub-Adviser(s) those of its duties
hereunder identified in the Sub-Advisory Agreement(s), provided that the
Adviser shall continue to supervise and monitor the performance of the
duties delegated to the Sub-Adviser(s) and any such delegation shall not
relieve the Adviser of its duties and obligations under this Agreement.
The Adviser shall be solely responsible for compensating the
Sub-Adviser(s) for services rendered under the Sub-Advisory
Agreement(s).
4. Control by Board of Trustees. Any investment activities
undertaken by the Adviser pursuant to this Agreement, as well as any
other activities undertaken by the Adviser on behalf of the Funds, shall
at all times be subject to any directives of the Trust's Board of
Trustees.
2
<PAGE>
5. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Adviser shall at all times conform
to:
(a) all applicable provisions of the 1940 Act, the
Advisers Act and any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the
Trust, as the same may be amended from time to time;
(c) the provisions of the Declaration of Trust of the
Trust, as the same may be amended from time to time;
(d) the provisions of the Code of Regulations of the
Trust, as the same may be amended from time to time; and
(e) any other applicable provisions of state or federal
law.
In addition, any code of ethics adopted by the Adviser
pursuant to Rule 17j-1 under the 1940 Act shall include policies,
prohibitions and procedures which substantially conform to the
recommendations regarding personal investing approved by the Board of
Governors of the Investment Company Institute on June 30, 1994, as such
recommendations may be amended from time to time.
6. Broker-Dealer Relationships. The Adviser is responsible for
the purchase and sale of securities for the Funds, broker-dealer
selection, and negotiation of brokerage commission rates. The Adviser's
primary consideration in effecting a security transaction will be to
obtain the best price and execution. In selecting a broker-dealer to
execute each particular transaction for a Fund, the Adviser will take
the following into consideration: the best net price available, the
reliability, integrity and financial condition of the broker-dealer; the
size of and difficulty in executing the order; and the value of the
expected contribution of the broker-dealer to the Fund on a continuing
basis. Accordingly, the price to the Fund in any transaction may be
less favorable than that available from another broker-dealer if the
difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Trust's
Board of Trustees may from time to time determine, the Adviser shall not
be deemed to have acted unlawfully or to have breached any duty created
by this Agreement or otherwise solely by reason of having caused a Fund
to pay a broker or dealer that provides brokerage and research services
to the Adviser an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if
the Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either
that particular transaction or the overall responsibilities of the
Adviser with respect to the Fund and to other clients of the Adviser.
The Adviser is further authorized to allocate the orders placed by it on
behalf of the Funds to brokers and dealers who also provide research or
statistical material, or other services to the Funds or to the Adviser.
Such allocation shall be in such amounts and proportions as the
3
<PAGE>
Adviser shall determine and the Adviser will report on said allocations
regularly to the Board of Trustees of the Trust indicating the brokers
to whom such allocations have been made and the basis therefor.
7. Compensation. The Trust shall pay the Adviser as
compensation for services rendered hereunder fees, payable monthly, at
the annual rates indicated on Schedule I hereto, as such Schedule may be
amended or supplemented from time to time.
The average daily net asset value of the Funds shall be
determined in the manner set forth in the Trust's Declaration of Trust
and registration statement, as amended from time to time.
8. Expenses of the Funds. All of the ordinary business expenses
incurred in the operations of the Funds and the offering of their shares
shall be borne by the Funds unless specifically provided otherwise in
this Agreement. These expenses borne by the Funds include, but are not
limited to, brokerage commissions, taxes, legal, auditing, or
governmental fees, the cost of preparing share certificates, custodian,
transfer agent and shareholder service agent costs, expenses of issue,
sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, expenses relating to directors and
shareholder meetings, the cost of preparing and distributing reports and
notices to shareholders, the fees and other expenses incurred by the
Funds in connection with membership in investment company organizations
and the cost of printing copies of prospectuses and statements of
additional information distributed to the Funds' shareholders.
9. Expense Limitation. If, for any fiscal year, the total of
all ordinary business expenses of a Fund, including all investment
advisory fees, but excluding brokerage commissions, fees, taxes,
interest and extraordinary expenses, such as litigation costs, would
exceed the applicable expense limitations imposed by state securities
regulations in any state in which the Funds' shares are qualified for
sale, as such limitations may be raised or lowered from time to time,
the aggregate of all such investment advisory fees shall be reduced by
the amount of such excess. The amount of any such reduction to be borne
by the Adviser shall be deducted from the monthly investment advisory
fee otherwise payable to the Adviser during such fiscal year. If
required pursuant to such state securities regulations, the Adviser
will, not later than the last day of the first month of the next
succeeding fiscal year, reimburse the Fund for any such annual operating
expenses (after reduction of all investment advisory fees in excess of
such limitation). For the purposes of this paragraph, the term "fiscal
year" shall exclude the portion of the current fiscal year which shall
have elapsed prior to the date hereof and shall include the portion of
the current fiscal year which shall have elapsed at the date of
termination of this Agreement.
10. Non-Exclusivity. The services of the Adviser to the Funds
are not to be deemed to be exclusive, and the Adviser shall be free to
render investment advisory and administrative or other services to
others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers or directors of
the Adviser may serve as officers and trustees of the Trust, and that
officers or trustees of the Trust may serve as officers
4
<PAGE>
or directors of the Adviser, to the extent that such services may be
permitted by law, and that the officers and directors of the Adviser are
not prohibited from engaging in any other business activity or from
rendering services to any other person, or from serving as partners,
officers, directors or trustees of any other firm or trust, including
other investment advisory companies.
11. Records. The Adviser shall, with respect to orders the
Adviser places for the purchase and sale of portfolio securities of the
Funds, maintain or arrange for the maintenance of the documents and
records required pursuant to Rule 31a-1 under the 1940 Act as well as
such records as the Funds' administrator reasonably requests to be
maintained, including, but not limited to, trade tickets and
confirmations for portfolio trades. All such records shall be
maintained in a form acceptable to the Funds and in compliance with the
provisions of Rule 31a-1. All such records will be the property of the
Funds and will be available for inspection and use by the Funds. The
Adviser will promptly notify the Funds' administrator if it experiences
any difficulty in maintaining the records in an accurate and complete
manner.
12. Term and Approval. This Agreement shall become effective
with respect to a Fund if and when approved by the Trustees of the
Trust, and if so approved, this Agreement shall thereafter continue from
year to year, provided that the continuation of the Agreement is
specifically approved at least annually;
(a) (i) by the Trust's Board of Trustees or (ii) by the
vote of "a majority of the outstanding voting securities" of a
Fund (as defined in Section 2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the Trust's
Trustees who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of a party to this
Agreement (other than as Trustees of the Trust), by votes cast in
person at a meeting specifically called for such purpose.
13. Termination. This Agreement may be terminated with
respect to a Fund at any time, without the payment of any penalty, by
vote of the Trust's Board of Trustees or by vote of a majority of a
Fund's outstanding voting securities, or by the Adviser, on sixty (60)
days' written notice to the other party. The notice provided for herein
may be waived by the party entitled to receipt thereof. This Agreement
shall automatically terminate in the event of its assignment, the term
"assignment" for purposes of this paragraph having the meaning defined
in Section 2(a)(4) of the 1940 Act.
14. Liability of Adviser. In the absence of willful misfeasance,
bad faith, negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser or any of its officers, directors,
employees or agents, the Adviser shall not be subject to liability to
the Trust or to any shareholder of the Trust for any act or omission in
the course of, or connected with, rendering services hereunder or for
any losses that may be sustained in the purchase, holding or sale of any
security.
5
<PAGE>
15. Indemnification. In the absence of willful misfeasance, bad
faith, negligence or reckless disregard of duties hereunder on the part
of the Adviser or any of its officers, directors, employees or agents,
the Trust hereby agrees to indemnify and hold harmless the Adviser
against all claims, actions, suits or proceedings at law or in equity
whether brought by a private party or a governmental department,
commission, board, bureau, agency or instrumentality of any kind,
arising from the advertising, solicitation, sale, purchase or pledge of
securities, whether of the Funds or other securities, undertaken by the
Funds, their officers, directors, employees or affiliates, resulting
from any violations of the securities laws, rules, regulations, statutes
and codes, whether federal or of any state, by the Funds, their
officers, directors, employees or affiliates. Federal and state
securities laws impose liabilities under certain circumstances on
persons who act in good faith, and nothing herein shall constitute a
waiver or limitation of any rights which a Fund may have and which may
not be waived under any applicable federal and state securities laws.
16. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other
party at such address as such other party may designate for the receipt
of such notice. Until further notice to the other party, it is agreed
that the address of the Trust shall be c/o Stephens Inc., 111 Center
Street, Suite 300, Little Rock, Arkansas 72201 and that of the Adviser
shall be One NationsBank Plaza, Charlotte, North Carolina 28255.
17. Questions of Interpretation. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or
otherwise derived from a term or provision of the 1940 Act or the
Advisers Act shall be resolved by reference to such terms or provision
of the 1940 Act or the Advisers Act and to interpretations thereof, if
any, by the United States Courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the
Commission issued pursuant to the 1940 Act or the Advisers Act. In
addition, where the effect of a requirement of the 1940 Act or the
Advisers Act reflected in any provision of this Agreement is revised by
rule, regulation or order of the Commission, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be
executed in duplicate by their respective officers on the day and year
first written above.
NATIONS FUND TRUST
on behalf of the Funds
By: /S/ A. Max Walker
------------------------------
A. Max Walker
President
NATIONSBANC ADVISORS, INC.
By: /S/ Mark H. Williamson
--------------------------------
Mark H. Williamson
President and Director
7
<PAGE>
SCHEDULE I
Fund Rate of
Compensation
Nations Government Money Market Fund 0.40%
Nations Tax Exempt Fund 0.40%
Nations Value Fund 0.75%
Nations Capital Growth Fund 0.75%
Nations Emerging Growth Fund 0.75%
Nations Equity Index Fund 0.50%
Nations Disciplined Equity Fund 0.75%
Nations Balanced Assets Fund 0.75%
Nations Short-Intermediate Government Fund 0.60%
Nations Short-Term Income Fund 0.60%
Nations Diversified Income Fund 0.60%
Nations Strategic Fixed Income Fund 0.60%
Nations Municipal Income Fund 0.60%
Nations Short-Term Municipal Income Fund 0.50%
Nations Intermediate Municipal Bond Fund 0.50%
Nations Florida Municipal Bond Fund 0.60%
Nations Georgia Municipal Bond Fund 0.60%
Nations Maryland Municipal Bond Fund 0.60%
Nations North Carolina Municipal Bond Fund 0.60%
Nations South Carolina Municipal Bond Fund 0.60%
Nations Tennessee Municipal Bond Fund 0.60%
Nations Texas Municipal Bond Fund 0.60%
Nations Virginia Municipal Bond Fund 0.60%
Nations Florida Intermediate Municipal Bond Fund 0.50%
Nations Georgia Intermediate Municipal Bond Fund 0.50%
Nations Maryland Intermediate Municipal Bond Fund 0.50%
Nations North Carolina Intermediate Municipal Bond Fund 0.50%
Nations South Carolina Intermediate Municipal Bond Fund 0.50%
Nations Tennessee Intermediate Municipal Bond Fund 0.50%
Nations Texas Intermediate Municipal Bond Fund 0.50%
Nations Virginia Intermediate Municipal Bond Fund 0.50%
<PAGE>
EX-99.B5(j)
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 1st day of January, 1996, by and
among NationsBanc Advisors, Inc., a North Carolina corporation (the
"Adviser"), TradeStreet Investment Associates, Inc., a Maryland
corporation (the "Sub-Adviser"), and Nations Fund Trust, a
Massachusetts business trust (the "Trust"), on behalf of those
portfolios of the Trust now or hereafter identified on Schedule I
hereto (each a "Fund" and collectively, the "Funds").
RECITALS
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end, series management
investment company; and
WHEREAS, the Adviser is registered with the Commission under the
Investment Advisers Act of 1940, as amended (the "Advisers Act") and
engages in the business of acting as an investment adviser; and
WHEREAS, the Sub-Adviser also is registered with the Commission
under the Advisers Act as an investment adviser; and
WHEREAS, the Adviser and the Trust have entered into an Investment
Advisory Agreement of even date herewith (the "Investment Advisory
Agreement"), pursuant to which the Adviser shall act as investment
adviser with respect to the Funds; and
WHEREAS, pursuant such Investment Advisory Agreement, the Adviser,
with the approval of the Trust, wishes to retain the Sub-Adviser for
purposes of rendering advisory services to the Adviser and the Trust
in connection with the Funds upon the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Sub-Adviser. The Adviser hereby appoints, and
the Trust hereby approves, the Sub-Adviser to render investment
research and advisory services to the Adviser and the Trust with
respect to the Funds, under the supervision of the Adviser and subject
to the policies and control of the Trust's Board of Trustees, and the
Sub-Adviser hereby accepts such appointment, all subject to the terms
and conditions contained herein.
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2. Investment Services. The specific duties of the Adviser
delegated to the Sub-Adviser shall be the following:
(a) obtaining and evaluating pertinent information about
significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether
affecting the economy generally or the Funds specifically, and
whether concerning the individual issuers whose securities are
included in the Funds or the activities in which such issuers
engage, or with respect to securities which the Adviser or
Sub-Adviser considers desirable for inclusion in the Funds;
(b) investing and reinvesting, on an ongoing basis,
assets held in the Funds in strict accordance with the
investment policies of the Funds as set forth in the
registration statement of the Trust with respect to the Funds,
as the same may be amended from time to time;
(c) in accordance with policies and procedures
established by the Board of Trustees of the Trust and the
Adviser, selecting brokers and dealers to execute portfolio
transactions for the Funds and selecting the markets on or in
which the transactions will be executed;
(d) voting, either in person or by general or limited
proxy, or refraining from voting, any securities held in the
Funds for any purposes; exercising or selling any subscription
or conversion rights; consenting to and joining in or opposing
any voting trusts, reorganizations, consolidations, mergers,
foreclosures and liquidations and in connection therewith,
depositing securities, and accepting other property received
therefor; and
(e) performing other acts necessary or appropriate in
connection with the proper management of the Funds, consistent
with its obligations hereunder, and as may be directed by the
Adviser and/or the Trust's Board of Trustees.
3. Control by Board of Trustees. As is the case with
respect to the Adviser under the Investment Advisory Agreement, any
investment activities undertaken by the Sub-Adviser pursuant to this
Agreement, as well as any other activities undertaken by the
Sub-Adviser with respect to the Funds, shall at all times be subject
to any directives of the Board of Trustees of the Trust.
4. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, the Sub-Adviser shall at all
times conform to:
(a) all applicable provisions of the 1940 Act, the Advisers
Act and any rules and regulations adopted thereunder;
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<PAGE>
(b) the provisions of the registration statement of the
Trust applicable to the Funds, as the same may be amended from
time to time, under the Securities Act of 1933 and the 1940
Act;
(c) the provisions of the Declaration of Trust of the
Trust, as the same may be amended from time to time;
(d) the provisions of the Code of Regulations of the
Trust, as the same may be amended from time to time;
(e) any other applicable provisions of state or federal
law.
In addition, any code of ethics adopted by the Sub-Adviser
pursuant to Rule 17j-1 under the 1940 Act shall include policies,
prohibitions and procedures which substantially conform to the
recommendations regarding personal investing approved by the Board of
Governors of the Investment Company Institute on June 30, 1994, as
such recommendations may be amended from time to time.
5. Broker-Dealer Relationships. The Sub-Adviser is responsible
for the purchase and sale of securities for the Funds, broker-dealer
selection, and negotiation of brokerage commission rates. The
Sub-Adviser's primary consideration in effecting a security
transaction will be to obtain the best price and execution. In
selecting a broker-dealer to execute each particular transaction for a
Fund, the Sub-Adviser will take the following into consideration: the
best net price available, the reliability, integrity and financial
condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the Fund on a continuing basis. Accordingly, the
price to the Fund in any transaction may be less favorable than that
available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services
offered. Subject to such policies as the Adviser or the Trust's Board
of Trustees may from time to time determine, the Sub-Adviser shall not
be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of having
caused a Fund to pay a broker or dealer that provides brokerage and
research services to the Sub-Adviser an amount of commission for
effecting a portfolio investment transaction in excess of the amount
of commission another broker or dealer would have charged for
effecting that transaction, if the Sub-Adviser determines in good
faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker
or dealer, viewed in terms of either that particular transaction or
the overall responsibilities of the Sub-Adviser with respect to the
Fund and to other clients of the Sub-Adviser. The Sub-Adviser is
further authorized to allocate the orders placed by it on behalf of
the Funds to brokers and dealers who also provide research or
statistical material, or other services to the Funds or to the
Sub-Adviser. Such allocation shall be in such amounts and proportions
as the Sub-Adviser shall determine and the Sub-Adviser will report on
said allocations regularly to the Adviser and to the Board of Trustees
of the
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<PAGE>
Trust indicating the brokers to whom such allocations have been made
and the basis therefor.
6. Compensation. The Adviser shall pay the Sub-Adviser, as
compensation for services rendered hereunder, fees, payable monthly,
at the annual rates indicated on Schedule I hereto, as such Schedule
may be amended or supplemented from time to time. It is understood
that the Adviser shall be responsible for the Sub-Adviser's fee for
its services hereunder, and the Sub-Adviser agrees that it shall have
no claim against the Trust or the Fund with respect to compensation
under this Agreement.
The average daily net asset value of the Funds shall be
determined in the manner set forth in the Declaration of Trust and
registration statement of the Trust, as amended from time to time.
7. Expenses of the Funds. All of the ordinary business
expenses incurred by the Trust in the operations of the Funds and the
offering of their shares shall be borne by the Funds unless
specifically provided otherwise in this Agreement. These expenses
borne by the Funds include but are not limited to brokerage
commissions, taxes, legal, auditing, or governmental fees, the cost of
preparing share certificates, custodian, transfer agent and
shareholder service agent costs, expenses of issue, sale, redemption
and repurchase of shares, trustees and shareholder meetings, the cost
of preparing and distributing reports and notices to shareholders, the
fees and other expenses incurred by the Funds in connection with
membership in investment company organizations and the cost of
printing copies of prospectuses and statements of additional
information distributed to the Funds' shareholders.
8. Expense Limitation. If, for any fiscal year of a Fund, the
amount of the aggregate advisory fee which the Trust would otherwise
be obligated to pay with respect to the Fund is reduced pursuant to
expense limitation provisions of the Investment Advisory Agreement,
the fee which the Sub-Adviser would otherwise receive pursuant to this
Agreement shall be reduced proportionately.
9. Non-Exclusivity. The services of the Sub-Adviser to the
Adviser and the Trust with respect to the Fund are not to be deemed to
be exclusive, and the Sub-Adviser shall be free to render investment
advisory and administrative or other services to others (including
other investment companies) and to engage in other activities. It is
understood and agreed that the officers and directors of the
Sub-Adviser are not prohibited from engaging in any other business
activity or from rendering services to any the person, or from serving
as partners, officers, directors or trustees of any other firm or
trust, including other investment advisory companies.
10. Records. The Sub-Adviser shall provide to the Adviser, with
respect to the orders the Sub-Adviser places for the purchases and
sales of portfolio securities of the Funds, the documents and records
required pursuant to Rule 31a-1 under the 1940 Act as well as such
records as the Funds' administrator reasonably requests to be
maintained,
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<PAGE>
including, but not limited to, trade tickets and confirmations for
portfolio trades. All such records shall be maintained in a form
acceptable to the Funds and in compliance with the provisions of Rule
31a-1. All such records will be the property of the Funds and will be
available for inspection and use by the Funds. The Sub-Adviser will
promptly notify the Adviser and the Fund's administrator if it
experiences any difficulty in providing the records in an accurate and
complete manner.
11. Term and Approval. This Agreement shall become effective
with respect to each Fund as of the date first set forth above and
shall thereafter continue in force and effect for one year, and may be
continued from year to year with respect to each Fund thereafter,
provided that the continuation of the Agreement is specifically
approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the
vote of "a majority of the outstanding voting securities" of
the Fund (as defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the
Trustees of the Trustees who are not parties to this Agreement
or "interested persons" (as defined in the 1940 Act) of a
party to this Agreement (other than as Trustees of the Trust),
by votes cast in person at a meeting specifically called for
such purpose.
12. Termination. This Agreement may be terminated at any
time with respect to a Fund, without the payment of any penalty, by
vote of the Trust's Board of Trustees or by vote of a majority of the
Fund's outstanding voting securities, or by the Adviser, or by the
Sub-Adviser on sixty (60) days' written notice to the other parties to
this Agreement. Any party entitled to notice may waive the notice
provided for herein. This Agreement shall automatically terminate in
the event of its assignment, the term "assignment" for purposes of
this paragraph having the meaning defined in Section 2(a)(4) of the
1940 Act.
13. Liability of Sub-Adviser. In the absence of willful
misfeasance, bad faith, negligence or reckless disregard of
obligations or duties hereunder on the part of the Sub-Adviser or any
of its officers, directors, employees or agents, the Sub-Adviser shall
not be subject to liability to the Adviser or to the Trustees for any
act or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
14. Indemnification. In the absence of willful misfeasance, bad
faith, negligence or reckless disregard of duties hereunder on the
part of the Sub-Adviser, or any officers, directors, employees or
agents thereof, the Trust hereby agrees to indemnify and hold harmless
the Sub-Adviser against all claims, actions, suits or proceedings at
law or in equity whether brought by a private party or a governmental
department, commission, board, bureau, agency or instrumentality of
any kind, arising from the
5
<PAGE>
advertising, solicitation, sale, purchase or pledge of securities,
whether of the Funds or other securities, undertaken by the Funds,
their officers, directors, employees, agents or affiliates, resulting
from any violations of the securities laws, rules, regulations,
statutes and codes, whether federal or of any state, by the Funds,
their officers, directors, employees or affiliates. Federal and state
securities laws impose liabilities under certain circumstances on
persons who act in good faith, and nothing herein shall constitute a
waiver or limitation of any rights which a Fund may have and which may
not be waived under any applicable federal and state securities laws.
15. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to such
address as may be designated for the receipt of such notice, with a
copy to the Trust. Until further notice, it is agreed that the
address of the Trust shall be 111 Center Street, Little Rock, Arkansas
72201; that of the Sub-Adviser shall be One NationsBank Plaza,
Charlotte, North Carolina 28255; and that of the Adviser shall be One
NationsBank Plaza, Charlotte, North Carolina 28255.
16. Questions of Interpretation. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or
otherwise derived from a term or provision of the 1940 Act or the
Advisers Act shall be resolved by reference to such term or provision
of the 1940 Act or the Advisers Act and to interpretations thereof, if
any, by the United States courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the
Commission issued pursuant to the 1940 Act or the Advisers Act. In
addition, where the effect of a requirement of the 1940 Act or the
Advisers Act reflected in any provision of this Agreement is revised
by rule, regulation or order of the Commission, such provision shall
be deemed to incorporate the effect of such rule, regulation or order.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in triplicate by their respective officers on the day
and year first written above.
NATIONS FUND TRUST
on behalf of the Funds
Attest:
_________________________ By: _________________________
Name:____________________ _________________________
A. Max Walker
President
NATIONSBANC ADVISORS, INC.
Attest:
_________________________ By: _________________________
Name:____________________ _________________________
Mark H. Williamson
President and Director
TRADESTREET INVESTMENT
ASSOCIATES, INC.
Attest:
_________________________ By: _________________________
Name:____________________ _________________________
Andrew M. Silton
President and Director
7
<PAGE>
SCHEDULE I
Fund Rate of
Compensation
Nations Government Money Market Fund 0.055%
Nations Tax Exempt Fund 0.07%
Nations Value Fund 0.25%
Nations Capital Growth Fund 0.25%
Nations Emerging Growth Fund 0.25%
Nations Equity Index Fund 0.20%
Nations Disciplined Equity Fund 0.25%
Nations Balanced Assets Fund 0.25%
Nations Short-Intermediate Government Fund 0.15%
Nations Short-Term Income Fund 0.15%
Nations Diversified Income Fund 0.15%
Nations Strategic Fixed Income Fund 0.15%
Nations Municipal Income Fund 0.07%
Nations Short-Term Municipal Income Fund 0.07%
Nations Intermediate Municipal Bond Fund 0.07%
Nations Florida Municipal Bond Fund 0.07%
Nations Georgia Municipal Bond Fund 0.07%
Nations Maryland Municipal Bond Fund 0.07%
Nations North Carolina Municipal Bond Fund 0.07%
Nations South Carolina Municipal Bond Fund 0.07%
Nations Tennessee Municipal Bond Fund 0.07%
Nations Texas Municipal Bond Fund 0.07%
Nations Virginia Municipal Bond Fund 0.07%
Nations Florida Intermediate Municipal Bond Fund 0.07%
Nations Georgia Intermediate Municipal Bond Fund 0.07%
Nations Maryland Intermediate Municipal Bond Fund 0.07%
Nations North Carolina Intermediate Municipal Bond Fund 0.07%
Nations South Carolina Intermediate Municipal Bond Fund 0.07%
Nations Tennessee Intermediate Municipal Bond Fund 0.07%
Nations Texas Intermediate Municipal Bond Fund 0.07%
Nations Virginia Intermediate Municipal Bond Fund 0.07%
<PAGE>
99.B6(f)
SHAREHOLDER ADMINISTRATION AGREEMENT
NATIONS FUND TRUST
TRUST B SHARES
Ladies and Gentlemen:
We wish to enter into this Shareholder Administration Agreement
("Agreement") with you concerning the provision of administrative
support services to your clients ("Customers") who may from time to time
beneficially own Trust B Shares in certain portfolios (as listed on
Exhibit I) (the "Funds") of Nations Fund Trust (the "Trust").
The terms and conditions of this Agreement are as follows:
Section 1. You agree to provide the following administrative
support services to your Customers who may from time to time
beneficially own Trust B Shares:1 (i) aggregating and processing purchase
and redemption requests for Trust B Shares from Customers and
transmitting promptly net purchase and redemption orders to our
distributor or transfer agent; (ii) providing Customers with a service
that invests the assets of their accounts in Trust B Shares pursuant to
specific or pre-authorized instructions; (iii) processing dividend and
distribution payments from the Trust on behalf of Customers; (iv)
providing information periodically to Customers showing their positions
in Trust B Shares; (v) arranging for bank wires; (vi) responding to
Customers' inquiries concerning their investment in Trust B Shares;
(vii) providing subaccounting with respect to Trust B Shares
beneficially owned by Customers or the information to us necessary for
subaccounting; (viii) if required by law, forwarding shareholder
communications from us (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax
notices) to Customers; (ix) forwarding to Customers proxy statements and
proxies containing any proposals regarding this Agreement; (x) providing
employee benefit plan recordkeeping, administration, custody and trustee
services; (xi) general shareholder liaison services; and (xii) providing
such other similar services as we may reasonably request to the extent
you are permitted to do so under applicable statutes, rules or
regulations. All services rendered hereunder by you shall be performed
in a professional, competent and timely manner.
Section 2. You will perform only those activities which are
consistent with statutes and regulations applicable to you. You will
act solely as agent or, upon the order of, and for the account of, your
Customers.
Section 3. You will provide such office space and equipment,
telephone facilities and personnel (which may be any part of the space,
equipment and facilities currently used in your
- ------------------------
1 Services may be modified or omitted in the particular case and items
relettered or renumbered.
<PAGE>
business, or any personnel employed by you) as may be reasonably
necessary or beneficial in order to provide the administrative support
services contemplated hereby.
Section 4. Neither you nor any of your officers, employees or
agents are authorized to make any representations concerning us or the
Trust B Shares except those contained in our then current prospectuses
and statements of additional information, as amended or supplemented
from time to time, copies of which will be supplied by us to you, or in
such supplemental literature or advertising as may be authorized by the
Distributor or us in writing.
Section 5. For all purposes of this Agreement you will be deemed to
be an independent contractor, and will have no authority to act as agent
for us in any matter or in any respect, except as provided herein. By
your written acceptance of this Agreement, you agree to and do release,
indemnify and hold us harmless from and against any and all direct or
indirect liabilities or losses resulting from requests, directions,
actions or inactions of or by you or your officers, employees or agents
regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Trust B Shares (or orders relating to the
same) by or on behalf of Customers. You and your employees will, upon
request, be available during normal business hours to consult with us or
our designees concerning the performance of your responsibilities under
this Agreement.
Section 6. In consideration of the services and facilities
provided by you hereunder, we will pay to you, and you will accept as
full payments therefor, a fee as described in the applicable then
current prospectuses. The fee rate payable to you may be prospectively
increased or decreased by us, in our sole discretion, at any time upon
notice to you. Further, we may, in our discretion and without notice,
suspend or withdraw the sale of Trust B Shares of any and all Funds,
including the sale of Trust B Shares to you for the account of any
Customer or Customers. Compensation payable under this Agreement is
subject to, among other things, the National Association of Securities
Dealers, Inc. ("NASD") Rules of Fair Practice governing receipt by NASD
members of service fees from registered investment companies. In this
regard, in no event may the portion of any fee payable hereunder that
constitutes a "service fee," as that term is defined in Article III,
Section 26(b)(9) of the NASD's Rules of Fair Practice, exceed 0.25% of
the average daily net asset value of the Trust B Shares of a Fund.
Section 7. You agree to provide to us at least quarterly, a written
report of the amounts expended by you in connection with the provision
of administrative support services hereunder and the purposes for which
such expenditures were made. In addition, you will furnish us or our
designees with such information as we or they may reasonably request
(including, without limitation, periodic certifications confirming the
provision to Customers of the services described herein), and will
otherwise cooperate with us and our designees (including, without
limitation, any auditors or legal counsel designated by us), in
connection with the preparation of reports to our Board of Trustees
concerning this Agreement and the monies paid or payable by us pursuant
hereto, as well as any other reports or filings that may be required by
law.
Section 8. We may enter into other similar Agreements with any
other person or persons without your consent.
2
<PAGE>
Section 9. By your written acceptance of this Agreement, you
represent, warrant and agree that: (i) in no event will any of the
services provided by you hereunder be primarily intended to result in
the sale of any shares issued by us; (ii) the compensation payable to
you hereunder, together with any other compensation you receive in
connection with the investment of your Customers' assets in Trust B
Shares of the Funds, will be disclosed by you to your Customers to the
extent required by applicable laws or regulations, will be authorized by
your Customers and will not result in an excessive or unreasonable fee
to you and (iii) in the event an issue pertaining to this Agreement is
submitted for shareholder approval, and you have the authority from your
Customer to do so, you will vote any Trust B Shares held for your own
account in the same proportion as the vote of the Trust B Shares held
for your Customers' benefit.
Section 10. You agree to conform to compliance standards adopted by
the Trust or its distributor as to when a class of shares in a Fund may
be appropriately sold to particular investors.
Section 11. This Agreement will become effective on the date a
fully executed copy of this Agreement is received by us or our designee
and continues in effect until terminated. This Agreement is terminable
with respect to any series of Trust B Shares, without penalty, at any
time by us (which termination may be by a vote of a majority of the
disinterested Trustees of the Trust) or by you upon written notice to
the other party hereto.
Section 12. All notices and other communications to either you or
us will be duly given if mailed, telegraphed, telexed or transmitted by
similar telecommunications device to the appropriate address or number
stated herein (with a confirming copy by mail), or to such other address
as either party shall so provide in writing to the other.
Section 13. This Agreement will be construed in accordance with the
internal laws of The Commonwealth of Massachusetts without giving effect
to principles of conflict of laws, and is nonassignable by the parties
hereto.
Section 14. The names "Nations Fund Trust" and "Trustees" refer
respectively to the trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration
of Trust dated May 6, 1985 which is hereby referred to and a copy of
which is on file at the office of the State Secretary of The
Commonwealth of Massachusetts and at the principal office of the Trust.
The obligations of "Nations Fund Trust" entered into in the name or on
behalf thereof by any of the Trustees, officers, representatives or
agents are made not individually, but in such capacities, and are not
binding upon any of the Trustees, Shareholders, officers,
representatives or agents of the Trust personally, but bind only the
Trust Property (as defined in the Declaration of Trust), and all persons
dealing with any class of shares of the Trust must look solely to the
Trust Property belonging to such class for the enforcement of any claims
against the Trust.
3
<PAGE>
If you agree to be legally bound by the provisions of this
Agreement, please sign a copy of this letter where indicated below and
promptly return it to us, at the following address: 111 Center Street,
Little Rock, Arkansas 72201; Fax No. (501) 377-2331; Attention: Mr.
Richard H. Blank, Jr.
Very truly yours,
NATIONS FUND TRUST
Date: ____________________ By: _____________________________
Name: ___________________________
Title: ____________________________
Accepted and Agreed to:
Servicing Agent
------------------------------------
(Firm Name)
------------------------------------
(Address)
-------------------------------------
(City) (State) (County)
Fax No._____________________________
Attention:__________________________
Date: ____________________ By: _____________________________
Name: ___________________________
Title: ____________________________
4
<PAGE>
EXHIBIT I
NATIONS FUND TRUST
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 Tax Managed Equity Fund
5
<PAGE>
99.B6(g)
SHAREHOLDER ADMINISTRATION AGREEMENT
NATIONS FUND
TRUST B SHARES
Ladies and Gentlemen:
We wish to enter into this Shareholder Administration Agreement
("Agreement") with you concerning the provision of administrative
support services to your clients ("Customers") who may from time to time
beneficially own Trust B Shares in one or more of the portfolios
(collectively, the "Funds") listed on Schedule I of Nations Fund Trust,
Nations Fund, Inc. and Nations Fund Portfolios, Inc. (collectively,
"Nations Fund"). The shares listed on Schedule I are collectively
referred to herein as "Shares." The terms and conditions of this
Agreement are as follows:
1. Provision of Shareholder Services.
(a) You agree to provide the following administrative support
services to your Customers who may from time to time beneficially own
Shares:1 (i) aggregating and processing purchase and redemption requests
for Shares from Customers and transmitting promptly net purchase and
redemption orders to our distributor or transfer agent; (ii) providing
Customers with a service that invests the assets of their accounts in
Shares pursuant to specific or pre-authorized instructions; (iii)
processing dividend and distribution payments from Nations Fund on
behalf of Customers; (iv) providing information periodically to
Customers showing their positions in Shares; (v) arranging for bank
wires; (vi) responding to Customers' inquiries concerning their
investment in Shares; (vii) providing subaccounting with respect to
Shares beneficially owned by Customers or the information to us
necessary for subaccounting; (viii) if required by law, forwarding
shareholder communications from us (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; (ix) forwarding to Customers
proxy statements and proxies containing any proposals regarding this
Agreement; (x) employee benefit plan recordkeeping, administration,
custody and trustee services; (xi) general shareholder liaison services;
and (xii) providing such other similar services as we may reasonably
request to the extent you are permitted to do so under applicable
statutes, rules or regulations.
(b) All services rendered hereunder by you shall be performed in
a professional, competent and timely manner.
(c) You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment
and facilities currently used in your business, or any personnel
employed by you) as may be reasonably necessary or beneficial in
- -------------------------
1 Services may be modified or omitted in the particular case and items
relettered or renumbered.
<PAGE>
order to provide the administrative support services contemplated
hereby. You and your employees will, upon request, be available during
normal business hours to consult with us or our designees concerning the
performance of your responsibilities under this Agreement.
(d) By your written acceptance of this Agreement, you represent,
warrant and agree that in no event will any of the services provided by
you hereunder be primarily intended to result in the sale of any shares
issued by us.
2. Adherence to Applicable Law.
You will perform only those activities which are consistent with
statutes and regulations applicable to you. You will act solely as
agent or, upon the order of, and for the account of, your Customers.
3. Representations Regarding Nations Fund and Shares.
Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning us or the Shares
except those contained in our then current prospectuses and statements
of additional information, as amended or supplemented from time to time,
copies of which will be supplied by us to you, or in such supplemental
literature or advertising as may be authorized by our distributor or us
in writing.
4. Status of Servicing Agent.
(a) For all purposes of this Agreement you will be deemed to be
an independent contractor, and will have no authority to act as agent
for us in any matter or in any respect, except as expressly provided
herein.
(b) We may, in our discretion and without notice, suspend or
withdraw the sale of Shares of any and all Funds, including the sale of
Shares to you for the account of any Customer or Customers.
5. Indemnification.
By your written acceptance of this Agreement, you agree to and do
release, indemnify and hold us harmless from and against any and all
direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you or your officers,
employees or agents regarding your responsibilities hereunder or the
purchase, redemption, transfer or registration of Shares (or orders
relating to the same) by or on behalf of Customers.
6. Compensation.
(a) In consideration of the services and facilities provided by
you hereunder, we will pay to you, and you will accept as full payment
therefor, a fee as described in the applicable
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then current prospectuses for the Shares. The fee rate payable to you
may be prospectively increased or decreased by us, in our sole
discretion, at any time upon notice to you.
(b) Compensation payable under this Agreement is subject to,
among other things, the National Association of Securities Dealers, Inc.
("NASD") Rules of Fair Practice governing receipt by NASD members of
service fees from registered investment companies. In this regard, in
no event may the portion of any fee payable hereunder that constitutes a
"service fee," as that term is defined in Article III, Section 26(b)(9)
of the NASD's Rules of Fair Practice, exceed 0.25% of the average daily
net asset value of the Shares of a Fund.
7. Reports.
You agree to provide to us at least quarterly, a written report of
the amounts expended by you in connection with the provision of
administrative support services hereunder and the purposes for which
such expenditures were made. In addition, you will furnish us or our
designees with such information as we or they may reasonably request
(including, without limitation, periodic certifications confirming the
provision to Customers of the services described herein), and will
otherwise cooperate with us and our designees (including, without
limitation, any auditors or legal counsel designated by us), in
connection with the preparation of reports to our Boards of
Trustees/Directors concerning this Agreement and the monies paid or
payable by us pursuant hereto, as well as any other reports or filings
that may be required by law.
8. Agreement Not Exclusive.
We may enter into other similar Agreements with any other person or
persons without your consent.
9. Disclosure of Compensation.
You agree that the compensation payable to you hereunder, together
with any other compensation you receive in connection with the
investment of your Customers' assets in Shares of the Funds, will be
disclosed by you to your Customers to the extent required by applicable
laws or regulations, will be authorized by your Customers and will not
result in an excessive or unreasonable fee to you.
10. Voting of Shares.
You agree that in the event an issue pertaining to this Agreement
is submitted for shareholder approval, and you have the authority from
your Customers to do so, you will vote any Shares held for your own
account in the same proportion as the vote of the Shares held for your
Customers' benefit.
11. Compliance Standards.
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You agree to conform to compliance standards adopted by Nations
Fund or its distributor as to when a class of shares in a Fund may be
appropriately sold to particular investors.
12. Effective Date and Termination.
(a) This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee and
continues in effect until terminated.
(b) This Agreement is terminable with respect to any series of
Shares, without penalty, at any time by us (which termination may be by
a vote of a majority of the disinterested Trustees of Nations Fund
Trust, the disinterested Directors of Nations Fund, Inc., or
disinterested Directors of Nations Fund Portfolios, Inc., as
appropriate) or by you upon written notice to the other party hereto.
13. Communications.
All notices and other communications to either you or us will be
duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address or number stated
herein (with a confirming copy by mail), or to such other address as
either party shall so provide in writing to the other.
14. Governing Law.
This Agreement will be construed in accordance with the internal
laws of the State of Maryland without giving effect to principles of
conflict of laws, and is nonassignable by the parties hereto.
15. Actions by Nations Fund Trust and Trustees.
The names "Nations Fund Trust" and "Trustees" refer respectively to
the trust created and the Trustees, as trustees but not individually or
personally, acting from time to time under a Declaration of Trust dated
May 6, 1985 which is hereby referred to and a copy of which is on file
at the office of the State Secretary of The Commonwealth of
Massachusetts and at the principal office of Nations Fund Trust. The
obligations of "Nations Fund Trust" entered into in the name or on
behalf thereof by any of the Trustees, officers, representatives or
agents are made not individually, but in such capacities, and are not
binding upon any of the Trustees, Shareholders, officers,
representatives or agents of the Trust personally, but bind only the
Trust Property (as defined in the Declaration of Trust), and all persons
dealing with any class of shares of Nations Fund Trust must look solely
to the Trust Property belonging to such class for the enforcement of any
claims against Nations Fund Trust.
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If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly
return it to us, at the following address: 111 Center Street, Little
Rock, AR; Fax No. (501) 377-2331; Attention: Mr. Richard H. Blank, Jr.
Very truly yours,
NATIONS FUND TRUST
Date: ____________________ By: ____________________
Name: __________________
Title: ___________________
NATIONS FUND, INC.
Date: ____________________ By: _____________________________
Name: ___________________________
Title: ____________________________
NATIONS FUND PORTFOLIOS, INC.
Date: ____________________ By: _____________________________
Name: ___________________________
Title: ____________________________
Accepted and Agreed to:
Servicing Agent
_________________________________
(Firm Name)
_________________________________
(Address)
_________________________________
(City) (State) (County)
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Fax No. _________________________
Attention: .________________________
Date: ____________________ By: ______________________________
Name: ____________________________
Title: _____________________________
6
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SCHEDULE I
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
Nations Tax Managed Equity 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 Global Government Income Fund
7
MORRISON & FOERSTER LLP LETTERHEAD
January 25, 1996
Nations Fund Trust
111 Center Street
Little Rock, Arkansas 72201
Re: Units of Beneficial Interest in the
Funds of the Nations Fund Trust
Gentlemen:
We refer to Post-Effective Amendment No. 41 to the Registration
Statement on Form N-1A (SEC File No. 2-97817; 811-4305) (the "Registration
Statement") of Nations Fund Trust (the "Trust") relating to the registration of
an indefinite number of units of Beneficial Interest in Funds of the Trust
(collectively, the "Shares").
We have been requested by the Trust to furnish this opinion as
Exhibit 10 to the Registration Statement.
We have examined such records, documents, instruments,
certificates of public officials and of the Trust, made such inquiries of the
Trust, and examined such questions of law as we have deemed necessary for the
purpose of rendering the opinion set forth herein. We have assumed the
genuineness of all signatures and the authenticity of all items submitted to us
as originals and the conformity with originals of all items submitted to us as
copies.
Based upon and subject to the foregoing, we are of the opinion
that:
The issuance and sale of the Shares by the Trust have been duly
and validly authorized by all appropriate action and, assuming delivery by sale
or in accord with the Trust's dividend reinvestment plan in accordance with the
description set forth in the Registration Statement, as amended, the Shares will
be validly issued, fully paid and nonassessable.
<PAGE>
Nations Fund Trust
January 25, 1996
Page 2
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
reference to our firm under the caption "Counsel" in the Statement of Additional
Information, and the description of advice rendered by our firm under the
heading "How The Funds Are Managed" in the Prospectuses, which is included as
part of the Registration Statement.
Very truly yours,
/s/ MORRISON & FOERSTER, LLP
MORRISON & FOERSTER, LLP
EX-99.B11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting parts of this Post-Effective Amendment No.
41 under the Securities Act of 1933 to the registration statement on Form N-1A
(the "Registration Statement") of our reports dated January 19, 1995, relating
to the financial statements and financial highlights appearing in the November
30, 1994 Annual Reports to Shareholders of Nations Fund Trust, which are also
incorporated by reference into the Registration Statement. We also consent to
the reference to us under the heading "Other Service Providers" in the
Prospectuses and under the heading "Independent Accountants and Reports" in the
Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 24, 1996
99.B15(g)
NATIONS FUND TRUST
SHAREHOLDER ADMINISTRATION
PLAN ("PLAN") FOR TRUST B SHARES
Section 1. Each of the proper officers of Nations Fund Trust (the
"Trust") is authorized to execute and deliver, in the name and on behalf of the
Trust, written agreements based substantially on the form attached hereto as
Appendix A or any other form duly approved by the Trust's Board of Trustees
("Agreements") with broker/dealers, banks and other financial institutions that
are dealers of record or holders of record or which have a servicing
relationship with the beneficial owners of Trust B Shares ("Servicing Agents")
in certain of the Trust's Funds (as listed on Exhibit I) offering such shares
provided that any material modifications of services listed in the Agreement
shall be presented for approval or ratification by the Trustees at the next
regularly scheduled Board Meeting. Pursuant to such Agreements, Servicing Agents
shall provide shareholder support services as set forth therein to their clients
who beneficially own Trust B Shares of the Funds in consideration of a fee,
computed monthly in the manner set forth in the applicable Fund's then current
prospectus, at an annual rate of up to 0.60% of the average daily net asset
value of the Trust B Shares beneficially owned by or attributable to such
clients, provided that in no event may the portion of such fee that constitutes
a "service fee," as that term is defined in Article III, Section 26(b)(9) of the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.,
exceed 0.25% of the average daily net asset value of such Trust B Shares of a
Fund. Affiliates of the Trust's distributor, administrator, co-administrator and
adviser are eligible to become Servicing Agents and to receive fees under this
Plan. All expenses incurred by a Fund in connection with the Agreements and the
implementation of this Plan shall be borne entirely by the holders of the Trust
B Shares of the particular Fund involved. If more than one Fund is involved and
these expenses are not directly attributable to Trust B Shares of a particular
Fund, then the expenses may be allocated between or among the Trust B Shares of
the Funds in a fair and equitable manner.
Section 2. The Trust's administrator and/or co-administrator shall
monitor the arrangements pertaining to the Trust's Agreements with Servicing
Agents. The Trust's administrator and co-administrator shall not, however, be
obligated by this Plan to recommend, and the Trust shall not be obligated to
execute, any Agreement with any qualifying Servicing Agents.
Section 3. So long as this Plan is in effect, the Trust's distributor
shall provide to the Trust's Board of Trustees, and the Trustees shall review,
at least quarterly, a written report of the amounts expended pursuant to this
Plan and the purposes for which such expenditures were made.
Section 4. Unless sooner terminated, this Plan shall continue in effect
for a period of one year from its date of execution and shall continue
thereafter for successive annual periods, provided that such continuance is
specifically approved by a majority of the Board of Trustees,
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including a majority of the Trustees who are not "interested persons," as
defined in the Investment Company Act of 1940 (the "Act"), of the Trust and have
no direct or indirect financial interest in the operation of this Plan or in any
Agreement related to this Plan (the "Disinterested Trustees") cast in person at
a meeting called for the purpose of voting on this Plan.
Section 5. This Plan may be amended at any time with respect to any
Fund by the Trust's Board of Trustees, provided that any material amendment of
the terms of this Plan (including a material increase of the fee payable
hereunder) shall become effective only upon the approvals set forth in Section
4.
Section 6. This Plan is terminable at any time with respect to any Fund
by vote of a majority of the Disinterested Trustees.
Section 7. While this Plan is in effect, the selection and nomination
of the Disinterested Trustees shall be committed to the discretion of such
Disinterested Trustees.
Section 8. To the extent that any portion of the fees payable under the
Agreements is deemed to be for services primarily intended to result in the sale
of Fund shares, such fees are deemed approved and may be paid pursuant to the
Plan and in accordance with Rule 12b-1 under the Act, provided that the
Agreements, to the extent they are deemed to relate to services primarily
intended to result in the sale of Fund shares, are approved and otherwise
treated in all respects as agreements related to the Plan.
Section 9. The Trust will preserve copies of this Plan, Agreements, and
any written reports regarding this Plan presented to the Board of Trustees for a
period of not less than six years.
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EXHIBIT I
NATIONS FUND TRUST
Nations Value Fund
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Equity Index Fund
Nations Disciplined Equity Fund
Nations Balanced Assets Fund
Nations Short-Term Income Fund
Nations Short-Intermediate Government Fund
Nations Strategic Fixed Income Fund
Nations Tax Managed Equity Fund
Nations Diversified Income Fund
3
