As filed with the Securities and Exchange Commission
on November 17, 1998
Registration No. 2-97817; 811-4305
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment No. 58 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 60 [X]
(Check appropriate box or boxes)
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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 LLP & 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 (date) pursuant
to Rule 485(b), or to Rule 485(b), or
[X] 60 days after filing pursuant [ ] on (date) 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.
<PAGE>
EXPLANATORY NOTE
The Registrant is filing this Post-Effective Amendment No. 58 to the
Company's Registration Statement for the purpose of restructuring the pricing of
Investor C Shares.
Part B filed pursuant to Rule 497(c) on October 19, 1998, is incorporated
by reference herein.
<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 ............................. Financial Highlights; 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 ....................... Organization And History
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 Registrant............. Trustees And Officers
15. Control Persons and Principal
Holders of Securities.................... Miscellaneous--Certain Record
Holders
16. Investment Advisory and Other Services... Investment
Advisory, Administration,
Custody, Transfer Agency,
Shareholder Servicing,
Shareholder Administration And
Distribution Agreements
17. Brokerage Allocation .................... Fund Transactions and Brokerage--
General Brokerage Policy
18. Capital Stock and Other
Securities............................... Description Of Shares;
Investment Advisory,
Administration,
Custody, Transfer Agency,
Shareholder Servicing And
Distribution Agreements
19. Purchase, Redemption and Pricing
of Securities Being Offered.............. Net Asset Value -- Purchases
And Redemptions; Distributor
20. Tax Status............................... Additional Information
Concerning
Taxes
21. Underwriters............................. Investment Advisory,
Administration
Custody, Transfer Agency,
Shareholder Servicing,
Shareholder Administration And
Distribution Agreements
22. Calculation of Performance Data.......... Additional Information on
Performance
23. Financial Statements..................... Independent Accountant 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>
Prospectus
Investor C Shares
August 1, 1998
as supplemented
on , 1998
This Prospectus describes the investment portfolios listed in the column to the
right (each a "Fund") of Nations Fund Trust, Nations Fund, Inc. and Nations
Fund Portfolios, Inc., ("Nations Portfolios"), each an open-end management
investment company in the Nations Funds Family ("Nations Funds" or "Nations
Funds Family"). This Prospectus describes one class of shares of each Fund --
Investor C Shares.
This Prospectus sets forth concisely the information about each Fund that a
prospective purchaser of Investor C Shares should consider before investing.
Investors should read this Prospectus and retain it for future reference.
Additional information about Nations Fund Trust, Nations Fund, Inc. and Nations
Portfolios is contained in a separate Statement of Additional Information (the
"SAI"), that has been filed with the Securities and Exchange Commission (the
"SEC") and is available upon request without charge by writing or calling
Nations Funds at its address or telephone number shown below. The SAI for
Nations Funds, dated August 1, 1998, is incorporated by reference in its
entirety into this Prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference
in this Prospectus and other information regarding registrants that file
electronically with the SEC. NationsBanc Advisors, Inc. ("NBAI") is the
investment adviser to each of the Funds. Gartmore Global Partners ("Gartmore")
is the investment sub-adviser to Nations International Equity Fund, Nations
Emerging Markets Fund, Nations Pacific Growth Fund and Nations International
Growth Fund. Brandes Investment Partners, L.P. ("Brandes") is the investment
sub-adviser to Nations International Value Fund and Marsico Capital Management,
LLC ("Marsico Capital") is the investment sub-adviser to all Marsico Focused
Equities Fund and Nations Marsico Growth & Income Fund. TradeStreet Investment
Associates, Inc. ("TradeStreet") is the investment sub-adviser to all the other
Nations Funds. As used herein the term "Adviser" shall mean NBAI, TradeStreet,
Gartmore, Brandes and/or Marsico Capital as the context may require, see "How
The Funds Are Managed."
SHARES OF NATIONS FUNDS 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 SERVICES TO NATIONS FUNDS,
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 FUNDS.
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 Emerging Growth Fund
Nations Small Company Growth Fund
Nations Disciplined Equity Fund
Nations Capital Growth Fund
Nations Marsico Focused Equities Fund
Nations Marsico Growth & Income Fund
Nations International Equity Fund
Nations International Growth Fund
Nations International Value Fund
Nations Emerging Markets Fund
Nations Pacific Growth Fund
BALANCED FUND:
Nations Balanced Assets Fund
For Fund information call:
1-800-321-7854
Nations Funds
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
[NATIONS FUNDS LOGO APPEARS HERE]
NF-96140-8/98
<PAGE>
Table Of Contents
About The Prospectus Summary 3
Funds -----------------------------------------------------
Expenses Summary 5
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Objectives 8
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How Objectives Are Pursued 9
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How Performance Is Shown 24
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How The Funds Are Managed 26
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Organization And History 32
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About Your
Investment
How To Buy Shares 34
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Investor C Shares -- Charges and Features 35
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How To Redeem Shares 37
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How To Exchange Shares 37
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Shareholder Servicing And Distribution Plans 38
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How The Funds Value Their Shares 40
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How Dividends And Distributions Are Made;
Tax Information 40
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Financial Highlights 41
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Appendix A -- Portfolio Securities 55
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Appendix B -- Description Of Ratings 65
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS, OR IN THE FUNDS' SAI INCORPORATED HEREIN
BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NATIONS FUNDS OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY NATIONS FUNDS OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Prospectus Summary
o TYPE OF COMPANIES: Open-end management investment companies.
o INVESTMENT OBJECTIVES AND POLICIES:
o EQUITY FUNDS:
o Nations Value Fund's investment objective is to seek growth of capital by
investing in companies that are believed to be undervalued.
o Nations Equity Income Fund's investment objective is to seek current income
and growth of capital by investing primarily in companies with above-average
dividend yields.
o Nations Emerging Growth Fund's investment objective is to seek capital
appreciation by investing in emerging growth companies that are believed to
have superior long-term earnings growth prospects.
o Nations Small Company Growth Fund's investment objective is to seek
long-term capital growth by investing primarily in equity securities.
o Nations Disciplined Equity Fund's investment objective is to seek growth of
capital by investing in companies that are expected to produce significant
increases in earnings per share.
o Nations Capital Growth Fund's investment objective is to seek growth of
capital by investing in companies that are believed to have superior
earnings growth potential.
o Nations Marsico Focused Equities Fund's investment objective is to seek
long-term growth of capital. It is a non-diversified fund that pursues its
objective by normally investing in a core position of 20-30 common stocks.
o Nations Marsico Growth & Income Fund's investment objective is to seek
long-term growth of capital with a limited emphasis on income. Under normal
circumstances, the Fund pursues its objective by investing up to 75% of its
assets in equity securities selected primarily for their growth potential
and at least 25% of its assets in securities that have income potential.
o Nations International Equity Fund's investment objective is to seek
long-term capital growth by investing primarily in equity securities of
non-United States companies in Europe, Australia, the Far East and other
regions, including developing countries.
o Nations International Growth Fund's investment objective is to seek
long-term capital growth by investing primarily in equity securities of
companies domiciled in countries outside the United States and listed on
major stock exchanges primarily in Europe and the Pacific Basin.
o Nations International Value Fund's investment objective is to seek long-term
capital appreciation by investing primarily in equity securities of foreign
issuers, including emerging markets countries.
o Nations Emerging Markets Fund's investment objective is to seek long-term
capital growth by investing primarily in equity securities of companies in
emerging market countries, such as those in Latin America, Eastern Europe,
the Pacific Basin, the Far East, Africa and India.
3
<PAGE>
o Nations Pacific Growth Fund's investment objective is to seek long-term
capital growth by investing primarily in equity securities of companies in
the Pacific Basin and the Far East (excluding Japan).
o BALANCED FUND:
o Nations Balanced Assets Fund's investment objective is to seek total return
by investing in equity and fixed income securities.
o INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as the investment
adviser to the Funds. NBAI provides investment management services to more
than 60 investment company portfolios in the Nations Funds Family. TradeStreet
Investment Associates, Inc., an affiliate of NBAI, Gartmore Global Partners
provides investment sub-advisory services to Nations International Equity
Fund, Nations Emerging Markets Fund, Nations Pacific Growth Fund and Nations
International Growth Fund, Brandes Investment Partners, L.P. provides
investment sub-advisory services to Nations International Value Fund and
Marsico Capital Management, LLC provides investment sub-advisory services to
Nations Marsico Focused Equities Fund and Nations Marsico Growth & Income
Fund. For more information about the investment adviser and investment
sub-adviser for Nations Funds, see "How The Funds Are Managed."
o DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income are declared
and paid monthly by Nations Capital Growth Fund, Nations Disciplined Equity
Fund, Nations Equity Income Fund, Nations Value Fund and Nations Small Company
Growth Fund. Dividends from net investment income are declared and paid
annually by Nations International Growth Fund and Nations International Value
Fund. All other Equity Funds and the Balanced Fund declare and pay dividends
from net investment income each calendar quarter. Each Fund's net realized
capital gains, including net short-term capital gains are distributed at least
annually.
o RISK FACTORS: Although NBAI, together with the sub-advisers, seek to achieve
the investment objective of each Fund, there is no assurance that they will be
able to do so. 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 risk, which is the risk that the value of the
stocks the Fund holds may decline over short or even extended periods. The
U.S. stock markets tend to be cyclical, with periods when stock prices
generally rise and periods when prices generally decline. As of the date of
this Prospectus, the stock markets, as measured by the S&P 500 Index (as
defined below) and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will continue. In
addition, certain of the Funds may invest in securities of smaller and newer
issuers. Investments in such companies may present greater opportunities for
capital appreciation because of high potential earnings growth, but also
present greater risks than investments in more established companies with
longer operating histories and greater financial capacity. Investments by a
Fund in debt securities are subject to interest rate risk, which is the risk
that increases in market interest rates will adversely affect a Fund's
investments in debt securities. The value of a Fund's investments in debt
securities, including U.S. Government Obligations (as defined below), 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 which are not issued or guaranteed by the U.S.
Government are subject to credit risk, which is the risk that the issuer may
not be able to pay principal and/or interest when due. Certain of the Funds'
investments may constitute derivative securities. Certain types of derivative
securities can, under particular circumstances, significantly increase an
investor's exposure to market and other risks. Certain of the Funds invest in
foreign securities which present additional risks associated with
international investing, including, among others, heightened economic and
political risk, as well as foreign currency risk. For a discussion of these
and other fac-
4
<PAGE>
tors, see "How Objectives Are Pursued -- Risk Considerations", "How
Objectives Are Pursued -- Special Risk Considerations Relevant to an
Investment in the International Funds" and "Appendix A."
o MINIMUM PURCHASE: $1,000 minimum initial investment per record holder except
that the minimum initial investment is: $500 for Individual Retirement Account
("IRA") investors; $250 for non-working spousal IRAs; and $100 for
investors participating on a monthly basis in the Systematic Investment
Plan. There is no minimum investment amount for investments by certain
401(k) and employee pension plans or salary reduction. Minimum subsequent
investment is $100, except for investments pursuant to the Systematic
Investment Plan. See "How To Buy Shares."
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds.
The following tables summarize shareholder transaction and operating expenses
for Investor C Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
NATIONS FUNDS EQUITY FUNDS INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations Nations
Nations Nations Small Nations Nations Marsico
Shareholder Equity Emerging Company Disciplined Capital Focused
Transaction Nations Income Growth Growth Equity Growth Equities
Expenses Value Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None None None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the original
purchase price or redemption
proceeds)1 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Annual Fund
Operating
Expenses
(as a percentage of average net
assets)
Management Fees (After Fee Waivers) .75% .63% .75% .75% .75% .75% .85%
Rule 12b-1 Fees .50% .53% .75% .50% .75% .75% .75%
Shareholder Servicing Fees .25% .25% .25% .25% .25% .25% .25%
Other Expenses (After Expense
Reimbursements) .19% .23% .23% .20% .23% .20% .40%
Total Operating Expenses (After Fee
Waivers and Expense
Reimbursements) 1.69% 1.64% 1.98% 1.70% 1.98% 1.95% 2.25%
</TABLE>
(1) Investor C Shares that are purchased at net asset value are subject to a
Deferred Sales Charge if redeemed within one year of purchase.
5
<PAGE>
NATIONS FUNDS EQUITY/BALANCED FUNDS INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations
Marsico Nations Nations Nations Nations Nations
Shareholder Growth & International International International Emerging Pacific Nations
Transaction Income Equity Growth Value Markets Growth Balanced
Expenses Fund Fund Fund Fund Fund Fund Assets Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Sales Load Imposed on
Purchases None None None None None None None
Maximum Deferred Sales
Charge (as a percentage of
the lower of the original
purchase price or
redemption proceeds)1 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Annual Fund
Operating
Expenses
(as a percentage of
average net assets)
Management Fees (After Fee
Waivers) .85% .90% .90% .90% 1.10% .90% .75%
Rule 12b-1 Fees .75% .75% .75% .75% .75% .75% .75%
Shareholder Servicing Fees .25% .25% .25% .25% .25% .25% .25%
Other Expenses (After
Expense Reimbursements) .40% .24% .22% .22% .47% .47% .33%
Total Operating Expenses
(After Fee Waivers and
Expense Reimbursements) 2.25% 2.14% 2.12% 2.12% 2.57% 2.37% 2.08%
</TABLE>
(1) Investor C Shares that are purchased at net asset value are subject to a
Deferred Sales Charge if redeemed within one year of purchase.
Examples: You would pay the following expenses on a $1,000 investment in
Investor C Shares of the indicated Fund assuming (1) a 5% annual return and (2)
redemption at the end of each time period.
<TABLE>
<CAPTION>
Nations
Marsico
Nations Nations Nations Small Nations Nations Focused
Nations Equity Emerging Company Disciplined Capital Equities
Value Fund Income Fund Growth Fund Growth Fund Equity Fund Growth Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 27 $ 27 $ 30 $ 27 $ 30 $ 30 $ 33
3 Years $ 53 $ 52 $ 62 $ 54 $ 62 $ 61 $ 70
5 Years $ 92 $ 89 $107 $ 92 $107 $105 $120
10 Years $201 $195 $232 $202 $232 $228 $260
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Nations
Marsico
Growth Nations Nations Nations Nations Nations Nations
& Income International International International Emerging Pacific Balanced
Fund Equity Fund Growth Fund Value Fund Markets Fund Growth Fund Assets Fund
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 33 $ 32 $ 32 $ 32 $ 36 $ 34 $ 31
3 Years $ 70 $ 67 $ 66 $ 66 $ 80 $ 74 $ 65
5 Years $120 $115 $114 $114 $137 $127 $112
10 Years $260 $248 $246 $246 $292 $272 $242
</TABLE>
You would pay the following expenses on a $1,000 investment in Investor C
Shares of the indicated Fund, assuming (1) a 5% annual return and (2) no
redemption.
<TABLE>
<CAPTION>
Nations
Marsico
Nations Nations Nations Small Nations Nations Focused
Nations Equity Emerging Company Disciplined Capital Equities
Value Fund Income Fund Growth Fund Growth Fund Equity Fund Growth Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 17 $ 17 $ 20 $ 17 $ 20 $ 20 $ 23
3 Years $ 53 $ 52 $ 62 $ 54 $ 62 $ 61 $ 70
5 Years $ 92 $ 89 $ 107 $ 92 $ 107 $ 105 $ 120
10 Years $ 201 $ 195 $ 232 $ 202 $ 232 $ 228 $ 260
</TABLE>
<TABLE>
<CAPTION>
Nations
Marsico
Growth Nations Nations Nations Nations Nations Nations
& Income International International International Emerging Pacific Balanced
Fund Equity Fund Growth Fund Value Fund Markets Fund Growth Fund Assets Fund
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 23 $ 22 $ 22 $ 22 $ 26 $ 24 $ 21
3 Years $ 70 $ 67 $ 66 $ 66 $ 80 $ 74 $ 65
5 Years $ 120 $ 115 $ 114 $ 114 $ 137 $ 127 $ 112
10 Years $ 260 $ 248 $ 246 $ 246 $ 292 $ 272 $ 242
</TABLE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor C Shares will bear either directly or indirectly. The figures in the
above tables are based on amounts incurred during each Fund's most recent
fiscal year and have been adjusted as necessary to reflect current service
provider fees. There is no assurance that any fee waivers and/or reimbursements
will continue. In particular, to the extent Other Expenses are less than those
shown, waivers and/or reimbursements of Management Fees, if any, may decrease.
Shareholders will be notified of any decrease that materially increases Total
Operating Expenses. If fee waivers and/or reimbursements are decreased or
discontinued, the amounts contained in the "Examples" above may increase.
Long-term shareholders of the Funds could pay more in sales charges than the
economic equivalent of the maximum front-end sales charges applicable to mutual
funds sold by members of the National Association of Securities Dealers, Inc.
For more complete descriptions of the Funds' operating expenses, see "How The
Funds Are Managed." For a more complete description of the Rule 12b-1 and
shareholder servicing fees payable by the Funds, see "Shareholder Servicing And
Distribution Plans."
Absent fee waivers, "Management Fees" and "Total Operating Expenses" for
Investor C Shares of Nations International Value Fund would have been 1.00%
and 2.22%, respectively.
7
<PAGE>
Absent expense reimbursements, "Other Expenses" and "Total Operating Expenses"
for Investor C Shares of the indicated Fund would have been as follows: Nations
International Growth -- .27% and 2.17%, respectively, Nations Marsico Focused
Equities Fund -- .67% and 2.52%, respectively, and Nations Marsico Growth &
Income Fund -- 1.12% and 2.97%, respectively.
Absent fee waivers, "12b-1 Fees" and "Total Operating Expenses" for Investor C
Shares of Nations Equity Income Fund would have been .75% and 1.86%,
respectively.
Absent expense reimbursements and fee waivers, "12b-1 Fees, "Other Expenses"
and "Total Operating Expenses" for Investor C Shares of Nations Value Fund
would have been .75%, .20% and 1.95%, respectively.
Absent expense reimbursement and fee waivers, "Management Fees" "12b-1 Fees,"
"Other Expenses" and "Total Operating Expenses" for Investor C Shares of
Nations Small Company Growth Fund would have been 1.00%, .75%, .26% and 2.26%,
respectively.
Effective May 1999, it is anticipated that certain voluntary total operating
expenses limits put in place in connection with the reorganization of The Pilot
Funds into the Nations Funds will terminate with respect to the following
Funds: Nations Value Fund, Nations Small Company Growth Fund, Nations
International Growth Fund, Nations Equity Income Fund and Nations Disciplined
Equity Fund. For more information, see the SAI.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST
OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Objectives
Equity Funds:
Nations Value Fund: Nations Value Fund's investment objective is to seek growth
of capital by investing in companies that are believed to be undervalued.
Nations Equity Income Fund: Nations Equity Income Fund's investment objective
is to seek current income and growth of capital by investing primarily in
companies with above-average dividend yields.
Nations Emerging Growth Fund: Nations Emerging Growth Fund's investment
objective is to seek capital appreciation by investing in emerging growth
companies that are believed to have superior long-term earnings growth
prospects.
Nations Small Company Growth Fund: Nations Small Company Growth Fund's
investment objective is to seek long-term capital growth by investing primarily
in equity securities.
Nations Disciplined Equity Fund: Nations Disciplined Equity Fund's investment
objective is to seek growth of capital by investing in companies that are
expected to produce significant increases in earnings per share.
Nations Capital Growth Fund: Nations Capital Growth Fund's investment objective
is to seek growth of capital by investing in companies that are believed to
have superior earnings growth potential.
Nations Marsico Focused Equities Fund: Nations Marsico Focused Equities Fund's
investment objective is to seek long-term growth of capital.
Nations Marsico Growth & Income Fund: Nations Marsico Growth & Income Fund's
investment objective is to seek long-term growth of capital with a limited
emphasis on income.
Nations International Equity Fund: Nations International Equity Fund's
investment objective is to seek long-term capital growth by investing primarily
in equity securities of non-United States companies in Europe, Australia, the
Far East and other regions, including developing countries.
8
<PAGE>
Nations International Growth Fund: Nations International Growth Fund's
investment objective is to seek long-term capital growth by investing primarily
in equity securities of companies domiciled in countries outside the United
States and listed on major stock exchanges primarily in Europe and the Pacific
Basin.
Nations International Value Fund: Nations International Value Fund's investment
objective is to seek long-term capital appreciation by investing primarily in
equity securities of foreign issuers, including emerging markets countries.
Nations Emerging Markets Fund: Nations Emerging Markets Fund's investment
objective is to seek long-term capital growth by investing primarily in equity
securities of companies in emerging market countries, such as those in Latin
America, Eastern Europe, the Pacific Basin, the Far East, Africa and India.
Nations Pacific Growth Fund: Nations Pacific Growth Fund's investment objective
is to seek long-term capital growth by investing primarily in equity securities
of companies in the Pacific Basin and the Far East (excluding Japan).
Balanced Fund:
Nations Balanced Assets Fund: Nations Balanced Assets Fund's investment
objective is to seek total return by investing in equity and fixed income
securities.
Although the Adviser seeks to achieve the investment objective of each Fund,
there is no assurance that it will be able to do so. No single Fund should be
considered, by itself, to provide a complete investment program for any
investor. The net asset value of the shares of the Funds will fluctuate based
on market conditions. Therefore, investors should not rely upon the Funds for
short-term financial needs nor are the Funds meant to provide a vehicle for
participating in short-term swings in the stock market. Investments in the
Funds are not insured against loss of principal.
How Objectives Are Pursued
Equity Funds:
Nations Value Fund: The Fund invests in stocks drawn from a broad universe of
companies monitored by the Adviser. The Adviser closely monitors these
companies, rating them for quality and projecting their future earnings and
dividends as well as other factors. To qualify for purchase, an issuer would
normally have a market capitalization of $500 million or more and have an
average daily trading volume of at least $3 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
issued by companies in the same industry or economic sector. The Adviser
believes that companies with lower price-to-earnings ratios are more likely to
provide better opportunities for capital appreciation. This "value" approach
typically 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.
The Fund invests under normal market conditions 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 stock, and other types
of securities having common stock characteristics (such
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<PAGE>
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 up to 20% of its assets in foreign
securities. The Fund also may hold up to 20% of its total assets in obligations
issued or guaranteed as to payment of principal and interest by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Obligations"),
and investment grade securities of domestic companies. Obligations with the
lowest investment grade rating (E.G. rated "BBB" by Standard & Poor's
Corporation ("S&P") or "Baa" by Moody's Investors Service, Inc. ("Moody's"))
have speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations
may be acquired by the Fund if they are determined by the Adviser to be of
comparable quality at the time of purchase to rated obligations that may be
acquired.
The Fund may invest in various money market instruments and repurchase
agreements. 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.
Nations Equity Income Fund: The investment program of the Fund is based on
several premises. First, that dividends are normally a more stable and
predictable source of return than capital appreciation. While the price of a
company's stock generally increases and decreases in response to short-term
earnings and market fluctuations, its dividends are generally less volatile.
Second, diversifying equity holdings in a manner that includes every major
economic sector contributes to reduced volatility, without a commensurate
reduction in investment return. Collectively, these traits may be combined in
such a fashion as to produce a Fund with less volatility and which provides
higher marks of The McGraw-Hill Companies, Inc. income than that of the stocks
in the S&P 500 Composite Stock Price Index ("S&P 500 Index").1
Typically, the Fund will own equity securities of 100-150 large capitalization,
high quality companies. The Fund's portfolio will seek to provide a yield which
exceeds that produced by the stocks in the S&P 500 Index. Stocks are selected
from a broad universe of such companies. The stock selection process is
quantitatively based, using fundamental measures of valuation and growth. The
process takes in account value factors such as book value, earnings yield and
cash flow, which measure a stock's intrinsic worth versus its market price, as
well as momentum characteristics such as price momentum, earnings growth and
earning acceleration, which measure a stock relative to others in the industry.
To achieve its objective, 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 and government 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 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. The Fund also may invest up to 5% of its assets
in debt securities that are rated below
- --------------
(1) "Standard & Poor's" and "Standard & Poor's 500" are trade-
10
<PAGE>
investment grade (E.G. rated "BB" by S&P or "Ba" by Moody's), or if not rated,
are of equivalent investment quality as determined by the Adviser. Non-
investment grade debt securities, 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 up to 20% of its total
assets in foreign securities. 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 and repurchase
agreements. 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.
Nations Emerging Growth Fund: The Fund will invest in equity securities,
consisting of common stocks, preferred stocks and convertible securities, such
as warrants, rights and securities convertible into common stocks, selected
from a universe of emerging growth companies monitored by the Adviser. Most of
the companies will have revenues between $50 million and $1.5 billion and a
debt ratio of less than 50% of capitalization. The universe focuses on
companies with above-average earnings growth rates and profit margins, yet the
portfolio may include positions of special situation companies whose growth is
expected to accelerate. These companies are believed to offer significant
opportunities for capital appreciation and the Adviser will attempt to identify
these opportunities before their potential is recognized by investors in
general.
In managing the Fund, the Adviser applies a disciplined process with rigorous
fundamental analysis providing the basis for stock selection. Its methodology
combines fundamental, valuation and momentum-based disciplines in portfolio
construction. First, the Adviser evaluates nearly 1500 stocks by using
quantitative modeling techniques. Companies within this universe are analyzed
using the following criteria: earnings growth trends, earnings momentum,
earnings estimate trends, relative price performance and importantly, valuation
or price/earnings ratios relative to forecasted earnings growth. Next, the
Adviser conducts a bottom-up, fundamental analysis of each candidate company.
This process, which involves using both internal and external research and
conducting one on one conversations with senior company executives, requires
several steps: gaining an understanding of the business, evaluating its growth
potential, risks and competitive strengths, discussing its growth strategy with
company management, and validating that strategy with third parties and the
Adviser's network of regional brokerage research resources. Stocks are selected
after this rigorous analysis only when their valuation is attractive relative
to forecasted growth.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks. The Fund may invest in various money market
instruments and repurchase agreements. 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.
The volatility of emerging growth stocks is greater 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 130 companies which represent a
broad range of industries and sectors, both in the United States and abroad.
Although the Fund invests primarily in securities of U.S. issuers, it may
invest up to 20% of its total assets in foreign securities.
Nations Small Company Growth Fund: In pursuing its investment objective, under
normal market conditions, the Fund will invest at least 65% of its total assets
in equity securities, consisting of common stocks, preferred stocks and
convertible securities, such as warrants, rights and convertible debt. In
addition, the Fund will invest
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<PAGE>
at least 65% of its total assets in companies with a market capitalization of
$1 billion or less.
The investment philosophy of the Small Company Growth Fund is based on the
premise that stock prices are driven by earnings growth and that superior stock
market returns occur when a company experiences rapid and accelerating earnings
growth due to improving fundamentals.
In managing the Fund, the Adviser applies a disciplined process with rigorous
fundamental analysis providing the basis for stock selection. Its methodology
combines fundamental, valuation and momentum-based disciplines in portfolio
construction. First, the Adviser evaluates nearly 5000 stocks by using
quantitative modeling techniques. Companies with a market capitalization of
less than $1 billion are analyzed using the following criteria: earnings growth
trends, earnings momentum, earnings estimate trends, relative price performance
and importantly, valuation or price/ earnings ratios relative to forecasted
earnings growth. Next, the Adviser conducts a bottom-up, fundamental analysis
of each candidate company. This process, which involves using both internal and
external research and conducting one on one conversations with senior company
executives, requires several steps: gaining an understanding of the business,
evaluating its growth potential, risks and competitive strengths, discussing
the growth strategy with company management, and validating that strategy with
third parties and the Adviser's network of regional brokerage research
resources.
Overall, the Fund's strategy is to own those investments offering both
attractive fundamental valuation and relatively good prospects for earnings
improvement. Typically, two types of companies are candidates for purchase: (i)
mature companies which may have fallen from a larger market due to business
difficulties, but which now exhibit improving prospects; and (ii) smaller or
younger companies which are experiencing strong trends in earnings growth, but
remain reasonably valued and therefore offer premium growth at a discount in
comparison to other companies.
The Fund's weighted median capitalization generally is not expected to exceed
125% of the weighted median capitalization of the Russell 2000 Small Stock
Index (the "Russell 2000") as measured on a quarterly basis, although this may
vary from time to time. The volatility of the small cap growth stocks in which
the Fund invests is greater 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 130
companies which represent a broad range of industries and sectors, both in the
United States and abroad.
The Fund may invest up to 35% of its total assets in securities of issuers with
a market capitalization greater than $1 billion and in debt securities.
However, the Fund will not invest more than 10% of its total assets in debt
securities, unless the Fund assumes a temporary defensive position as discussed
below. Debt securities, if any, purchased by the Fund will be rated "AA" or
above by S&P or "Aa" or above by Moody's or, if unrated, determined by the
Adviser to be of comparable quality. For temporary defensive purposes, the Fund
may invest up to 100% of its assets in debt securities. Debt securities in
which the Fund may invest include short-term and intermediate-term obligations
of corporations, the U.S. and foreign governments and international
organizations (such as the International Bank for Reconstruction and
Development (the "World Bank")), and money market instruments.
The Fund may invest in common stocks (including securities convertible into
common stocks) of foreign issuers and rights to purchase common stock, options
and futures contracts on securities, securities indexes and foreign currencies,
securities lending, forward foreign exchange contracts and repurchase
agreements. The Fund currently intends to limit any investment in foreign
securities to 20% of total assets.
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 sig-
12
<PAGE>
nificant 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 the Fund, the Adviser utilizes quantitative analysis
and optimization tools. This approach seeks to identify companies with
improving profit potential through analysis of 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. The quantitative analysis also includes
ranking the attractiveness of equity securities according to a multi-factor
valuation model. Both value and growth factors are considered in the ranking
process. Value factors such as book value, earnings yield and cash flow measure
a stock's intrinsic worth versus its market price, while growth characteristics
such as price momentum, earnings growth and earnings acceleration measure a
stock relative to others in the same industry. The objective is to maintain a
broadly diversified portfolio which ranks in the top quartile on earnings
momentum and in the top third on valuation. This approach generally produces a
dividend yield less than the market average. Although this Fund seeks to invest
in attractively priced securities with increasing earnings, its investment
objective focuses on long-term capital appreciation; income is not an objective
of this 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 $1 billion 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 $1 billion. 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 an NRSRO 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 up to 20% of its total assets in foreign securities. For
temporary defensive purposes if market conditions warrant, the Fund may invest
without limitation in preferred stocks, investment grade debt instruments,
money market instruments and repurchase agreements.
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:
o above-average earnings growth relative to the S&P 500 Index;
o established operating histories, strong balance sheets and favorable financial
characteristics; and
o above-average return on equity relative to the S&P 500 Index.
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<PAGE>
In addition, the Fund's investment program enables it to invest in the
following types of companies:
o 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;
o companies that own or develop natural resources, such as energy exploration
companies;
o companies that may benefit from changing consumer demands and lifestyles, such
as financial service organizations and telecommunication companies;
o foreign companies, including those in countries with more rapid economic
growth than the U.S.;
o companies whose earnings growth is projected at a pace in excess of the
average company (I.E., growth companies); and
o companies whose earnings are temporarily depressed and are currently out of
favor with most investors.
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 up to 20% of its total assets in foreign securities.
The Fund also may invest in various money market instruments and repurchase
agreements. 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.
Nations Marsico Focused Equities Fund: Nations Marsico Focused Equities Fund is
a non-diversified fund that pursues its objective by normally investing in a
core position of 20-30 common stocks. Under normal circumstances, the Fund
invests at least 65% of its assets in large capitalization common stocks
selected for their growth potential. The Fund may invest to a lesser degree in
other types of securities, including preferred stock, warrants, convertible
securities and debt securities.
In building the portfolio, the Adviser seeks to identify individual companies
with earnings growth potential that may not be recognized by the market at
large. To identify such opportunities, the Adviser looks for a combination of
four characteristics:
o Change -- The Adviser believes that extraordinary growth derives from
products, markets and technologies that are in flux.
o Franchise -- The Adviser looks for strong brand franchises that can be
leveraged in a changing global environment.
o Global reach -- The Adviser selects securities without geographic bias in the
belief that the global market is both a source of growth opportunity and a
hedge against fluctuations and dislocations of local markets.
o Themes -- The Adviser seeks companies that are moving with, not against, the
major social, economic and cultural shifts taking place in the world.
Once an opportunity is identified, it is subjected to a disciplined analytic
process including both "top-down" and "bottom-up" elements. The "top-down"
element of the process takes into consideration such macroeconomic factors as
interest rates, inflation, the regulatory environment and the global
competitive landscape, and also analyzes such factors as the most attractive
global opportunities, industry consolidation and the sustainability of economic
trends. With respect to the "bottom-up" element, the Adviser considers company
fundamentals such as commitment to research, market franchise and management's
strength and vision to determine the present and future value of the company as
an investment.
14
<PAGE>
Realization of income is not a significant investment consideration. Any income
realized on the Fund's investments will be incidental to its objective.
Nations Marsico Growth & Income Fund:
Under normal circumstances, Nations Marsico Growth & Income Fund pursues its
objective by investing up to 75% of its assets in equity securities selected
primarily for their growth potential and at least 25% of its assets in
securities that have income potential. The Fund typically emphasizes the growth
component. However, in adverse market conditions, the Fund may reduce the
growth component of its portfolio to 25% of its assets. The Fund may invest in
any combination of common stock, preferred stock, warrants, convertible
securities and debt securities. However, it is expected that the Fund will
emphasize investments in large capitalization common stocks. The Fund may shift
assets between the growth and income components of its portfolio based on the
Adviser's analysis of relevant market, financial and economic conditions. If
the Adviser believes that growth securities will provide better returns than
the yields then available or expected on income-producing securities, then the
Fund will place a greater emphasis on the growth component. In building the
portfolio, the Adviser seeks to identify individual companies with earnings
growth potential that may not be recognized by the market at large. To identify
such opportunities, the Adviser looks for a combination of four
characteristics:
o Change -- The Adviser believes that extraordinary growth derives from
products, markets and technologies that are in flux.
o Franchise -- The Adviser looks for strong brand franchises that can be
leveraged in a changing global environment.
o Global reach -- The Adviser selects securities without geographic bias in the
belief that the global market is both a source of growth opportunity and a
hedge against fluctuations and dislocations of local markets.
o Themes -- The Adviser seeks companies that are moving with, not against, the
major social, economic and cultural shifts taking place in the world.
Once an opportunity is identified, it is subjected to a disciplined analytic
process including both "top-down" and "bottom-up" elements. The "top-down"
element of the process takes into consideration such macroeconomic factors as
interest rates, inflation, the regulatory environment and the global
competitive landscape, and also analyzes such factors as the most attractive
global opportunities, industry consolidation and the sustainability of economic
trends. With respect to the "bottom-up" element, the Adviser considers company
fundamentals such as commitment to research, market franchise and management's
strength and vision to determine the present and future value of the company as
an investment.
Because income is a part of the investment objective of the Fund, the Adviser
may also consider dividend-paying characteristics in selecting equity
securities for the Fund. The Fund may also find opportunities for capital
growth from debt securities because of anticipated changes in interest rates,
credit standing, currency relationships or other factors. Investors in the Fund
should keep in mind that the Fund is not designed to produce a consistent level
of income.
Nations International Equity Fund: The Fund intends to diversify investments
broadly among countries and to normally invest in securities representing at
least three different countries. The Fund may invest in companies 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 companies 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 may invest up
to 35% of its assets in any other type of security including: convertible
securities; preferred stocks; bonds, notes and other debt securities (including
Eurodollar securities); and obligations of domestic or foreign governments and
their political subdivisions.
The Fund also may invest in American Depository Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), European Depository Receipts ("EDRs"),
15
<PAGE>
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 defensive purposes, the Fund may
temporarily invest substantially all of its assets in U.S. financial markets or
U.S. dollar-denominated instruments.
Nations International Growth Fund: In pursuing its investment objective, under
normal market conditions, the Fund will invest at least 65% of its total assets
in foreign equity securities listed on major exchanges, consisting of common
stocks, preferred stocks and convertible securities, such as warrants, rights
and convertible debt. The Fund may purchase the stock of small-, mid- and
large-capitalization companies.
The Fund may invest up to 35% of its total assets in securities of issuers
domiciled in developing countries. These countries are generally located in
Eastern Europe, the Asia-Pacific region, Latin and South America, Africa and,
subject to approval by the Board of Directors, the former Soviet Union and the
Middle East. Debt securities, if any, purchased by the Fund will be rated in
the top two categories by a nationally recognized statistical rating
organization ("NRSRO"), or, if unrated, determined by the Adviser to be of
comparable quality. For temporary defensive purposes, the Fund may invest up to
100% of its assets in debt and equity securities of U.S. issuers. Debt
securities in which the Fund may invest include short-term and
intermediate-term obligations of corporations, foreign governments and
international organizations (such as the World Bank), and money market
instruments.
The Fund may invest in common stocks (including securities convertible into
common stocks) of foreign issuers and rights to purchase common stock, options
and futures contracts on securities, securities indexes and foreign currencies,
securities lending, forward foreign exchange contracts and repurchase
agreements. The Fund may also 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 .
Nations International Value Fund: The Fund will pursue its investment objective
under normal market conditions, by investing its assets in the securities of
issuers located in at least three different foreign countries. Although the
Fund may earn income from dividends, interest and other sources, income will be
incidental to the Fund's investment objective. The Fund emphasizes investments
in established companies, although it may invest in companies of various sizes
as measured by assets, sales and capitalization.
The Fund intends to invest at least 65% of its total assets in equity
securities of non-United States issuers whose market capitalizations exceed $1
billion at the time of purchase. These securities may include common stocks,
preferred stocks, securities convertible into common stocks, shares of closed-
end investment companies, ADRs, EDRs, and/or GDRs. Although the Fund intends to
invest primarily in equity securities listed on stock exchanges, the Fund may
also invest in equity securities traded in over the counter markets and in
private placements. The Fund is not subject to any specific geographic
diversification requirements. Countries in which the Fund may invest include,
but are not limited to, the nations of Western Europe, North and South America,
Australia, Africa, and Asia.
The Adviser's approach in selecting investments for the Fund is oriented to
individual stock selection and is value driven as described below. Typically,
no more than 5% of total Fund assets will be invested in any one equity
security at the time of purchase. With respect to Fund investments in any
particular country or industry, the Fund may typically invest up to the greater
of either (a) 20% of its total assets in any particular country or industry at
the time of purchase or (b) 150% of the weighting of such country or industry
as represented in the Morgan Stanley Capital International ("MSCI") EAFE Index
at the time of purchase, but in no event may the Fund invest more than 25% of
its total assets, calculated at the time of purchase and taken at market value,
in any one industry (other than U.S. Government securities). Generally, no more
than 20% of the value of the Fund's total assets, measured at the time of
purchase, may be invested in securities of companies located in emerging or
developing countries. As used in this Prospectus, the term "emerging" or
"developing" country applies to any country which is generally considered to be
an emerging or developing country by the international financial community,
which
16
<PAGE>
includes the World Bank and the International Finance Corporation. There are
currently over 130 countries which are generally considered to be emerging or
developing countries by the international financial community, approximately 40
of which currently have stock markets. These countries generally include every
nation in the world except the United States, Canada, Japan, Australia, New
Zealand, Hong Kong, Singapore and most nations located in Western Europe.
Currently, investing in many emerging countries is not feasible or may involve
unacceptable political risks. Emerging markets securities pose greater
liquidity and other risks than securities of companies located in developed
countries and traded in more established markets.
The Adviser to the Fund is committed to the use of the Graham and Dodd-style
value investing approach as introduced in the classic book SECURITY ANALYSIS.
Using this philosophy, the Adviser views stocks as small pieces of businesses
which are for sale. It seeks to purchase a diversified group of these
businesses at prices its research indicates are below their true long-term, or
intrinsic, value. By purchasing stocks whose current prices are believed to be
below their intrinsic values, the Adviser seeks to secure not only a possible
margin of safety against price declines, but also an attractive opportunity for
profit over the business cycle.
In analyzing a company's long-term value, the Adviser uses sources of
information such as company reports, filings with the SEC, computer databases,
industry publications, general and business publications, brokerage firm
research reports, and interviews with company management. Its focus is on
fundamental characteristics of a company, including, but not limited to, book
value, cash flow and capital structure, as well as management's record and
broad industry issues. Once the intrinsic value of a company is estimated, this
value is compared to the current price of the stock. If the price is
appreciably lower than the indicated intrinsic value, the stock may be
purchased.
During temporary defensive periods in response to unusual and adverse
conditions affecting the equity markets, the Fund's assets may be invested
without limitation in short-term debt instruments and in securities of United
States issuers. In addition, when the Fund experiences large cash inflows from
the issuance of new shares or the sale of portfolio securities, and desirable
equity securities that are consistent with the Fund's investment objective are
unavailable in sufficient quantities, the Fund may hold more than 35% of its
assets in short-term debt instruments for a limited time pending availability
of suitable equity securities. During normal market conditions, no more than
35% of the Fund's total assets will be invested in short-term debt instruments.
Subject to applicable securities regulations, the Fund may, for the purpose of
hedging its portfolio, purchase and write covered call options on specific
portfolio securities and may purchase and write put and call options on foreign
stock indices listed on foreign and domestic stock exchanges. See "Appendix A"
for additional information concerning the investment practices of the Fund.
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
equity securities of companies in emerging markets.
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 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.
Emerging market countries include, but are not limited to: Argentina, Brazil,
Chile, China, the Czech Republic, Columbia, Ecuador, Greece, Hong Kong,
Indonesia, India, Malaysia, Mexico, the Philippines, Poland, Portugal, Peru,
Russia, Singapore, South Africa, Thailand, Taiwan and Turkey.
A company will be considered in a country, market or region if it conducts its
principal business activities in the country, market or region. A company will
be considered to conduct its principal business activities in a country, market
or region if it
17
<PAGE>
derives a significant portion (at least 50%) of its revenues or profits from
goods produced or sold, investments made, or services performed in such
country, market or region or has at least 50% of its assets situated in such
country, market or region.
Equity securities of emerging market issuers may include common stocks,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment
trust securities. The Fund may invest in ADRs, 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 International Funds," 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.
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.
Nations Pacific Growth Fund: The Fund seeks to achieve its objective by
investing primarily in securities of issuers in the regions known as the
Pacific Basin and the Far East. An issuer will be considered in a region if it
conducts its principal business activities in the region. An issuer will be
considered to conduct its principal business activities in a region if it
derives a significant portion (at least 50%) of its revenues or profits from
goods produced or sold, investments made, or services performed in such region
or has at least 50% of its assets situated in such region. 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 in Japan.
The Fund will focus on equity securities, but may also invest in debt
obligations. Such equity securities may include common stocks, preferred stocks
(including convertible preferred stocks) and warrants; bonds, notes and
debentures convertible into common or preferred stock; equity interests in
foreign investment funds or trusts and real estate investment trust securities.
Debt obligations acquired by the Fund will be rated investment grade at the
time of purchase by Moody's or S&P or, if unrated, determined by the Adviser to
be comparable in quality to instruments so rated. Obligations with the lowest
investment grade rating (E.G., rated "Baa" by Moody's or "BBB" by S&P) have
speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations. See
"Appendix B" for a description of these ratings designations.
In seeking to achieve its objective, the Fund will invest under normal market
conditions at least 65% of its total assets in securities of issuers that
conduct their principal business activities in countries of the Pacific Basin
and Far East, except for Japan. Although the Fund may not invest in securities
issued by companies that conduct their principal business activities in Japan,
the Fund may invest in securities that are listed on a Japanese exchange.
18
<PAGE>
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 International Funds" 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.
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 classes in which
the Fund 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. These asset classes
are actively managed in an effort to maximize total return. In general, the
Adviser believes that common stocks offer the best opportunity for long-term
capital appreciation.
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. Fundamental research and valuation analysis are emphasized in the
stock selection process. Stock holdings are typically those of seasoned,
financially strong companies with favorable industry positioning.
Under normal circumstances, at least 25% of the total value of the Fund's
assets will be invested in fixed income securities. The Fund may invest in
government, corporate and municipal debt securities, as well as mortgage-backed
and 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 IBCA ("Fitch"), 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 and BankWatch are 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.
Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest up to 25% of its total assets in foreign securities.
The Fund may invest in various money market instruments and repurchase
agreements. 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.
19
<PAGE>
General: Each Fund may invest in certain specified derivative securities,
including: exchange-traded options; over-the-counter options executed with
primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. and foreign exchange-traded financial futures approved by the
Commodity Futures Trading Commission (the "CFTC") and options thereon for
market exposure risk management. Each Fund may lend its portfolio securities to
qualified institutional investors and may invest in repurchase agreements,
restricted, private placement and other illiquid securities. Nations Balanced
Assets Fund also may engage in reverse repurchase agreements and dollar roll
transactions. Each Equity Fund also may invest in real estate investment trust
securities. In addition, each Equity Fund may invest in securities issued by
other investment companies, consistent with the Fund's investment objective and
policies. Nations International Equity Fund, Nations International Growth Fund,
Nations Emerging Markets Fund and Nations Pacific Growth Fund (collectively the
"International Funds") may invest in forward foreign exchange contracts.
Nations Value Fund, Nations Equity Income Fund, Nations Capital Growth Fund,
Nations Emerging Growth Fund, Nations Small Company Growth Fund and Nations
Disciplined Equity Fund are managed with careful consideration to the overall
tax implications of portfolio activity.
The Adviser considers employing various techniques to minimize the distribution
of capital gains to shareholders. These techniques, which the Adviser uses when
consistent with each Fund's overall objectives and policies, may include:
o MANAGING PORTFOLIO TURNOVER. By appropriately limiting the number of buy and
sell transactions, each Fund attempts to effectively manage its distribution
of capital gains.
o SELLING SHARE LOTS THAT GENERATE THE LOWEST TAX BURDEN TO THE SHAREHOLDER.
After the decision is made to sell a specific security, each Fund will
endeavor to sell the shares that create the lowest potential tax burden to
shareholders, as a general matter.
o OFFSETTING CAPITAL GAINS WITH CAPITAL LOSSES. Each Fund may, when prudent,
sell securities in order to realize capital losses. Capital losses can be used
to offset capital gains thus reducing capital gains distributions.
While each Fund seeks to minimize the distribution of capital gains, consistent
with its investment objectives, there can be no assurance that all taxable
distributions to shareholders can be avoided. In addition, the ability to
utilize these tax management techniques may be reduced or eliminated by future
legislation, regulation, administrative interpretations or court decisions.
Portfolio Turnover: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. If a Fund's annual portfolio turnover rate exceeds 100%, it
may result in higher brokerage costs and possible tax consequences to the Fund
and its shareholders. For the Funds' portfolio turnover rates, see "Financial
Highlights."
Risk Considerations: Investments by a Fund in common stocks and other equity
securities are subject to stock market risk. The value of the stocks that a
Fund holds, like the broader stock market, may decline over short or even
extended periods. The U.S. stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. As of
the date of this Prospectus, the stock markets, as measured by the S&P 500
Index and other commonly used indices, were trading at or close to record
levels. There can be no guarantee that these levels will continue.
The value of a Fund's investments in debt securities, including U.S. Government
Obligations, 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 U.S.
Government are subject to credit risk, which is the risk that the issuer may
not be able to pay principal and/or interest when due.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index
or reference rate. There are certain types of derivative securities that can,
under certain circum-
20
<PAGE>
stances, 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 a 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."
Certain of the Funds may invest in securities of smaller and newer issuers.
Investments in such companies may present greater opportunities for capital
appreciation because of high potential earnings growth, but also present
greater risks than investments in more established companies with longer
operating histories and greater financial capacity.
Special Risk Considerations Relevant to an Investment in Nations Marsico
Focused Equities Fund and Nations Marsico Growth & Income Fund: Nations Marsico
Focused Equities Fund, as a non-diversified fund, may invest in fewer issuers
than a diversified fund, such as Nations Marsico Growth & Income Fund.
Therefore, appreciation or depreciation of an investment in a single issuer
could have a greater impact on the Fund's net asset value. Nations Marsico
Focused Equities Fund reserves the right to become a diversified fund by
limiting the investments in which more than 5% of its total assets are
invested. The techniques employed by the Adviser in managing this Fund
generally result in a portfolio of fewer holdings than that of other equity
mutual funds. As a result, the net asset value of a share in the Fund tends to
fluctuate more greatly than would otherwise be the case with an equity fund
that invested more broadly. In other words, an investment in the Fund
represents both greater risks and potential rewards than may be the case with
an equity fund whose portfolio is more diversified.
Nations Marsico Focused Equities Fund and Nations Marsico Growth & Income Fund
(together, the "Marsico Funds") may also invest up to 25% of their assets in
mortgage- and asset-backed securities, up to 10% of their assets in zero
coupon, pay-in-kind and step coupon securities, and may invest without limit in
indexed/structured securities. The Marsico Funds will invest no more than 35%
of their assets in high-yield/high-risk securities. The Marsico Funds may also
purchase high-grade commercial paper, certificates of deposit, and repurchase
agreements. Such securities may offer growth potential because of anticipated
changes in interest rates, credit standing, currency relationships or other
factors. The Marsico Funds may also invest in short-term debt securities as a
means of receiving a return on idle cash. See "Appendix B" for a description of
ratings.
When the Adviser believes that market conditions are not favorable for
profitable investing or when the Adviser is otherwise unable to locate
favorable investment opportunities, the Marsico Funds may hold cash or cash
equivalents and invest without limit in U.S. Government Obligations and short-
term debt securities or money market instruments if the Adviser determines that
a temporary defensive position is advisable or to meet anticipated redemption
requests. In other words, the Marsico Funds do not always stay fully invested
in stocks and bonds. Cash or similar investments are a residual -- they
represent the assets that remain after the Adviser has committed available
assets to desirable investment opportunities. When a Fund's cash position
increases, it may not participate in stock market advances or declines to the
extent that it would if it remained more fully invested in common stocks.
The Marsico Funds may invest up to 25% of their assets in foreign equity and
debt securities. The Funds may invest directly in foreign securities
denominated in a foreign currency and not publicly traded in the United States.
Other ways of investing in foreign securities include depositary receipts or
shares, and passive foreign investment companies. Foreign securities are
generally selected on a company-by-company basis without regard to any defined
allocation among countries or geographic regions. However, certain factors such
as expected levels of inflation, government policies influencing business
conditions, the outlook for currency relationships, and prospects for economic
growth among countries, regions or geographic areas may warrant greater
consideration in selecting foreign securities. The Marsico Funds may use
options, futures, forward currency contracts and other types of derivatives for
hedging purposes. The Funds may purchase securities on
21
<PAGE>
a when-issued, delayed delivery or forward commitment basis.
Special Risks Considerations Relevant to an investment in the International
Funds: Investors should understand and consider carefully the special risks
involved in foreign investing. Such risks include, but are not limited to: (1)
restrictions on foreign investment and repatriation of capital; (2)
fluctuations in currency exchange rates, which can significantly affect a
Fund's share price; (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 U.S. markets; (6) exposure to political and economic risks,
including the risk of nationalization, expropriation of assets and war; (7)
possible impositions 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.
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 International Funds offer a more efficient way for
individual investors to participate in foreign markets, their expenses,
including custodial fees, are also typically higher than those of domestic
equity mutual funds.
Certain of the risks associated with investments by the International Funds in
foreign securities are heightened with respect to investment in developing
countries and emerging market countries. Political and economic structures in
many emerging markets countries may be undergoing significant evolution and
rapid development, and may lack the social, political and economic stability
characteristic of more developed countries. Investing in emerging markets
securities also involves risks which are in addition to the usual risks
inherent in foreign investments. Some emerging markets countries may have fixed
or managed currencies that are not free-floating against the U.S. dollar.
Further, certain currencies may not be traded internationally and some
countries with emerging securities markets have sustained long periods of
substantially high inflation or rapid fluctuation in inflation rates which can
have negative effects on a country's economy or securities markets.
In addition to the general risk inherent in foreign investing, investors should
understand and consider carefully the special risks involved in investing in
Eastern Europe, the Pacific Basin and the Far East. Economic and political
reforms in Eastern Europe are still in their infancy. As a result, investing in
such countries could be deemed to be highly speculative and could result in
losses to the Fund and, thus, to its shareholders. 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 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. See "Appendix A" for additional discussion of the
risks associated with an investment in the International Funds.
Year 2000 Issue: Many computer programs employed throughout the world use two
digits to identify the year. Unless modified, these programs may not correctly
handle the change from "99" to "00" on January 1, 2000, and may not be able to
perform necessary functions. Any failure to adapt these programs in time could
hamper the Funds' operations. The Funds' principal service providers have
advised the Funds that they have been actively working on implementing
necessary changes to their systems, and that they expect that their systems
will be adapted in time, although there can be no assurance of success. Because
the Year 2000 issue affects virtually all organizations, the companies or
governmental entities in which the Funds invest could be adversely impacted by
the Year 2000 issue, although the extent of such impact cannot be predicted. To
the extent the impact on a portfolio holding is negative, a Fund's return could
be adversely affected.
Investment Limitations: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fun-
22
<PAGE>
damental policy and may not be changed without the affirmative vote of the
holders of a majority of the Fund's outstanding shares. Other investment
limitations that cannot be changed without such a vote of shareholders are
described in the SAI.
Each Fund (except Nations International Value Fund) may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. Except for Nations Marsico Focused Equities Fund, 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.
Nations Marsico Focused Equities 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 a Fund's total
assets would be invested in the securities of one issuer, and with respect to
50% of such Fund's total assets, more than 5% of its assets would be invested
in the securities of one issuer.
Nations International Growth Fund may not:
1. Borrow money except as a temporary measure and then only in amounts not
exceeding 5% of the value of the Fund's total assets or from banks or in
connection with reverse repurchase agreements provided that immediately after
such borrowing, all borrowings of the Fund do not exceed one-third of the
Fund's total assets and no purchases of portfolio instruments will be made
while the Fund has borrowings outstanding in an amount exceeding 5% of its
total assets.
Nations Small Company Growth Fund may not:
1. Borrow money except as a temporary measure for extraordinary or emergency
purposes or except in connection with reverse repurchase agreements and
mortgage rolls; provided that the Fund will maintain asset coverage of 300% for
all borrowings.
Nations International Value Fund may not:
1. Invest 25% or more of its total assets in one or more issuers conducting
their principal business activities in the same industry (with certain
exceptions).
2. Purchase securities of any one issuer (with certain exceptions, including
U.S. Government securities) if more than 5% of the Fund's total assets will be
invested in the securities of any one issuer, except that up to 25% of the
value of the Fund's total assets may be invested without regard to the 5%
limitation. The Fund may not purchase more than 10% of the outstanding voting
securities of any issuer subject, however, to the foregoing 25% exception.
3. Borrow money except for temporary purposes in amounts up to one-third of the
value of its total assets at the time of such borrowing. Whenever borrowings
exceed 5% of the Fund's total assets, the Fund will not make any investments.
If a percentage limitation has been met at the time an investment is made, a
subsequent change in that percentage that is the result of a change in value of
a Fund's portfolio securities does not mean that the limitation has been
violated.
23
<PAGE>
The investment objective and policies of each Fund, unless otherwise specified,
are non-fundamental and may be changed without shareholder approval.
Shareholders of Nations Small Company Growth Fund, however, must receive at
least 30 days' prior written notice in the event an investment objective is
changed. If the investment objective or policies of a Fund change, shareholders
should consider whether the Fund remains an appropriate investment in light of
their current positions and needs.
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 DATA
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a
class of shares of a Fund may be calculated on an average annual total return
basis or an aggregate total return basis. Average annual total return refers to
the average annual compounded rates of return on a class of shares over one-,
five-, and ten-year periods or the life of a Fund (as stated in a Fund's
advertisement) that would equate an initial amount invested at the beginning of
a stated period to the ending redeemable value of the investment (reflecting
the deduction of any applicable contingent deferred sales charge ("CDSC")),
assuming the reinvestment of all dividend and capital gain 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
dividend and capital gain distributions. Total return may also be presented for
other periods or may not reflect a deduction of any applicable CDSC.
"Yield" is calculated by dividing the annualized net investment income per
share during a recent 30-day (or one month) period of a class of shares of a
Fund by the maximum public offering price per share on the last day of that
period. The yield on a class of shares does not reflect deduction of any
applicable CDSC.
Brandes Composite Performance: Set forth below is certain performance data
relating to the composite of certain international equity accounts of clients
of Brandes and the Brandes Institutional International Equity Fund, an open-end
management investment company (the "Brandes Composite"); and the Morgan Stanley
Capital International European, Australasian and Far Eastern Index (the "MSCI
EAFE Index"). The performance data for the Brandes Composite is deemed relevant
because the accounts and mutual fund in the Brandes Composite have investment
objectives and policies that are substantially similar to those of Nations
International Value Fund, and are managed by Brandes using substantially
similar, but not identical, investment strategies, policies and techniques as
those used in managing Nations International Value Fund. The data below
regarding the Brandes Composite and the MSCI EAFE Index should not be
considered as an indication of future performance of Nations International
Value Fund or of Brandes. The accounts that are included in the Brandes
Composite are not subject to the same types of expenses to which Nations
International Value Fund is subject nor to the diversification requirements,
specific tax restrictions and investment limitations imposed on Nations
International Value Fund by the 1940 Act or Subchapter M of the Internal
Revenue Code. Consequently, the performance results for the Brandes Composite
could have been adversely affected if the accounts included in the Brandes
Composite had been regulated as investment companies or subject to the Fund's
expenses. In addition, the results presented below for the Brandes Composite
may not necessarily equate with the return experienced by any particular
account of Brandes.
Average Annual Total Return for the Periods Indicated through March 31, 1998
<TABLE>
<CAPTION>
One Three Five Since
Year Year Year Inception
<S> <C> <C> <C> <C>
Brandes
Composite* 32.81% 23.15% 18.85% 18.56%
MSCI EAFE
Index** 18.61% 10.57% 11.93% 6.98%
</TABLE>
24
<PAGE>
Annual Total Returns
<TABLE>
<CAPTION>
MSCI
Brandes EAFE
Year Composite* Index**
<S> <C> <C>
1997 20.00% 1.78%
1996 16.34% 6.05%
1995 13.75% 11.21%
1994 -2.98% 7.78%
1993 40.86% 32.56%
1992 6.28% -12.17%
1991 40.17% 12.13%
</TABLE>
* The returns above were calculated on a time- and asset-weighted total return
basis, assuming reinvestment of all dividends, interest and income, realized
and unrealized gains or losses and are net of all applicable expenses,
including investment advisory fees, brokerage commission and execution
costs, custodial fees and any applicable foreign withholding taxes, without
provision for any federal or state income taxes. The Brandes Composite
results include all actual, fee-paying and non-fee-paying, fully
discretionary accounts under management by Brandes for at least one month
beginning July 1, 1990, having substantially the same investment objectives,
policies, techniques and restrictions, other than client accounts
denominated in currencies other than U.S. dollars. The Brandes Composite
results also include performance data relating to the Brandes Institutional
International Equity Fund since its inception on January 2, 1997.
** The MSCI EAFE Index is an unmanaged index consisting of securities listed on
exchanges in European, Australasian and Far Eastern markets and includes
dividends and distributions, but does not reflect fees, brokerage
commissions or other expenses of investing.
Marsico Prior Performance: Mr. Thomas Marsico is responsible for the investment
program of the Marsico Funds. Prior to forming Marsico Capital, Mr. Marsico
served as Portfolio Manager of the Janus Twenty Fund from January 31, 1988
through August 11, 1997, and served in the same capacity for the Janus Growth
and Income Fund from May 31, 1991 (inception) through August 11, 1997. The
average annual returns for the Janus Twenty Fund and the Janus Growth and
Income Fund ("Janus Funds") from the date on which Mr. Marsico began serving as
Portfolio Manager of each Janus Fund through August 7, 1997 were 22.38% and
21.19%, respectively. On August 11, 1997, the date on which Mr. Marsico ceased
serving as the Portfolio Manager to both the Janus Twenty Fund and the Janus
Growth and Income Fund, the Janus Twenty Fund had approximately $6 billion in
net assets, and the Janus Growth and Income Fund had approximately $1.7 billion
in net assets. As Executive Vice President and Portfolio Manager of the Janus
Twenty Fund and the Janus Growth and Income Fund, Mr. Marsico had full
discretionary authority over the selection of investments for those funds.
Average annual returns for the one-year, three-year and five-year periods ended
August 7, 1997, and for the period during which Mr. Marsico managed those funds
compared with the performance of the S&P 500 Index were:
<TABLE>
<CAPTION>
Janus Janus
Twenty Growth and S&P 500
Fund (a) Income Fund (a) Index (b)
<S> <C> <C> <C>
One Year (8/8/96-
8/7/97) 48.21% 47.77% 46.41%
Three Years
(8/11/94-8/7/97) 32.07% 31.13% 30.63%
Five Years
(8/13/92-8/7/97) 20.02% 21.16% 20.98%
Janus Twenty:
During Period of 18.20%(c)
Management by Janus Growth
Mr. Marsico and Income:
(through 8/7/97) 22.38% 21.19% 18.59%(d)
</TABLE>
(a) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
(b) The S&P 500 Index is adjusted to reflect reinvestment of dividends.
(c) This figure represents the average annual return of the S&P 500 Index during
the period that Mr. Marsico managed the Janus Twenty Fund through August 7,
1997.
(d) This figure represents the average annual return of the S&P 500 Index during
the period that Mr. Marsico managed the Janus Growth and Income Fund through
August 7, 1997.
The Janus Twenty Fund has substantially similar investment policies,
strategies, and objectives as those of Nations Marsico Focused Equities Fund,
while the investment policies, strategies, and objectives of the Janus Growth
and Income Fund are substantially similar to those of Nations Marsico Growth &
Income Fund. Historical performance is not indicative of future performance.
For a majority of the periods shown above, the expenses of the Janus Twenty
Fund and the Janus Growth and Income Fund were lower than the anticipated
expenses of Nations Marsico Focused Equities Fund and Nations Marsico Growth &
Income Fund, respectively. Higher expenses, of course, would have resulted in
lower performance. The Janus Twenty Fund and the Janus Growth and Income Fund
are separate funds and their historical performance is not indicative of the
potential performance of Nations Marsico Focused Equities Fund
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and Nations Marsico Growth & Income Fund, respectively. The Janus Twenty Fund
and the Janus Growth and Income Fund were the only investment vehicles that Mr.
Marsico managed during the period he was employed at Janus Capital Corporation
that have substantially similar objectives, policies, and strategies as those
of the Funds. Share prices and investment returns will fluctuate reflecting
market conditions, as well as changes in company-specific fundamentals of
portfolio securities.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolios and the Fund's
operating expenses. Investment performance also often reflects the risks
associated with such Fund's investment objective and policies. These factors
should be considered when comparing a Fund's investment results to those of
other mutual funds and other investment vehicles. Since yields fluctuate, yield
data cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
Any fees charged by a selling agent and/or servicing agent directly to its
customers' accounts in connection with investments in the Funds will not be
included in calculations of total return or yield.
In addition to Investor C Shares, the Funds generally offer Primary A, Primary
B, Investor A and Investor B Shares. Certain Funds, however, do not offer
shares in every class. Each class of shares may bear different sales charges,
shareholder servicing fees and other expenses, which may cause the performance
of a class to differ from the performance of the other classes. Performance
quotations will be computed separately for each class of a Fund's shares. Any
quotation of total return or yield not reflecting CDSCs would be reduced if
such sales charges were reflected. Each Fund's annual report contains
additional performance information and is available upon request without charge
from the Funds' distributor or an investor's Agent (as defined below) or by
calling Nations Funds at the toll-free number indicated on the cover of this
Prospectus.
How The Funds Are Managed
The business and affairs of Nations Fund Trust, Nations Fund, Inc. and Nations
Portfolios are managed under the direction of their Board of Trustees and
Boards of Directors, respectively. Nations Funds' SAI contains the names of and
general background information concerning each Director/ Trustee of Nations
Fund Trust, Nations Fund, Inc. and Nations Portfolios.
As described below, each Fund is advised by NBAI which is responsible for the
overall management and supervision of the investment management of each Fund.
Each Fund also is sub-advised by a separate investment sub-adviser, which as a
general matter is responsible for the day-to-day investment decisions for the
respective Fund.
Nations Funds 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.
NationsBank Corporation, the parent company of NationsBank, has signed an
agreement to merge with BankAmerica Corporation. The proposed merger is subject
to certain regulatory approvals and must be approved by shareholders of both
holding companies. The merger is expected to close in the second half of 1998.
NationsBank and NBAI have advised the Funds that the merger will not reduce the
level or quality of advisory and other services provided to the Funds.
Investment Adviser: NationsBanc Advisors, Inc., serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
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TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as investment
sub-adviser to all of the Funds except for those Funds listed below, for which
Gartmore, Brandes or Marsico Capital serve as investment sub-adviser.
TradeStreet is a wholly owned subsidiary of NationsBank. TradeStreet provides
investment management services to individuals, corporations and institutions.
Gartmore Global Partners, with principal offices at One NationsBank Plaza,
Charlotte, North Carolina 28255, serves as investment sub-adviser to Nations
International Equity Fund, Nations Emerging Markets Fund, Nations Pacific
Growth Fund and Nations International Growth Fund pursuant to investment
sub-advisory agreements. 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 an indirect, wholly owned subsidiary of Gartmore
Investment Management plc ("Gartmore plc"), a UK company which is the holding
company for a leading UK-based international fund management group of
companies. National Westminster Bank plc and affiliated entities (collectively,
"NatWest") own 100% of the equity of Gartmore plc.
Brandes Investment Partners, L.P., with principal offices at 12750 High Bluff
Drive, San Diego, California 92130, serves as investment sub-adviser to Nations
International Value Fund pursuant to an investment sub-advisory agreement.
Marsico Capital Management, LLC, located at 1200 17th Street, Suite 1300,
Denver, Colorado 80202, serves as the investment sub-adviser to the Marsico
Funds pursuant to an investment sub-advisory agreement. NationsBank has an
option to purchase up to 50% of Marsico Capital.
Subject to the general supervision of Nations Fund Trust's Board of Trustees
and Nations Fund, Inc.'s and Nations Portfolios' Boards of Directors, and in
accordance with each Fund's investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions
with respect to and places orders for each Fund's purchases and sales of
portfolio securities and maintains records relating to such purchases and
sales. The Adviser is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with the
Adviser or which have sold shares in the Funds, if the Adviser believes that
the quality of the transactions and the commissions are comparable to what they
would be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objective, policies and restrictions, each Fund
may invest in securities of companies with which NationsBank has a lending
relationship.
For the services provided and expenses assumed pursuant to various investment
advisory agreements, NBAI is entitled to receive advisory fees, computed daily
and paid monthly, at the annual rates of: .75% of the average daily net assets
of each of Nations Capital Growth Fund, Nations Emerging Growth Fund, Nations
Disciplined Equity Fund, Nations Value Fund and Nations Balanced Assets Fund;
1.00% of the average daily net assets of Nations Small Company Growth Fund;
.75% of the first $100 million of the Nations Equity Income Fund's average
daily net assets, plus .70% of the Fund's average daily net assets in excess of
$100 million and up to $250 million, plus .60% of the Fund's average daily net
assets in excess of $250 million; .85% of the average daily net assets of
Nations Marsico Focused Equities Fund; .85% of the average daily net assets of
Nations Marsico Growth & Income Fund; .90% of each of Nations International
Equity Fund's, Nations International Growth Fund's and Nations Pacific Growth
Fund's average daily net assets; and 1.10% of Nations Emerging Markets Fund's
average daily net assets and 1.00% of Nations International Value Fund's
average daily net assets.
For the services provided pursuant to investment sub-advisory agreements, NBAI
will pay TradeStreet sub-advisory fees, computed daily and paid monthly, at the
annual rates of: .25% of Nations Value Fund's, Nations Balanced Assets Fund's,
Nations Capital Growth Fund's, Nations Emerging Growth Fund's, Nations Small
Company Growth Fund's and Nations Disciplined Equity Fund's average daily net
assets; and .20% of Nations Equity Income Fund's average daily net assets
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For services provided pursuant to an investment sub-advisory agreement, NBAI
will pay Gartmore sub-advisory fees, computed daily and paid monthly, at the
annual rate of .70% of Nations International Equity Fund's , Nations Pacific
Growth Fund's and Nations International Growth Fund's average daily net assets;
and .85% of Nations Emerging Markets Fund's average daily net assets.
For services provided pursuant to investment sub-advisory agreements, NBAI will
pay Brandes sub-advisory fees, computed daily and paid monthly, at the annual
rate of .50% of Nations International Value Fund's average daily net assets.
For the services provided pursuant to an investment sub-advisory agreement,
NBAI will pay Marsico Capital sub-advisory fees, computed daily and paid
monthly, at the annual rate of .45% of the average of Nations Marsico Focused
Equities Fund's daily net assets; .45% of Nations Marsico Growth & Income
Fund's average daily net assets.
From time to time, NationsBank (and/or TradeStreet, Gartmore, Brandes or
Marsico Capital) may waive or reimburse (either voluntarily or pursuant to
applicable state limitations) advisory fees or expenses payable by a Fund.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid NBAI under the investment advisory agreement, advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Value Fund -- .75%, Nations Capital Growth Fund -- .75%, Nations
Emerging Growth Fund -- .75%, Nations Disciplined Equity Fund -- .75% and
Nations Balanced Assets Fund -- .75%.
For the fiscal period from December 31, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid NBAI under the investment advisory agreement, advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Marsico Focused Equities Fund -- .85% and Nations Marsico Growth &
Income Fund -- .00%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund, Inc. paid NBAI under the investment advisory agreement, advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Equity Income Fund -- .64%, Nations International Equity Fund -- .90%,
Nations Small Company Growth Fund -- .70% and Nations International Growth Fund
- -- .87%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Portfolios paid NBAI under the investment advisory agreement, advisory
fees at the indicated rates of the following Fund's average daily net assets:
Nations Emerging Markets Fund -- 1.10% and Nations Pacific Growth Fund -- .90%.
For the fiscal period from December 1, 1997 to May 15, 1998, after waivers, the
Emerald Funds paid Barnett Capital Advisors, Inc. ("Barnett"), under a previous
investment advisory agreement, advisory fees of .90 % of the Nations
International Value Fund's average daily net assets (formerly called the
Emerald International Equity Fund).
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers, NBAI
paid Gartmore under the investment sub-advisory agreements, sub-advisory fees
at the indicated rates of the following Funds' average daily net assets:
Nations Emerging Markets Fund -- .85%, Nations Pacific Growth Fund -- .70%,
and Nations International Equity Fund -- .70%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers, NBAI
paid TradeStreet under the investment sub-advisory agreements, sub-advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Value Fund -- .25%, Nations Capital Growth Fund -- .25%, Nations
Emerging Growth Fund -- .25%, Nations Disciplined Equity Fund -- .25%, Nations
Balanced Assets Fund -- .25% and Nations Equity Income Fund -- .20%.
For the fiscal period from December 31, 1997 to March 31, 1998, after waivers,
NBAI paid Marsico Capital under the sub-advisory agreement, sub-advisory fees
at the indicated rates of the following Funds' average daily net assets:
Nations Marsico Focused Equities Fund -- .45% and Nations Marsico Growth &
Income Fund -- .45%.
For the fiscal period from December 1, 1997 to May 15, 1998, after waivers,
Barnett paid Brandes, under a previous investment sub-advisory agree-
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ment, sub-advisory fees of .50% of the Nations International Value Fund.
The Structured Products Management Team of TradeStreet is responsible for the
day-to-day management of Nations Disciplined Equity Fund.
The Value Management Team of TradeStreet is responsible for the day-to-day
management of Nations Value Fund, Nations Balanced Assets Fund and Nations
Equity Income Fund.
The Core Growth Management Team of TradeStreet is responsible for the
day-to-day management of Nations Capital Growth Fund.
The Strategic Growth Management Team of TradeStreet is responsible for the
day-to-day management of Nations Emerging Growth Fund and Nations Small Company
Growth Fund.
Philip Ehrmann is Co-Portfolio Manager of Nations International Equity Fund,
responsible for the Fund's investments in developing countries (since June
1998). Mr. Ehrmann is also Principal Portfolio Manager of Nations Emerging
Markets Fund (since 1995) and is Head of the Gartmore Emerging Markets Team.
Prior to joining Gartmore in 1995, Mr. Ehrmann was the Director of Emerging
Markets for Invesco in London. He began his career in 1981 as an institutional
stockbroker with Rowe & Pitman Inc. and also spent a brief period with
Prudential Bache Securities as an institutional salesman before joining Invesco
in 1984. Mr. Ehrmann graduated from the London School of Economics with a
degree in Economics, Industry and Trade.
Seok Teoh is Co-Portfolio Manager of Nations International Equity Fund,
responsible for the Fund's investments in Asia (since June 1998). Ms. Teoh is
also Principal Portfolio Manager of Nations Pacific Growth Fund (since that
Fund's inception in June 1995). She has been with Gartmore since 1990 as the
London based manager of its Far East Team. Previously, Ms. Teoh managed four
equity funds for Rothschild Asset Management in Tokyo and in Singapore. She was
also responsible for Singaporean and Malaysian equity sales at Overseas Union
Bank Securities in Singapore. Ms. Teoh, who is native to Singapore, is fluent
in Mandarin and Cantonese and received an Economics degree from the University
of Durham.
Mark Fawcett is Co-Portfolio Manager of Nations International Equity Fund,
responsible for the Fund's investments in Japan (since June 1998). He is also
Senior Investment Manager for the Gartmore Japanese Equities Team. Mr. Fawcett
joined Gartmore as an investment manager on the Japanese Equity Team in 1991
and has specific responsibility for large stock research. Before joining
Gartmore in Tokyo he worked on the Far East desk of Provident Mutual, a major
London-based Life Assurance company, managing funds invested in Japan. Mr.
Fawcett graduated from Oxford University in 1986 with an honours degree in
Mathematics and Philosophy.
Stephen Jones is Co-Portfolio Manager of Nations International Equity Fund,
responsible for the Fund's investments in Europe (since June 1998). He is also
the Head of Gartmore European Equities. Mr. Jones joined Gartmore as a senior
investment manager in the European Equities Team in 1994 and was appointed Head
of the European Equity Team in 1995. He began his career at the Prudential in
1984, spending a year as a business analyst before becoming the personal
assistant to the Group Chief Executive. In 1987, he became a European equities
investment manager focusing primarily on France, Belgium and Switzerland. Mr.
Jones graduated from Manchester University in 1984 with an honours degree in
Economics.
Stephen Watson is Co-Portfolio Manager for Nations International Equity Fund,
responsible for allocating the Fund's assets among the various regions in which
it invests, as well as determining the Fund's investments in regions not
covered by the other Co-Portfolio Managers (since June 1998). Mr. Watson had
been the sole Portfolio Manager of the Fund since February 1995. He joined
Gartmore as a Global Fund Manager in 1993 and currently holds the position of
Chief Investment Officer of Gartmore Global Partners and is a member of
Gartmore's Global Policy Group. Previously, Mr. Watson was a director and
global fund manager with James Capel Fund Managers, London, as well as Client
Services Manager for international clients. From 1980 to 1987 he was with
Capel-Cure Myers in their Portfolio Management Division. He began his career in
1976 when he joined the investment division at Samuel Motagu. Mr. Watson is a
member of the Securities Institute.
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Brian O'Neill is the Principal Senior Investment Manager of the Gartmore Global
Portfolio Team and has been the Portfolio Manager of Nations International
Growth Fund since July 1997. Mr. O'Neill joined Gartmore as a Senior Investment
Manager on the Global Portfolio Team in 1981 with responsibility for a variety
of specialized global funds, including resource funds. Mr. O'Neill began his
career with Royal Insurance in 1970 as an investment analyst specializing in
United Kingdom research. He then expanded his field of expertise to include
management of global equities, and in 1978 he moved to Antony Gibbs & Sons
where he was appointed as a fund manager, specializing in global equities. Mr.
O'Neill graduated from Glasgow University in 1969 with an MA Honours degree in
Political Economy.
Brandes' Investment Committee is responsible for the day-to-day management of
Nations International Value Fund.
Thomas F. Marsico is the Chief Executive Officer of Marsico Capital and has
been the Portfolio Manager of both Nations Marsico Focused Equities Fund and
Nations Marsico Growth & Income Fund since each Fund's respective inception.
Prior to forming Marsico Capital, Mr. Marsico was a portfolio manager with
Janus Funds for 11 years and was responsible for the day-to-day management of
Janus Twenty Fund and Janus Growth and Income Fund. Overall, Mr. Marsico had 18
years of experience as a securities analyst/portfolio manager before becoming
the Portfolio Manager of the Marsico Funds.
Morrison & Foerster LLP, counsel to Nations Funds and special counsel to
NationsBank, has advised Nations Funds and NationsBank that NationsBank and its
affiliates may perform the services contemplated by the various investment
advisory agreements and this Prospectus without violation of the Glass-Steagall
Act. 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
entities from continuing to perform, in whole or in part, such services. If any
such entity were prohibited from performing any of such services, it is
expected that new agreements would be proposed or entered into 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 Funds 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.
First Data Investor Services Group, Inc. ("First Data"), 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
Funds pursuant to co-administration agreements. Under the co-administration
agreements, First Data 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 First Data are entitled to receive a combined fee at
the annual rate of up to .10% of each Fund's average daily net assets.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid its administrators combined fees at the indicated rates
of the following Funds' average daily net assets: Nations Value Fund -- .10%,
Nations Capital Growth Fund -- .10%, Nations Emerging Growth Fund -- .10%,
Nations Disciplined Equity Fund -- .10% and Nations Balanced Assets Fund --
.10%.
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For the fiscal period from December 31, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid its administrators combined fees at the indicated rates
of the following Funds' average daily net assets: Nations Marsico Focused
Equities Fund -- .10% and Nations Marsico Growth & Income Fund -- .10%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund, Inc. paid its administrators combined fees at the indicated rates
of the following Funds' average daily net assets: Nations Equity Income Fund,
Nations Small Company Growth Fund -- .10%, Nations International Value Fund --
.10% and Nations International Growth Fund -- .10%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Portfolios paid its administrators combined fees at the indicated rates
of the following Funds' average daily net assets: Nations Emerging Markets Fund
- -- .10% and Nations Pacific Growth Fund -- .10%.
NBAI serves as sub-administrator for the Funds pursuant to a sub-administration
agreement. Pursuant to the terms of the sub-administration agreement, NBAI
assists Stephens in supervising, coordinating and monitoring various aspects of
the Funds' administrative operations. For providing such services, NBAI 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. Nations Funds
has entered into distribution agreements with Stephens which provide that
Stephens has the exclusive right to distribute shares of the Funds. Stephens
may pay service fees or commissions to selling agents that assist customers in
purchasing Investor Shares of the Funds. See "Shareholder Servicing And
Distribution Plans."
The Bank of New York ("BONY" or the "Custodian"), located at 90 Washington
Street, New York, New York 10286, provides custodial services for the assets of
all Nations Funds, except the International Funds. In return for providing
custodial services to the Nations Funds Family, BONY is entitled to receive, in
addition to out-of-pocket expenses, fees at the rate of (i) 3/4 of one basis
point per annum on the aggregate net assets of all Nations Funds' non-money
market funds up to $10 billion; and (ii) 1/2 of one basis point on the excess,
including all Nations Funds' money market funds.
BONY, located at Avenue des Arts, 35 1040 Brussels, Belgium, provides custodial
services for the assets of the International Funds.
First Data serves as transfer agent (the "Transfer Agent") for the Funds'
Investor C Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
PricewaterhouseCoopers LLP serves as independent accountant to Nations Funds.
Their address is 160 Federal Street, Boston, Massachusetts 02110.
Expenses: The accrued expenses of each Fund are deducted from accrued income
before dividends are declared the Funds'. These expenses include, but are not
limited to: fees paid to the Adviser, Stephens and First Data; interest; fees
(including fees paid to Nations Funds' Directors, Trustees and officers);
federal and state securities registration and qualification fees; brokerage
fees and commissions; cost of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings,
other expenses which are not expressly assumed by the Adviser, Stephens or
First Data under their respective agreements with Nations Funds; and any
extraordinary expenses. Investor C Shares may bear certain class specific
expenses and also bear certain additional shareholder service and/or sales
support costs. Any general expenses of Nations Fund Trust and/or Nations Fund,
Inc. that are not readily identifiable as belonging to a particular investment
portfolio are allocated among all portfolios in the proportion that the assets
of a portfolio bears to the assets of Nations Fund Trust and Nations Fund, Inc.
or in such other manner as the relevant Board of Trustees or Board of Directors
deems appropriate.
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Organization And History
The Funds are members of the Nations Funds Family, which consists of Nations
Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc., Nations
Institutional Reserves, Nations Annuity Trust and Nations Life Goal Funds, Inc.
The Nations Funds Family currently has more than 60 distinct investment
portfolios and total assets in excess of $40 billion.
Nations Fund Trust: Nations Fund Trust was organized as a Massachusetts
business trust on May 6, 1985. Nations Fund Trust's fiscal year end is March
31; prior to 1996, Nations Fund Trust's fiscal year end was November 30. The
Funds currently offer five classes of shares -- Primary A Shares, Primary B
Shares, Investor A Shares, Investor B Shares and Investor C Shares. Certain
Funds, however, do not offer shares in every class. This Prospectus relates
only to the Investor C Shares of the following Funds of Nations Funds Trust.
Nations Capital Growth Fund, Nations Emerging Growth Fund, Nations Disciplined
Equity Fund, Nations Value Fund, Nations Balanced Assets Fund, Nations Marsico
Growth & Income Fund and Nations Marsico Focused Equities Fund . To obtain
additional information regarding the Funds' other classes of shares which may
be available to you, contact your Agent (as defined below) or Nations Funds at
1-800-321-7854.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See the SAI for examples of when the Investment
Company Act of 1940 (the "1940 Act") requires voting by fund.
As of August 1, 1998, 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 the SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders
entitled to vote at least 10% of the outstanding shares of Nations Fund Trust
entitled to be voted at such meeting.
Nations Fund, Inc.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. Nations Fund,
Inc.'s fiscal year end is March 31; prior to 1996, Nations Fund, Inc.'s fiscal
year end was May 31. As of the date of this Prospectus, the authorized capital
stock of Nations Fund, Inc. consists of 460,000,000,000 shares of common stock,
par value of $.001 per share, which are divided into series or funds each of
which consists of separate classes of shares. This Prospectus relates only to
the Investor C Shares of the following Funds of Nations Fund, Inc. of Nations
Equity Income Fund, Nations Small Company Growth Fund and Nations International
Value Fund. To obtain additional information regarding the Fund's other classes
of shares which may be available to you, contact your Agent (as defined below)
or Nations Funds at 1-800-321-7854.
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Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the
exclusive right to vote on matters affecting only the rights of the holders of
such fund or class. In the event of dissolution or liquidation, holders of each
class will receive pro rata, subject to the rights of creditors, (a) the
proceeds of the sale of that portion of the assets allocated to that class held
in the respective fund of Nations Fund, Inc., less (b) the liabilities of
Nations Fund, Inc. attributable to the respective fund or class or allocated
among the funds or classes based on the respective liquidation value of each
fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Fund, Inc.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s
shares. Nations Fund, Inc.'s shares, when issued, will be fully paid and
non-assessable.
As of August 1, 1998, 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 the 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. Nations Portfolios' fiscal year end is March 31. As of the date of
this Prospectus, the authorized capital stock of Nations Portfolios consists of
150,000,000,000 shares of common stock, par value of $.001 per share, which are
divided into series or funds each of which consists of separate classes of
shares. This Prospectus relates only to the Investor C Shares of the following
Funds of Nations Portfolios: Nations Emerging Markets Fund and Nations Pacific
Growth Fund. To obtain additional information regarding the Funds' other
classes of shares which may be available to you, contact your Selling Agent (as
defined below) or Nations Funds at 1-800-321-7854.
Shares of a fund and class have equal rights with respect to voting, except
that the holders of shares of a fund or class will have the exclusive right to
vote on matters affecting only the rights of the holders of such fund or class.
In the event of dissolution or liquidation, holders of each class will receive
pro rata, subject to the rights of creditors, (a) the proceeds of the sale of
that portion of the assets allocated to that class held in the respective fund
of Nations Portfolios, less (b) the liabilities of Nations Portfolios
attributable to the respective fund or class allocated among the funds or
classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Portfolios do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Portfolios. Meetings of shareholders may be
called upon the request of 10% or more of the outstanding shares of Nations
Portfolios. There are no preemptive rights applicable to any of Nations
Portfolios' shares. Nations Portfolios' shares, when issued, will be fully paid
and non-assessable.
As of August 1, 1998, 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 the 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
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incomplete disclosure in this Prospectus concerning another investment company.
Nations Fund Trust, Nations Fund, Inc. and Nations Portfolios have entered into
an indemnification agreement that creates a right of indemnification from the
investment company responsible for any such misstatement, inaccuracy or
incomplete disclosure that may appear in this Prospectus.
About Your Investment
How To Buy Shares
This Prospectus offers one class of shares to the general public. Investor C
Shares are sold without an initial sales charge and are subject to a CDSC upon
certain redemptions. Contact your Agent or NationsFunds at 1-800-321-7854 for
more information.
The Funds have established various procedures for purchasing Investor C Shares
in order to accommodate different investors. Purchase orders for Investor C
Shares may be placed through banks, broker/dealers or other financial
institutions (including certain affiliates of NationsBank) that have entered
into a shareholder servicing agreement ("Servicing Agreement") with Nations
Funds ("Servicing Agents") and/or a sales support agreement ("Sales Support
Agreement") with Stephens ("Selling Agents").
The Funds reserve the right, in their discretion, to make Investor C Shares
available to other categories of investors, including those who become eligible
in connection with a merger or reorganization.
There is a minimum initial investment of $1,000, except that the minimum
initial investment is:
o $500 for "IRA" investors;
o $250 for non-working spousal IRAs; and
o $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.
There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified
employee pension plans ("SAR-SEPs"), Savings Incentives Method Plans for
Employees ("SIMPLE IRAs"), salary reduction-Individual Retirement Account
("SAR-IRAs"), or similar types of accounts. However, the assets of such plans
must reach an asset value of $1,000 ($500 for SEPs, SAR-SEPs, SIMPLE IRAs and
SAR-IRAs) within one year of the account open date. If the assets of such plans
do not reach the minimum asset size within one year, Nations Funds reserves the
right to redeem the shares held by such plans on 60 days' written notice. The
minimum subsequent investment is $100, except for investments pursuant to the
Systematic Investment Plan described below.
Investor C Shares may be purchased at net asset value per share without the
imposition of a sales charge, but are subject to a CDSC if redeemed within one
year after purchase. Purchases may be effected on days on which the New York
Stock Exchange (the "Exchange") is open for business (a "Business Day").
The Servicing Agents will provide various shareholder services for, and the
Selling Agents will provide sales support assistance to, their respective
customers ("Customers") who own Investor C Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Funds may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.
Nations Funds and Stephens reserve the right to reject any purchase order. The
issuance of Investor C Shares is recorded on the books of the Funds, and share
certificates are not issued unless expressly requested in writing. Certificates
are not issued for fractional shares.
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Effective Time of Purchases: Purchase orders for Investor C Shares in the Funds
which are received by Stephens, the Transfer Agent or their respective agents
before the close of regular trading 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. In the event that the Exchange closes early, purchase
orders received prior to closing will be priced as of the time the Exchange
closes and purchase orders received after the Exchange closes will be deemed
received on the next Business Day and priced according to the net asset value
determined on the next Business Day. Purchase orders are not executed until
4:00 p.m., Eastern time, on the Business Day on which immediately available
funds in payment of the purchase price are received by the Funds' Custodian.
Such payment must be received no later than 4:00 p.m., Eastern time, by the
third Business Day following the receipt of the order, as determined above. If
funds are not received by such date, the order will not be accepted and notice
thereof will be given to the Agent placing the order. Payment for orders which
are not received or accepted will be returned after prompt inquiry to the
sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor C
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Funds.
Systematic Investment Plan: Under the Funds' Systematic Investment Plan
("SIP"), a shareholder may automatically purchase Investor C Shares. On a
bi-monthly, monthly or quarterly basis, a shareholder may direct cash to be
transferred automatically from his/her checking or savings account at any bank
which is a member of the Automated Clearing House to his/her Fund account.
Transfers will occur on or about the 15th and/or the last day of the applicable
month. Subject to certain exceptions for employees of NationsBank and its
affiliates and pre-existing SIP accounts, the systematic investment amount may
be in any amount from $50 to $100,000. For more information concerning the SIP,
contact your Agent.
Telephone Transactions: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How To Redeem Shares" and "How To
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. Shareholders should be aware that by using the telephone transaction
feature, such shareholders may be giving up a measure of security that they may
have if they were to authorize written requests only. A shareholder may bear
the risk of any resulting losses from a telephone transaction. Nations Funds
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if Nations Funds and its service providers fail to
employ such measures, they may be liable for any losses due to unauthorized or
fraudulent instructions. Nations Funds requires a form of personal
identification prior to acting upon instructions received by telephone and
provides written confirmation to shareholders of each telephone share
transaction. In addition, Nations Funds reserves the right to record all
telephone conversations. Shareholders should be aware that during periods of
significant economic or market change, telephone transactions may be difficult
to complete.
Investor C Shares -- Charges and Features
Investor C Contingent Deferred Sales Charge:
Subject to certain waivers, Investor C Shares of the Funds that are redeemed
within one year of the date of purchase will be subject to a CDSC equal to
1.00% of the lesser of the net asset value or the purchase price of the shares
being redeemed. No CDSC is imposed on increases in net asset value above the
initial purchase price, including shares acquired by reinvestment of
distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor C Shares, all purchases during a month will
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be aggregated and deemed to have been made on the last day of the month. In
determining whether a CDSC is applicable to a redemption, the calculation will
be made in the manner that results in the lowest possible charge being
assessed. In this regard, it will be assumed that the redemption is first of
shares held for the longest period of time or shares acquired pursuant to
reinvestment of dividends or distributions. The charge will not be applied to
dollar amounts representing an increase in the net asset value since the time
of purchase.
The CDSC will be waived on redemptions of Investor C Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as
amended (the "Code")) of a shareholder (including a registered joint owner),
(ii) in connection with the following retirement plan distributions: (a) lump-
sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or in the case of a "key employee" of a
"top heavy" plan, following attainment of age 59 1/2); (b) distributions from
an IRA, or Custodial Account under Section 403(b)(7) of the Code, following
attainment of age 59 1/2; (c) a tax-free return of an excess contribution to an
IRA; and (d) distributions from a qualified retirement plan that are not
subject to the 10% additional Federal withdrawal tax pursuant to Section
72(t)(2) of the Code, (iii) payments made to pay medical expenses which exceed
7.5% of income and distributions to pay for insurance by an individual who has
separated from employment and who has received unemployment compensation under
a federal or state program for at least 12 weeks, (iv) effected pursuant to
Nations Funds' right to liquidate a shareholder's account, including instances
where the aggregate net asset value of the Investor C shares held in the
account is less than the minimum account size, (v) effected pursuant to the
Automatic Withdrawal Plan discussed below, provided that such redemptions do
not exceed, on an annual basis, 12% of the net asset value of the Investor C
Shares in the account, and (vi) in connection with the combination of Nations
Funds with any other registered investment company by a merger, acquisition of
assets or by any other transaction. In addition, the CDSC will be waived on
Investor C Shares purchased before September 30, 1994 by current or retired
employees of NationsBank and its affiliates or by current or former Trustees or
Directors of Nations Funds or other management companies managed by
NationsBank. Shareholders are responsible for providing evidence sufficient to
establish that they are eligible for any waiver of the CDSC.
Reinstatement Privilege: Within 120 days after a redemption of Investor C
Shares of the Fund, a shareholder may reinvest any portion of the proceeds of
such redemption in Investor C Shares of the Fund. The amount which may be so
reinvested is limited to an amount up to, but not exceeding, the redemption
proceeds (or to the nearest full share if fractional shares are not purchased).
A shareholder exercising this privilege would receive a pro rata credit for any
CDSC paid in connection with the prior redemption. A shareholder may not
exercise this privilege with the proceeds of a redemption of shares previously
purchased through the reinvestment privilege. In order to exercise this
privilege, a written order for the purchase of Investor C Shares must be
received by the Transfer Agent or by Stephens within 120 days after the
redemption.
Automatic Withdrawal Plan: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Fund if the value of the
Investor C Shares in his/her accounts within the Nations Funds Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor C Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis 12% of
the net value of the Investor C Shares in the account. Otherwise, any applicable
CDSC will be imposed on shares redeemed under the AWP. Shareholders who elect to
establish an AWP may receive a monthly, quarterly or annual check or automatic
transfer to a checking or savings account in a stated amount of not less than
$25 on or about the 10th or 25th day of the applicable month of withdrawal.
Investor C Shares will be redeemed (net of any applicable CDSC) as necessary to
meet withdrawal payments. Withdrawals will reduce principal and may eventually
deplete the shareholder's account. If a shareholder desires to establish an AWP
after opening an account, a signature guarantee will be required. An AWP may be
terminated by a shareholder on 30 days' written notice to his/her Agent or by
Nations Funds at any time.
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How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders for
Investor C Shares of the Funds which are received by Stephens, the Transfer
Agent or their respective agents before the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on any Business Day are priced
according to the net asset value next determined after acceptance of the order.
In the event that the Exchange closes early, redemption orders received prior
to the Exchange's closing will be priced as of the time the Exchange closes and
redemption orders received after the Exchange closes will be deemed received on
the next Business Day and priced according to the net asset value determined on
the next Business Day. Redemption orders are effected at the net asset value
per share next determined after receipt of the order by Stephens, the Transfer
Agent or their respective agents, less any applicable CDSC. The Agents are
responsible for transmitting redemption orders to Stephens, the Transfer Agent
or their respective agents and for crediting their Customers' accounts with the
redemption proceeds on a timely basis. No charge for wiring redemption payments
is imposed by Nations Funds. There is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens, the Transfer Agent or
their respective agents. However, redemption proceeds for shares purchased by
check may not be remitted until at least 15 days after the date of purchase to
ensure that the check has cleared; a certified check, however, is deemed to be
cleared immediately.
Nations Funds may redeem a shareholder's Investor C Shares upon 60 days'
written notice if the balance in the shareholder's account drops below $500 as
a result of redemptions. Share balances also may be redeemed at the direction
of an Agent pursuant to arrangements between the Agent and its Customers.
Nations Funds also may redeem shares of the Funds involuntarily or make payment
for redemption in readily marketable securities or other property under certain
circumstances in accordance with the 1940 Act.
Prior to effecting a redemption of Investor C Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock
exchange, unless other arrangements satisfactory to Nations Funds have
previously been made. Nations Funds may require any additional information
reasonably necessary to evidence that a redemption has been duly authorized.
How To Exchange Shares
The exchange feature enables a shareholder of Investor C Shares of a Nations
Funds non-money market fund to acquire shares of the same class that are
offered by another non-money market fund of Nations Funds (other than an index
fund) or Daily Shares of any Nations Funds money market fund when he or she
believes that a shift between funds is an appropriate investment decision. A
qualifying exchange is based on the next calculated net asset value per share
of each fund after the exchange order is received.
If a shareholder acquires Investor C Shares of a non-money market fund through
an exchange, the CDSC applicable to that current fund will be applied to any
redemption of the acquired shares. However, if a shareholder acquires Daily
Shares of a money market fund through an exchange of Investor C Shares, the
CDSC applicable to the exchanged Investor C Shares will be applied on any
redemption of the acquired Daily Shares. Notwithstanding the foregoing, if a
shareholder redeems shares acquired through an exchange, the shareholder will
be subject to the highest CDSC applicable to any
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shares that were exchanged within the 30 days prior to the redemption.
The Funds and each of the other funds of Nations Funds may limit the number of
times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Funds upon such notice as may be required by
applicable regulatory agencies (presently 60 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 describes its investment objective and
policies, and shareholders should obtain a copy and examine it carefully before
investing. Exchanges are subject to the minimum investment requirement and any
other conditions imposed by each fund. In the case of any shareholder holding a
share certificate or certificates, no exchanges may be made until all
applicable share certificates have been received by the Transfer Agent and
deposited in the shareholder's account. An exchange will be treated for Federal
income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
Nations Funds and Stephens reserve 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.
The Investor C Shares exchanged must have a current value of at least $1,000
(except for exchanges through the Automatic Exchange Feature, which is
described below). Nations Funds and Stephens reserve the right to reject any
exchange request. Only shares that may legally be sold in the state of the
investor's residence may be acquired in an exchange. Only shares of a class
that is accepting investments generally may be acquired in an exchange. An
investor may telephone an exchange request by calling his/her Agent which is
responsible for transmitting such request to Stephens or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges
may be difficult to complete. In such event, shares may be exchanged by mailing
the request directly to the Agent through which the original shares were
purchased. An investor should consult his/her Agent or Stephens for further
information regarding exchanges.
Automatic Exchange Feature: Under the Fund's Automatic Exchange Feature ("AEF")
a shareholder may automatically exchange at least $25 on a monthly or quarterly
basis. A shareholder may direct proceeds to be exchanged from one Nations Funds
to another as allowed by the applicable exchange rules within the prospectus.
Exchanges will occur on or about the 15th or 30th day of the applicable month.
The shareholder must have an existing position in both Funds in order to
establish the AEF. This feature may be established by directing a request to
the Transfer Agent by telephone or in writing. For additional information, an
investor should contact his/her Selling Agent or Nations Funds.
Shareholder Servicing And Distribution Plans
Pursuant to Rule 12b-1 under the 1940 Act, the Trustees and Directors have
approved a Distribution Plan with respect to Investor C Shares of the Funds.
Pursuant to the Distribution Plan, the Funds may compensate or reimburse
Stephens for any activities or expenses primarily intended to result in the
sale of the Funds' Investor C Shares. Payments under the Investor C
Distribution Plan will be calculated daily and paid monthly at a rate or rates
set from time to time by the Trustees and Directors, provided that the annual
rate may not
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exceed .75% of the average daily net asset value of the Funds' Investor C
Shares.
The fees payable under the Distribution Plan are used (i) to compensate Selling
Agents for providing sales support assistance relating to Investor C Shares,
(ii) to pay for promotional activities intended to result in the sale of
Investor C Shares such as the preparation, printing and distribution of
prospectuses to other than current shareholders, and (iii) to compensate
Selling Agents for providing sales support services with respect to their
Customers who are, from time to time, beneficial and record holders of Investor
C Shares. Currently, substantially all fees paid pursuant to the Distribution
Plan are paid to compensate Selling Agents for providing the services described
in (i) and (iii) above, with any remaining amounts being used by Stephens to
partially defray other expenses incurred by Stephens in distributing Investor C
Shares. Fees received by Stephens pursuant to the Distribution Plan will not be
used to pay any interest expenses, carrying charges or other financing costs
(except to the extent permitted by the SEC) and will not be used to pay any
general and administrative expenses of Stephens.
Nations Funds and Stephens may suspend or reduce payments under the
Distribution Plan at any time, and payments are subject to the continuation of
the Distribution Plan described above and the terms of the Sales Support
Agreement between Selling Agents and Stephens. See the SAI for more details on
the Distribution Plan.
The Trustees and Directors also have approved a shareholder servicing plan
("Servicing Plan") for the Funds which permits the Funds to compensate
Servicing Agents for services provided to their Customers that own Investor C
Shares. Payments under the Servicing Plan are calculated daily and paid monthly
at a rate or rates set from time to time by the Funds, provided that the annual
rate may not exceed .25% of the average daily net asset value of the Funds'
Investor C Shares.
The fees payable under the Servicing Plan are used primarily to compensate or
reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents may include: (i) aggregating and processing purchase and
redemption requests for Investor C Shares from Customers and transmitting net
purchase and redemption orders to Stephens or the Transfer Agent; (ii)
providing Customers with a service that invests the assets of their accounts in
Investor C Shares pursuant to specific or preauthorized instructions; (iii)
processing dividend and distribution payments from the Funds on behalf of
Customers; (iv) providing information periodically to Customers showing their
positions in Investor C Shares; (v) arranging for bank wires; and (vi)
providing general shareholder liaison services.
Nations Funds may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Servicing Plan
described above and the terms of the Servicing Agreements. See the SAI for more
details on the Servicing Plan.
Nations Funds understands that Agents may charge fees to their Customers who
are the owners of Investor C Shares for various services provided in connection
with a Customer's account. These fees would be in addition to any amounts
received by a Selling Agent under its Sales Support Agreement with Stephens or
by a Servicing Agent under its Servicing Agreement with Nations Funds. The
Sales Support Agreements and Servicing Agreements require Agents to disclose to
their Customers any compensation payable to the Agent by Stephens or Nations
Funds and any other compensation payable by the Customers for various services
provided in connection with their accounts. Customers should read this
Prospectus in light of the terms governing their accounts with their Agents.
The Adviser may also pay out of its own asset, amounts to Stephens or other
broker/dealers in connection with the provision of administrative and/or
distribution related services to shareholders.
In addition, Stephens may, from time to time, at its expense or as an expense
for which it may be reimbursed under the Distribution Plan, pay a bonus or
other consideration or incentive to Agents who sell a minimum dollar amount of
shares of the Funds during a specified period of time. Stephens may also, from
time to time, pay additional consideration to Agents not to exceed .75% of the
offering price per share on all sales of Investor C Shares
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as an expense of Stephens or for which Stephens may be reimbursed under the
plan adopted pursuant to Rule 12b-1 or upon receipt of a CDSC. Any such
additional consideration or incentive program may be terminated at any time by
Stephens.
Stephens has also established a non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise. This non-cash compensation program may
be amended or terminated at any time by Stephens.
How The Funds Value Their Shares
The Funds calculate the net asset value of a share of each class by dividing
the total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares of the Funds are valued as of the close of regular
trading on the Exchange (currently 4:00 p.m., Eastern time) on each Business
Day. In the event that the Exchange closes early, shares of the Funds will be
priced as of the time the Exchange closes. Currently, the days on which the
Exchange is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities for which market quotations are readily available are
valued at market value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following procedures
approved by the Directors or Trustees.
How Dividends And Distributions Are Made; Tax Information
Dividends and Distributions: Dividends from net investment income are declared
and paid monthly by Nations Capital Growth Fund, Nations Disciplined Equity
Fund, Nations Equity Income Fund, Nations Value Fund and Nations Small Company
Growth Fund. Nations Balanced Assets Fund, Nations Emerging Growth Fund,
Nations Marsico Growth & Income Fund, Nations Marsico Focused Equities Fund,
Nations International Equity Fund, Nations Emerging Markets Fund and Nations
Pacific Growth Fund distribute any net investment income each calendar quarter.
Dividends from net investment income are declared and paid annually by Nations
International Value Fund and Nations International Growth Fund. The Funds
distribute any net realized capital gains (including net short-term capital
gains) at least annually. Distributions from capital gains are made after
applying any available capital loss carryovers. Distributions paid by the Funds
with respect to one class of shares may be greater or less than those paid with
respect to another class of shares due to the different expenses of the
different classes.
Investor C Shares of the Funds are eligible to receive dividends when declared,
provided, however, that the purchase order for such shares is received at least
one day prior to the dividend declaration and such shares continue to be
eligible for dividends through and including the day before the redemption
order is executed.
The net asset value of Investor C Shares will be reduced by the amount of any
dividend or distribution. A dividend or distribution on newly purchased shares
would therefore represent, in substance, a return of capital. However, such
dividend or distribution would nevertheless be taxable. Certain Agents may
provide for the reinvestment of dividends in the form of additional Investor C
Shares of the same class in the same Fund. Dividends and distributions are paid
in cash within five Busi-
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ness Days of the end of the month, quarter or year to which the payment
relates. Dividends and distributions payable to a shareholder are paid in cash
within five Business Days after a shareholder's complete redemption of his/her
Investor C Shares.
Tax Information: Each Fund intends to continue to qualify as a "regulated
investment company" under the Code. Such qualification relieves the Fund of
liability for Federal income tax on amounts distributed in accordance with the
Code.
Each Fund intends to distribute substantially all of its net investment income
each taxable year. Distributions by a Fund of its net investment income
(including net foreign currency gains) and the excess, if any, of its net
short-term capital gain over its net long-term capital loss generally are
taxable as ordinary income to shareholders, whether such income is received in
cash or reinvested in additional shares.
Corporate investors in the Funds may be entitled to the dividends-received
deduction on a portion of such Funds' dividends to the extent that a Fund's
income is derived from dividends received from domestic corporations.
Substantially all of the Funds' net realized long-term capital gains will be
distributed at least annually. The Funds will generally have no tax liability
with respect to such gains, and the distributions generally will be taxable to
shareholders as net capital gain, regardless of how long the shareholders have
held the Funds' shares and whether such distributions are received in cash or
reinvested in additional shares. Noncorporate shareholders may be taxed on such
distributions at preferential rates.
Each year, shareholders will be notified as to the amount and Federal tax
status of all dividends and capital gain distributions paid during the prior
year. Such dividends and capital gain distributions may be subject to state and
local taxes.
Dividends and distributions declared in October, November, or December of any
year payable to shareholders of record on a specified date in such months will
be deemed to have been received by shareholders and paid by the Funds on
December 31 of such year in the event such dividends and distributions are
actually paid during January of the following year.
Federal law requires Nations Funds to withhold 31% from any distributions paid
by Nations Funds and/or redemptions (including exchanges and redemptions
in-kind) that occur in certain shareholder accounts if the shareholder has not
properly furnished a certified correct Taxpayer Identification Number and has
not certified that withholding does not apply, or if the Internal Revenue
Service has notified Nations Funds that the Taxpayer Identification Number
listed on a shareholder account is incorrect according to its records, or that
the shareholder is subject to backup withholding. Amounts withheld are applied
to the shareholder's Federal tax liability, and a refund may be obtained from
the Internal Revenue Service if withholding results in overpayment of taxes.
Federal law also requires the Funds to withhold tax on dividends paid to
certain foreign shareholders.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisors with respect to their specific tax
situations as well as with respect to foreign, state and local taxes. Further
tax information is contained in the SAI.
Financial Highlights
The following financial information has been derived from the audited financial
statements of Nations Fund Trust, Nations Fund, Inc. and Nations Portfolios.
PricewaterhouseCoopers LLP is the independent accountant to Nations Fund Trust,
Nations Fund, Inc. and Nations Portfolios. The reports of
PricewaterhouseCoopers LLP for the most recent fiscal period of Nations Fund
Trust, Nations Fund, Inc. and Nations Portfolios accompany the financial
statements for such period and are incorporated by reference in the SAI, which
is available upon request. For more information see "Organization And History."
Shareholders of the Funds will receive unaudited semi-annual reports describing
the Funds' invest-
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ment operations and annual financial statements audited by the Funds'
independent accountant. Financial Highlights for Investor C Shares of Nations
International Value Fund, Nations Marsico Growth & Income Fund and Nations
Marsico Focused Equities Fund are not provided below because each Fund's share
class had not yet commenced operations during the period indicated below.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Value Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/98# 03/31/97 03/31/96(a) 11/30/95 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 17.75 $ 16.50 $ 16.09 $ 12.90 $ 13.64 $ 12.41 $ 11.63
Net investment income 0.04 0.17 0.04 0.13 0.12 0.13 0.07
Net realized and
unrealized gain/(loss)
on investments 5.95 2.68 1.05 3.88 ( 0.22) 1.32 0.78
Net increase/(decrease) in
net asset value from
operations 5.99 2.85 1.09 4.01 ( 0.10) 1.45 0.85
Distributions:
Dividends from net
investment income ( 0.05) ( 0.18) ( 0.06) ( 0.15) ( 0.10) ( 0.13) ( 0.07)
Distributions from net
realized capital gains ( 3.94) ( 1.42) ( 0.62) ( 0.67) ( 0.54) ( 0.09) --
Total dividends and
distributions ( 3.99) ( 1.60) ( 0.68) ( 0.82) ( 0.64) ( 0.22) ( 0.07)
Net asset value, end of
period $ 19.75 $ 17.75 $ 16.50 $ 16.09 $ 12.90 $ 13.64 $ 12.41
Total return++ 37.55% 17.51% 6.99% 33.15% ( 0.92)% 11.85% 7.33%+++
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $13,969 $6,519 $4,633 $4,185 $2,983 $2,997 $1,286
Ratio of operating
expenses to average net
assets 1.78%(b) 1.47%(b) 1.58%+ 1.94% 1.93% 1.96% 1.98%+
Ratio of net investment
income to average net
assets 0.21% 1.01% 0.68%+ 0.90% 0.85% 0.98% 1.22%+
Portfolio turnover rate 79% 47% 12% 63% 75% 64% 60%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.78%(b) 1.47%(b) 1.58%+ 1.94% 1.93% 1.97% 1.98%+
</TABLE>
* Nations Value Fund Investor C Shares commenced operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share net investment income has been calculated using the monthly
average share method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
42
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Equity Income Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/98# 03/31/97 03/31/96(a) 05/31/95 05/31/94 05/31/93*
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 12.35 $ 13.19 $ 11.83 $ 11.47 $ 12.04 $ 11.13
Net investment income 0.18 0.33 0.21 0.32 0.28 0.32
Net realized and unrealized gain on
investments 3.83 1.59 1.78 1.08 0.21 1.32
Net increase in net asset value from
operations 4.01 1.92 1.99 1.40 0.49 1.64
Distributions:
Dividends from net investment
income ( 0.19) ( 0.35) ( 0.26) ( 0.31) ( 0.25) ( 0.28)
Distributions from net realized
capital gains ( 2.16) ( 2.41) ( 0.37) ( 0.73) ( 0.81) ( 0.45)
Total dividends and distributions ( 2.35) ( 2.76) ( 0.63) ( 1.04) ( 1.06) ( 0.73)
Net asset value, end of period $ 14.01 $ 12.35 $ 13.19 $ 11.83 $ 11.47 $ 12.04
Total return++ 36.28% 15.01% 17.20% 13.49% 3.96% 15.31%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $10,348 $5,007 $4,612 $4,278 $4,221 $4,377
Ratio of operating expenses to
average net assets 1.69%(b) 1.41%(b) 1.75%+ 1.92% 1.94% 1.92%+
Ratio of net investment income to
average net assets 1.39% 2.59% 1.99%+ 2.75% 2.41% 2.37%+
Portfolio turnover rate 74% 102% 59% 158% 116% 55%
Ratio of operating expenses to
average net assets without waivers
and/or expense reimbursements 1.69%(b) 1.41%(b) 1.75%+ 1.93% 1.95% 2.04%+
</TABLE>
* Nations Equity Income Fund Investor C Shares commenced operations on June
17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average share method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
May 31.
(b) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
43
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Emerging Growth Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/98# 03/31/97# 03/31/96#(a) 11/30/95 11/30/94# 11/30/93*
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 12.31 $ 13.56 $ 13.87 $ 11.20 $ 10.78 $ 9.89
Net investment income/(loss) ( 0.18) ( 0.10) ( 0.03) ( 0.08) ( 0.14) ( 0.09)
Net realized and unrealized
gain/(loss) on investments 5.29 0.19 1.22 3.15 0.70 0.98
Net increase/(decrease) in net asset
value from operations 5.11 0.09 1.19 3.07 0.56 0.89
Distributions:
Distributions from net realized
capital gains ( 1.79) ( 1.34) ( 1.50) ( 0.40) ( 0.14) --
Total dividends and distributions ( 1.79) ( 1.34) ( 1.50) ( 0.40) ( 0.14) --
Net asset value, end of period $ 15.63 $ 12.31 $ 13.56 $ 13.87 $ 11.20 $ 10.78
Total return++ 43.80% ( 0.04)% 9.64% 28.67% 5.19% 9.00%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $2,266 $1,437 $ 936 $ 805 $ 542 $ 469
Ratio of operating expenses to
average net assets 1.81%(b) 1.48%(b) 1.61%+ 1.98% 2.01% 1.80%+
Ratio of operating expenses to
average net assets including
interest expense 1.82% N/A N/A N/A N/A N/A
Ratio of net investment income/(loss)
to average net assets ( 1.25)% ( 0.76)% ( 0.68)%+ ( 0.92)% ( 1.29)% ( 1.15)%+
Portfolio turnover rate 76% 93% 39% 139% 129% 159%
Ratio of operating expenses to
average net assets without waivers
and/or expense reimbursements 1.81%(b) 1.48%(b) 1.61%+ 1.98% 2.01% 2.01%+
</TABLE>
* Nations Emerging Growth Fund Investor C Shares commenced operations on
December 18, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average share method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
44
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT THE PERIOD
Nations Small Company Growth Fund
<TABLE>
<CAPTION>
PERIOD
ENDED
Investor C Shares 03/31/98*
<S> <C>
Operating performance:
Net asset value at the beginning of the period $ 15.18
Net investment income ( 0.08)
Net realized and unrealized gain on investments 1.35
Net increase in net asset value from operations 1.27
Distributions:
Dividends from net investment income --
Distributions from net realized capital gains ( 0.71)
Total dividends and distributions ( 0.71)
Net asset value, end of the period $ 15.74
Total return ++ 8.75%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $3,122
Ratio of operating expenses to average net assets 1.95%+(a)
Ratio of operating expenses to average net assets including interest expense 1.95%+
Ratio of net investment income/(loss) to average net assets ( 0.95)%+
Portfolio turnover rate 59%
Ratio of expenses to average net assets (assuming no waivers or expense reimbursements) 2.26%+(a)
</TABLE>
* Nations Small Company Growth Investor C Shares commenced operations on
September 22, 1997.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charge.
(a) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
45
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Disciplined Equity Fund
<TABLE>
<CAPTION>
YEAR
ENDED
Investor C Shares 03/31/98#
<S> <C>
Operating performance:
Net asset value, beginning of period $ 18.41
Net investment income/(loss) ( 0.09)
Net realized and unrealized gain/(loss) on investments 7.83
Net increase/(decrease) in net asset value from operations 7.74
Distributions:
Dividends from net investment income --
Distributions from net realized capital gains ( 4.23)
Return of capital --
Total dividends and distributions ( 4.23)
Net asset value, end of period $ 21.92
Total return++ 47.38%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,199
Ratio of operating expenses to average net assets 1.81%(c)(d)
Ratio of net investment income/(loss) to average net assets ( 0.46)%
Portfolio turnover rate 79%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.81%(c)(d)
<CAPTION>
YEAR PERIOD PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/97 03/31/96(a) 11/30/95*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 17.10 $ 16.97 $ 14.08
Net investment income/(loss) 0.04 0.01 ( 0.00)(b)
Net realized and unrealized gain/(loss) on investments 2.79 0.35 2.92
Net increase/(decrease) in net asset value from operations 2.83 0.36 2.92
Distributions:
Dividends from net investment income ( 0.01) -- ( 0.03)
Distributions from net realized capital gains ( 1.51) ( 0.23) --
Return of capital -- -- --
Total dividends and distributions ( 1.52) ( 0.23) ( 0.03)
Net asset value, end of period $ 18.41 $ 17.10 $ 16.97
Total return++ 16.45% 2.19% 20.78%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 446 $ 283 $ 322
Ratio of operating expenses to average net assets 1.54%(c) 1.65%+ 2.30%+
Ratio of net investment income/(loss) to average net assets 0.20% 0.19%+ ( 0.15)%+
Portfolio turnover rate 120% 47% 124%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.54% 1.65%+ 2.30%+
</TABLE>
* Nations Disciplined Equity Fund Investor C Shares commenced operations on
May 10, 1995.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average share method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) Amount represents less than $0.01 per share.
(c) The effect of interest expense on the operating expense ratio was less than
0.01%.
(d) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
46
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Capital Growth Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/98## 03/31/97## 03/31/96(a)
<S> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 11.50 $ 13.26 $ 14.09
Net investment
income/(loss) ( 0.08) ( 0.01) 0.00 (b)
Net realized and
unrealized gain on
investments 5.18 1.64 0.36
Net increase in net asset
value from operations 5.10 1.63 0.36
Distributions:
Dividends from net
investment income -- -- --
Distributions from net
realized capital gains ( 3.68) ( 3.39) ( 1.19)
Total dividends and
distributions ( 3.68) ( 3.39) ( 1.19)
Net asset value, end of
period $ 12.92 $ 11.50 $ 13.26
Total return++ 53.02% 11.39% 2.86%
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $6,176 $5,752 $3,655
Ratio of operating
expenses to average net
assets 1.78%(c)(d) 1.46%(d) 1.58%+
Ratio of net investment
income/(loss) to average
net assets ( 0.70)% ( 0.11)% ( 0.24)%+
Portfolio turnover rate 113% 75% 25%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.78%(c) 1.46% 1.58%+
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
Investor C Shares 11/30/95 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 11.14 $ 11.01 $ 10.67 $ 10.00
Net investment
income/(loss) ( 0.03) ( 0.02) ( 0.00)(b) ( 0.00)(b)
Net realized and
unrealized gain on
investments 3.24 0.15 0.38 0.67 #
Net increase in net asset
value from operations 3.21 0.13 0.38 0.67
Distributions:
Dividends from net
investment income -- -- ( 0.03) --
Distributions from net
realized capital gains ( 0.26) ( 0.00)(b) ( 0.01) --
Total dividends and
distributions ( 0.26) ( 0.00)(b) ( 0.04) ( 0.00)(b)
Net asset value, end of
period $ 14.09 $ 11.14 $ 11.01 $ 10.67
Total return++ 29.61% 1.22% 3.61% 6.70%+++
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $3,322 $2,394 $2,919 $ 406
Ratio of operating
expenses to average net
assets 1.98% 1.90% 1.80% 1.30%+
Ratio of net investment
income/(loss) to average
net assets ( 0.29)% ( 0.15)% ( 0.16)% 0.33%+
Portfolio turnover rate 80% 56% 81% 7%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.98% 1.91% 1.89% 2.05%+
</TABLE>
* Nations Capital Growth Fund Investor C Shares commenced operations on
October 2, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of 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.
## Per share net investment income has been calculated using the monthly
average share method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) Amount represents less than $0.01 per share.
(c) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(d) The effect of interest expense on the operating expense ratio was less than
0.01%.
47
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT THE PERIOD
Nations Marsico Focused Equities Fund
<TABLE>
<CAPTION>
PERIOD
ENDED
Investor C Shares 03/31/98*#
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) ( 0.04)
Net realized and unrealized gains on investments 2.17
Net increase in net asset value from operations 2.13
Distributions:
Dividends from net investment income 0.00
Distributions from net realized capital gains 0.00
Total dividends and distributions 0.00
Net asset value, end of period $ 12.13
Total return++ 21.30%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 469
Ratio of operating expenses to average net assets 2.52%+(a)
Ratio of net investment loss to average net assets ( 1.30)%+
Portfolio turnover rate 25%
Ratio of expenses to average net assets without waivers and/or expense reimbursements 2.52%+(a)
</TABLE>
* Nations Marsico Focused Equities Fund Investor C Shares commenced operations
on December 31, 1997.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charge.
# Per share net investment income has been calculated using the monthly
average share method.
(a) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was 0.01%.
48
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT THE PERIOD
Nations Marsico Growth & Income Fund
<TABLE>
<CAPTION>
PERIOD
ENDED
Investor C Shares 03/31/98*#
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Income from investment operations:
Net investment income ( 0.02)
Net realized and unrealized gain on investments 2.04
Net increase in net asset value from operations 2.02
Distributions:
Dividends from net investment income 0.00
Distributions from net realized capital gains 0.00
Total dividends and distributions 0.00
Net asset value, end of period $ 12.02
Total return++ 20.20%
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 518
Ratio of operating expenses to average net assets 2.09%+(a)
Ratio of net investment income/loss to average net assets 0.62%+
Portfolio turnover rate 22%
Ratio of expenses to average net assets without waivers and/or expense reimbursements 2.97%+(a)
</TABLE>
* Nations Marsico Growth & Income Fund Investor C Shares commenced operations
on December 31, 1997.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average share method.
(a) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was 0.01%.
49
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations International Equity Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/98# 03/31/97# 03/31/96(a)# 05/31/95# 05/31/94# 05/31/93*#
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 12.74 $ 13.13 $ 11.45 $ 11.86 $ 10.49 $ 10.10
Net investment income/(loss) ( 0.01) 0.02 ( 0.03) 0.02 ( 0.03) 0.00**
Net realized and unrealized gain/(loss)
on investments 1.89 0.10 1.75 ( 0.21) 1.43 0.48
Net increase/(decrease) in net asset
value from operations 1.88 0.12 1.72 ( 0.19) 1.40 0.48
Distributions:
Dividends from net investment
income ( 0.10) ( 0.06) -- -- ( 0.01) ( 0.07)
Distributions in excess of net
investment income ( 0.02) ( 0.00)** ( 0.02) -- -- --
Distributions from net realized capital
gains ( 0.16) ( 0.42) ( 0.02) ( 0.12) ( 0.02) ( 0.02)
Distributions in excess of net realized
capital gains -- ( 0.03) -- ( 0.10) -- --
Total dividends and distributions ( 0.28) ( 0.51) ( 0.04) ( 0.22) ( 0.03) ( 0.09)
Net asset value, end of period $ 14.34 $ 12.74 $ 13.13 $ 11.45 $ 11.86 $ 10.49
Total return++ 15.05% 0.77% 15.09% ( 1.56)% 13.21% 4.97%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 933 $ 988 $ 652 $ 495 $ 339 $ 200
Ratio of operating expenses to average
net assets 1.97% 1.66% 2.09%+ 2.03% 2.17% 2.30%+
Ratio of net investment income/(loss)
to average net assets ( 0.07)% 0.12% ( 0.27)%+ 0.17% ( 0.25)% 0.03%+
Portfolio turnover rate 64% 36% 26% 92% 39% 41%
Ratio of operating expenses to average
net assets without waivers and/or
expense reimbursements 1.97% 1.66% 2.10%+ 2.04% 2.18% 2.32%+
</TABLE>
* Nations International Equity Fund Investor C Shares commenced operations on
June 17, 1992.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Per share net investment income/(loss) has been calculated using the monthly
average share method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
May 31.
50
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT THE PERIOD
Nations International Growth Fund
<TABLE>
<CAPTION>
PERIOD
ENDED
Investor C Shares 03/31/98#
<S> <C>
Operating performance:
Net asset value at the beginning of the period $ 18.49
Net investment income/(loss) ( 0.09)
Net realized and unrealized gain/(loss) on investments 1.36
Net increase/(decrease) in net asset value from operations 1.27
Distributions:
Dividends from net investment income --
Distributions from net realized capital gains ( 0.34)
Total dividends and distributions ( 0.34)
Net asset value, end of the period $ 19.42
Total return++ 7.04%
Ratio to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 465
Ratio of operating expenses to average net assets 2.15%+
Ratio of operating expenses to average net assets without waivers 2.17%+
Ratio of net investment income to average net assets 0.79%+
Portfolio turnover rate 11%
</TABLE>
* Nations International Growth Fund Investor C Shares commenced operations on
September 19, 1997.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Per share investment income/(loss) has been calculated using the monthly
average share method.
51
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Emerging Markets Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/98# 03/31/97# 03/31/96*#
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.34 $ 10.27 $ 10.00
Net investment income/(loss) ( 0.05) ( 0.04) ( 0.10)
Net realized and unrealized gain/(loss) on investments ( 0.75) 1.20 0.37
Net increase/(decrease) in net asset value from operations ( 0.80) 1.16 0.27
Distributions:
Dividends from net investment income ( 0.07) ( 0.01) --
Distributions in excess of net investment income -- ( 0.02) --
Distributions from net realized capital gains -- ( 0.06) --
Total dividends and distributions ( 0.07) ( 0.09) --
Net asset value, end of period $ 10.47 $ 11.34 $ 10.27
Total return++ ( 7.17)% 11.34% 2.70%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 293 $ 226 $ 23
Ratio of operating expenses to average net assets 2.40% 2.24% 3.02%+
Ratio of net investment income to average net assets ( 0.47)% ( 0.37)% ( 1.27)%+
Portfolio turnover rate 63% 31% 17%
</TABLE>
* Nations Emerging Markets Fund Investor C Shares commenced operations on June
30, 1995.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Per share net investment income/(loss) has been calculated using the monthly
average share method.
52
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Pacific Growth Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/98# 03/31/97 03/31/96*#
<S> <C> <C> <C>
Operating Performance:
Net asset value, beginning of period $ 10.34 $ 10.20 $ 10.00
Net investment income/(loss) 0.01 0.00** ( 0.09)
Net realized and unrealized gain/(loss) on investments ( 2.98) 0.14 0.29
Net increase/(decrease) in net asset value from operations ( 2.97) 0.14 0.20
Distributions:
Dividends from net investment income ( 0.13) -- --
Distributions in excess of net investment income -- --
Total dividends and distributions ( 0.13) -- --
Net asset value, end of period $ 7.24 $ 10.34 $ 10.20
Total return++ (28.91)% 1.57% 2.00%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 42 $ 102 $ 60
Ratio of operating expenses to average net assets 2.20% 1.92% 2.65%+
Ratio of net investment income/(loss) to average net assets 0.11% ( 0.11)% ( 1.16)%+
Portfolio turnover rate 123% 78% 23%
</TABLE>
* Nations Pacific Growth Fund Investor C Shares commenced operations on June
30, 1995.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Per share net investment income/(loss) has been calculated using the monthly
average share method.
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<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Balanced Assets Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98 03/31/97
<S> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 11.08 $ 11.60
Net investment income 0.20 0.33
Net realized and
unrealized gain/(loss)
on investments 2.67 1.02
Net increase/(decrease) in
net asset value from
operations 2.87 1.35
Distributions:
Dividends from net
investment income ( 0.20) ( 0.33)
Distributions from net
realized capital gains ( 2.34) ( 1.54)
Total dividends and
distributions ( 2.54) ( 1.87)
Net asset value, end of
period $ 11.41 $ 11.08
Total return++ 29.43% 11.85%
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $1,947 $1,396
Ratio of operating
expenses to average net
assets 1.91%(b)(c) 1.50%(b)
Ratio of net investment
income to average net
assets 1.87% 2.81%
Portfolio turnover rate 276% 264%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.91%(b) 1.50%(b)
<CAPTION>
PERIOD YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/96(a) 11/30/95 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 12.61 $ 10.38 $ 10.82 $ 10.23 $ 10.00
Net investment income 0.09 0.26 0.14 0.23 0.01
Net realized and
unrealized gain/(loss)
on investments 0.45 2.21 ( 0.43) 0.59 0.22 #
Net increase/(decrease) in
net asset value from
operations 0.54 2.47 ( 0.29) 0.82 0.23
Distributions:
Dividends from net
investment income ( 0.14) ( 0.22) ( 0.15) ( 0.23) --
Distributions from net
realized capital gains ( 1.41) ( 0.02) -- -- --
Total dividends and
distributions ( 1.55) ( 0.24) ( 0.15) ( 0.23) --
Net asset value, end of
period $ 11.60 $ 12.61 $ 10.38 $ 10.82 $ 10.23
Total return++ 4.71% 24.03% ( 2.72)% 8.06% 2.30%+++
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $1,187 $ 992 $ 951 $1,196 $ 156
Ratio of operating
expenses to average net
assets 1.62%+ 1.99% 1.98% 1.90% 1.30%+
Ratio of net investment
income to average net
assets 2.29%+ 2.25% 1.31% 1.82% 2.85%+
Portfolio turnover rate 83% 174% 156% 50% 79%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.62%+ 1.99% 1.99% 1.97% 2.05%+
</TABLE>
* Nations Balanced Assets Fund Investor C Shares commenced operations on
October 2, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of 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) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating expense ratio was less than
0.01%.
54
<PAGE>
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAI contains more
information concerning such investments.
Asset-Backed Securities: Asset-backed securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset-backed
securities consist of both mortgage- and non-mortgage-backed securities (see
below). Interests in pools of these assets may 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. Conversely,
asset-backed securities provide periodic payments which may consist of both
interest and principal payments.
Mortgage-backed securities represent an ownership interest in a pool of
residential mortgage loans, the interest in which is in most cases issued and
guaranteed by an agency or instrumentality of the U.S. Government, though not
necessarily by the U.S. Government itself.
Mortgage-backed securities include mortgage pass-through securities,
collateralized mortgage obligations ("CMOs"), parallel pay CMOs, planned
amortization class CMOs ("PAC Bonds") and stripped mortgage-backed securities
("SMBS"), including interest-only and principal-only SMBS. SMBS may be more
volatile than other debt securities. For additional information concerning
mortgage-backed securities, see the 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.
Mortgage-Backed Securities: Mortgage-backed securities represent an ownership
interest in a pool of mortgage loans.
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 the Government National Mortgage
Association ("GNMA"), by the Federal National Mortgage Association ("FNMA") and
by the Federal Home Loan and 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.
The average life of a mortgage-backed security 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
55
<PAGE>
return of the greater part of principal invested far in advance of the maturity
of the mortgages in the pool.
The yield which will be earned on mortgage-backed securities 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.
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.
The principal and interest payments on the Mortgage Assets may be allocated
among the various classes of CMOs in several ways. Typically, payments of
principal, including any prepayments, on the underlying mortgages are applied
to the classes in the order of their respective stated maturities or final
distribution dates, so that no payment of principal is made on CMOs of a class
until all CMOs of other classes having earlier stated maturities or final
distribution dates have been paid in full.
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.
The average life of mortgage-backed securities varies with the maturities of
the underlying mortgage instruments. 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 and duration of the Funds. For additional information concerning
mortgage backed securities, see the SAI.
56
<PAGE>
The mortgage-backed securities in which the Funds invest are subject to
extension risk. This is the risk that when interest rates rise, prepayments of
the underlying obligations slow thereby lengthening duration and potentially
reducing the value of these securities. The debt securities held by the Funds
also may be subject to credit risk. Credit risk is the risk that the issuers of
securities in which a Fund invests may default in the payment of principal
and/or interest. Any such defaults or adverse changes in an issuer's financial
condition or credit rating may adversely affect the value of the Funds'
portfolio investments and, hence, the value of your investment in the
corresponding Fund.
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. Such securities also
may include instruments issued by certain trusts, partnerships or other special
purpose issuers, including pass-through certificates representing
participations in, or debt instruments backed by, the securities and other
assets owned by such issuers.
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.
The purchase of non-mortgage-backed securities raises considerations unique 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.
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.
U.S. dollar-denominated obligations issued by foreign branches of domestic
banks ("Eurodollar" obligations) and domestic branches of foreign banks
("Yankee dollar" obligations), and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
57
<PAGE>
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. Pursuant to line of credit arrangements with BONY, the
Funds may borrow primarily for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities.
Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells
a portfolio security to another party, such as a bank or broker/dealer, in
return for cash, and agrees to buy the security back at a future date and
price. Reverse repurchase agreements may be used to provide cash to satisfy
unusually heavy redemption requests without having to sell portfolio
securities, or for other temporary or emergency purposes. Generally, the effect
of such a transaction is that the Funds can recover all or most of the cash
invested in the portfolio securities involved during the term of the reverse
repurchase agreement, while they will be able to keep the interest income
associated with those portfolio securities. Such transactions are only
advantageous if the interest cost to the Funds of the reverse repurchase
transaction is less than the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
a Fund is obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The
Funds only enter 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 may be considered to be borrowings. Dollar roll
transactions consist of the sale by a Fund of mortgage-backed or other asset-
58
<PAGE>
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 objective. 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: Each Fund may invest in
debt securities convertible into or exchangeable for equity securities,
preferred stocks or warrants. Preferred stocks are securities that represent an
ownership interest in a corporation providing the owner with claims on a
company's earnings and assets before common stock owners, but after bond or
other debt security owners. Warrants are options to buy a stated number of
shares of common stock at a specified price any time during the life of the
warrants.
Fixed Income Investing: The performance of the fixed income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.
Foreign Currency Transactions: To the extent provided under "How Objectives Are
Pursued," the Funds may enter into foreign currency exchange transactions to
convert foreign currencies to and from the U.S. dollar. A Fund either enters
into these transactions on a spot (I.E., cash) basis at the spot rate
prevailing in the foreign currency exchange market, or uses forward contracts
to purchase or sell foreign currencies. A forward foreign currency exchange
contract is an obligation by a Fund to purchase or sell a specific currency at
a future date, which may be any fixed number of days from the date of the
contract.
Foreign currency hedging transactions are an attempt to protect a Fund against
changes in foreign currency exchange rates between the trade and settlement
dates of specific securities transactions or changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. Neither spot transactions nor
forward foreign currency exchange contracts eliminate fluctuations in the
prices of a Fund's portfolio securities or in foreign exchange rates, or
prevent loss if the prices of these securities should decline.
A Fund will generally enter into forward currency exchange contracts only under
two circumstances: (i) when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, to "lock" in the U.S.
dollar price of the security; and (ii) when 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
59
<PAGE>
the Fund from adverse currency movements, they also involve the risk that
anticipated currency movements will not be accurately predicted.
In addition, the Euro will become the single currency in at least 11 European
nations used in many financial transactions. Accordingly, the German mark,
French franc and other national currencies will no longer be used. Although the
impact of implementing the Euro is not possible to predict, the transition
could have an effect on the financial markets and economic environment in
Europe and other parts of the world. For example, investors may begin to view
those countries participating in the Economic Monetary Union as a single
combined entity and may alter their investment behavior accordingly. In
response to any such effect of the Euro implementation, the Adviser may need to
adapt its investment policies and strategy.
Foreign Securities: Foreign securities include debt and equity obligations
(dollar- and non-dollar-denominated) 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 income (including interest, distributions and
disposition proceeds), 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 securities
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 United
States. Fixed commissions on foreign securities exchanges are generally higher
than the negotiated commissions on U.S. exchanges, and there is generally less
government supervision and regulation of foreign securities exchanges, brokers,
and companies than in the United States. 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.
The Funds may invest indirectly in the securities of foreign issuers through
sponsored or unsponsored ADRs, ADSs, GDRs and EDRs or other securities
representing securities of companies based in countries other than the United
States. Transactions in these securities may not necessarily be settled in the
same currency as the underlying securities which they represent. Ownership of
unsponsored ADRs, ADSs, GDRs and EDRs may not entitle the Funds to financial or
other reports from the issuer, to which it would be entitled as the owner of
sponsored ADRs, ADSs, GDRs or EDRs. Generally, ADRs and ADSs in registered
form, are designed for use in the U.S. securities markets. GDRs are designed
for use in both the U.S. and European securities markets. EDRs, in bearer form,
are designed for use in European securities markets. ADRs, ADSs, GDRs and EDRs
also involve certain risks of other investments in foreign securities.
Futures, Options and Other Derivative Instruments: To the extent provided under
"How Objectives Are Pursued" the Funds may attempt to reduce the overall level
of investment risk of particular securities and attempt to protect a Fund
against adverse market movements by investing in futures, options and other
derivative instruments. These include the purchase and writing of options on
securities (including index options) and options on foreign currencies, and
investing in futures contracts for the purchase or sale of instruments based on
financial indices, including interest rate indices or indices of U.S. or
foreign government, equity or fixed income securities ("futures contracts"),
options on futures contracts, forward
60
<PAGE>
contracts and swaps and swap-related products such as interest rate swaps,
currency swaps, caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable
position. Additional risks inherent in the use of futures, options, forward
contracts and swaps include: imperfect correlation between the price of
futures, options and forward contracts and movements in the prices of the
securities or currencies being hedged; the possible absence of a liquid
secondary market for any particular instrument at any time; and the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences. A Fund may not purchase put and call options which are traded on
a national stock exchange in an amount exceeding 5% of its net assets. Further
information on the use of futures, options and other derivative instruments,
and the associated risks, is contained in the SAI.
Illiquid Securities: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not hold more
than 15% (10% with respect to Nations International Value Fund) of the value of
their respective net assets in securities that are illiquid . Repurchase
agreements, time deposits and guaranteed investment contracts that do not
provide for payment to a Fund within seven days after notice, and illiquid
restricted securities, are subject to the limitation on illiquid securities.
If otherwise consistent with their investment objectives and policies, certain
Funds may purchase securities that are not registered under the Securities Act
of 1933, as amended (the "1933 Act") but which can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the 1933 Act, or which
were issued under Section 4(2) of the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by a Fund's Board of Trustees
or Board of Directors or the Adviser, acting under guidelines approved and
monitored by the Fund's Board, after considering trading activity, availability
of reliable price information and other relevant information, that an adequate
trading market exists for that security. To the extent that, for a period of
time, qualified institutional or other buyers cease purchasing such restricted
securities pursuant to Rule 144A or otherwise, the level of illiquidity of a
Fund holding such securities may increase during such period.
Indexed/Structured Securities: Indexed/ structured securities are typically
short- to intermediate-term debt securities whose value at maturity or interest
rate is linked to currencies, interest rates, equity securities, indices,
commodity prices or other financial indicators. Such securities may be
positively or negatively indexed (i.e., their value may increase or decrease if
the reference index or instrument appreciates). Indexed/ structured securities
may have return characteristics similar to direct investments in the underlying
instruments and may be more volatile than the underlying instruments. The Fund
bears the market risk of an investment in the underlying instruments, as well as
the credit risk of the issuer.
Interest Rate Transactions: In order to attempt to protect the value of their
portfolios 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 the
extent a specified index is below a predetermined interest rate, to receive
payments of interest on a notional principal amount from the party selling such
interest rate floor. The Adviser
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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: Nations Equity Income Fund may invest in
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 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' Boards, including the use of outside pricing services. Adverse
publicity and changing investor perceptions may affect the ability of outside
pricing services used by the Fund to value its portfolio securities, and the
Fund's ability to dispose of these lower-rated bonds.
Money Market Instruments: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government Obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
Municipal Securities: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General
obligation securities are secured by the issuer's pledge of its full faith,
credit, and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by a Fund are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by
a Fund will be determined by the Adviser to be of comparable quality at the
time of purchase to instruments rated "high quality" by any major rating
service. Where necessary to ensure that an instrument is of comparable "high
quality," a Fund will require that an issuer's obligation to pay the principal
of the note may be backed by an unconditional bank letter or line of credit,
guarantee, or commitment to lend.
Municipal securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases,"
and units of participation in trusts hold-
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ing pools of tax-exempt leases. Such loans in most cases are not backed by the
taxing authority of the issuers and may have limited marketability or may be
marketable only by virtue of a provision requiring repayment following demand
by the lender. Such loans made by a Fund may have a demand provision permitting
the Fund to require payment within seven days. Participations in such loans,
however, may not have such a demand provision and may not be otherwise
marketable. To the extent these securities are illiquid, they will be subject
to each Fund's limitation on investments in illiquid securities. As it deems
appropriate, the Adviser will establish procedures to monitor the credit
standing of each such municipal borrower, including its ability to meet
contractual payment obligations.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying
municipal security. To the extent that municipal participation interests are
considered to be "illiquid securities," such instruments are subject to each
Fund's limitation on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/ dealers with respect to municipal securities held in their
portfolios. Under a stand-by commitment, a dealer would agree to purchase at a
Fund's option specified municipal securities at a specified price. A Fund will
acquire stand-by commitments solely to facilitate portfolio liquidity and do
not intend to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis, a Fund
may invest more than 25% of its total assets in municipal securities the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Adviser. To the extent
that more than 25% of a Fund's total assets are invested in municipal
securities that are payable from the revenues of similar projects, a Fund will
be subject to the peculiar risks presented by such projects to a greater extent
than it would be if its assets were not so concentrated.
Other Investment Companies: Each 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. Pursuant to an exemptive order, the Nations Funds' non-money
market funds may purchase shares of Nations Funds' money market funds.
Passive Foreign Investment Companies: Passive foreign investment companies
("PFICs") are any foreign corporations which generate certain amounts of
passive income or hold certain amounts of assets for the production of passive
income. Passive income includes dividends, interest, royalties, rents and
annuities. Income tax regulations may require the Fund to recognize income
associated with the PFIC prior to the actual receipt of any such income.
Pay-in-Kind Bonds: Pay-in-kind bonds are debt securities that normally give the
issuer an option to pay cash at a coupon payment date or give the holder of the
security a similar bond with the same coupon rate and a face value equal to the
amount of the coupon payment that would have been made.
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.
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Repurchase Agreements: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker/dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can
be liquidated on the open market. Repurchase agreements with a maturity 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 Funds.
Securities Lending: To increase return on portfolio securities, the Funds may
lend their portfolio securities to broker/dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned. There is a risk of delay in receiving collateral or
in recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Adviser to be credit worthy and when, in its
judgment, the income to be earned from the loan justifies the attendant risks.
The aggregate of all outstanding loans of a Fund may not exceed 33% of the
value of its total assets, which may include cash collateral received for
securities loans. Cash collateral received by a Nations Fund may be invested in
a Nations Funds' money market fund.
Step Coupon Bonds: Step coupon bonds are debt securities that trade at a
discount from their face value and pay coupon interest. The discount from the
face value depends on the time remaining until cash payments begin, prevailing
interest rates, liquidity of the security and the perceived credit quality of
the issuer.
Stock Index, Interest Rate and Currency Futures Contracts: Each Fund may
purchase and sell futures contracts and related options with respect to
non-U.S. stock indices, 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. U.S.
Treasury Obligations differ only in their interest rates, maturities and time
of issuance. Obligations of U.S. Government agencies, authorities and
instrumentalities are issued by government-sponsored agencies and enterprises
acting under authority of Congress. Although obligations of federal agencies,
authorities and instrumentalities are not debts of the U.S. Treasury, some 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; some
are supported by the right of the issuer to borrow from the U.S. Government,
such as obli-
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gations of Federal Home Loan Banks, and some are backed only by the credit of
the issuer itself, such as obligations of the Federal National Mortgage
Association. 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.
The market value of U.S. Government Obligations may fluctuate due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government Obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government Obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
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.
Zero Coupon Bonds: Zero coupon bonds are debt securities that do not pay
interest at regular intervals, but are issued at a discount from face value.
The discount approximates the total amount of interest the security will accrue
from the date of issuance to maturity. The market value of these securities
generally fluctuates more in response to changes in interest rates than
interest-paying securities of comparable maturity.
Appendix B -- Description Of Ratings
The following summarizes the highest eight 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.
CCC, CC -- An obligation rated CCC is vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse conditions, the obligor is not likely to have the
capacity to meet its financial commitments on the obligation; an
obligation rated CC is highly vulnerable to nonpayment.
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To provide more detailed indications of credit quality, the AA, A, BBB and CCC
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 eight 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 toprincipal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa, Ca -- Bonds that are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest. Bonds that are rated Ca represent
obligations that are speculative in a high degree. Such issues are often
in default or have other marked shortcomings.
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.
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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 IBCA ("Fitch")
for bonds, each of which denotes that the securities are investment grade:
AAA -- "AAA" ratings denote the lowest expectation of credit risk. They
are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA -- "AA" ratings denote a very low expectation of credit risk. They
indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to
foreseeable events.
A -- "A" ratings denote a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher
ratings.
BBB -- "BBB" ratings indicate that there is currently a low expectation
of credit risk. The capacity for timely payment of financial commitments
is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable-rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high
quality, with ample margins of protection although not so large as in
the preceding group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
are given a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are D-1, D-2 and D-3. D&P
employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-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." D-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.
D-1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. D-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. D-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 two highest rating categories used by Fitch for
short-term obligations:
F1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are
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regarded as having the strongest degree of assurance for timely payment.
F1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in
degree than issues rated F1+.
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. Commercial paper rated A-3
exhibits adequate protection parameters. However, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation. Commercial paper
rated A-3 or B correlates with the S&P Bond rankings (described above) of BBB/
BBB- and BB+, respectively.
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 obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of senior short-term 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. Issuers rated Prime-3 have an acceptable ability for
repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt
protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
For commercial paper, D&P uses the short-term debt ratings described above.
For commercial paper, Fitch uses the short-term debt ratings described above.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the
rated instrument. The following are the 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 extremely high.
AA -- The second highest category; indicates a very strong 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 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
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relative degree of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and
interest in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
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Prospectus
Investor C Shares
August 1, 1998
as supplemented on
, 1998
This Prospectus describes NATIONS SHORT-TERM MUNICIPAL INCOME FUND, NATIONS
INTERMEDIATE MUNICIPAL BOND FUND and NATIONS MUNICIPAL INCOME FUND (each a
"Fund") of Nations Fund Trust, an open-end management investment company in the
Nations Funds Family ("Nations Funds" or "Nations Funds Family"). This
Prospectus describes one class of shares of each Fund -- Investor C Shares.
This Prospectus sets forth concisely the information about each Fund that a
prospective purchaser of Investor C Shares should consider before investing.
Investors should read this Prospectus and retain it for future reference.
Additional information about Nations Fund Trust is contained in a separate
Statement of Additional Information (the "SAI"), that has been filed with the
Securities and Exchange Commission (the "SEC") and is available upon request
without charge by writing or calling Nations Funds at its address or telephone
number shown below. The SAI for Nations Funds, dated August 1, 1998, is
incorporated by reference in its entirety into this Prospectus. The SEC
maintains a Web site (http://www.sec.gov) that contains the SAI, material
incorporated by reference in this Prospectus and other information regarding
registrants that file electronically with the SEC. NationsBanc Advisors, Inc.
("NBAI") is the investment adviser to each of the Funds. TradeStreet Investment
Associates, Inc. ("TradeStreet") is the investment sub-adviser to the Funds. As
used herein the term "Adviser" shall mean NBAI and/or TradeStreet as the
context may require, see "How The Funds Are Managed."
SHARES OF NATIONS FUNDS 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 SERVICES TO NATIONS FUNDS,
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 FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Nations Short-Term Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Municipal Income Fund
For Fund information call:
1-800-321-7854
Nations Funds
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
[NATIONS FUNDS LOGO APPEARS HERE]
NF-96141-8/98
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Table Of Contents
About The Prospectus Summary 3
Funds -----------------------------------------------------
Expenses Summary 4
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Objectives 6
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How Objectives Are Pursued 6
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How Performance Is Shown 9
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How the Funds Are Managed 10
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Organization And History 12
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About Your How To Buy Shares 13
Investment -----------------------------------------------------
Investor C Shares -- Charges and Features 14
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How To Redeem Shares 16
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How To Exchange Shares 17
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Shareholder Servicing And Distribution Plans 18
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How The Funds Value Their Shares 19
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How Dividends And Distributions Are Made;
Tax Information 20
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Financial Highlights 22
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Appendix A -- Portfolio Securities 25
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Appendix B -- Description Of Ratings 29
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS, OR IN THE FUNDS' SAI INCORPORATED HEREIN
BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NATIONS FUNDS OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY NATIONS FUNDS OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
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About The Funds
Prospectus Summary
o TYPE OF COMPANY: Open-end management investment company.
o INVESTMENT OBJECTIVES AND POLICIES:
o Nations Short-Term Municipal Income Fund's investment objective is to seek
high current income exempt from Federal income tax consistent with minimal
fluctuation of principal. The Fund invests in investment grade, short-term
municipal securities.
o Nations Intermediate Municipal Bond Fund's investment objective is to seek
high current income exempt from Federal income tax consistent with moderate
fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
o Nations Municipal Income Fund's investment objective is to seek high current
income exempt from Federal income tax with the potential for principal
fluctuation associated with investments in long-term municipal securities.
The Fund invests in investment grade, long-term municipal securities.
o INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as the investment
adviser to the Funds. NBAI provides investment management services to more
than 60 investment company portfolios in the Nations Funds Family.
TradeStreet Investment Associates, Inc., an affiliate of NBAI, provides
investment sub-advisory services to the Funds. For more information about
the investment adviser and investment sub-adviser to the Nations Funds, see
"How The Funds Are Managed."
o DIVIDENDS AND DISTRIBUTIONS: The Funds declare dividends daily and pay them
monthly. Each Fund's net realized capital gains, including net short-term
capital gains are distributed at least annually.
o RISK FACTORS: Although NBAI, together with the sub-adviser, seek to achieve
the investment objective of each Fund, there is no assurance that they will
be able to do so. Investments in a Fund are not insured against loss of
principal. Investments by a Fund in debt securities are subject to interest
rate risk, which is the risk that increases in market interest rates will
adversely affect a Fund's investments in debt securities. The value of a
Fund's investments in debt securities, including U.S. Government Obligations
(as defined below), 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 which are
not issued or guaranteed by the United States Government are subject to
credit risk, which is the risk that the issuer may not be able to pay
principal and/or interest when due. Certain of the Funds' investments may
constitute derivative securities. Certain types of derivative securities
can, under particular circumstances, significantly increase an investor's
exposure to market and other risks. For a discussion of these and other
factors, see "How Objectives Are Pursued -- Risk Considerations" and
"Appendix A."
o MINIMUM PURCHASE: $1,000 minimum initial investment per record holder,
except for investments pursuant to the Systematic Investment Plan. The
minimum subsequent investment is $100, except for investments pursuant to
the Systematic Investment Plan. See "How To Buy Shares."
3
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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 the Investor C Shares of the Funds. The Examples show the cumulative
expenses attributable to a hypothetical $1,000 investment in the Funds over
specified periods.
NATIONS FUNDS INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations Nations
Short-Term Intermediate Nations
Municipal Municipal Municipal
Shareholder Transaction Expenses Income Fund Bond Fund Income Fund
<S> <C> <C> <C>
Sales Load Imposed on Purchases None None None
Maximum Deferred Sales Charge (as a percentage of the lower of the original
purchase price or redemption proceeds) 1.00% 1.00% 1.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (After Fee Waivers) .17% .34% .42%
Rule 12b-1 Fees (After Fee Waivers) .10% .25% .50%
Shareholder Servicing Fees .25% .25% .25%
Other Expenses (After Expense Reimbursements) .23% .16% .18%
Total Operating Expenses (After Fee Waivers and Expense Reimbursements) .75% 1.00% 1.35%
</TABLE>
(1) Investor C Shares that are purchased at net asset value are subject to a
Deferred Sales Charge if redeemed within one year of purchase.
Examples: You would pay the following expenses on a $1,000 investment in
Investor C Shares of the indicated Fund, assuming (1) a 5% annual return and
(2) redemption at the end of each time period.
<TABLE>
<CAPTION>
Nations Nations
Short-Term Intermediate Nations
Municipal Municipal Municipal
Income Fund Bond Fund Income Fund
------------- -------------- ------------
<S> <C> <C> <C>
1 Year $ 24 $ 20 $ 24
3 Years $ 44 $ 32 $ 43
5 Years $ 77 $ 55 $ 74
10 Years $169 $123 $163
</TABLE>
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You would pay the following expenses on a $1,000 investment in Investor C
Shares of the indicated Fund, assuming (1) a 5% annual return and (2) no
redemption.
<TABLE>
<CAPTION>
Nations Nations
Short-Term Intermediate Nations
Municipal Municipal Municipal
Income Fund Bond Fund Income Fund
------------- -------------- ------------
<S> <C> <C> <C>
1 Year $ 14 $ 10 $ 14
3 Years $ 44 $ 32 $ 43
5 Years $ 77 $ 55 $ 74
10 Years $169 $123 $163
</TABLE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor C Shares will bear either directly or indirectly. The figures
contained in the above tables are based on amounts incurred during each Fund's
most recent fiscal year and have been adjusted as necessary to reflect current
service provider fees. There is no assurance that any fee waivers and/or
reimbursements will continue. In particular, to the extent Other Expenses are
less than those shown, waivers and/or reimbursements of Management Fees, if
any, may decrease. Shareholders will be notified of any decrease that
materially increases Total Operating Expenses. If fee waivers and/or
reimbursements are decreased or discontinued, the amounts contained in the
"Examples" above may increase. Long-term shareholders of a Fund could pay more
in sales charges than the economic equivalent of the maximum front-end sales
charges applicable to mutual funds sold by members of the National Association
of Securities Dealers, Inc. For more complete descriptions of the Funds'
operating expenses, see "How The Funds Are Managed." For a more complete
description of the Rule 12b-1 and shareholder servicing fees payable by the
Funds, see "Shareholder Servicing And Distribution Plans."
Absent fee waivers and expense reimbursements, "Management Fees," "12b-1 Fees,"
"Other Expenses" and "Total Operating Expenses" for Investor C Shares of the
indicated Fund would have been as follows: Nations Short-Term Municipal Income
Fund -- .50%, .75%, .27% and 1.77%, respectively; Nations Intermediate
Municipal Fund -- .50%, .75%, .24% and 1.74%, respectively and Nations
Municipal Income Fund -- .60%, .75%, .24% and 1.84%, respectively.
Effective May 1999, it is anticipated that certain voluntary total operating
expense limits put in place in connection with the reorganization of The Pilot
Funds into the Nations Funds will terminate with respect to the following
Funds: Nations Intermediate Municipal Bond Fund and Nations Municipal Income
Fund. For more information, see the SAI.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST
OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
5
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Objectives
Nations Short-Term Municipal Income Fund:
Nations Short-Term Municipal Income Fund's investment objective is to seek high
current income exempt from Federal income tax consistent with minimal
fluctuation of principal. The Fund invests in investment grade, short-term
municipal securities.
Nations Intermediate Municipal Bond Fund:
Nations Intermediate Municipal Bond Fund's investment objective is to seek high
current income exempt from Federal income tax consistent with moderate
fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
Nations Municipal Income Fund: Nations Municipal Income Fund's investment
objective is to seek high current income exempt from Federal income tax with
the potential for principal fluctuation associated with investments in
long-term municipal securities. The Fund invests in investment grade, long-term
municipal securities.
Although the Adviser will seek to achieve the investment objective of each
Fund, there is no assurance that it will be able to do so. No single Fund
should be considered, by itself, to provide a complete investment program for
any investor. Investments in the Funds are not insured against loss of
principal.
How Objectives Are Pursued
In pursuing their objectives, the Funds will invest at least 80% of their total
net assets in investment grade obligations issued by or on behalf of states,
territories, and possessions of the United States, the District of Columbia,
and their political subdivisions, agencies, instrumentalities, and authorities,
the interest on which, in the opinion of counsel to the issuer or bond counsel,
is exempt from Federal income tax ("Municipal Securities"). To the extent
consistent with the Funds' investment approach described in this Prospectus,
the Funds are managed to seek capital appreciation and minimize capital losses
due to interest rate movements.
Under normal market conditions, the average dollar-weighted maturity and
duration of each of the Funds' portfolios are expected to be as follows:
Nations Short-Term Municipal Income Fund -- average weighted dollar-maturity
less than three years and duration between 1.25 and 2.75 years; Nations
Intermediate Municipal Bond Fund -- average weighted maturity between three and
10 years and duration between three and six years; and Nations Municipal Income
Fund -- average weighted dollar-maturity greater than 8.5 years and duration
between six and nine years.
Municipal Securities will be rated investment grade at the time of purchase by
at least one of the following nationally recognized statistical rating
organizations: Standard & Poor's Corporation ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("D&P"), Fitch IBCA
("Fitch"), or Thomson BankWatch, Inc. ("BankWatch") (collectively, "NRSROs")
or, if unrated, determined by the Adviser to be of comparable quality at the
time of purchase to rated obligations that may be acquired by a Fund.
Obligations rated in the lowest of the top four investment grade rating
categories (E.G. rated "BBB" by S&P or "Baa" by Moody's) have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt obligations. Subsequent to its
purchase by a Fund, an issue of Municipal Securities may cease to be rated, or
its rating may be reduced below the minimum rating required for purchase by a
Fund. The Adviser will consider such an event in determining whether a Fund
should continue to hold the obligation. See "Appendix B" for a description of
these rating designations.
During temporary defensive periods, the Funds may invest in short-term taxable
and non-taxable obli-
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gations in such proportions as, in the opinion of the Adviser, prevailing
market or economic conditions warrant. Taxable obligations that may be acquired
by a Fund include repurchase agreements and short-term debt securities. Under
normal market conditions, each Fund's investments in taxable obligations and
private activity bonds, the interest on which may be treated as a specific tax
preference item under the Federal alternative minimum tax, will not exceed 20%
of its total net assets at the time of purchase. The Funds may hold uninvested
cash reserves pending investment or during defensive periods.
General: Each Fund may invest in certain specified derivative securities,
including: interest rate swaps, caps and floors for hedging purposes;
exchange-traded options; over-the-counter options executed with primary
dealers, including long calls and puts and covered calls to enhance return; and
U.S. and foreign exchange-traded financial futures and options thereon approved
by the Commodity Futures Trading Commission (the "CFTC") for market exposure
risk-management. Each Fund also may lend its portfolio securities to qualified
institutional investors and may invest in restricted, private placement and
other illiquid securities. Additionally, each Fund may purchase securities
issued by other investment companies, consistent with the Fund's investment
objective and policies. The Funds may invest in instruments issued by certain
trusts, partnerships or other special purpose issuers, including pass-through
certificates representing participations in, or debt instruments backed by, the
securities and other assets owned by such issuers.
Certain government securities that have variable or floating interest rates or
demand, put or prepayment features or paydown schedules may be deemed to have
remaining maturities shorter than their nominal maturities for purposes of
determining the average weighted maturity and duration of the Funds.
Duration, as used in this Prospectus, means modified duration, which is a
measure of the expected life of fixed income securities on a present value
basis. Duration is used to estimate how much a Fund's share price will
fluctuate in response to a change in interest rates. To see how a Fund's share
price could shift, multiply the Fund's duration by the change in rates. If
interest rates rise by one percentage point, for example, the share price of a
Fund with a duration of five years would decline by about 5%. If rates decrease
by one percentage point, the Fund's share price would rise by about 5%.
Average dollar-weighted maturity is the average length of time until fixed
income securities held by a Fund reach maturity and are repaid. In general, the
longer the average dollar-weighted maturity, the more a Fund's share price will
fluctuate in response to changes in interest rates.
For more information concerning these and other investments in which the Funds
may invest and the Funds' investment practices, see "Appendix A."
Portfolio Turnover: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. If a Fund's annual portfolio turnover rate exceeds 100%, it
may result in higher brokerage costs and possible tax consequences for the Fund
and its shareholders. For the Funds' portfolio turnover rates, see "Financial
Highlights."
Risk Considerations: The value of a Fund's investments in debt securities,
including U.S. Government obligations, will tend to decrease when interest
rates rise and increase when interest rates fall. In general, longer-term debt
instruments tend to fluctuate in value more than shorter-term debt instruments
in response to interest rate movements. In addition, debt securities that are
not backed by the United States Government are subject to credit risk, which is
the risk that the issuer may not be able to pay principal and/or interest when
due.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index
or reference rate. There are certain types of derivative securities that can,
under particular circumstances, significantly increase a purchaser's exposure
to market or other risks. The Funds' investment adviser, however, only
purchases derivative securities in circumstances where it believes such
purchases are consistent with the Fund's investment objective and do not unduly
increase the Fund's exposure to market or other risks. For additional
7
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risk information regarding the Funds' investments in particular instruments,
see "Appendix A"
Year 2000 Issue: Many computer programs employed throughout the world use two
digits to identify the year. Unless modified, these programs may not correctly
handle the change from "99" to "00" on January 1, 2000, and may not be able to
perform necessary functions. Any failure to adapt these programs in time could
hamper the Funds' operations. The Funds' principal service providers have
advised the Funds that they have been actively working on implementing
necessary changes to their systems, and that they expect that their systems
will be adapted in time, although there can be no assurance of success. Because
the Year 2000 issue affects virtually all organizations, the companies or
governmental entities in which the Funds invest could be adversely impacted by
the Year 2000 issue, although the extent of such impact cannot be predicted. To
the extent the impact on a portfolio holding is negative, a Fund's return could
be adversely affected.
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 a Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAI.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to
25% of the value of the Fund's total assets may be invested without regard to
these limitations and with respect to 75% of such Fund's assets, such Fund will
not hold more than 10% of the voting securities of any issuer.
As a matter of fundamental policy, except during defensive periods, Nations
Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond Fund and
Nations Municipal Income Fund will invest at least 80% of their respective
total net assets in Municipal Securities the interest on which is exempt from
Federal income tax. For purposes of these fundamental policies, private
activity bonds are included in the term "Municipal Securities" only if the
interest paid thereon is exempt from Federal income tax and not treated as a
specific tax preference item under the Federal alternative minimum tax.
The investment objective and policies of each Fund, unless otherwise specified,
may be changed without shareholder approval. If the investment objective or
policies of a Fund change, shareholders should consider whether the Fund
remains an appropriate investment in light of their current positions and
needs.
8
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How Performance Is Shown
From time to time, a Fund may advertise the "total return", "yield" and
"tax-equivalent yield" on a class of shares. TOTAL RETURN, YIELD AND
TAX-EQUIVALENT YIELD FIGURES ARE BASED ON HISTORICAL DATA AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE. The "total return" of a class of shares of a
Fund may be calculated on an average annual total return basis or an aggregate
total return basis. Average annual total return refers to the average annual
compounded rates of return on a class of shares over one-, five-, and ten-year
periods or the life of a Fund (as stated in a Fund's advertisement) that would
equate an initial amount invested at the beginning of a stated period to the
ending redeemable value of the investment (reflecting the deduction of any
applicable contingent deferred sales charge ("CDSC")) assuming the reinvestment
of all dividend and capital gain distributions. Aggregate total return reflects
the total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gain
distributions. Total return may also be presented for other periods or may not
reflect a deduction of any applicable CDSC.
"Yield" is calculated by dividing the annualized net investment income per
share during a recent 30-day (or one month) period of a class of shares of a
Fund by the maximum public offering price per share on the last day of that
period. The yield on a class of shares does not reflect deduction of any
applicable CDSC. The "tax-equivalent yield" of a class of shares of a Fund also
may be quoted from time to time, which shows the level of taxable yield needed
to produce an after-tax equivalent to the particular class's tax-free yield.
This is done by increasing such class's yield (as calculated above) by the
amount necessary to reflect the payment of Federal income tax at a stated tax
rate. The tax-equivalent yield of a class of shares will always be higher than
its yield.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of the Fund's portfolio and the Fund's
operating expenses. Investment performance also often reflects the risks
associated with a Fund's investment objective and policies. These factors
should be considered when comparing a Fund's investment results to those of
other mutual funds and other investment vehicles. Since yields fluctuate, yield
data cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
In addition to Investor C Shares, the Funds offer Primary A, Investor A and
Investor B Shares. Each Class of shares may bear different sales charges,
shareholder servicing fees and other expenses, which may cause the performance
of a class to differ from the performance of the other classes. Total return
and yield quotations will be computed separately for each class of the Funds'
shares. Any fees charged by a selling agent and/or servicing agent directly to
its customers' accounts in connection with investments in the Funds will not be
included in calculations of total return or yield. Any quotation of total
return or yield not reflecting CDSCs would be reduced if such sales charges
were reflected. The Funds' annual report contains additional performance
information and is available upon request without charge from the Funds'
distributor or an investor's selling agent or by calling Nations Funds at the
toll-free number indicated on the cover of this Prospectus.
9
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How The Funds Are Managed
The business and affairs of Nations Fund Trust are managed under the direction
of its Trustees. The SAI contains the names of and general background
information of each Trustee of Nations Fund Trust.
As described below, each Fund is advised by NBAI which is responsible for the
overall management and supervision of the investment management of each Fund.
Each Fund also is sub-advised by a separate investment sub-adviser, which as a
general matter is responsible for the day-to-day investment decisions for the
respective Fund.
Nations Funds 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.
NationsBank Corporation, the parent company of NationsBank, has signed an
agreement to merge with BankAmerica Corporation. The proposed merger is subject
to certain regulatory approvals and must be approved by shareholders of both
holding companies. The merger is expected to close in the second half of 1998.
NationsBank and NBAI have advised the Funds that the merger will not reduce the
level or quality of advisory and other services provided by NationsBank to the
Funds.
Investment Adviser: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza Charlotte, North Carolina 28255, serves as investment sub-
adviser to the Funds. TradeStreet is a wholly owned subsidiary of NationsBank.
TradeStreet provides investment management services to individuals,
corporations and institutions.
Subject to the general supervision of the Trustees of Nations Fund Trust, and
in accordance with each Fund's investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions
with respect to and places orders for each Fund's purchases and sales of
portfolio securities and maintains records relating to such purchases and
sales. The Adviser is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with the
Adviser or which have sold shares in the Funds, if the Adviser believes that
the quality of the transaction and the commission are comparable to what they
would be with other qualified brokerage firms. From time to time, to the extent
consistent with their investment objectives, policies and restrictions, the
Funds may invest in securities of companies with which NationsBank has a
lending relationship. For the services provided pursuant to an investment
advisory agreement, NBAI is entitled to receive advisory fees, computed daily
and paid monthly, at the annual rates of: .50% of the average daily net assets
of each of Nations Short-Term Municipal Income Fund and Nations Intermediate
Municipal Bond Fund; and .60% of the average daily net assets of Nations
Municipal Income Fund.
For the services provided pursuant to an investment sub-advisory agreement,
NBAI will pay TradeStreet sub-advisory fees, computed daily and paid monthly,
at the annual rates of .07% of the average daily net assets of each Fund.
From time to time, NBAI (and/or TradeStreet) may waive or reimburse (either
voluntarily or pursuant to applicable state limitations) advisory fees and/or
expenses payable by a Fund.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid NBAI under the investment advisory agreement, advisory
fees at the indicated rates of the
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following Funds' average daily net assets: Nations Short-Term Municipal Income
Fund -- .14%, Nations Intermediate Municipal Bond Fund -- .28%, and Nations
Municipal Income Fund -- .38%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers, NBAI
paid TradeStreet under the investment sub-advisory agreements, sub-advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Short-Term Municipal Income Fund -- .07%, Nations Intermediate
Municipal Bond Fund -- .07%, and Nations Municipal Income Fund -- .07%.
The Municipal Fixed Income Management Team of TradeStreet is responsible for
the day-to-day management of Nations Short-Term Municipal Income Fund, Nations
Intermediate Municipal Bond Fund and Nations Municipal Income Fund.
Morrison & Foerster LLP, counsel to Nations Funds and special counsel to
NationsBank, has advised Nations Funds and NationsBank that NationsBank and its
affiliates may perform the services contemplated by the investment advisory
agreement and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such federal or state statutes, regulations and
judicial or administrative decisions or interpretations, could prevent such
entities from continuing to perform, in whole or in part, such services. If any
such entity were prohibited from performing any such services, it is expected
that new agreements would be proposed or entered into with another entity or
entities qualified to perform such services.
Other Service Providers: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
the Funds pursuant to an administration agreement. Pursuant to the terms of the
administration agreement, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
First Data Investor Services Group, Inc. ("First Data"), a wholly owned
subsidiary of First Data Corporation, with principal offices at One Exchange
Place, Boston, Massachusetts 02109, serves as the co-administrator of the Funds
pursuant to a co-administration agreement. Under the co-administration
agreement, First Data provides various administrative and accounting services
to the Funds, including performing calculations necessary to determine net
asset values and dividends, preparing tax returns and financial statements and
maintaining the portfolio records and certain general accounting records for
the Funds. For the services rendered pursuant to the administration and
co-administration agreements, Stephens and First Data are entitled to receive a
combined fee at the annual rate of up to .10% of each Fund's average daily net
assets.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid its administrators combined fees at the indicated rates
of the following Funds' average daily net assets: Nations Short-Term Municipal
Income Fund -- .08%, Nations Intermediate Municipal Bond Fund -- .08%, and
Nations Municipal Income Fund -- .08%.
NBAI serves as sub-administrator for the Funds pursuant to a sub-administration
agreement. Pursuant to the terms of the sub-administration agreement, NBAI
assists Stephens in supervising, coordinating and monitoring various aspects of
the Funds' administrative operations. For providing such services, NBAI 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. Nations Funds
has entered into a distribution agreement with Stephens which provides that
Stephens has the exclusive right to distribute shares of the Funds. Stephens
may pay service fees or commissions to
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selling agents that assist customers in purchasing Investor C Shares of the
Funds. See "Shareholder Servicing And Distribution Plans."
The Bank of New York ("BONY" or the "Custodian"), located at 90 Washington
Street, New York, New York 10286, provides custodial services for the assets of
all Nations Funds, except the international portfolios. In return for providing
custodial services to the Nations Funds Family, BONY is entitled to receive, in
addition to out-of-pocket expenses, fees at the rate of (i) 3/4 of one basis
point per annum on the aggregate net assets of all Nations Funds' non-money
market funds up to $10 billion; and (ii) 1/2 of one basis point on the excess,
including all Nations Funds' money market funds.
First Data serves as transfer agent (the "Transfer Agent") for the Funds'
Investor C Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
PricewaterhouseCoopers LLP serves as independent accountant to Nations Funds.
Their address is 160 Federal Street, Boston, Massachusetts 02110.
Expenses: The accrued expenses of each Fund are deducted from the Funds' accrued
income before dividends are declared. These expenses include, but are not
limited to: fees paid to the Adviser, Stephens and First Data; interest; fees
(including fees paid to Nations Funds' Trustees and officers); and federal and
state securities registration and qualification fees; brokerage fees and
commissions; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; charges of the Custodian
and Transfer Agent; certain insurance premiums; outside auditing and legal
expenses; costs of shareholder reports and shareholder meetings; other expenses
which are not expressly assumed by the Adviser, Stephens or First Data under
their respective agreements with Nations Funds; and any extraordinary expenses.
Investor C Shares may bear certain class specific expenses and also bear certain
additional shareholder service and/or sales support costs. Any general expenses
of Nations Fund Trust that are not readily identifiable as belonging to a
particular investment portfolio are allocated among all portfolios in the
proportion that the assets of a portfolio bear to the assets of Nations Fund
Trust or in such other manner as the Board of Trustees deems appropriate.
Organization And History
The Funds are members of the Nations Funds Family, which consists of Nations
Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc., Nations
Institutional Reserves, Nations Annuity Trust and Nations LifeGoal Funds, Inc.
The Nations Funds Family currently has more than 60 distinct investment
portfolios and total assets in excess of $40 billion.
Nations Fund Trust was organized as a Massachusetts business trust on May 6,
1985. Nations Fund Trust's fiscal year end is March 31; prior to 1996, Nations
Fund Trust's fiscal year end was November 30. The Funds currently offer four
classes of shares -- Primary A Shares, Investor A Shares, Investor B Shares and
Investor C Shares. This Prospectus relates only to the Investor C Shares of the
following Funds of Nations Fund Trust: Nations Municipal Income Fund, Nations
Short-Term Municipal Income Fund and Nations Intermediate Municipal Bond Fund.
To obtain additional information regarding the Funds' other classes of shares
which may be available to you, contact your Selling Agent (as defined below) or
Nations Funds at 1-800-321-7854.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each
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fund of Nations Fund Trust will vote in the aggregate and not by fund and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class of shares. See the SAI for examples of instances where
the Investment Company Act of 1940 (the "1940 Act") requires voting by fund.
As of August 1, 1998, 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 the SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders
entitled to vote at least 10% of the outstanding shares of Nations Fund Trust
entitled to be voted at such meeting.
About Your Investment
How To Buy Shares
This Prospectus offers one class of shares to the general public. Investor C
Shares are sold without an initial sales charge and are subject to a CDSC upon
certain redemptions. Contact your Agent or Nations Funds at 1-800-321-7854 for
more information.
The Funds have established various procedures for purchasing Investor C Shares
in order to accommodate different investors. Purchase orders for Investor C
Shares may be placed through banks, broker/dealers or other financial
institutions (including certain affiliates of NationsBank) that have entered
into a shareholder servicing agreement ("Servicing Agreement") with Nations
Funds ("Servicing Agents") and/or a sales support agreement ("Sales Support
Agreement") with Stephens ("Selling Agents").
The Funds reserve the right, in their discretion, to make Investor C Shares
available to other categories of investors, including those who become eligible
in connection with a merger or reorganization.
There is a minimum initial investment of $1,000, except for investments
pursuant to the Systematic Investment Plan described below. The minimum
subsequent investment is $100, except for investments pursuant to the
Systematic Investment Plan.
Investor C Shares may be purchased at net asset value per share without the
imposition of a sales charge, but are subject to a CDSC if redeemed within one
year after purchase. Purchases may be effected on days on which the New York
Stock Exchange (the "Exchange") is open for business (a "Business Day").
The Servicing Agents will provide various shareholder services for, and the
Selling Agents will provide sales support assistance to, their respective
customers ("Customers") who own Investor C Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Funds may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.
Nations Funds and Stephens reserve the right to reject any purchase order. The
issuance of Investor C Shares is recorded on the books of the Funds and share
certificates are not issued unless expressly
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requested in writing. Certificates are not issued for fractional shares.
Effective Time of Purchases: Purchase orders for Investor C Shares in the Funds
which are received by Stephens, the Transfer Agent or their respective agents
before the close of regular trading 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. In the event that the Exchange closes early, purchase
orders received prior to closing will be priced as of the time the Exchange
closes and purchase orders received after the Exchange closes will be deemed
received on the next Business Day and priced according to the net asset value
determined on the next Business Day. Purchase orders are not executed until
4:00 p.m., Eastern time, on the Business Day on which immediately available
funds in payment of the purchase price are received by the Funds' Custodian.
Such payment must be received no later than 4:00 p.m., Eastern time, by the
third Business Day following the receipt of the order, as determined above. If
funds are not received by such date, the order will not be accepted and notice
thereof will be given to the Agent placing the order. Payment for orders which
are not received or accepted will be returned after prompt inquiry to the
sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor C
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Funds.
Systematic Investment Plan: The minimum initial investment is $100 for
investors participating on a monthly basis in the Systematic Investment Plan
("SIP"). Under the Funds' SIP, a shareholder may automatically purchase
Investor C Shares. On a bi-monthly, monthly or quarterly basis, shareholders
may direct cash to be transferred automatically from their checking or savings
account at any bank which is a member of the Automated Clearing House to their
Fund account. Transfers will occur on or about the 15th and/or the last day of
the applicable month. Subject to certain exceptions for employees of
NationsBank and its affiliates and pre-existing SIP accounts, the systematic
investment amount may be in any amount from $50 to $100,000. For more
information concerning the SIP, contact your Agent.
Telephone Transactions: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How To
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. Shareholders should be aware that by using the telephone transaction
feature, such shareholders may be giving up a measure of security that they may
have if they were to authorize written requests only. A shareholder may bear
the risk of any resulting losses from a telephone transaction. Nations Funds
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if Nations Funds and its service providers fail to
employ such measures, they may be liable for any losses due to unauthorized or
fraudulent instructions. Nations Funds requires a form of personal
identification prior to acting upon instructions received by telephone and
provides written confirmation to shareholders of each telephone share
transaction. In addition, Nations Funds reserves the right to record all
telephone conversations. Shareholders should be aware that during periods of
significant economic or market change, telephone transactions may be difficult
to complete.
Investor C Shares -- Charges and Features
Investor C Contingent Deferred Sales Charge:
Subject to certain waivers, Investor C Shares of Nations Short-Term Municipal
Income Fund, Nations Intermediate Municipal Bond Fund and Nations Municipal
Income Fund that are redeemed within one year of the date of purchase will be
subject to a CDSC equal to 1.00% of the lesser of the net asset value or the
purchase price of the shares
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being redeemed. No CDSC is imposed on increases in net asset value above the
initial purchase price, including shares acquired by reinvestment of
distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor C Shares, all purchases during a month will be
aggregated and deemed to have been made on the last day of the month. In
determining whether a CDSC is applicable to a redemption, the calculation will
be made in the manner that results in the lowest possible charge being
assessed. In this regard, it will be assumed that the redemption is first of
shares held for the longest period of time or shares acquired pursuant to
reinvestment of dividends or distributions. The charge will not be applied to
dollar amounts representing an increase in the net asset value since the time
of purchase.
The CDSC will be waived on redemptions of Investor C Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as
amended (the "Code")) of a shareholder (including a registered joint owner),
(ii) in connection with the following retirement plan distributions: (a) lump-
sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or in the case of a "key employee" of a
"top heavy" plan, following attainment of age 59 1/2); (b) distributions from
an IRA, or Custodial Account under Section 403(b)(7) of the Code, following
attainment of age 59 1/2; (c) a tax-free return of an excess contribution to an
IRA; and (d) distributions from a qualified retirement plan that are not
subject to the 10% additional Federal withdrawal tax pursuant to Section
72(t)(2) of the Code, (iii) payments made to pay medical expenses which exceed
7.5% of income and distributions to pay for insurance by an individual who has
separated from employment and who has received unemployment compensation under
a federal or state program for at least 12 weeks, (iv) effected pursuant to
Nations Funds' right to liquidate a shareholder's account, including instances
where the aggregate net asset value of the Investor C shares held in the
account is less than the minimum account size, (v) effected pursuant to the
Automatic Withdrawal Plan discussed below, provided that such redemptions do
not exceed, on an annual basis,
12% of the net asset value of the Investor C Shares in the account, and (vi) in
connection with the combination of Nations Funds with any other registered
investment company by a merger, acquisition of assets or by any other
transaction. In addition, the CDSC will be waived on Investor C Shares
purchased before September 30, 1994 by current or retired employees of
NationsBank and its affiliates or by current or former Trustees or Directors of
Nations Funds or other management companies managed by NationsBank.
Shareholders are responsible for providing evidence sufficient to establish
that they are eligible for any waiver of the CDSC.
Reinstatement Privilege: Within 120 days after a redemption of Investor C
Shares of the Fund, a shareholder may reinvest any portion of the proceeds of
such redemption in Investor C Shares of the Fund. The amount which may be so
reinvested is limited to an amount up to, but not exceeding, the redemption
proceeds (or to the nearest full share if fractional shares are not purchased).
A shareholder exercising this privilege would receive a pro rata credit for any
CDSC paid in connection with the prior redemption. A shareholder may not
exercise this privilege with the proceeds of a redemption of shares previously
purchased through the reinvestment privilege. In order to exercise this
privilege, a written order for the purchase of Investor C Shares must be
received by the Transfer Agent or by Stephens within 120 days after the
redemption.
Automatic Withdrawal Plan: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Fund if the value of the
Investor C Shares in his/her accounts within the Nations Funds Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor C Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis 12% of
the net value of the or Investor C Shares in the account. Otherwise, any
applicable CDSC will be imposed on shares redeemed under the AWP. Shareholders
who elect to establish an AWP may receive a monthly, quarterly or annual check
or automatic transfer to a checking or savings account in a stated amount of not
less than $25 on or about the 10th or 25th day of the applicable month of
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withdrawal. Investor C Shares will be redeemed (net of any applicable CDSC) as
necessary to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. An AWP may be terminated by a shareholder on 30 days' written notice
to his/her Agent or by Nations Funds at any time.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders for
Investor C Shares of the Funds which are received by Stephens, the Transfer
Agent or their respective agents before the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on any Business Day are priced
according to the net asset value next determined after acceptance of the order.
In the event that the Exchange closes early, redemption orders received prior
to closing will be priced as of the time the Exchange closes and redemption
orders received after the Exchange closes will be deemed received on the next
Business Day and priced according to the net asset value determined on the next
Business Day. Redemption orders are effected at the net asset value per share
next determined after receipt of the order by Stephens, the Transfer Agent, or
their respective agents, less any applicable CDSC. The Agents are responsible
for transmitting redemption orders to Stephens, the Transfer Agent or their
respective agents and for crediting their Customers' accounts with the
redemption proceeds on a timely basis. No charge for wiring redemption payments
is imposed by Nations Funds. There is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens, the Transfer Agent or
their respective agents. However, redemption proceeds for shares purchased by
check may not be remitted until at least 15 days after the date of purchase to
ensure that the check has cleared; a certified check, however, is deemed to be
cleared immediately.
Nations Funds may redeem a shareholder's Investor C Shares upon 60 days'
written notice if the balance in the shareholder's account drops below $500 as
a result of redemptions. Share balances also may be redeemed at the direction
of an Agent pursuant to arrangements between the Agent and its Customers.
Nations Funds also may redeem shares of a Fund involuntarily or make payment
for redemption in readily marketable securities or other property under certain
circumstances in accordance with the 1940 Act.
Prior to effecting a redemption of Investor C Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock
exchange, unless other arrangements satisfactory to Nations Funds have
previously been made. Nations Funds may require any additional information
reasonably necessary to evidence that a redemption has been duly authorized.
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How To Exchange Shares
The exchange feature enables a shareholder of Investor C Shares of a Nations
Funds non-money market fund to acquire shares of the same class that are
offered by another non-money market fund of Nations Funds (other than an index
fund) or Daily Shares of any Nations Funds money market fund when he or she
believes that a shift between funds is an appropriate investment decision. A
qualifying exchange is based on the next calculated net asset value per share
of each fund after the exchange order is received.
If a shareholder acquires Investor C Shares of a non-money market fund through
an exchange, the CDSC applicable to that current fund will be applied to any
redemption of the acquired shares. However, if a shareholder acquires Daily
Shares of a money market fund through an exchange of Investor C Shares, the
CDSC applicable to the exchanged Investor C Shares will be applied on any
redemption of the acquired Daily Shares. Notwithstanding the foregoing, if a
shareholder redeems shares acquired through an exchange, the shareholder will
be subject to the highest CDSC applicable to any shares that were exchanged
within the 30 days prior to the redemption.
The Funds and each of the other funds of Nations Funds may limit the number of
times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Funds upon such notice as may be required by
applicable regulatory agencies (presently 60 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 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 cer-tificates, no exchanges may be made until all
applicable share certificates have been received by the Transfer Agent and
deposited in the shareholder's account. An exchange will be treated for Federal
income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
Nations Funds and Stephens reserve 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.
The Investor C Shares exchanged must have a current value of at least $1,000
(except for exchanges through the Automated Exchange Feature, which is
described below). Nations Funds and Stephens reserve the right to reject any
exchange request. Only shares that may legally be sold in the state of the
investor's residence may be acquired in an exchange. Only shares of a class
that is accepting investments generally may be acquired in an exchange. An
investor may telephone an exchange request by calling his/her Agent which is
responsible for transmitting such request to Stephens or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges
may be difficult to complete. In such event, shares may be exchanged by mailing
the request directly to the Agent through which the original shares were
purchased. An investor should consult his/her Agent or Stephens for further
information regarding exchanges.
Automatic Exchange Feature: Under the Funds' Automatic Exchange Feature
("AEF"), a shareholder may automatically exchange at least $25 on a monthly or
quarterly basis. A shareholder may direct proceeds to be exchanged from one
Fund of Nations Funds to another as allowed by the applicable exchange rules
within the prospectus.
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Exchanges will occur on or about the 15th or 30th day of the applicable month.
The shareholder must have an existing position in both Funds in order to
establish the AEF. This feature may be established by directing a request to
the Transfer Agent by telephone or in writing. For additional information, an
investor should contact his/her Selling Agent or Nations Funds.
Shareholder Servicing And Distribution Plans
Pursuant to Rule 12b-1 under the 1940 Act, the Trustees have approved a
Distribution Plan with respect to Investor C Shares of the Funds. Pursuant to
the Distribution Plan, each Fund may compensate or reimburse Stephens for any
activities or expenses primarily intended to result in the sale of the Fund's
Investor C Shares. Payments under the Distribution Plan will be calculated
daily and paid monthly at a rate or rates set from time to time by the
Trustees, provided that the annual rate may not exceed .75% of the average
daily net asset value of each Fund's Investor C Shares.
The fees payable under the Distribution Plan are used (i) to compensate Selling
Agents for providing sales support assistance relating to Investor C Shares,
(ii) to pay for promotional activities intended to result in the sale of
Investor C Shares such as the preparation, printing and distribution of
prospectuses to other than current shareholders, and (iii) to compensate
Selling Agents for providing sales support services with respect to their
Customers who are, from time to time, beneficial and record holders of Investor
C Shares. Currently, substantially all fees paid pursuant to the Distribution
Plan are paid to compensate Selling Agents for providing the services described
in (i) and (iii) above, with any remaining amounts being used by Stephens to
partially defray other expenses incurred by Stephens in distributing Investor C
Shares. Fees received by Stephens pursuant to the Distribution Plan will not be
used to pay any interest expenses, carrying charges or other financing costs
(except to the extent permitted by the SEC) and will not be used to pay any
general and administrative expenses of Stephens.
Nations Funds and Stephens may suspend or reduce payments under the
Distribution Plan at any time, and payments are subject to the continuation of
the Distribution Plan described above and the terms of the Sales Support
Agreement between Selling Agents and Stephens. See the SAI for more details on
the Distribution Plan.
The Trustees also have approved a shareholder servicing plan (the "Investor C
Servicing Plan") for each Fund which permits the Fund to compensate Servicing
Agents for services provided to their Customers that own Investor C Shares.
Payments under the Investor C Servicing Plan are calculated daily and paid
monthly at a rate or rates set from time to time by each Fund, provided that
the annual rate may not exceed .25% of the average daily net asset value of the
Fund's Investor C Shares.
The fees payable under the Investor C Servicing Plan are used primarily to
compensate or reimburse Servicing Agents for shareholder services provided, and
related expenses incurred, by such Servicing Agents. The shareholder services
provided by Servicing Agents may include: (i) aggregating and processing
purchase and redemption requests for Investor C Shares from Customers and
transmitting net purchase and redemption orders to Stephens or the Transfer
Agent; (ii) providing Customers with a service that invests the assets of their
accounts in Investor C Shares pursuant to specific or preauthorized
instructions; (iii) processing dividend and distribution payments from a Fund
on behalf of Customers; (iv) providing information periodically to Customers
showing their positions in Investor C Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services.
Nations Funds may suspend or reduce payments under the Investor C Servicing
Plan at any time, and payments are subject to the continuation of the Investor
C Servicing Plan described above and
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the terms of the Servicing Agreements. See the SAI for more details on the
Investor C Servicing Plan.
Nations Funds understands that Agents may charge fees to their Customers who
are the owners of the Funds' Investor Shares in connection with a Customer's
account. These fees would be in addition to any amounts received by a Selling
Agent under its Sales Support Agreement with Stephens or by a Servicing Agent
under its Servicing Agreement with Nations Funds. The Sales Support Agreements
and Servicing Agreements require Agents to disclose to their Customers any
compensation payable to the Agent by Stephens or Nations Funds and any other
compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.
The Adviser may also pay out of its own assets amounts to Stephens or other
broker/dealers in connection with the provision of administrative and/or
distribution related services to shareholders.
In addition, Stephens may, from time to time, at its expense or as an expense
for which it may be reimbursed under the Distribution Plan, pay a bonus or
other consideration or incentive to Agents who sell a minimum dollar amount of
shares of a Fund during a specified period of time. Stephens may also, from
time to time, pay additional consideration to dealers not to exceed .75% of the
offering price per share on all sales of Investor C Shares as an expense of
Stephens or for which Stephens may be reimbursed under the plan adopted
pursuant to Rule 12b-1 or upon receipt of a CDSC. Any such additional
consideration or incentive program may be terminated at any time by Stephens.
Stephens has also established a non-cash compensation program pursuant to which
broker/dealers or financial institutions that sell shares of the Funds may earn
additional compensation in the form of trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift certificates for
meals or merchandise. This non-cash compensation program may be amended or
terminated at any time by Stephens.
How The Funds Value Their Shares
The Funds calculate the net asset value of a share of each class by dividing
the total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares of the Funds are valued as of the close of regular
trading on the Exchange (currently 4:00 p.m., Eastern time) on each Business
Day. In the event that the Exchange closes early, shares of the Funds will be
priced as of the time the Exchange closes. Currently, the days on which the
Exchange is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities for which market quotations are readily available are
valued at market value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following procedures
approved by the Trustees.
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How Dividends And Distributions Are Made; Tax Information
Dividends and Distributions: Dividends from net investment income are declared
daily and paid monthly by the Funds. Each Fund's net realized capital gains
(including net short-term capital gains) are distributed at least annually.
Distributions from capital gains are made after applying any available capital
loss carryovers. Distributions paid by the Funds with respect to one class of
shares may be greater or less than those paid with respect to another class of
shares due to the different expenses of the different classes.
Investor C Shares of the 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.
The net asset value of Investor C Shares will be reduced by the amount of any
dividend or distribution. Certain Selling or Servicing Agents may provide for
the reinvestment of dividends in the form of additional Investor C Shares of
the same class of the same Fund. Dividends and distributions are paid in cash
within five Business Days of the end of the month to which the payment relates.
Dividends and distributions payable to a shareholder are paid in cash within
five Business Days after a shareholder's complete redemption of his/ her
Investor C Shares in a Fund.
Tax Information: Each Fund intends to continue to qualify as a "regulated
investment company" under the Code. Such qualification relieves a Fund of
liability for Federal income tax on amounts distributed in accordance with the
Code.
As regulated investment companies, the Funds are permitted to pass through to
their shareholders tax-exempt income ("exempt-interest dividends") subject to
certain requirements which the Funds intend to satisfy. Distributions from
taxable income generally will be taxable as ordinary income to shareholders
whether such income is received in cash or reinvested in additional shares. The
policy of the Funds is to pay to their shareholders an amount equal to at least
90% of their exempt-interest income and their investment company taxable
income. Exempt-interest dividends may be treated by shareholders as items of
interest excludable from their Federal gross income under Section 103(a) of the
Code unless under the circumstances applicable to the particular shareholder
the exclusion would be disallowed. (See the SAI under "Additional Information
Concerning Taxes.") Distributions from the Funds will not qualify for the
dividends-received deduction for corporate shareholders. Distributions of net
investment income by Nations Municipal Income Fund, Nations Short-Term
Municipal Income Fund and Nations Intermediate Municipal Bond Fund may be
taxable to investors even though a substantial portion of such distributions
may be derived from interest on tax-exempt obligations which, if realized
directly, would be exempt from such income taxes.
To the extent that dividends, if any, paid by the Funds to shareholders are
derived from taxable income or from long-term or short-term capital gains, such
dividends will not be exempt from Federal income tax.
Substantially all of a Fund's net realized long-term capital gains will be
distributed at least annually. The Funds generally will have no tax liability
with respect to such gains, and the distributions will be taxable to
shareholders as net capital gain, regardless of how long the shareholders have
held the Fund's shares and whether such gains are received in cash or
reinvested in additional shares. Noncorporate shareholders may be taxed on such
distributions at preferential rates.
Each year, shareholders will be notified as to the amount and federal tax
status of all dividends and capital gain distributions paid during the prior
year. Such dividends and capital gain distributions may be subject to state and
local taxes.
Dividends and distributions declared in October, November, or December of any
year payable to shareholders of record on a specified date in such months
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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 and distributions are
actually paid during January of the following year.
Federal law requires Nations Funds to withhold 31% from any distributions
(other than exempt-interest dividends) paid by Nations Funds and/or redemptions
(including exchanges and redemptions in-kind) that occur in certain shareholder
accounts if the shareholder has not properly furnished a certified correct
Taxpayer Identification Number and has not certified that withholding does not
apply, or if the Internal Revenue Service has notified Nations Funds that the
Taxpayer Identification Number listed on a shareholder account is incorrect
according to its records, or that the shareholder is subject to backup
withholding. Amounts withheld are applied to the shareholder's Federal tax
liability, and a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes.
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;
investors should consult their tax advisors with specific reference to their
own tax situations and with respect to foreign, state and local taxes. Further
tax information is contained in the SAI.
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Financial Highlights
The following financial information has been derived from the audited financial
statements of Nations Fund Trust. PricewaterhouseCoopers LLP is the independent
accountant to Nations Fund Trust. The reports of PricewaterhouseCoopers LLP for
Nations Fund Trust's most recent fiscal period accompany the financial
statements for such period and are incorporated by reference in the SAI, which
is available upon request. Shareholders of a Fund will receive unaudited
semi-annual reports describing the Fund's investment operations and annual
financial statements audited by the Funds' independent accountant.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Short-Term Municipal Income Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98 03/31/97
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.95 $ 9.98
Net investment income 0.39 0.40
Net realized and unrealized gain/(loss) on
investments 0.10 (0.03)
Net increase/(decrease) in net asset value from
operations 0.49 0.37
Distributions:
Dividends from net investment income ( 0.39) (0.40)
Distributions from net realized capital gains -- --
Total dividends and distributions ( 0.39) (0.40)
Net asset value, end of period $ 10.05 $ 9.95
Total return++ 4.99% 3.79%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,388 $1,080
Ratio of operating expenses to average net assets 0.75%(a) 0.75%(a)
Ratio of net investment income to average net assets 3.82% 4.01%
Portfolio turnover rate 94% 80%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.12% 1.19%
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.03 $ 9.69 $ 9.84
Net investment income 0.14 0.42 0.19
Net realized and unrealized gain/(loss) on
investments ( 0.05) 0.34 (0.15)
Net increase/(decrease) in net asset value from
operations 0.09 0.76 0.04
Distributions:
Dividends from net investment income ( 0.14) ( 0.42) (0.19)
Distributions from net realized capital gains -- -- (0.00)#
Total dividends and distributions ( 0.14) ( 0.42) (0.19)
Net asset value, end of period $ 9.98 $ 10.03 $ 9.69
Total return++ 0.85% 7.95% 0.45%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $2,072 $1,953 $ 323
Ratio of operating expenses to average net assets 0.72%+(a) 0.70%(a) 0.59%+(a)
Ratio of net investment income to average net assets 4.05%+ 4.13% 3.58%+
Portfolio turnover rate 16% 82% 57%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.18%+ 1.18% 1.05%+
</TABLE>
* Nations Short-Term Municipal Income Fund Investor C Shares commenced
operations on May 19, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
22
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98 03/31/97
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.01 $ 10.03
Net investment income 0.42 0.43
Net realized and unrealized gain/(loss) on
investments 0.33 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.75 0.41
Distributions:
Dividends from net investment income ( 0.42) ( 0.43)
Distributions from net realized capital gains ( 0.04) --
Total dividends and distributions ( 0.46) ( 0.43)
Net asset value, end of period $ 10.30 $ 10.01
Total return++ 7.62% 4.11%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,590 $ 756
Ratio of operating expenses to average net assets 1.20%(a) 1.00%(a)
Ratio of net investment income to average net assets 3.95% 4.24%
Portfolio turnover rate 47% 21%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.44% 1.31%
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.17 $ 9.24 $ 9.35
Net investment income 0.14 0.43 0.03
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.93 (0.11)
Net increase/(decrease) in net asset value from
operations 0.00 1.36 (0.08)
Distributions:
Dividends from net investment income ( 0.14) ( 0.43) (0.03)
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.14) ( 0.43) (0.03)
Net asset value, end of period $ 10.03 $ 10.17 $ 9.24
Total return++ 0.03% 14.96% (0.52)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 716 $ 359 $ 2
Ratio of operating expenses to average net assets 1.00%+(a) 0.95%(a) 0.85%+(a)
Ratio of net investment income to average net assets 4.25%+ 4.41% 4.09%+
Portfolio turnover rate 4% 31% 51%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.33%+ 1.34% 1.38%+
</TABLE>
* Nations Intermediate Municipal Bond Fund Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
23
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Municipal Income Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/98 03/31/97 03/31/96(b)
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 10.89 $ 10.84 $ 11.08
Net investment income 0.49 0.53 0.18
Net realized and unrealized
gain/(loss) on investments 0.62 0.05 ( 0.24)
Net increase/(decrease) in net
asset value from operations 1.11 0.58 ( 0.06)
Distributions:
Dividends from net investment
income ( 0.49) ( 0.53) ( 0.18)
Distributions from net realized
capital gains ( 0.05) -- --
Total dividends and distributions ( 0.54) ( 0.53) ( 0.18)
Net asset value, end of period $ 11.46 $ 10.89 $ 10.84
Total return++ 10.37% 5.50% ( 0.60)%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $2,444 $1,713 $2,173
Ratio of operating expenses to
average net assets 1.33% 1.10% 1.16%+
Ratio of operating expenses to
average net assets including
interest expense (a) (a) (a)
Ratio of net investment income to
average net assets 4.24% 4.91% 4.79%+
Portfolio turnover rate 38% 25% 4%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 1.57% 1.41% 1.47%+
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
Investor C Shares 11/30/95 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 9.64 $ 11.33 $ 10.65 $ 10.48
Net investment income 0.51 0.49 0.50 0.21
Net realized and unrealized
gain/(loss) on investments 1.44 ( 1.44) 0.72 0.17
Net increase/(decrease) in net
asset value from operations 1.95 ( 0.95) 1.22 0.38
Distributions:
Dividends from net investment
income ( 0.51) ( 0.49)# ( 0.50) ( 0.21)
Distributions from net realized
capital gains -- ( 0.25) ( 0.04) --
Total dividends and distributions ( 0.51) ( 0.74) ( 0.54) ( 0.21)
Net asset value, end of period $ 11.08 $ 9.64 $ 11.33 $ 10.65
Total return++ 20.65% ( 8.86)% 11.69% 3.63%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $2,268 $3,064 $6,331 $3,744
Ratio of operating expenses to
average net assets 1.35% 1.36% 1.27% 1.21%+
Ratio of operating expenses to
average net assets including
interest expense (a) 1.37% -- --
Ratio of net investment income to
average net assets 4.88% 4.67% 4.49% 4.36%+
Portfolio turnover rate 49% 63% 48% 19%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 1.63% 1.65% 1.59% 1.61%+
</TABLE>
* Nations Municipal Income Fund Investor C Shares commenced operations on June
17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount includes distributions in excess of net investment income, which were
less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
24
<PAGE>
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAI contains more
information concerning such investments.
Bank Instruments: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. Each Fund will limit its investments in
bank obligations so they do not exceed 25% of the Fund's total assets at the
time of purchase.
U.S. dollar-denominated obligations issued by foreign branches of domestic
banks ("Eurodollar" obligations) and domestic branches of foreign banks
("Yankee dollar" obligations) 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. Pursuant to line of credit arrangements with BONY, the
Funds may borrow primarily for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities.
Fixed Income Investing: The performance of the fixed income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.
Futures, Options and Other Derivative Instruments: Each Fund may attempt to
reduce the overall level of investment risk of particular securities and
attempt to protect a Fund against adverse market movements by investing in
futures, options and other derivative instruments. These include the purchase
and writing of options on securities (including index options) and options on
foreign currencies, and investing in futures contracts for the purchase or sale
of instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and
swaps and swap-related products such as interest rate swaps, currency swaps,
caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable
position. Additional risks inherent in the use of futures, options, forward
contracts and swaps include: imperfect correlation between the price of
futures, options and forward contracts and movements in the prices of the
securities or currencies being hedged; the possible absence of a liquid
secondary market for any particular instrument at any time; and the possible
need to defer closing out certain hedged
25
<PAGE>
positions to avoid adverse tax consequences. A Fund may not purchase put and
call options which are traded on a national stock exchange in an amount
exceeding 5% of its net assets. Further information on the use of futures,
options and other derivative instruments, and the associated risks, is
contained in the SAI.
Illiquid Securities: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not hold more
than 15% of the value of their respective net assets in securities that are
illiquid. Repurchase agreements, time deposits and guaranteed investment
contracts that do not provide for payment to a Fund within seven days after
notice, and illiquid restricted securities, are subject to the limitation on
illiquid securities.
If otherwise consistent with their investment objectives and policies, the
Funds may purchase securities which are not registered under the Securities Act
of 1933, as amended (the "1933 Act") but which can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the 1933 Act, or which
were issued under Section 4(2) of the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by a Fund's Board of Trustees
or the Adviser, acting under guidelines approved and monitored by the Fund's
Board of Trustees, 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 or other buyers cease purchasing such restricted
securities pursuant to Rule 144A or otherwise, 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 their
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 the
extent a specified index is below a predetermined interest rate, 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.
Money Market Instruments: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
Municipal Securities: The two principal classifications of Municipal Securities
are "general obligation" securities and "revenue" securities. General
obligation securities are secured by the issuer's pledge of its full faith,
credit, and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by a Fund are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of private activity bonds is usu-
26
<PAGE>
ally directly related to the credit standing of the corporate user of the
facility involved.
Municipal Securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal Securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by
a Fund will be determined by NationsBank to be of comparable quality at the
time of purchase to instruments rated "high quality" by any major rating
service. Where necessary to ensure that an instrument is of comparable "high
quality," a Fund will require that an issuer's obligation to pay the principal
of the note may be backed by an unconditional bank letter or line of credit,
guarantee, or commitment to lend.
Municipal Securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases."
Generally such loans are unrated, in which case they will be determined by the
Adviser to be of comparable quality at the time of purchase to rated
instruments that may be acquired by a Fund. Frequently, privately arranged
loans have variable interest rates and may be backed by a bank letter of
credit. In other cases, they may be unsecured or may be secured by assets not
easily liquidated. Moreover, such loans in most cases are not backed by the
taxing authority of the issuers and may have limited marketability or may be
marketable only by virtue of a provision requiring repayment following demand
by the lender. Such loans made by a Fund may have a demand provision permitting
the Fund to require payment within seven days. Participations in such loans,
however, may not have such a demand provision and may not be otherwise
marketable. To the extent these securities are illiquid, they will be subject
to each Fund's limitation on investments in illiquid securities. Recovery of an
investment in any such loan that is illiquid and payable on demand may depend
on the ability of the municipal borrower to meet an obligation for full
repayment of principal and payment of accrued interest within the demand
period, normally seven days or less (unless a Fund determines that a particular
loan issue, unlike most such loans, has a readily available market). As it
deems appropriate, the Adviser will establish procedures to monitor the credit
standing of each such municipal borrower, including its ability to meet
contractual payment obligations.
Municipal Securities may include units of participation in trusts holding pools
of tax-exempt leases. Municipal participation interests may be purchased from
financial institutions, and give the purchaser an undivided interest in one or
more underlying Municipal Security. To the extent that municipal participation
interests are considered to be "illiquid securities," such instruments are
subject to each Fund's limitation on the purchase of illiquid securities.
Municipal leases and participating interests therein which may take the form of
a lease or an installment sales contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying leases are exempt from Federal
income taxes.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/ dealers with respect to Municipal Securities held in their
portfolios. Under a stand-by commitment, a dealer would agree to purchase at a
Fund's option specified Municipal Securities at a specified price. A Fund will
acquire stand-by commitments solely to facilitate portfolio liquidity and do
not intend to exercise their rights thereunder for trading purposes.
27
<PAGE>
Although the Funds do not presently intend to do so on a regular basis, each
may invest more than 25% of its total assets in Municipal Securities the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Adviser. To the extent
that more than 25% of a Fund's total assets are invested in Municipal
Securities that are payable from the revenues of similar projects, a Fund will
be subject to the peculiar risks presented by such projects to a greater extent
than it would be if its assets were not so concentrated.
Other Investment Companies: Each 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. Pursuant to an exemptive order issued by the SEC, the Nations
Funds' non-money market funds may purchase shares of Nations Funds' money
market funds.
Repurchase Agreements: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker/dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can
be liquidated on the open market. Repurchase agreements with a maturity 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 Funds.
Securities Lending: To increase return on portfolio securities, the Funds may
lend their portfolio securities to broker/dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned. There is a risk of delay in receiving collateral or
in recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Adviser to be credit worthy and when, in their
judgment, the income to be earned from the loan justifies the attendant risks.
The aggregate of all outstanding loans of a Fund may not exceed 33% of the
value of its total assets, which may include cash collateral received for
securities loans. Cash collateral received by a Nations Fund may be invested in
a Nations Funds' money market fund.
Stock Index, Interest Rate and Currency Futures Contracts: The Funds may
purchase and sell futures contracts and related options with respect to
non-U.S. stock indices, 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.
28
<PAGE>
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. U.S.
Treasury obligations differ only in their interest rates, maturities and time
of issuance. Obligations of U.S. Government agencies, authorities and
instrumentalities are issued by government-sponsored agencies and enterprises
acting under authority of Congress. Although obligations of federal agencies,
authorities and instrumentalities are not debts of the U.S. Treasury, some 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; some
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 are backed only by the
credit of the issuer itself, such as obligations of the Federal National
Mortgage Association. 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.
The market value of U.S. Government obligations may fluctuate due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
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 take
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 eight 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
29
<PAGE>
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.
CCC, CC -- An obligation rated CCC is vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse conditions, the obligor is not likely to have the
capacity to meet its financial commitments on the obligation; an
obligation rated CC is highly vulnerable to nonpayment.
To provide more detailed indications of credit quality, the AA, A, BBB and CCC
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 eight ratings used by Moody's for
corporate and municipal bonds. The first four ratings denote investment grade
securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa, Ca -- Bonds that are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest. Bonds that are rated Ca represent
obligations that are speculative in a high degree. Such issues are often
in default or have other marked shortcomings.
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
30
<PAGE>
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 -- "AAA" ratings denote the lowest expectation of credit risk. They
are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA -- "AA" ratings denote a very low expectation of credit risk. They
indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to
foreseeable events.
A -- "A" ratings denote a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher
ratings.
BBB -- "BBB" ratings indicate that there is currently a low expectation
of credit risk. The capacity for timely payment of financial commitments
is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable-rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high
quality, with ample margins of protection although not so large as in
the preceding group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
are given a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are D-1, D-2 and D-3. D&P
employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-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." D-1 indicates very high
certainty of timely payment.
31
<PAGE>
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are considered to be minor. D-1- indicates high certainty
of timely payment. Liquidity factors are strong and supported by good
fundamental protection factors. Risk factors are very small. D-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. D-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 two highest rating categories used by Fitch for
short-term obligations:
F1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in
degree than issues rated F1+.
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. Commercial paper rated A-3
exhibits adequate protection parameters. However, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation. Commercial paper
rated A-3 or B correlates with the S&P Bond rankings (described above) of BBB/
BBB- and BB+, respectively.
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 obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of senior short-term 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. Issuers rated Prime-3 have an acceptable ability for
repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt
protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
For commercial paper, D&P uses the short-term debt ratings described above.
For commercial paper, Fitch uses the short-term debt ratings described above.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the
rated instrument. The following are the 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 extremely high.
AA -- The second highest category; indicates a very strong 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.
32
<PAGE>
BBB -- The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are,
however, more vul nerable 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 likelihood that
principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and
interest in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
33
<PAGE>
Prospectus
Investor C Shares
August 1, 1998
as supplemented on
, 1998
This Prospectus describes the investment portfolios listed in the column to the
right (each a "Fund"), of Nations Fund Trust and Nations Fund, Inc., each an
open-end management investment company in the Nations Funds Family ("Nations
Funds" or "Nations Funds Family"). This Prospectus describes one class of
shares of the Funds -- Investor C Shares.
This Prospectus sets forth concisely the information about each Fund that a
prospective purchaser of Investor C Shares should consider before investing.
Investors should read this Prospectus and retain it for future reference.
Additional information about Nations Fund Trust and Nations Fund, Inc. is
contained in a separate Statement of Additional Information (the "SAI"), that
has been filed with the Securities and Exchange Commission (the "SEC") and is
available upon request without charge by writing or calling Nations Funds at
its address or telephone number shown below. The SAI for Nations Funds, dated
August 1, 1998, is incorporated by reference in its entirety into this
Prospectus. The SEC maintains a Web site (http://www.sec.gov) that contains the
SAI, material incorporated by reference in this Prospectus and other
information regarding registrants that file electronically with the SEC.
NationsBanc Advisors, Inc. ("NBAI") is the investment adviser to each of the
Funds. TradeStreet Investment Associates, Inc. ("TradeStreet") is the
investment sub-adviser to the Funds except Nations U.S. Government Bond Fund
for which Boatmen's Capital Management, Inc. ("Boatmen's") is the investment
sub-adviser. As used herein the term "Adviser" shall mean NBAI and/or
TradeStreet and/or Boatmen's as the context may require, see "How The Funds Are
Managed."
SHARES OF NATIONS FUNDS 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 SERVICES TO NATIONS FUNDS,
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 FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Nations Short-Term Income Fund
Nations Short-Intermediate Government Fund
Nations Government Securities Fund
Nations Strategic Fixed Income Fund
Nations Diversified Income Fund
Nations U.S. Government Bond Fund
For Fund information call:
1-800-321-7854
Nations Funds
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
[NATIONS FUNDS LOGO APPEARS HERE]
NF-96142-8/98
<PAGE>
Table Of Contents
About The Prospectus Summary 3
Funds -----------------------------------------------------
Expenses Summary 4
-----------------------------------------------------
Objectives 6
-----------------------------------------------------
How Objectives Are Pursued 6
-----------------------------------------------------
How Performance Is Shown 11
-----------------------------------------------------
How the Funds Are Managed 12
-----------------------------------------------------
Organization And History 15
-----------------------------------------------------
About Your How To Buy Shares 17
Investment -----------------------------------------------------
Investor C Shares -- Charges and Features 18
-----------------------------------------------------
How To Redeem Shares 20
-----------------------------------------------------
How To Exchange Shares 20
-----------------------------------------------------
Shareholder Servicing And Distribution Plans 21
-----------------------------------------------------
How The Funds Value Their Shares 23
-----------------------------------------------------
How Dividends And Distributions Are Made;
Tax Information 23
-----------------------------------------------------
Financial Highlights 24
-----------------------------------------------------
Appendix A -- Portfolio Securities 31
-----------------------------------------------------
Appendix B -- Description of Ratings 41
-----------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS, OR IN THE FUNDS' SAI INCORPORATED HEREIN
BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NATIONS FUNDS OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY NATIONS FUNDS OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Prospectus Summary
o TYPE OF COMPANIES: Open-end management investment companies.
o INVESTMENT OBJECTIVES AND POLICIES:
o Nations Short-Term Income Fund's investment objective is to seek high
current income consistent with minimal fluctuation of principal. The Fund
invests in investment grade debt securities.
o Nations Short-Intermediate Government Fund's investment objective is to seek
high current income consistent with modest fluctuation of principal. The
Fund invests primarily in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
o Nations Government Securities Fund's investment objective is to seek high
current income consistent with moderate fluctuation of principal. The Fund
invests primarily in intermediate-term securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
o Nations Strategic Fixed Income Fund's investment objective is to seek total
return by investing in investment grade fixed income securities.
o Nations Diversified Income Fund's investment objective is to seek total
return with an emphasis on current income by investing in a diversified
portfolio of fixed income securities.
o Nations U.S. Government Bond Fund's investment objective is to seek total
return and preservation of capital by investing in U.S. Government
securities and repurchase agreements collateralized by such securities.
o INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as the investment
adviser to the Funds. NBAI provides investment management services to more
than 60 investment company portfolios in the Nations Funds Family. TradeStreet
Investment Associates, Inc., an affiliate of NBAI, provides investment
sub-advisory services to certain of the Funds, and Boatmen's Capital
Management, Inc. provides investment sub-advisory services to Nations U.S.
Government Bond Fund. For more information about the investment adviser and
sub-adviser to the Nations Funds, see "How The Funds Are Managed."
o DIVIDENDS AND DISTRIBUTIONS: The Funds declare dividends daily and pay them
monthly. Each Fund's net realized capital gains, including net short-term
capital gains are distributed at least annually.
o RISK FACTORS: Although NBAI, together with the investment sub-advisers, seek
to achieve the investment objective of each Fund, there is no assurance that
they will be able to do so. Investments in a Fund are not insured against loss
of principal. Investments by a Fund in debt securities are subject to interest
rate risk, which is the risk that increases in market interest rates will
adversely affect a Fund's investments in debt securities. The value of a
Fund's investments in debt securities, including U.S. Government Obligations
(as defined below), 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 which are not issued
or guaranteed by the U.S. Government are subject to credit risk, which is the
risk that the issuer may not be able to pay principal and/or interest when
due. Certain of the Funds' investments may constitute derivative securities.
Certain types of derivative securities
3
<PAGE>
can, under particular circumstances, significantly increase an investor's
exposure to market and other risks. For a discussion of these and other
factors, see "How Objectives Are Pursued -- Risk Considerations" and
"Appendix A."
o MINIMUM PURCHASE: $1,000 minimum initial investment per record holder except
that the minimum initial investment is: $500 for Individual Retirement Account
("IRA") investors; $250 for non-working spousal IRAs; and $100 for investors
participating on a monthly basis in the Systematic Investment Plan. There is
no minimum investment amount for investments by certain 401(k) and employee
pension plans or salary reduction. See "How To Buy Shares."
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds.
The following tables summarize shareholder transaction and operating expenses
for Investor C Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
NATIONS FUNDS INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations Short-
Shareholder Nations Short- Intermediate
Transaction Term Income Government
Expenses Fund Fund
<S> <C> <C>
Sales Load Imposed on Purchases None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the
original purchase price or
redemption proceeds)1 1.00% 1.00%
Annual Fund
Operating Expenses
(as a percentage of
average net assets)
Management Fees (After Fee
Waivers) .30% .40%
Rule 12b-1 Fees (After Fee Waivers) .10% .36%
Shareholder Servicing Fees .25% .25%
Other Expenses (After Expense
Reimbursements) .26% .21%
Total Operating Expenses (After Fee
Waivers and Expense
Reimbursements) .91% 1.22%
<CAPTION>
Shareholder Nations Nations Nations Nations U.S.
Transaction Government Strategic Fixed Diversified Government
Expenses Securities Fund Income Fund Income Fund Bond Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Maximum Deferred Sales Charge (as a
percentage of the lower of the
original purchase price or
redemption proceeds)1 1.00% 1.00% 1.00% 1.00%
Annual Fund
Operating Expenses
(as a percentage of
average net assets)
Management Fees (After Fee
Waivers) .50% .50% .50% .40%
Rule 12b-1 Fees (After Fee Waivers) .60% .40% .60% .40%
Shareholder Servicing Fees .25% .25% .25% .25%
Other Expenses (After Expense
Reimbursements) .35% .20% .23% .20%
Total Operating Expenses (After Fee
Waivers and Expense
Reimbursements) 1.70% 1.35% 1.58% 1.25%
</TABLE>
(1) Investor C Shares that are purchased at net asset value are subject to a
Deferred Sales Charge if redeemed within one year of purchase.
4
<PAGE>
Examples: You would pay the following expenses on a $1,000 investment in
Investor C Shares of the indicated Fund, assuming (1) a 5% annual return and
(2) redemption at the end of each time period.
<TABLE>
<CAPTION>
Nations Short- Nations Nations
Nations Short- Intermediate Government Strategic Nations Nations U.S.
Term Income Government Securities Fixed Income Diversified Government
Fund Fund Fund Fund Income Fund Bond Fund
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 26 $ 22 $ 29 $ 24 $ 28 $ 23
3 Years $ 49 $ 39 $ 58 $ 43 $ 54 $ 40
5 Years $ 85 $ 67 $100 $ 74 $ 94 $ 69
10 Years $186 $148 $218 $163 $205 $152
</TABLE>
You would pay the following expenses on a $1,000 investment in Investor C
Shares of the indicated Fund, assuming (1) a 5% annual return and (2) no
redemption.
<TABLE>
<CAPTION>
Nations Short- Nations Nations
Nations Short- Intermediate Government Strategic Nations Nations U.S.
Term Income Government Securities Fixed Income Diversified Government
Fund Fund Fund Fund Income Fund Bond Fund
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 16 $ 12 $ 19 $ 14 $ 18 $ 13
3 Years $ 49 $ 39 $ 58 $ 43 $ 54 $ 40
5 Years $ 85 $ 67 $100 $ 74 $ 94 $ 69
10 Years $186 $148 $218 $163 $205 $152
</TABLE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor C Shares will bear either directly or indirectly. The figures
contained in the above tables are based on amounts incurred during each Fund's
most recent fiscal year and have been adjusted as necessary to reflect current
service provider fees. There is no assurance that any fee waivers and/or
reimbursements will continue. In particular, to the extent Other Expenses are
less than those shown, waivers and/or reimbursements of Management Fees, if
any, may decrease. Shareholders will be notified of any decrease that
materially increases Total Operating Expenses. If fees waivers and/or
reimbursements are decreased or discontinued, the amounts contained in the
"Examples" above may increase. Long-term shareholders of the Funds could pay
more in sales charges than the economic equivalent of the maximum front-end
sales charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. For more complete descriptions of the
Funds' operating expenses, see "How The Funds Are Managed." For a more complete
description of the Rule 12b-1 and shareholder servicing fees payable by the
Funds, see "Shareholder Servicing And Distribution Plans."
Absent fee waivers, "Management Fees," "12b-1 Fees" and "Total Operating
Expenses" for Investor C Shares of the indicated Fund would have been as
follows: Nations Short-Term Income Fund -- .60%, .75% and 1.86%, respectively;
Nations Short-Intermediate Government Fund -- .60%, .75% and 1.81%,
respectively; Nations Government Securities Fund -- .64%, .75% and 1.99%,
respectively; and Nations Diversified Income Fund -- .60%, .75% and 1.83%,
respectively.
Absent fee waivers and expense reimbursements, "Management Fees," "12b-1 Fees,"
"Other Expenses" and "Total Operating Expenses" for Investor C Shares of the
indicated Fund would have been as follows: Nations Strategic Fixed Income Fund
- -- .60%, .75%, .23% and 1.83%, respectively; and Nations U.S. Government Bond
Fund -- .60%, .75%, .26% and 1.86%, respectively.
5
<PAGE>
Effective May 1999, it is anticipated that certain voluntary total operating
expenses limits put in place in connection with the reorganization of The Pilot
Funds into the Nations Funds will terminate with respect to the following
funds: Nations Strategic Fixed Income Fund, Nations U.S. Government Bond Fund,
and Nations Short-Intermediate Government Fund. For more information, see the
SAI.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST
OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Objectives
Nations Short-Term Income Fund: Nations Short-Term Income Fund's investment
objective is to seek high current income consistent with minimal fluctuation of
principal. The Fund invests in investment grade debt securities.
Nations Short-Intermediate Government Fund: Nations Short-Intermediate
Government Fund's investment objective is to seek high current income
consistent with modest fluctuation of principal. The Fund invests primarily in
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Nations Government Securities Fund: Nations Government Securities Fund's
investment objective is to seek high current income consistent with moderate
fluctuation of principal. The Fund invests primarily in intermediate-term
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Nations Strategic Fixed Income Fund: Nations Strategic Fixed Income Fund's
investment objective is to seek total return by investing in investment grade
fixed income securities.
Nations Diversified Income Fund: Nations Diversified Income Fund's investment
objective is to seek total return with an emphasis on current income by
investing in a diversified portfolio of fixed income securities.
Nations U.S. Government Bond Fund: Nations U.S. Government Bond Fund's
investment objective is to seek total return and preservation of capital by
investing in U.S. Government securities and repurchase agreements
collateralized by such securities.
Although the Adviser will seek to achieve the investment objective of each
Fund, there is no assurance that it will be able to do so. No single Fund
should be considered, by itself, to provide a complete investment program for
any investor. Investments in the Funds are not insured against loss of
principal.
How Objectives Are Pursued
Nations Short-Term Income Fund: In pursuing its investment objective, the Fund
will, under normal market conditions, invest at least 65% of the total value of
its assets in investment grade debt obligations. It is expected that the
average dollar-weighted maturity of the Fund will not exceed five years and the
duration of the Fund's portfolio will not exceed three years.
The Fund may invest in corporate convertible and non-convertible debt
obligations, including bonds, notes and debentures rated investment grade by
one of the following nationally recognized statistical rating organizations,
Duff & Phelps Credit Rating Co. ("D&P"), Fitch IBCA ("Fitch"), Standard &
Poor's Corporation ("S&P"), Moody's Investors Service, Inc. ("Moody's"), or
Thomson BankWatch, Inc. ("BankWatch") (collectively, "NRSROs"), or, if not so
rated, determined by the Adviser to be of comparable quality to instruments so
rated; dollar-denominated debt obligations of foreign issuers, including
foreign corporations and foreign governments; and mortgage-related securities
of governmental issuers or of
6
<PAGE>
private issuers, including mortgage pass-through certificates, collateralized
mortgage obligations or "CMOs", real estate investment trust securities or
mortgage-backed bonds; other asset-backed and municipal securities rated by one
of the NRSROs, or, if not so rated, determined by the Adviser to be of
comparable quality to instruments so rated. The Fund may also invest in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Obligations").
Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. The Fund may invest up
to 25% of its assets in foreign securities.
As noted above, the Fund will invest in investment grade debt obligations.
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 invest in "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 circumstances
warrant.
Nations Short-Intermediate Government Fund: In pursuing its investment
objective, Nations Short-Intermediate Government Fund invests substantially all
of its assets in U.S. Government Obligations and repurchase agreements relating
to such obligations. Under normal market conditions, it is expected that the
average dollar-weighted maturity of the Fund's portfolio will be between three
and five years and the duration will not exceed five years. 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.
The Fund also 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 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; mortgage-related securities of
governmental issuers or of private issuers, including mortgage pass-through
certificates, CMOs, real estate investment trust securities or mortgage-backed
bonds; other asset-backed and municipal securities rated by one of the NRSROs,
or if not so rated, determined by the Adviser to be of comparable quality.
The Fund also may invest in "high quality" money market instruments, 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, prevailing market or economic circumstances
warrant.
Nations Government Securities Fund: In pursuing its investment objective,
Nations Government Securities Fund invests at least 65% of its assets in U.S.
Government Obligations. Under normal market conditions, it is expected that the
average dollar-weighted maturity of the Fund's portfolio will be between five
and 12 years and the Fund's duration is expected to be in a range of 3.5 to
eight years.
The Fund also 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 NRSROs, or if not so rated, determined by
the
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Adviser to be of comparable quality to instruments so rated; dollar-denominated
debt obligations of foreign issuers, including foreign corporations and foreign
governments; mortgage-related securities of governmental issuers or of private
issuers, including mortgage pass-through certificates, CMOs, real estate
investment trust securities or mortgage-backed bonds; other asset-backed and
municipal securities rated by one of the NRSROs, or if not so rated, determined
by the Adviser to be of comparable quality.
The Fund also may invest in "high quality" money market instruments, 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, prevailing market economic circumstances warrant.
Nations Strategic Fixed Income Fund: In pursuing its investment objective, the
Fund will, under normal market conditions, invest at least 65% of the total
value of its assets in investment grade fixed income securities. It is expected
that the average dollar-weighted maturity of the Fund's portfolio will be ten
years or less and under no circumstances will it exceed 15 years.
The 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 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; mortgage-related
securities of governmental issuers or of private issuers, including mortgage
pass-through certificates, CMOs, real estate investment trust securities or
mortgage-backed bonds; other asset-backed and municipal securities rated by one
of the NRSROs, or if not so rated, determined by the Adviser to be of
comparable quality. The Fund also may invest in dividend-paying preferred and
common stock.
Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. The Fund may invest up
to 25% of its assets in foreign securities.
The Fund will invest in investment grade debt obligations. 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 invest in "high quality" money market instruments, 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
circumstances warrant.
Nations Diversified Income Fund: In pursuing its investment objective, the Fund
will invest at least 65% of the total value of its assets in investment grade
debt obligations. It is expected that the average dollar-weighted maturity of
the Fund's portfolio will greater than five years.
The Fund may invest in corporate convertible and non-convertible debt
obligations; U.S. Government Obligations; dollar-denominated and non-
dollar-denominated debt obligations of foreign issuers, including foreign
corporations and foreign governments; mortgage-related securities of
governmental issuers or of private issuers, including mortgage pass-through
certificates, CMOs, real estate investment trust securities or mortgage-backed
bonds; other asset-backed and municipal securities rated by one of the NRSROs,
or if not so rated, determined by the Adviser to be of comparable quality.
Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. The Fund may invest up
to 25% of its assets in foreign securities.
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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." They 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.
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 "high quality" money market instruments,
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
circumstances warrant.
Nations U.S. Government Bond Fund: Under normal market conditions, the Fund
will invest at least 65% of its total assets in U.S. Government securities and
repurchase agreements collateralized by such securities. While the maturity of
individual securities will not be restricted, except during temporary defensive
periods or unusual market conditions, the average dollar-weighted maturity of
the Fund will be between five and 30 years. The Fund may invest in a variety of
U.S. Government Obligations. The Fund may also invest in interests in the
foregoing securities, including collateralized mortgage obligations issued or
guaranteed by a U.S. Government agency or instrumentality. U.S. Government
Obligations have historically had a very low risk of loss of principal if held
to maturity. The Fund, however, can give no assurance that the U.S. Government
would provide financial support to its agencies or instrumentalities if it were
not legally required to do so.
The Fund may also invest up to 35% of its total assets in debt securities of
U.S. and foreign corporate and foreign government issuers, American Depository
Receipts ("ADRs") and European Depository Receipts ("EDRs"), zero coupon bonds
and cash equivalents. The Fund will purchase only those non-government
investments which are rated investment grade or better by at least one NRSRO
or, if unrated, are determined by the Adviser to be of comparable quality. If a
portfolio security held by the Fund ceases to be rated investment grade by at
least one NRSRO or if the Adviser determines that an unrated portfolio security
held by the Fund is no longer of comparable quality to an investment grade
security, the security will be sold in an orderly manner as quickly as
possible. Additionally, the Fund may also invest in futures contracts, interest
rate swaps and options.
The value of the Fund's portfolio (and consequently its shares) is expected to
fluctuate inversely in relation to changes in the direction of interest rates.
For more information concerning these and other investments in which the Fund
may invest, see "Appendix A".
General: Each of the Funds may invest in certain specified derivative
securities, including: interest rate swaps, caps and floors for hedging
purposes; exchange-traded options; over-the-counter options executed with
primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. and foreign exchange-traded financial futures and options
thereon approved by the Commodity Futures Trading Commission (the "CFTC") for
market exposure risk-management. Each of the Funds may lend its portfolio
securities to qualified institutional investors and may invest in restricted,
private placement and other illiquid securities. Each of the Funds may engage
in reverse repurchase agreements and dollar roll
9
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transactions. Additionally, each Fund may purchase securities issued by other
investment companies, consistent with the Fund's investment objective and
policies.
The Funds also may invest in instruments issued by trusts or certain
partnerships including pass-through certificates representing participations
in, or debt instruments backed by, the securities and other assets owned by
such trusts and partnerships.
Certain securities that have variable or floating interest rates or demand, put
or prepayment features may be deemed to have remaining maturities shorter than
their nominal maturities for purposes of determining the average weighted
maturity and duration of the Funds.
Duration, as used in this Prospectus, means modified duration, which is a
measure of the expected life of fixed income securities on a present value
basis. Duration is used to estimate how much a Fund's share price will
fluctuate in response to a change in interest rates. To see how a Fund's share
price could shift, multiply the Fund's duration by the change in rates. If
interest rates rise by one percentage point, for example, the share price of a
Fund with a duration of five years would decline by about 5%. If rates decrease
by one percentage point, the Fund's share price would rise by about 5%.
Average dollar-weighted maturity is the average length of time until fixed
income securities held by a Fund reach maturity and are repaid. In general, the
longer the average dollar-weighted maturity, the more a Fund's share price will
fluctuate in response to changes in interest rates.
Although changes in the value of securities subsequent to their acquisition are
reflected in the net asset value of the Funds' shares, such changes will not
affect the income received by the Funds from such securities. However, since
available yields vary over time, no specific level of income can ever be
assured. The dividends paid by the Funds will increase or decrease in relation
to the income received by the Funds from their investments, which will in any
case be reduced by the Funds' expenses before being distributed to the Funds'
shareholders.
For more information concerning these and other instruments in which the Funds
invest and their investment practices, see "Appendix A."
Portfolio Turnover: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. If a Fund's annual portfolio turnover rate exceeds 100%, it
may result in higher brokerage costs and possible tax consequences for the Fund
and its shareholders. For the Funds' portfolio turnover rates, see "Financial
Highlights."
Risk Considerations: The value of a Fund's investments in debt securities,
including U.S. Government Obligations, 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 U.S. Government are subject to credit risk, which is the risk
that the issuer may not be able to pay principal and/or interest when due.
Investments by a Fund in common stocks and other equity securities are subject
to stock market risk. The value of the stocks that the Fund holds, like the
broader stock market, may decline over short or even extended periods.
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 particular 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."
Year 2000 Issue: Many computer programs employed throughout the world use two
digits to identify the year. Unless modified, these programs may not correctly
handle the change from "99" to "00" on January 1, 2000, and may not be able to
perform necessary functions. Any failure
10
<PAGE>
to adapt these programs in time could hamper the Funds' operations. The Funds'
principal service providers have advised the Funds that they have been actively
working on implementing necessary changes to their systems, and that they
expect that their systems will be adapted in time, although there can be no
assurance of success. Because the Year 2000 issue affects virtually all
organizations, the companies or governmental entities in which the Funds invest
could be adversely impacted by the Year 2000 issue, although the extent of such
impact cannot be predicted. To the extent the impact on a portfolio holding is
negative, a Fund's return could be adversely affected.
Investment Limitations: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAI.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry, provided that this limitation does not apply to investments in
obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities.
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. 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.
Nations U.S. Government Bond Fund may not borrow money except as a temporary
measure for extraordinary or emergency purposes or except in connection with
reverse repurchase agreements and mortgage rolls; provided that the Fund will
maintain asset coverage of 300% for all borrowings.
The investment objective and policies of each Fund, unless otherwise specified,
may be changed without shareholder approval. Shareholders of Nations U.S.
Government Bond Fund, however, must receive at least 30 days' prior written
notice in the event an investment objective is changed. If the investment
objective or policies of a Fund change, shareholders should consider whether
the Fund remains an appropriate investment in light of their current position
and needs.
How Performance Is Shown
From time to time, a Fund may advertise the "total return" and "yield" on a
class of shares. TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL DATA
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a
class of shares may be calculated on an average annual total return basis or an
aggregate total return basis. The "total return" of a class of shares refers to
the average annual compounded rates of return over one-, five-, and ten-year
periods or the life of a Fund (as stated in a Fund's advertisement) that would
equate an initial amount invested at the beginning of a stated period to the
ending redeemable value of the investment, (reflecting the deduction of any
applicable contingent deferred sales charge ("CDSC")) assuming the reinvestment
of all dividend and capital gain distributions. Aggregate total return reflects
the total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gain
distributions. Total return may also be presented for other periods or may not
reflect a deduction of any applicable CDSC.
"Yield" is calculated by dividing the annualized net investment income per
share during a recent 30-day (or one month) period of a class of shares
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of a Fund by the maximum public offering price per share on the last day of
that period. The yield on a class of shares does not reflect deduction of any
applicable CDSC.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and a Fund's operating
expenses. Investment performance also often reflects the risks associated with
such Fund's investment objective and policies. These factors should be
considered when comparing a Fund's investment results to those of other mutual
funds and other investment vehicles. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in a Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time.
In addition to Investor C Shares, the Funds offer Primary A, Primary B,
Investor A and Investor B Shares. Each class of shares may bear different sales
charges, shareholder servicing fees and other expenses, which may cause the
performance of a class to differ from the performance of the other classes.
Total return and yield quotations will be computed separately for each class of
the Funds' shares. Any fees charged by a selling agent and/or servicing agent
directly to its customers' accounts in connection with investments in a Fund
will not be included in calculations of yield and total return or yield. Any
quotation of total return or yield not reflecting CDSCs would be reduced if
such sales charges were reflected. Each Fund's annual report contains
additional performance information and is available upon request without charge
from the Funds' distributor or an investor's selling agent or by calling
Nations Funds at the toll-free number indicated on the cover of this
Prospectus.
How The Funds Are Managed
The business and affairs of each of Nations Fund Trust and Nations Fund, Inc.
are managed under the direction of its Board of Trustees and Board of
Directors, respectively. The SAI contains the names of and general background
information concerning each Trustee of Nations Fund Trust. and each Director of
Nations Fund, Inc.
As described below, each Fund is advised by NBAI which is responsible for the
overall management and supervision of the investment management of each Fund.
Each Fund also is sub-advised by a separate investment sub-adviser, which as a
general matter is responsible for the day-to-day investment decisions for the
respective Fund.
Nations Funds 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.
NationsBank Corporation, the parent company of NationsBank, has signed an
agreement to merge with BankAmerica Corporation. The proposed merger is subject
to certain regulatory approvals and must be approved by shareholders of both
holding companies. The merger is expected to close in the second half of 1998.
NationsBank and NBAI have advised the Funds that the merger will not reduce the
level or quality of advisory and other services provided to the Funds.
Investment Adviser: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as investment
sub-adviser to all of the Funds except Nations U.S. Government Bond Fund.
TradeStreet is a wholly owned subsidiary of NationsBank. TradeStreet provides
investment management services to individuals, corporations and institutions.
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<PAGE>
Boatmen's Capital Management, Inc. serves as investment sub-adviser to Nations
U.S. Government Bond Fund. Its principal offices are located at 100 North
Broadway, St. Louis, Missouri 63102. Boatmen's is a wholly owned subsidiary of
NationsBank.
Subject to the general supervision of Nations Fund Trust's Board of Trustees
and Nations Fund, Inc.'s Board of Directors, and in accordance with the Funds'
investment policies, the Adviser formulates guidelines and lists of approved
investments for each Fund, makes decisions with respect to and places orders
for each Fund's purchases and sales of portfolio securities and maintains
records relating to such purchases and sales. The Adviser is authorized to
allocate purchase and sale orders for portfolio securities to certain financial
institutions, including, in the case of agency transactions, financial
institutions which are affiliated with the Adviser or which have sold shares of
a Fund, if the Adviser believes that the quality of the transaction and the
commission are comparable to what they would be with other qualified brokerage
firms. From time to time, to the extent consistent with its investment
objective, policies and restrictions, each Fund may invest in securities of
companies with which NationsBank has a lending relationship.
For the services provided and expenses assumed pursuant to the investment
advisory agreement, NBAI is entitled to receive advisory fees, computed daily
and paid monthly, at the annual rate of .60% of the average daily net assets of
each of Nations Short-Term Income Fund, Nations Diversified Income Fund,
Nations Strategic Fixed Income Fund, Nations Short-Intermediate Government Fund
and Nations U.S. Government Bond Fund; and .65% of the first $100 million of
the Nations Government Securities Fund's average daily net assets, plus .55% of
the Fund's average daily net assets in excess of $100 million and up to $250
million, plus .50% of the Fund's average daily net assets in excess of $250
million.
For the services provided pursuant to investment sub-advisory agreements, NBAI
will pay TradeStreet sub-advisory fees, computed daily and paid monthly, at the
annual rate of .15% of Nations Short-Term Income Fund's, Nations
Short-Intermediate Government Fund's, Nations Government Securities Fund's,
Nations Strategic Fixed Income Fund's and Nations Diversified Income Fund's
average daily net assets.
NBAI will pay Boatmen's sub-advisory fees at the rate of .15% of the average
net assets of Nations U.S. Government Bond Fund.
From time to time, NBAI and/or TradeStreet and/or Boatmen's may waive or
reimburse (either voluntarily or pursuant to applicable state limitations)
advisory fees and/or expenses payable by a Fund.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid NBAI under the investment advisory agreement, advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Short-Intermediate Government Fund --.40%, Nations Short-Term Income
Fund -- .30%, Nations Diversified Income Fund -- .50% and Nations Strategic
Fixed Income Fund -- .48%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund, Inc. paid NBAI under the investment advisory agreement, advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Government Securities Fund -- .50% and Nations U.S. Government Bond
Fund -- .33%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers, NBAI
paid TradeStreet under the investment sub-advisory agreements, sub-advisory fees
at the indicated rates of the following Funds' average daily net assets: Nations
Short-Intermediate Government Fund -- .15%, Nations Short-Term Income Fund --
.15%, Nations Diversified Income Fund -- .15% and Nations Strategic Fixed Income
Fund -- .15% and Nations Government Securities Fund -- .15%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers, NBAI
paid Boatmen's under the investment sub-advisory agreement, sub-advisory fees
at the rate of .15% of Nations U.S. Government Bond Fund's average daily
assets.
The Fixed Income Management Team of TradeStreet is responsible for the
day-to-day management of Nations Short-Intermediate Government Fund, Nations
Government Securities Fund, Nations Short--
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Term Income Fund, Nations Diversified Income Fund and Nations Strategic Fixed
Income Fund.
The Fixed Income Committee of Boatmen's is responsible for the day-to-day
management of Nations U.S. Government Bond Fund.
Morrison & Foerster LLP, counsel to Nations Funds and special counsel to
NationsBank, has advised Nations Funds and NationsBank that NationsBank and its
affiliates may perform the services contemplated by the investment advisory
agreements and this Prospectus without violation of the Glass-Steagall Act.
Such counsel has pointed out, however, that there are no controlling judicial
or administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into 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 Funds 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.
First Data Investor Services Group, Inc. ("First Data"), a wholly owned
subsidiary of First Data Corporation, with principal offices at One Exchange
Place, Boston, Massachusetts 02109, serves as the co-administrator of the Funds
pursuant to co-administration agreements. Under the terms of the
co-administration agreements, First Data provides various administrative and
accounting services to the Funds, including performing the calculations
necessary to determine net asset values and dividends, preparing tax returns
and financial statements, maintaining the portfolio records and certain general
accounting records for the Funds.
For the services rendered pursuant to the administration and co-administration
agreements, Stephens and First Data are entitled to receive a combined fee at
the annual rate of up to .10% of each Fund's average daily net assets.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid its administrators combined fees at the indicated rates
of the following Funds' average daily net assets: Nations Short-Intermediate
Government Fund -- .10%, Nations Short-Term Income Fund -- .10%, Nations
Diversified Income Fund -- .10%, Nations Strategic Fixed Income Fund -- .10%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund, Inc. paid its administrators combined fees at the indicated rates
of the following Fund's average daily net assets: Nations Government Securities
Fund -- .10% and Nations U.S. Government Bond Fund -- .10%.
NBAI serves as sub-administrator for the Funds pursuant to a sub-administration
agreement. Pursuant to the terms of the sub-administration agreement, NBAI
assists Stephens in supervising, coordinating and monitoring various aspects of
the Funds' administrative operations. For providing such services, NBAI 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. Nations Funds
has entered into a distribution agreement with Stephens which provides that
Stephens has the exclusive right to distribute shares of the Funds. Stephens
may pay service fees or commissions to selling agents that assist customers in
purchasing Investor C Shares. See "Shareholder Servicing And Distribution
Plans."
The Bank of New York ("BONY" or the "Custodian"), located at 90 Washington
Street, New York, New York 10286, provides cutodial services for the
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assets of each Fund. In return for providing custodial services to the Nations
Funds Family, BONY is entitled to receive, in addition to out-of-pocket
expenses, fees at the rate of (i) 3/4 of one basis point per annum, on the
aggregate net assets of all Nations Funds' non-money market funds up to $10
billion; and (ii) 1/2 of one basis point on the excess, including all Nations
Funds' money market funds.
First Data serves as transfer agent (the "Transfer Agent") for the Funds'
Investor C Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
PricewaterhouseCoopers LLP serves as independent accountant to Nations Funds.
Their address is 160 Federal Street, Boston, Massachuetts 02110.
Expenses: The accrued expenses of each Fund are deducted from the Funds'
accrued income before dividends are declared. These expenses include, but are
not limited to: fees paid to the Adviser, Stephens and First Data; interest;
fees (including fees paid to Nations Funds' Directors, Trustees and officers);
federal and state securities registration and qualification fees; brokerage
fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings;
other expenses which are not expressly assumed by the Adviser, Stephens or
First Data under their respective agreements with Nations Funds; and any
extraordinary expenses. Investor C Shares may bear certain class specific
expenses and also bear certain additional shareholder service and sales support
costs. Any general expenses of Nations Fund Trust and/or Nations Fund, Inc.
that are not readily identifiable as belonging to a particular investment
portfolio are allocated among all portfolios in the proportion that the assets
of a portfolio bear to the assets of Nations Fund Trust and Nations Fund, Inc.
or in such other manner as the Board of Trustees or Board of Directors deems
appropriate.
Organization And History
The Funds are members of the Nations Funds Family, which consists of Nations
Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc., Nations
Institutional Reserves, Nations Annuity Trust and Nations LifeGoal Funds, Inc.
The Nations Funds Family currently has more than 60 distinct investment
portfolios and total assets in excess of $40 billion.
Nations Fund Trust: Nations Fund Trust was organized as a Massachusetts
business trust on May 6, 1985. Nations Fund Trust's fiscal year end is March
31; prior to 1996, Nations Fund Trust's fiscal year end was November 30. The
Funds currently offer five classes of shares -- Investor A, Investor B,
Investor C, Primary A and Primary B Shares. This Prospectus relates only to the
Investor C Shares of the following Funds of Nations Fund Trust: Nations
Short-Term Income Fund, Nations Diversified Income Fund, Nations Strategic
Fixed Income Fund and Nations Short-Intermediate Government Fund. To obtain
additional information regarding the Funds' other classes of shares which may
be available to you, contact your Selling Agent (as defined below) or Nations
Funds at 1-800-321-7854.
Each share is without par value, represents an equal proportionate interest in
the related fund with other shares of the same class, and is entitled to such
dividends and distributions out of the income earned on the assets belonging to
such fund as are declared in the discretion of Nations Fund Trust's Board of
Trustees. Nations Fund Trust's Declaration of Trust authorizes the Board of
Trustees to classify or reclassify any class of shares into one or more series
of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of
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shareholders of a particular fund or class. See the SAI for examples of when
the 1940 Act requires voting by fund.
As of August 1, 1998, 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 the SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders
entitled to vote at least 10% of the outstanding shares of Nations Fund Trust
entitled to be voted at such meeting.
Nations Fund, Inc.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. Nations Fund,
Inc.'s fiscal year end is March 31; prior to 1996, Nations Fund, Inc.'s fiscal
year end was May 31. As of the date of this Prospectus, the authorized capital
stock of Nations Fund, Inc. consists of 460,000,000,000 shares of common stock,
par value of $.001 per share, which are divided into series or funds each of
which consists of separate classes of shares. This Prospectus relates only to
the Investor C Shares of the following Funds of Nations Fund, Inc.: Nations
Government Securities Fund and Nations U.S. Government Bond Fund. To obtain
additional information regarding the Fund's other classes of shares which may
be available to you, contact your Selling Agent (as defined below) or Nations
Funds at 1-800-321-7854.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the
exclusive right to vote on matters affecting only the rights of the holders of
such fund or class. In the event of dissolution or liquidation, holders of each
class will receive pro rata, subject to the rights of creditors, (a) the
proceeds of the sale of that portion of the assets allocated to that class held
in the respective fund of Nations Fund, Inc., less (b) the liabilities of
Nations Fund, Inc. attributable to the respective fund or class or allocated
among the funds or classes based on the respective liquidation value of each
fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Fund, Inc.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s
shares. Nations Fund, Inc.'s shares, when issued, will be fully paid and
non-assessable.
As of August 1, 1998, 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 the SAI. It is anticipated that Nations Fund, Inc. will
not hold annual shareholder meetings on a regular basis unless required by the
1940 Act or Maryland law.
Because this Prospectus combines disclosure on two separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning another investment company. Nations Fund Trust and
Nations Fund, Inc. have entered into an indemnification agreement that creates
a right of indemnification from the investment company responsible for any such
misstatement, inaccuracy or incomplete disclosure that may appear in this
Prospectus.
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About Your Investment
How To Buy Shares
This Prospectus offers one class of shares to the general public. Investor C
Shares are sold without an initial sales charge and are subject to a CDSC upon
certain redemptions. Contact your Agent or Nations Funds at 1-800-321-7854 for
more information.
The Funds have established various procedures for purchasing Investor C Shares
in order to accommodate different investors. Purchase orders for Investor C
Shares may be placed through banks, broker/dealers or other financial
institutions (including certain affiliates of NationsBank) that have entered
into a servicing agreement ("Servicing Agreement") with NationsBank ("Servicing
Agents") and/or a sales support agreement ("Sales Support Agreement") with
Stephens ("Selling Agents").
The Funds reserve the right, in their discretion, to make Investor C Shares
available to other categories of investors, including those who become eligible
in connection with a merger or reorganization.
There is a minimum initial investment of $1,000 in the Funds, except that the
minimum initial investment is:
o $500 for IRA investors;
o $250 for non-working spousal IRAs; and
o $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.
There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified
employee pension plans ("SAR-SEPs"), Savings Incentives Method Plans for
Employees ("SIMPLE IRAs"), salary reduction-Individual Retirement Accounts
("SAR-IRAs"), or similar types of accounts. However, the assets of such plans
must reach an asset value of $1,000 ($500 for SEPs, SAR-SEPs, SIMPLE IRAs and
SAR-IRAs) within one year of the account open date. If the assets of such plans
do not reach the minimum asset size within one year, Nations Funds reserves the
right to redeem the shares held by such plans on 60 days' written notice. The
minimum subsequent investment is $100, except for investments pursuant to the
Systematic Investment Plan described below.
Investor C Shares are purchased at net asset value per share without the
imposition of a sales charge, but are subject to a CDSC if redeemed within one
year after purchase. Purchases may be effected on days on which the New York
Stock Exchange (the "Exchange") is open for business (a "Business Day").
The Servicing Agents will provide various shareholder services for, and the
Selling Agents will provide sales support assistance to, their respective
customers ("Customers") who own Investor C Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Funds may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.
Nations Funds and Stephens reserve the right to reject any purchase order. The
issuance of Investor C Shares is recorded on the books of the Funds, and share
certificates are not issued unless expressly requested in writing. Certificates
are not issued for fractional shares.
Effective Time of Purchases: Purchase orders for Investor C Shares in the Funds
which are received by Stephens, the Transfer Agent or their respective agents
before the close of regular trading 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. In the event that the Exchange closes early, purchase
orders received prior to closing will be priced as of the time the Exchange
closes and purchase orders received after the Exchange closes will be deemed
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received on the next Business Day and priced according to the net asset value
determined on the next Business Day. Purchase orders are not executed until
4:00 p.m., Eastern time, on the Business Day on which immediately available
funds in payment of the purchase price are received by the Funds' Custodian.
Such payment must be received no later than 4:00 p.m., Eastern time, by the
third Business Day following the receipt of the order, as determined above. If
funds are not received by such date, the order will not be accepted and notice
thereof will be given to the Agent placing the order. Payment for orders which
are not received or accepted will be returned after prompt inquiry to the
sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor C
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Funds.
Systematic Investment Plan: Under the Funds' Systematic Investment Plan
("SIP"), a shareholder may automatically purchase Investor C Shares. On a
bi-monthly, monthly or quarterly basis, a shareholder may direct cash to be
transferred automatically from his/her checking or savings account at any bank
which is a member of the Automated Clearing House to his/her Fund account.
Transfers will occur on or about the 15th and/or the last day of the applicable
month. Subject to certain exceptions for employees of NationsBank and its
affiliates and pre-existing SIP accounts, the systematic investment amount may
be in any amount from $50 to $100,000. For more information concerning the SIP,
contact your Agent.
Telephone Transactions: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How To Redeem Shares" and "How To
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. Shareholders should be aware that by using the telephone transaction
feature, such shareholders may be giving up a measure of security that they may
have if they were to authorize written requests only. A shareholder may bear
the risk of any resulting losses from a telephone transaction. Nations Funds
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if Nations Funds and its service providers fail to
employ such measures, they may be liable for any losses due to unauthorized or
fraudulent instructions. Nations Funds requires a form of personal
identification prior to acting upon instructions received by telephone and
provides written confirmation to shareholders of each telephone share
transaction. In addition, Nations Funds reserves the right to record all
telephone conversations. Shareholders should be aware that during periods of
significant economic or market change, telephone transactions may be difficult
to complete.
Investor C Shares -- Charges and Features
Investor C Contingent Deferred Sales Charge:
Subject to certain waivers, Investor C shares of Nations Short-Term Income
Fund, Nations Short-Intermediate Government Fund, Nations Government Securities
Fund, Nations Strategic Fixed Income Fund, Nations Diversified Income Fund and
Nations U.S. Government Bond Fund that are redeemed within one year of the date
of purchase will be subject to a CDSC equal to 1.00% of the lesser of the net
asset value or the purchase price of the shares being redeemed. No CDSC is
imposed on increases in net asset value above the initial purchase price,
including shares acquired by reinvestment of distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor C Shares, all purchases during a month will be
aggregated and deemed to have been made on the last day of the month. In
determining whether a CDSC is applicable to a redemption, the calculation will
be made in the manner that results in the lowest possible charge being
assessed. In this regard, it will be assumed that the redemption is
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first of shares held for the longest period of time or shares acquired pursuant
to reinvestment of dividends or distributions. The charge will not be applied
to dollar amounts representing an increase in the net asset value since the
time of purchase.
The CDSC will be waived on redemptions of Investor C Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as
amended (the "Code")) of a shareholder (including a registered joint owner),
(ii) in connection with the following retirement plan distributions: (a) lump-
sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or in the case of a "key employee" of a
"top heavy" plan, following attainment of age 59 1/2); (b) distributions from
an IRA, or Custodial Account under Section 403(b)(7) of the Code, following
attainment of age 59 1/2; (c) a tax-free return of an excess contribution to an
IRA; and (d) distributions from a qualified retirement plan that are not
subject to the 10% additional Federal withdrawal tax pursuant to Section
72(t)(2) of the Code, (iii) payments made to pay medical expenses which exceed
7.5% of income and distributions to pay for insurance by an individual who has
separated from employment and who has received unemployment compensation under
a federal or state program for at least 12 weeks, (iv) effected pursuant to
Nations Funds' right to liquidate a shareholder's account, including instances
where the aggregate net asset value of the Investor C shares held in the
account is less than the minimum account size, (v) effected pursuant to the
Automatic Withdrawal Plan discussed below, provided that such redemptions do
not exceed, on an annual basis, 12% of the net asset value of the Investor C
Shares in the account, and (vi) in connection with the combination of Nations
Funds with any other registered investment company by a merger, acquisition of
assets or by any other transaction. In addition, the CDSC will be waived on
Investor C Shares purchased before September 30, 1994 by current or retired
employees of NationsBank and its affiliates or by current or former Trustees or
Directors of Nations Funds or other management companies managed by
NationsBank. Shareholders are responsible for providing evidence sufficient to
establish that they are eligible for any waiver of the CDSC.
Reinstatement Privilege: Within 120 days after a redemption of Investor C Shares
of the Fund, a shareholder may reinvest any portion of the proceeds of such
redemption in Investor C Shares of the Fund. The amount which may be so
reinvested is limited to an amount up to, but not exceeding, the redemption
proceeds (or to the nearest full share if fractional shares are not purchased).
A shareholder exercising this privilege would receive a pro rata credit for any
CDSC paid in connection with the prior redemption. A shareholder may not
exercise this privilege with the proceeds of a redemption of shares previously
purchased through the reinvestment privilege. In order to exercise this
privilege, a written order for the purchase of Investor C Shares must be
received by the Transfer Agent or by Stephens within 120 days after the
redemption.
Automatic Withdrawal Plan: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Fund if the value of the
Investor C Shares in his/her accounts within the Nations Funds Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor C Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis 12% of
the net value of the Investor C Shares in the account. Otherwise, any applicable
CDSC will be imposed on shares redeemed under the AWP. Shareholders who elect to
establish an AWP may receive a monthly, quarterly or annual check or automatic
transfer to a checking or savings account in a stated amount of not less than
$25 on or about the 10th or 25th day of the applicable month of withdrawal.
Investor C Shares will be redeemed (net of any applicable CDSC) as necessary to
meet withdrawal payments. Withdrawals will reduce principal and may eventually
deplete the shareholder's account. If a shareholder desires to establish an AWP
after opening an account, a signature guarantee will be required. An AWP may be
terminated by a shareholder on 30 days' written notice to his/her Agent or by
Nations Funds at any time.
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How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders for
Investor C Shares of the Funds which are received by Stephens, the Transfer
Agent or their respective agents before the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on any Business Day are priced
according to the net asset value next determined after acceptance of the order.
In the event that the Exchange closes early, redemption orders received prior
to closing will be priced as of the time the Exchange closes and redemption
orders received after the Exchange closes will be deemed received on the next
Business Day and priced according to the net asset value determined on the next
Business Day. Redemption orders are effected at the net asset value per share
next determined after receipt of the order by Stephens the Transfer Agent, or
their respective agents, less any applicable CDSC. The Agents are responsible
for transmitting redemption orders to Stephens or to the Transfer Agent or
their respective agents and for crediting their Customers' accounts with the
redemption proceeds on a timely basis. No charge for wiring redemption payments
is imposed by Nations Funds. There is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens or by the Transfer Agent
or their respective agents. However, redemption proceeds for shares purchased
by check may not be remitted until at least 15 days after the date of purchase
to ensure that the check has cleared; a certified check, however, is deemed to
be cleared immediately.
Nations Funds may redeem a shareholder's Investor C Shares upon 60 days'
written notice if the balance in the shareholder's account drops below $500 as
a result of redemptions. Share balances also may be redeemed at the direction
of an Agent pursuant to arrangements between the Agent and its Customers.
Nations Funds also may redeem shares of a Fund involuntarily or make payment
for redemption in readily marketable securities or other property under certain
circumstances in accordance with the 1940 Act.
Prior to effecting a redemption of Investor C Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock
exchange, unless other arrangements satisfactory to Nations Funds have
previously been made. Nations Funds may require any additional information
reasonably necessary to evidence that a redemption has been duly authorized.
How To Exchange Shares
The exchange feature enables a shareholder of Investor C Shares of a Nations
Funds non-money market fund to acquire shares of the same class that are
offered by another non-money market fund of Nations Funds (other than an index
fund) or Daily Shares of any Nations Funds money market fund when he or she
believes that a shift between funds is an appropriate investment decision. A
qualifying exchange is based on the next calculated net asset value per share
of each fund after the exchange order is received.
If a shareholder acquires Investor C Shares of a non-money market fund through
an exchange, the CDSC applicable to that current fund will be applied to any
redemption of the acquired Shares. However, if a shareholder acquires Daily
Shares of a money market fund through an exchange of Investor C Shares, the
CDSC applicable to the exchanged Investor C Shares will be applied on any
redemption of the acquired Daily Shares. Notwithstanding the foregoing, if a
shareholder redeems shares acquired through an exchange, the shareholder will
be subject to the highest CDSC applicable to any
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shares that were exchanged within the 30 days prior to the redemption.
The Funds and each of the other funds of Nations Funds may limit the number of
times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Funds upon such notice as may be required by
applicable regulatory agencies (presently 60 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 describes its investment objective and
policies, and shareholders should obtain a copy and examine it carefully before
investing. Exchanges are subject to the minimum investment requirement and any
other conditions imposed by each fund. In the case of any shareholder holding a
share certificate or certificates, no exchanges may be made until all
applicable share certificates have been received by the Transfer Agent and
deposited in the shareholder's account. An exchange will be treated for Federal
income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
Nations Funds and Stephens reserve 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.
The Investor C Shares exchanged must have a current value of at least $1,000
(except for exchanges through the Automatic Exchange Feature, which is
described below). Nations Funds and Stephens reserve the right to reject any
exchange request. Only shares that may legally be sold in the state of the
investor's residence may be acquired in an exchange. Only shares of a class
that is accepting investments generally may be acquired in an exchange. An
investor may telephone an exchange request by calling his/her Selling or
Servicing Agent which is responsible for transmitting such request to Stephens
or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges
may be difficult to complete. In such event, shares may be exchanged by mailing
the request directly to the Selling or Servicing Agent through which the
original shares were purchased. An investor should consult his/ her Selling or
Servicing Agent or Stephens for further information regarding exchanges.
Automatic Exchange Feature: Under the Funds' Automatic Exchange Feature ("AEF")
a shareholder may automatically exchange at least $25 on a monthly or quarterly
basis. A shareholder may direct proceeds to be exchanged from one fund of
Nations Funds to another as allowed by the applicable exchange rules within the
prospectus. Exchanges will occur on or about the 15th or the last day of the
applicable month. The shareholder must have an existing position in both Funds
in order to establish the AEF. This feature may be established by directing a
request to the Transfer Agent by telephone or in writing. For additional
information, an investor should contact his/her Selling Agent or Nations Funds.
Shareholder Servicing And Distribution Plans
Pursuant to Rule 12b-1 under the 1940 Act, the Trustees have approved a
Distribution Plan with respect to the Investor C Shares of each Fund. Pursuant
to the Distribution Plan, each Fund may compensate or reimburse Stephens for
any activities or expenses primarily intended to result in the sale of the
Fund's Investor C Shares. Payments under the Distribution Plan will be
calculated daily and paid monthly at a rate or rates set from time to time by
the Trustees provided that the annual rate may not exceed .75% of the average
daily net asset value of each Fund's Investor C Shares.
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The fees payable under the Distribution Plan are used (i) to compensate Selling
Agents for providing sales support assistance relating to Investor
C Shares, (ii) to pay for promotional activities intended to result in the sale
of Investor C Shares such as the preparation, printing and distribution of
prospectuses to other than current shareholders, and (iii) to compensate
Selling Agents for providing sales support services with respect to their
Customers who are, from time to time, beneficial and record holders of Investor
C Shares. Currently, substantially all fees paid pursuant to the Distribution
Plan are paid to compensate Selling Agents for providing the services described
in (i) and (iii) above, with any remaining amounts being used by Stephens to
partially defray other expenses incurred by Stephens in distributing Investor C
Shares. Fees received by Stephens pursuant to the Distribution Plan will not be
used to pay any interest expenses, carrying charges or other financing costs
(except to the extent permitted by the SEC) and will not be used to pay any
general and administrative expenses of Stephens.
Nations Funds and Stephens may suspend or reduce payments under the
Distribution Plan at any time, and payments are subject to the continuation of
the Distribution Plan described above and the terms of the Sales Support
Agreement between Selling Agents and Stephens. See the SAI for more details on
the Distribution Plan.
The Trustees and Directors also have approved a shareholder servicing plan
("Investor C Servicing Plan") for each Fund which permits the Funds to
compensate Servicing Agents for services provided to their Customers that own
Investor C Shares. Payments under the Investor C Servicing Plan are calculated
daily and paid monthly at a rate or rates set from time to time by the Funds,
provided that the annual rate may not exceed .25% of the average daily net
asset value of the Investor C Shares.
The fees payable under the Investor C Servicing Plan are used primarily to
compensate or reimburse Servicing Agents for shareholder services provided, and
related expenses incurred, by such Servicing Agents. The shareholder services
provided by Servicing Agents may include: (i) aggregating and processing
purchase and redemption requests for Investor C Shares from Customers and
transmitting net purchase and redemption orders to Stephens or the Transfer
Agent; (ii) providing Customers with a service that invests the assets of their
accounts in Investor C Shares pursuant to specific or preauthorized
instructions; (iii) processing dividend and distribution payments from a Fund
on behalf of Customers; (iv) providing information periodically to Customers
showing their positions in Investor C Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services.
Nations Funds may suspend or reduce payments under the Investor C Servicing
Plan at any time, and payments are subject to the continuation of the Investor
C Servicing Plan described above and the terms of the Servicing Agreements. See
the SAI for more details on the Investor C Servicing Plan.
Nations Funds understands that Agents may charge fees to their Customers who
are the owners of Investor Shares for various services provided in connection
with a Customer's account. These fees would be in addition to any amounts
received by a Selling Agent under its Sales Support Agreement with Stephens or
by a Servicing Agent under its Servicing Agreement with Nations Funds. The
Sales Support Agreements and Servicing Agreements require Agents to disclose to
their Customers any compensation payable to the Agent by Stephens or Nations
Funds and any other compensation payable by the Customers for various services
provided in connection with their accounts. Customers should read this
Prospectus in light of the terms governing their accounts with their Agents.
The Adviser may also pay out of its own assets amounts to Stephens or other
broker/dealers in connection with the provision of administrative and/or
distribution related services to shareholders.
In addition, Stephens may, from time to time, at its expense or as an expense
for which it may be reimbursed under the Distribution Plan, pay a bonus or
other consideration or incentive to Agents who sell a minimum dollar amount of
shares of a Fund during a specified period of time. Stephens may also, from
time to time, pay additional consideration to Agents not to exceed .75% of the
offering price per share on all sales of Investor C Shares
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as an expense of Stephens or for which Stephens may be reimbursed under the
plan adopted pursuant to Rule 12b-1 or upon receipt of a CDSC. Any such
additional consideration or incentive program may be terminated at any time by
Stephens.
Stephens has also established a non-cash compensation program pursuant to which
broker/dealers or financial institutions that sell shares of the Funds may earn
additional compensation in the form of trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift certificates for
meals or merchandise. This non-cash compensation program may be amended or
terminated at any time by Stephens.
How The Funds Value Their Shares
The Funds calculate the net asset value of a share of each class by dividing
the total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares of the Funds are valued as of the close of regular
trading on the Exchange (currently 4:00 p.m., Eastern time) on each Business
Day. In the event that the Exchange closes early, shares of the Funds will be
priced as of the time the Exchange closes. Currently, the days on which the
Exchange is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities for which market quotations are readily available are
valued at market value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following procedures
approved by the Trustees or Directors.
How Dividends And Distributions Are Made; Tax Information
Dividends and Distributions: Dividends from net investment income are declared
daily and paid monthly by the Funds. The Funds' net realized capital gains
(including net short-term capital gains) are distributed at least annually.
Distributions from capital gains are made after applying any available capital
loss carryovers. Distributions paid by the Funds with respect to one class of
shares may be greater or less than those paid with respect to another class of
shares due to the different expenses of the different classes.
Shares of the 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.
The net asset value of Investor C Shares will be reduced by the amount of any
dividend or distribution. Accordingly, dividends and distributions on newly
purchased shares represent, in substance, a return of capital. However, such
dividends and distributions would nevertheless be taxable. Certain Selling and
Servicing Agents may provide for the reinvestment of dividends in the form of
additional Investor Shares of the same class in the same Fund. Dividends and
distributions are paid in cash within five Business Days of the end of the
month to which the payment relates. Dividends and distributions payable to a
shareholder are paid in cash within five Business Days after a shareholder's
complete redemption of his/her Investor C Shares.
Tax Information: Each Fund intends to continue to qualify as a "regulated
investment company" under the Code. Such qualification relieves a Fund of
liability for Federal income tax on amounts distributed in accordance with the
Code.
23
<PAGE>
The Funds intend to distribute substantially all of their net investment income
each taxable year. Distributions by a Fund of its net investment income
(including net foreign currency gains) and the excess, if any, of its net
short-term capital gain over its net long-term capital loss generally are
taxable as ordinary income to shareholders, whether such income is received in
cash or reinvested in additional shares. Corporate investors generally will not
be entitled to the dividends-received deduction on dividends paid by the Funds.
Substantially all of the Funds' net realized long-term capital gains will be
distributed at least annually. The Funds will generally have no tax liability
with respect to such gains, and the distributions generally will be taxable to
shareholders as net capital gain, regardless of how long the shareholders have
held the Funds' shares and whether such distributions are received in cash or
reinvested in additional shares. Noncorporate shareholders may be taxed on such
distributions at preferential rates.
Each year, shareholders will be notified as to the amount and Federal tax
status of all dividends and capital gain distributions paid during the prior
year. Such dividends and capital gain distributions may be subject to state and
local taxes.
Dividends and distributions declared in October, November, or December of any
year payable to shareholders of record on a specified date in such months will
be deemed to have been received by shareholders and paid by the Funds on
December 31 of such year in the event such dividends and distributions are
actually paid during January of the following year.
Federal law requires Nations Funds to withhold 31% from any distributions paid
by Nations Funds and/or redemptions (including exchanges and redemptions
in-kind) that occur in certain shareholder accounts if the shareholder has not
properly furnished a certified correct Taxpayer Identification Number and has
not certified that withholding does not apply, or if the Internal Revenue
Service has notified Nations Funds that the Taxpayer Identification Number
listed on a shareholder account is incorrect according to its records, or that
the shareholder is subject to backup withholding. Amounts withheld are applied
to the shareholder's Federal tax liability, and a refund may be obtained from
the Internal Revenue Service if withholding results in overpayment of taxes.
Federal law also requires the Funds to withold tax on dividends paid to certain
foreign shareholders.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisors with respect to their specific tax
situations as well as with respect to foreign, state and local taxes. Further
tax information is contained in the SAI.
Financial Highlights
The following financial information has been derived from the audited financial
statements of Nations Fund Trust and Nations Fund, Inc. PricewaterhouseCoopers
LLP is the independent accountant to Nations Fund Trust and Nations Fund, Inc.
The reports of PricewaterhouseCoopers LLP for the most recent fiscal period of
Nations Fund Trust and Nations Fund, Inc. accompany the financial statements
for such period and are incorporated by reference in the SAI, which is
available upon request. For more information see "Organization And History."
Shareholders of a Fund will receive unaudited semi-annual reports describing
the Fund's investment operations and financial statements audited by the Funds'
independent accountant.
24
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Short-Term Income Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98 03/31/97#
<S> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 9.68 $ 9.76
Net investment income 0.53 0.55
Net realized and
unrealized gain/(loss)
on investments 0.09 (0.08)
Net increase/(decrease) in
net asset value from
operations 0.62 $ 0.47
Distributions:
Dividends from net
investment income (0.53) (0.55)
Distributions in excess of
net investment income -- --
Distributions from capital -- --
Total dividends and
distributions (0.53) (0.55)
Net asset value, end of
period $ 9.77 $ 9.68
Total return++ 6.51% 4.89%
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $2,992 $4,063
Ratio of operating
expenses to average net
assets 0.91%(b)(c) 0.90%(b)
Ratio of net investment
income to average net
assets 5.40% 5.62%
Portfolio turnover rate 66% 172%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.21%(c) 1.20%
<CAPTION>
PERIOD YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/96(a)# 11/30/95# 11/30/94# 11/30/93 11/30/92*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 9.84 $ 9.48 $ 10.01 $ 9.75 $ 10.00
Net investment income 0.19 0.57 0.46 0.48 0.08
Net realized and
unrealized gain/(loss)
on investments (0.08) 0.36 ( 0.51) 0.26 ( 0.26)
Net increase/(decrease) in
net asset value from
operations 0.11 0.93 ( 0.05) 0.74 ( 0.18)
Distributions:
Dividends from net
investment income (0.19) (0.57) ( 0.44) ( 0.48) ( 0.07)
Distributions in excess of
net investment income -- -- ( 0.02) -- --
Distributions from capital -- -- ( 0.02) -- --
Total dividends and
distributions (0.19) (0.57) ( 0.48) ( 0.48) ( 0.07)
Net asset value, end of
period $ 9.76 $ 9.84 $ 9.48 $ 10.01 $ 9.75
Total return++ 1.07% 10.08% ( 0.51)% 7.73% ( 1.82)%+++
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $6,121 $6,056 $8,102 $19,851 $6,747
Ratio of operating
expenses to average net
assets 0.90%+ 0.91% 0.89% 0.87% 0.80%+
Ratio of net investment
income to average net
assets 5.72%+ 5.97% 4.84% 4.77% 5.04%+
Portfolio turnover rate 73% 224% 293% 121% 45%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.23%+ 1.21% 1.21% 1.29% 1.40%+
</TABLE>
* Nations Short-Term Income Fund Investor C Shares commenced operations on
October 2, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share net investment income has been calculated using the monthly
average share method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) The effect of interest expense on the operating expense ratio was less than
0.01%.
(c) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
25
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Short-Intermediate Government Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/98 03/31/97# 03/31/96(b)#
<S> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 3.99 $ 4.07 $ 4.14
Net investment income 0.20 0.21 0.07
Net realized and
unrealized gain/(loss)
on investments 0.13 (0.08) (0.07)
Net increase/(decrease) in
net asset value from
operations 0.33 0.13 0.00
Distributions:
Dividends from net
investment income (0.20) (0.21) (0.07)
Distributions from net
realized capital gains -- -- --
Total dividends and
distributions (0.20) (0.21) (0.07)(a)
Net asset value, end of
period $ 4.12 $ 3.99 $ 4.07
Total return++ 8.45% 3.21% (0.10)%
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $1,808 $8,334 $11,820
Ratio of operating
expenses to average net
assets 1.31% 1.13%(c)(d) 1.13%+
Ratio of net investment
income to average net
assets 4.83% 5.23% 4.82%+
Portfolio turnover rate 538% 529% 189%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.51% 1.33%(d) 1.36%+
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
Investor C Shares 11/30/95# 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 3.93 $ 4.28 $ 4.16 $ 4.19
Net investment income 0.22 0.20 0.20 0.10
Net realized and
unrealized gain/(loss)
on investments 0.21 (0.33) 0.14 (0.03)
Net increase/(decrease) in
net asset value from
operations 0.43 (0.13) 0.34 0.07
Distributions:
Dividends from net
investment income (0.22) (0.20) (0.20) (0.10)
Distributions from net
realized capital gains -- (0.02) (0.02) --
Total dividends and
distributions (0.22)(a) (0.22)(a) (0.22) (0.10)
Net asset value, end of
period $ 4.14 $ 3.93 $ 4.28 $ 4.16
Total return++ 11.15% (2.80)% 8.20% 1.64%+++
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $13,206 $16,725 $31,440 $24,352
Ratio of operating
expenses to average net
assets 1.10% 1.17% 1.30% 1.18%+
Ratio of net investment
income to average net
assets 5.38% 5.18% 4.65% 4.80%+
Portfolio turnover rate 328% 133% 92% 25%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.30% 1.38% 1.54% 1.44%+
</TABLE>
* Nations Short-Intermediate Government Fund Investor C Shares commenced
operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share net investment income has been calculated using the monthly
average share method.
(a) Includes distribution in excess of less than $0.01 per share.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) The effect of interest expense on the operating expense ratio was less than
0.01%.
(d) The effect of the credits allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense reimbursements, was less than
0.01%.
26
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Government Securities Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98 03/31/97#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.39 $ 9.67
Net investment income 0.48 0.55
Net realized and unrealized
gain/(loss) on investments 0.51 (0.30)
Net increase/(decrease) in net asset
value from operations 0.99 0.25
Distributions:
Dividends from net investment
income (0.48) (0.53)
Dividends in excess of net investment
income -- --
Distributions in excess of net realized
capital gains -- --
Distributions from capital -- (0.00)(b)
Total dividends and distributions (0.48) (0.53)
Net asset value, end of period $ 9.90 $ 9.39
Total return++ 10.84% 2.67%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 735 $1,835
Ratio of operating expenses to
average net assets 1.58%(c)(d) 1.30%
Ratio of net investment income to
average net assets 4.90% 5.78%
Portfolio turnover rate 303% 468%
Ratio of operating expenses to
average net assets without waivers
and/or expense reimbursements 1.72%(d) 1.44%
<CAPTION>
PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
Investor C Shares 03/31/96(a)# 05/31/95# 05/31/94 05/31/93*#
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.86 $ 9.80 $ 10.46 $ 10.52
Net investment income 0.47 0.57 0.55 0.59
Net realized and unrealized
gain/(loss) on investments (0.19) 0.06 ( 0.61) 0.02
Net increase/(decrease) in net asset
value from operations 0.28 0.63 ( 0.06) 0.61
Distributions:
Dividends from net investment
income (0.45) (0.53) ( 0.50) ( 0.63)
Dividends in excess of net investment
income (0.02) -- ( 0.01) --
Distributions in excess of net realized
capital gains -- -- ( 0.05) ( 0.04)
Distributions from capital -- (0.04) ( 0.04) --
Total dividends and distributions (0.47) (0.57) ( 0.60) ( 0.67)
Net asset value, end of period $ 9.67 $ 9.86 $ 9.80 $ 10.46
Total return++ 2.83% 6.76% ( 0.69)% 5.37%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $2,558 $2,945 $5,265 $5,998
Ratio of operating expenses to
average net assets 1.48% 1.51% 1.48% 1.60%
Ratio of net investment income to
average net assets 5.68%+ 5.94% 5.33% 5.92%+
Portfolio turnover rate 199% 413% 56% 103%
Ratio of operating expenses to
average net assets without waivers
and/or expense reimbursements 1.63%+ 1.69% 1.69% 1.75%+
</TABLE>
* Nations Government Securities Fund Investor C Shares commenced operations on
July 6, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average share method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
May 31.
(b) Amount represents less than $0.01.
(c) The effect of interest expense on the operating expense ratio was less than
0.01%.
(d) The effect of the credits allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense reimbursements, was less than
0.01%.
27
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Strategic Fixed Income Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98 03/31/97#
<S> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 9.62 $ 9.93
Net investment income 0.52 0.53
Net realized and
unrealized gain/(loss)
on investments 0.41 (0.20)
Net increase/(decrease) in
net asset value from
operations 0.93 0.33
Distributions:
Dividends from net
investment income ( 0.52) (0.53)
Distributions in excess of
net investment income -- --
Distributions from net
realized capital gains -- (0.11)
Distributions from capital -- $(0.00)(b)
Total dividends and
distributions ( 0.52) (0.64)
Net asset value, end of
period $ 10.03 $ 9.62
Total return++ 9.87% 3.38%
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $ 943 $1,068
Ratio of operating
expenses to average net
assets 1.42%(c)(d) 1.21%(c)
Ratio of net investment
income to average net
assets 5.16% 5.48%
Portfolio turnover rate 244% 368%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.53%(d) 1.31%(d)
<CAPTION>
PERIOD YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/96(a) 11/30/95 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 10.22 $ 9.32 $ 10.55 $ 9.94 $ 9.97
Net investment income 0.17 0.54 0.47 0.48 0.02
Net realized and
unrealized gain/(loss)
on investments ( 0.29) 0.90 ( 0.89) 0.62 (0.04)
Net increase/(decrease) in
net asset value from
operations ( 0.12) 1.44 ( 0.42) 1.10 (0.02)
Distributions:
Dividends from net
investment income ( 0.17) ( 0.54) ( 0.45) ( 0.48) (0.01)
Distributions in excess of
net investment income -- -- ( 0.02) -- --
Distributions from net
realized capital gains -- -- ( 0.34) ( 0.01) --
Distributions from capital -- -- -- -- --
Total dividends and
distributions ( 0.17) ( 0.54) ( 0.81) ( 0.49) (0.01)
Net asset value, end of
period $ 9.93 $ 10.22 $ 9.32 $ 10.55 $ 9.94
Total return++ ( 1.22)% 15.87% ( 4.14)% 11.20% (0.22)%+++
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $ 299 $ 227 $ 41 $ 65 $ 84
Ratio of operating
expenses to average net
assets 1.22%+ 1.21% 1.43% 1.36% 1.03%+
Ratio of net investment
income to average net
assets 4.99%+ 5.55% 4.68% 4.65% 5.40%+
Portfolio turnover rate 133% 228% 307% 161% 12%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.33%+ 1.31% 1.51% 1.52% 1.63%+
</TABLE>
* Nations Strategic Fixed Income Fund Investor C Shares commenced operations
on November 16, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share net investment income has been calculated using the monthly
average share method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) Amount represents less than $0.01.
(c) The effect of the credits allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense reimbursements, was less than
0.01%.
(d) The effect of interest expense on the operating expense ratio was less than
0.01%.
28
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Diversified Income Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/98 03/31/97# 03/31/96(b)
<S> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 10.11 $ 10.42 $ 10.82
Net investment income 0.58 0.63 0.21
Net realized and
unrealized gain/(loss)
on investments 0.44 ( 0.18) ( 0.40)
Net increase/(decrease) in
net asset value from
operations 1.02 0.45 ( 0.19)
Distributions:
Dividends from net
investment income ( 0.58) ( 0.63) ( 0.21)
Distributions from net
realized capital gains -- ( 0.13) --
Total dividends and
distributions ( 0.58) ( 0.76) ( 0.21)
Net asset value, end of
period $ 10.55 $ 10.11 $ 10.42
Total return++ 10.27% 4.44% ( 1.77)%
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $2,090 $3,343 $3,454
Ratio of operating
expenses to average net
assets 1.46%(c) 1.25%(c) 1.33%+
Ratio of net investment
income to average net
assets 5.54% 6.23% 5.93%+
Portfolio turnover rate 203% 278% 69%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.56%(c) 1.35%(c) 1.43%+
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
Investor C Shares 11/30/95 11/30/94# 11/30/93# 11/30/92*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 9.67 $ 10.88 $ 9.96 $ 9.93
Net investment income 0.66 0.67 0.70 0.03
Net realized and
unrealized gain/(loss)
on investments 1.15 ( 1.06) 0.92 0.02
Net increase/(decrease) in
net asset value from
operations 1.81 ( 0.39) 1.62 0.05
Distributions:
Dividends from net
investment income ( 0.66) ( 0.67)(a) ( 0.70) (0.02)
Distributions from net
realized capital gains -- ( 0.15) -- --
Total dividends and
distributions ( 0.66) ( 0.82) ( 0.70) (0.02)
Net asset value, end of
period $ 10.82 $ 9.67 $ 10.88 $ 9.96
Total return++ 19.22% ( 3.77)% 16.65% 0.54%+++
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $3,582 $2,636 $3,633 $ 149
Ratio of operating
expenses to average net
assets 1.55% 1.49% 1.30% 1.00%+
Ratio of net investment
income to average net
assets 6.28% 6.56% 6.27% 7.01%+
Portfolio turnover rate 96% 144% 86% 46%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.68% 1.70% 1.70% 1.60%+
</TABLE>
* Nations Diversified Income Fund Investor C Shares commenced operations on
November 9, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share net investment income has been calculated using the monthly
average share method.
(a) Includes distributions in excess of less than $0.01.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) The effect of the credits allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense reimbursements, was less than
0.01%.
29
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations U.S. Government Bond Fund
<TABLE>
<CAPTION>
PERIOD
ENDED
Investor C Shares 03/31/98(b)
<S> <C>
Operating performance:
Net asset value at the beginning of the period $ 10.41
Net investment income 0.25
Net realized and unrealized gain/(loss) on investments 0.09
Net increase in net asset value from operations 0.34
Distributions:
Dividends from net investment income ( 0.25)
Distributions from net realized capital gains ( 0.13)
Total dividends and distributions ( 0.38)
Net asset value at the end of the period $ 10.37
Total return++ 3.50%
Ratios to average net assets/supplemental data:
Net assets at end of period (in 000's) $1,332
Ratio of operating expenses to average net assets 1.45%(a)+
Ratio of net investment income to average net assets 4.41%+
Portfolio turnover rate 188%
Ratio of operating expenses to average net assets without waivers and/or expense 1.71%(a)+
reimbursements
</TABLE>
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements was less than 0.01%.
(b) Investor C Shares commenced operations on September 19, 1997.
30
<PAGE>
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAI contains more
information concerning such investments.
Asset-Backed Securities: Asset-backed securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset-backed
securities consist of both mortgage- and non-mortgage backed securities (see
below). Interests in pools of these assets may 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. Conversely,
asset-backed securities provide periodic payments which may 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 a function of current market interest rates and other economic and
demographic factors. 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 may not be 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 mortgage loans.
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 the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and
the 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.
The average life of a mortgage-backed security 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 of the greater part of principal invested far
in advance of the maturity of the mortgages in the pool.
The yield which will be earned on mortgage-backed securities 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
31
<PAGE>
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.
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.
The principal and interest payments on the Mortgage Assets may be allocated
among the various classes of CMOs in several ways. Typically, payments of
principal, including any prepayments, on the underlying mortgages are applied
to the classes in the order of their respective stated maturities or final
distribution dates, so that no payment of principal is made on CMOs of a class
until all CMOs of other classes having earlier stated maturities or final
distribution dates have been paid in full.
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.
The average life of mortgage-backed securities varies with the maturities of
the underlying mortgage instruments. 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
dollar-weighted maturity and duration of the Funds. For additional information
concerning mortgage-backed securities, see the SAI.
Mortgage-backed securities in which the Funds invest are subject to extension
risk. This is the risk that when interest rates rise, prepayments of the
underlying obligations slow thereby lengthening duration and potentially
reducing the value of these securities. The debt securities held by the Funds
also may be subject to credit risk. Credit risk is the risk that the issuers of
securities in which a Fund invests may default in the payment of principal
and/or interest. Any such defaults or adverse changes in an issuer's financial
condition or credit
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rating may adversely affect the value of the Funds' portfolio investments and,
hence, the value of your investment in the corresponding Fund.
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. Such securities also
may include instruments issued by certain trusts, partnerships or other special
purpose issuers, including pass-through certificates representing
participations in, or debt instruments backed by, the securities and other
assets owned by such issuers.
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.
The purchase of non-mortgage-backed securities raises considerations unique 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.
Bank Instruments: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. Each Fund will limit its investments in
bank obligations so they do not exceed 25% of its total assets at the time of
purchase.
U.S. dollar-denominated obligations issued by foreign branches of domestic
banks ("Eurodollar" obligations) and domestic branches of foreign banks
("Yankee dollar" obligations), and other foreign obligations involve special
investment risk, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning for-
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eign issuers, there may be difficulties in enforcing a judgment against a
foreign issuer or the accounting, auditing and financial reporting standards,
practices and requirements applicable to foreign issuers may differ from those
applicable to domestic issuers. In addition, foreign banks are not subject to
examination by U.S. Government agencies or instrumentalities.
Borrowings: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Fund's total assets must be repaid prior to the purchase of
portfolio securities. Pursuant to line of credit arrangements with BONY, the
Funds may borrow primarily for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities.
Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells
a portfolio security to another party, such as a bank or broker/dealer, in
return for cash, and agrees to buy the security back at a future date and
price. Reverse repurchase agreements may be used to provide cash to satisfy
unusually heavy redemption requests without having to sell portfolio
securities, or for other temporary or emergency purposes. Generally, the effect
of such a transaction is that the Funds can recover all or most of the cash
invested in the portfolio securities involved during the term of the reverse
repurchase agreement, while they will be able to keep the interest income
associated with those portfolio securities. Such transactions are only
advantageous if the interest cost to the Funds of the reverse repurchase
transaction is less than the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government Securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
a Fund is obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The
Funds only enter into reverse repurchase agreements (and repurchase agreements)
with counterparties that are deemed by the Adviser to be creditworthy. 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.
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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 objective. 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: Each Fund 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: Each Fund may enter into foreign currency
exchange transactions to convert foreign currencies to and from the U.S.
dollar. A Fund either enters into these transactions on a spot (I.E., cash)
basis at the spot rate prevailing in the foreign currency exchange market, or
uses forward contracts to purchase or sell foreign currencies. A forward
foreign currency exchange contract is an obligation by a Fund to purchase or
sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract.
Foreign currency hedging transactions are an attempt to protect a Fund against
changes in foreign currency exchange rates between the trade and settlement
dates of specific securities transactions or changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize
the risk of loss due to a decline in the value of the hedged currency, at the
same time they tend to limit any potential gain that might be realized should
the value of the hedged currency increase. Neither spot transactions nor
forward foreign currency exchange contracts eliminate fluctuations in the
prices of a Fund's portfolio securities or in foreign exchange rates, or
prevent loss if the prices of these securities should decline.
A Fund will generally enter into forward currency exchange contracts only under
two circumstances: (i) when such Fund enters into a contract for the purchase
or sale of a security denominated in a foreign currency, to "lock" in the U.S.
dollar price of the security; and (ii) when the Adviser believes that the
currency of a particular foreign country may experience a substantial movement
against another currency. Under certain circumstances, a Fund may commit a
substantial portion of its portfolio to the execution of these contracts. The
Adviser will consider the effects such a commitment would have on the
investment program of such Fund and the flexibility of such Fund to purchase
additional securities. Although forward contracts will be used primarily to
protect a Fund from adverse currency movements, they also involve the risk that
anticipated currency movements will not be accurately predicted.
In addition, the Euro will become the single currency in at least 11 European
nations used in many financial transactions. Accordingly, the German mark,
French franc and other national currencies will no longer be used. Although the
impact of implementing the Euro is not possible to predict, the transition
could have an effect on the financial markets and economic environment in
Europe and other parts of the world. For example, investors may begin to view
those countries participating in the Economic Monetary Union as a single
combined entity
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and may alter their investment behavior accordingly. In response to any such
effect of the Euro implementation, the Adviser may need to adapt its investment
policies and strategy.
Foreign Securities: Foreign securities include debt and equity obligations
(dollar- and non-dollar-denominated) 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 income (including interest, distributions and
disposition proceeds), 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 securities
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 United
States. Fixed commissions on foreign securities exchanges are generally higher
than the negotiated commissions on U.S. exchanges, and there is generally less
government supervision and regulation of foreign securities exchanges, brokers,
and companies than in the United States. 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.
The Funds may invest indirectly in the securities of foreign issuers through
sponsored or unsponsored ADRs, ADSs, GDRs and EDRs or other securities
representing securities of companies based in countries other than the United
States. Transactions in these securities may not necessarily be settled in the
same currency as the underlying securities which they represent. Ownership of
unsponsored ADRs, ADSs, GDRs and EDRs may not entitle the Funds to financial or
other reports from the issuer, to which it would be entitled as the owner of
sponsored ADRs, ADSs, GDRs or EDRs. Generally, ADRs and ADSs in registered
form, are designed for use in the U.S. securities markets. GDRs are designed
for use in both the U.S. and European securities markets. EDRs, in bearer form,
are designed for use in European securities markets. ADRs, ADSs, GDRs and EDRs
also involve certain risks of other investments in foreign securities.
Futures, Options and Other Derivative Instruments: Each Fund may attempt to
reduce the overall level of investment risk of particular securities and
attempt to protect such Funds against adverse market movements by investing in
futures, options and other derivative instruments. These include the purchase
and writing of options on securities (including index options) and options on
foreign currencies, and investing in futures contracts for the purchase or sale
of instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and
swaps and swap-related products such as interest rate swaps, currency swaps,
caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable
position. Additional risks inherent in the use of futures, options, forward
contracts and swaps include: imperfect correlation between the price of
futures, options and forward contracts and movements in the prices of the
securities or currencies being hedged; the possible absence of a liquid
secondary market for
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any particular instrument at any time; and the possible need to defer closing
out certain hedged positions to avoid adverse tax consequences. A Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks, is
contained in the SAI.
Illiquid Securities: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not hold more
than 15% of the value of their respective net assets in securities that are
illiquid. Repurchase agreements, time deposits and guaranteed investment
contracts that do not provide for payment to a Fund within seven days after
notice, and illiquid restricted securities, are subject to the limitation on
illiquid securities.
If otherwise consistent with their investment objectives and policies, the
Funds may purchase securities that are not registered under the Securities Act
of 1933, as amended (the "1933 Act") but which can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the 1933 Act, or which
were issued under Section 4(2) of 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 or other buyers cease purchasing such
restricted securities pursuant to Rule 144A or otherwise, 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 their
portfolios 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 the
extent that a specified index is below a predetermined interest rate, 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: Nations Diversified Income Fund may invest in
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. Each Fund that may invest in lower-rated debt securities intends 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' Boards, including
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the use of outside pricing services. Adverse publicity and changing investor
perceptions may affect the ability of outside pricing services used by a Fund
to value its portfolio securities, and a Fund's ability to dispose of these
lower-rated bonds.
The market prices of lower-rated securities may fluctuate more than
higher-rated securities and may decline significantly in periods of general
economic difficulty which may follow periods of rising interest rates. During
an economic downturn or a prolonged period of rising interest rates, the
ability of issuers of lower quality debt to service their payment obligations,
meet projected goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower-rated securities, the Adviser
will try to minimize the risks inherent in investing in lower-rated debt
securities by engaging in credit analysis, diversification, and attention to
current developments and trends affecting interest rates and economic
conditions. The Adviser will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future obligations,
have improved, or are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated securities,
but they may not be attractive to as many buyers. Each Fund's policies
regarding lower-rated debt securities is not fundamental and may be changed at
any time without shareholder approval.
Money Market Instruments: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
Municipal Securities: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General
obligation securities are secured by the issuer's pledge of its full faith,
credit, and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by a Fund are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by
a Fund will be determined by the Adviser to be of comparable quality at the
time of purchase to instruments rated "high quality" by any major rating
service. Where necessary to ensure that an instrument is of comparable "high
quality," a Fund will require that an issuer's obligation to pay the principal
of the note may be backed by an unconditional bank letter or line of credit,
guarantee, or commitment to lend.
Municipal securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases,"
and units of participation in trusts holding pools of tax exempt leases. Such
loans in most cases are not backed by the taxing authority of
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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 securities. 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. 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.
Other Investment Companies: Each 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. Pursuant to an exemptive order, the Nations Funds' non-money
market funds may purchase shares of Nations Funds' money market funds.
Repurchase Agreements: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker/dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can
be liquidated on the open market. Repurchase agreements with a maturity 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 Funds.
Securities Lending: To increase return on portfolio securities, the Funds may
lend their portfolio securities to broker/dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned. There is a risk of delay in receiving collateral or
in recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Adviser to be credit worthy and when, in its
judgment, the income to be earned from the loan justifies the attendant risks.
The aggregate of all outstanding loans of a Fund may not exceed 33% of the
value of its total assets, which may include cash collateral received for
securities loans. Cash collateral received by a Nations Fund may be invested in
a Nations Funds' money market fund.
39
<PAGE>
Stock Index, Interest Rate and Currency Futures Contracts: The Funds may
purchase and sell futures contracts and related options with respect to
non-U.S. stock indices, 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. U.S.
Treasury obligations differ only in their interest rates, maturities and time
of issuance. Obligations of U.S. Government agencies, authorities and
instrumentalities are issued by government-sponsored agencies and enterprises
acting under authority of Congress. Although obligations of federal agencies,
authorities and instrumentalities are not debts of the U.S. Treasury, some 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; some
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 are backed only by the
credit of the issuer itself, such as obligations of the Federal National
Mortgage Association. 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.
The market value of U.S. Government Obligations may fluctuate due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government Obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government Obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
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 and foreign 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.
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 take
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.
40
<PAGE>
Appendix B -- Description Of Ratings
The following summarizes the highest eight 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.
CCC, CC -- An obligation rated CCC is vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse conditions, the obligor is not likely to have the
capacity to meet its financial commitments on the obligation; an
obligation rated CC is highly vulnerable to nonpayment.
To provide more detailed indications of credit quality, the AA, A, BBB and CCC
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 eight ratings used by Moody's for
corporate and municipal bonds. The first four ratings denote investment grade
securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protec-
41
<PAGE>
tive 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.
Caa, Ca -- Bonds that are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest. Bonds that are rated Ca represent
obligations that are speculative in a high degree. Such issues are often
in default or have other marked shortcomings.
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 -- "AAA" ratings denote the lowest expectation of credit risk. They
are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA -- "AA" ratings denote a very low expectation of credit risk. They
indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to
foreseeable events.
A -- "A" ratings denote a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher
ratings.
BBB -- "BBB" ratings indicate that there is currently a low expectation
of credit risk. The capacity for timely payment of financial commitments
is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
42
<PAGE>
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable-rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high
quality, with ample margins of protection although not so large as in
the preceding group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
are given a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are D-1, D-2 and D-3. D&P
employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-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." D-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.
D-1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. D-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. D-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 two highest rating categories used by Fitch for
short-term obligations:
F1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in
degree than issues rated F1+.
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. Commercial paper rated A-3
exhibits adequate protection parameters. However, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation. Commercial paper
rated A-3 or B correlates with the S&P Bond rankings (described above) of BBB/
BBB- and BB+, respectively.
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 obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of senior short-term 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. Issuers rated Prime-3 have an acceptable ability for
repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protec-
43
<PAGE>
tion measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
For commercial paper, D&P uses the short-term debt ratings described above.
For commercial paper, Fitch uses the short-term debt ratings described above.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the
rated instrument. The following are the 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 extremely high.
AA -- The second highest category; indicates a very strong 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 likelihood that
principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and
interest in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
44
<PAGE>
Prospectus
Investor C Shares
August 1, 1998
as supplemented on
, 1998
This Prospectus describes the investment portfolios listed in the column to the
right (each a "Fund") of Nations Fund Trust, an open-end management investment
company in the Nations Funds Family ("Nations Funds" or "Nations Funds
Family"). This Prospectus describes one class of shares of each Fund --
Investor C Shares.
This Prospectus sets forth concisely the information about each Fund that a
prospective purchaser of Investor C Shares should consider before investing.
Investors should read this Prospectus and retain it for future reference.
Additional information about Nations Fund Trust is contained in a separate
Statement of Additional Information (the "SAI"), that has been filed with the
Securities and Exchange Commission (the "SEC") and is available upon request
without charge by writing or calling Nations Funds at its address or telephone
number shown below. The SAI for Nations Funds, dated August 1, 1998, is
incorporated by reference in its entirety into this Prospectus. The SEC
maintains a Web site (http://www.sec.gov) that contains the SAI, material
incorporated by reference in this Prospectus and other information regarding
registrants that file electronically with the SEC. NationsBanc Advisors, Inc.
("NBAI") is the investment adviser to each of the Funds. TradeStreet Investment
Associates, Inc. ("TradeStreet") is the investment sub-adviser to the Funds. As
used herein the term "Adviser" shall mean NBAI and/or TradeStreet as the
context may require, see "How The Funds Are Managed."
SHARES OF NATIONS FUNDS 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 SERVICES TO NATIONS FUNDS,
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 FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
TAX-EXEMPT BOND FUNDS
Nations Florida Intermediate Municipal Bond Fund
Nations Florida Municipal Bond Fund
Nations Georgia Intermediate Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Maryland Intermediate Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations Tennessee Intermediate Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Texas Intermediate Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Virginia Intermediate Municipal Bond Fund
Nations Virginia Municipal Bond Fund
For Fund information call:
1-800-321-7854
Nations Funds
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
[NATIONS FUNDS LOGO APPEARS HERE]
NF-98395-8/98
<PAGE>
Table Of Contents
About The Prospectus Summary 3
Funds -----------------------------------------------------
Expenses Summary 5
-----------------------------------------------------
Objectives 9
-----------------------------------------------------
How Objectives Are Pursued 11
-----------------------------------------------------
How Performance Is Shown 14
-----------------------------------------------------
How the Funds Are Managed 15
-----------------------------------------------------
Organization And History 18
-----------------------------------------------------
About Your
Investment
How To Buy Shares 19
-----------------------------------------------------
Investor C Shares -- Charges and Features 20
-----------------------------------------------------
How To Redeem Shares 21
-----------------------------------------------------
How To Exchange Shares 22
-----------------------------------------------------
Shareholder Servicing And Distribution Plans 23
-----------------------------------------------------
How The Funds Value Their Shares 25
-----------------------------------------------------
How Dividends And Distributions Are Made;
Tax Information 25
-----------------------------------------------------
Financial Highlights 27
-----------------------------------------------------
Appendix A -- Portfolio Securities 42
-----------------------------------------------------
Appendix B -- Description Of Ratings 49
-----------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS, OR IN THE FUNDS' SAI INCORPORATED HEREIN
BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NATIONS FUNDS OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY NATIONS FUNDS OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Prospectus Summary
o TYPE OF COMPANY: Open-end management investment company.
o INVESTMENT OBJECTIVES AND POLICIES:
o Nations Florida Intermediate Municipal Bond Fund's investment objective is
to seek high current income exempt from Federal income and the Florida state
intangibles taxes consistent with moderate fluctuation of principal. The
Fund invests in investment grade, intermediate-term municipal securities.
o Nations Florida Municipal Bond Fund's investment objective is to seek high
current income exempt from Federal income and the Florida state intangibles
taxes with the potential for principal fluctuation associated with
investments in long-term municipal securities. The Fund invests in
investment grade, long-term municipal securities.
o Nations Georgia Intermediate Municipal Bond Fund's investment objective is
to seek high current income exempt from Federal and Georgia state income
taxes consistent with moderate fluctuation of principal. The Fund invests in
investment grade, intermediate-term municipal securities.
o Nations Georgia Municipal Bond Fund's investment objective is to seek high
current income exempt from Federal and Georgia state income taxes with the
potential for principal fluctuation associated with investments in long-term
municipal securities. The Fund invests in investment grade, long-term
municipal securities.
o Nations Maryland Intermediate Municipal Bond Fund's investment objective is
to seek high current income exempt from Federal and Maryland state income
taxes consistent with moderate fluctuation of principal. The Fund invests in
investment grade, intermediate-term municipal securities.
o Nations Maryland Municipal Bond Fund's investment objective is to seek high
current income exempt from Federal and Maryland state income taxes with the
potential for principal fluctuation associated with investments in long-term
municipal securities. The Fund invests in investment grade, long-term
municipal securities.
o Nations North Carolina Intermediate Municipal Bond Fund's investment
objective to seek high current income exempt from Federal and North Carolina
state income taxes consistent with moderate fluctuation of principal. The
Fund invests in investment grade, intermediate-term municipal securities.
o Nations North Carolina Municipal Bond Fund's investment objective is to seek
high current income exempt from Federal and North Carolina state income
taxes with the potential for principal fluctuation associated with
investments in long-term municipal securities. The Fund invests in
investment grade, long-term municipal securities.
o Nations South Carolina Intermediate Municipal Bond Fund's investment
objective is to seek high current income exempt from Federal and South
Carolina state income taxes consistent with moderate fluctuation of
principal. The Fund invests in investment grade, intermediate-term municipal
securities.
o Nations South Carolina Municipal Bond Fund's investment objective is to seek
high current income exempt from Federal and South Carolina state income
taxes with the potential for principal fluc-
3
<PAGE>
tuation associated with investments in long-term municipal securities. The
Fund invests in investment grade, long-term municipal securities.
o Nations Tennessee Intermediate Municipal Bond Fund's investment objective is
to seek high current income exempt from Federal income tax and the Tennessee
Hall Income Tax on unearned income consistent with moderate fluctuation of
principal. The Fund invests in investment grade, intermediate-term municipal
securities.
o Nations Tennessee Municipal Bond Fund's investment objective is to seek high
current income exempt from Federal Income Tax and the Tennessee Hall Income
Tax on unearned income with the potential for principal fluctuation
associated with investments in long-term municipal securities. The Fund
invests in investment grade, long-term municipal securities.
o Nations Texas Intermediate Municipal Bond Fund's investment objective is to
to seek high current income exempt from Federal income tax consistent with
moderate fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
o Nations Texas Municipal Bond Fund's investment objective is to seek high
current income exempt from Federal income tax with the potential for
principal fluctuation associated with investments in long-term municipal
securities. The Fund invests in investment grade, long-term municipal
securities.
o Nations Virginia Intermediate Municipal Bond Fund's investment objective is
to seek high current income exempt from Federal and Virginia state income
taxes consistent with moderate fluctuation of principal. The Fund invests in
investment grade, intermediate-term municipal securities.
o Nations Virginia Municipal Bond Fund's investment objective is to seek high
current income exempt from Federal and Virginia state income taxes with the
potential for principal fluctuation associated with investments in long-term
municipal securities. The Fund invests in investment grade, long-term
municipal securities.
o INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as the investment
adviser to the Funds. NBAI provides investment management services to more
than 60 investment company portfolios in the Nations Funds Family.
TradeStreet Investment Associates, Inc., an affiliate of NBAI, provides
investment sub-advisory services to the Funds. For more information about
the investment adviser and investment sub-adviser to the Nations Funds, see
"How The Funds Are Managed."
o DIVIDENDS AND DISTRIBUTIONS: The Funds declare dividends daily and pay them
monthly. Each Fund's net realized capital gains, including net short-term
capital gains, are distributed at least annually.
o RISK FACTORS: Although NBAI, together with the sub-adviser, seek to achieve
the investment objective of each Fund, there is no assurance that they will
be able to do so. Investments in a Fund are not insured against loss of
principal. Investments by a Fund in debt securities are subject to interest
rate risk, which is the risk that increases in market interest rates will
adversely affect a Fund's investments in debt securities. The value of a
Fund's investments in debt securities, including U.S. Government Obligations
(as defined below), 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 which are
not issued or guaranteed by the U.S. Government are subject to credit risk,
which is the risk that the issuer may not be able to pay principal and/or
interest when due. Certain of the Funds' investments may constitute
derivative securities. Certain types of derivative securities can, under
particular circumstances, significantly increase an investor's exposure to
market and other risks. Since the Funds invest primarily in securities
issued by entities located in a single state, the Funds are more susceptible
to changes in value due to political or economic changes affecting such
states or their subdivisions. For a discussion of these and other factors,
see "How Objectives Are Pursued -- Risk Considerations" and "Appendix A."
o MINIMUM PURCHASE: $1,000 minimum initial investment per record holder,
except for investments pursuant to the Systematic Investment Plan. The
minimum subsequent investment is $100, except for investments pursuant to
the Systematic Investment Plan. See "How To Buy Shares."
4
<PAGE>
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds.
The following tables summarize shareholder transaction and operating expenses
for Investor C Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
NATIONS FUNDS INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations Nations
Florida Nations Georgia Nations
Intermediate Florida Intermediate Georgia
Municipal Municipal Municipal Municipal
Shareholder Transaction Expenses Bond Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Maximum Deferred Sales Charge (as a percentage of the lower of
the original purchase price or redemption proceeds)1 1.00% 1.00% 1.00% 1.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (After Fee Waivers) .31% .35% .31% .23%
Rule 12b-1 Fees (After Fee Waivers) .55% .60% .55% .60%
Shareholder Servicing Fees .25% .25% .25% .25%
Other Expenses (After Expense Reimbursements) .19% .25% .19% .37%
Total Operating Expenses (After Fee Waivers and Expense
Reimbursements) 1.30% 1.45% 1.30% 1.45%
</TABLE>
(1) Investor C Shares that are purchased at net asset value are subject to a
Deferred Sales Charge if redeemed within one year of purchase.
5
<PAGE>
NATIONS FUNDS INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations Nations
Nations North Nations South Nations
Maryland Nations Carolina North Carolina South
Shareholder Intermediate Maryland Intermediate Carolina Intermediate Carolina
Transaction Municipal Municipal Municipal Municipal Municipal Municipal
Expenses Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None None None
Maximum Deferred Sales Charge (as
a percentage of the lower of the
original purchase price or
redemption proceeds)1 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Annual Fund
Operating
Expenses
(as a percentage of average
net assets)
Management Fees (After Fee
Waivers) .29% .22% .33% .31% .33% .27%
Rule 12b-1 Fees (After Fee Waivers) .55% .60% .55% .60% .55% .60%
Shareholder Servicing Fees .25% .25% .25% .25% .25% .25%
Other Expenses (After Expense
Reimbursements) .21% .38% .17% .29% .17% .33%
Total Operating Expenses (After Fee
Waivers and Expense
Reimbursements) 1.30% 1.45% 1.30% 1.45% 1.30% 1.45%
</TABLE>
(1) Investor C Shares that are purchased at net asset value are subject to a
Deferred Sales Charge if redeemed within one year of purchase.
6
<PAGE>
<TABLE>
<CAPTION>
Nations Nations Nations
Tennessee Nations Texas Nations Virginia Nations
Shareholder Intermediate Tennessee Intermediate Texas Intermediate Virginia
Transaction Municipal Municipal Municipal Municipal Municipal Municipal
Expenses Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None None None
Maximum Deferred Sales Charge (as
a percentage of the lower of the
original purchase price or
redemption proceeds)1 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Annual Fund
Operating
Expenses
(as a percentage of average
net assets)
Management Fees (After Fee
Waivers) .26% .09% .34% .20% .31% .28%
Rule 12b-1 Fees (After Fee Waivers) .55% .60% .55% .60% .55% .60%
Shareholder Servicing Fees .25% .25% .25% .25% .25% .25%
Other Expenses (After Expense
Reimbursements) .24% .51% .16% .40% .19% .32%
Total Operating Expenses
(After Fee Waivers and Expense
Reimbursements) 1.30% 1.45% 1.30% 1.45% 1.30% 1.45%
</TABLE>
(1) Investor C Shares that are purchased at net asset value are subject to a
Deferred Sales Charge if redeemed within one year of purchase.
Examples: You would pay the following expenses on a $1,000 investment in
Investor C Shares of the indicated Fund, assuming (1) a 5% annual return and
(2) redemption at the end of each time period.
<TABLE>
<CAPTION>
Nations
Nations Nations Nations North Nations
Florida Nations Georgia Nations Maryland Nations Carolina North
Intermediate Florida Intermediate Georgia Intermediate Maryland Intermediate Carolina
Municipal Municipal Municipal Municipal Municipal Municipal Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
-------------- ----------- -------------- ----------- -------------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 25 $ 26 $ 25 $ 26 $ 25 $ 26 $ 25 $ 26
3 Years $ 47 $ 50 $ 47 $ 50 $ 47 $ 50 $ 47 $ 50
5 Years $ 82 $ 87 $ 82 $ 87 $ 82 $ 87 $ 82 $ 87
10 Years $180 $191 $180 $191 $180 $191 $180 $191
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Nations
South Nations Nations Nations Nations
Carolina South Tennessee Nations Texas Nations Virginia Nations
Intermediate Carolina Intermediate Tennessee Intermediate Texas Intermediate Virginia
Municipal Municipal Municipal Municipal Municipal Municipal Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 25 $ 26 $ 25 $ 26 $ 25 $ 26 $ 25 $ 26
3 Years $ 47 $ 50 $ 47 $ 50 $ 47 $ 50 $ 47 $ 50
5 Years $ 82 $ 87 $ 82 $ 87 $ 82 $ 87 $ 82 $ 87
10 Years $180 $191 $180 $191 $180 $191 $180 $191
</TABLE>
You would pay the following expenses on a $1,000 investment in Investor C
Shares of the indicated Fund, assuming (1) a 5% annual return and (2) no
redemption.
<TABLE>
<CAPTION>
Nations
Nations Nations Nations North Nations
Florida Nations Georgia Nations Maryland Nations Carolina North
Intermediate Florida Intermediate Georgia Intermediate Maryland Intermediate Carolina
Municipal Municipal Municipal Municipal Municipal Municipal Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
-------------- ----------- -------------- ----------- -------------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 15 $ 16 $ 15 $ 16 $ 15 $ 16 $ 15 $ 16
3 Years $ 47 $ 50 $ 47 $ 50 $ 47 $ 50 $ 47 $ 50
5 Years $ 82 $ 87 $ 82 $ 87 $ 82 $ 87 $ 82 $ 87
10 Years $180 $191 $180 $191 $180 $191 $180 $191
</TABLE>
<TABLE>
<CAPTION>
Nations
South Nations Nations Nations Nations
Carolina South Tennessee Nations Texas Nations Virginia Nations
Intermediate Carolina Intermediate Tennessee Intermediate Texas Intermediate Virginia
Municipal Municipal Municipal Municipal Municipal Municipal Municipal Municipal
Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 15 $ 16 $ 15 $ 16 $ 15 $ 16 $ 15 $ 16
3 Years $ 47 $ 50 $ 47 $ 50 $ 47 $ 50 $ 47 $ 50
5 Years $ 82 $ 87 $ 82 $ 87 $ 82 $ 87 $ 82 $ 87
10 Years $180 $191 $180 $191 $180 $191 $180 $191
</TABLE>
8
<PAGE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor C Shares will bear either directly or indirectly. The figures
contained in the above tables are based on amounts incurred during each Fund's
most recent fiscal year and have been adjusted as necessary to reflect current
service provider fees. There is no assurance that any fee waivers and/or
reimbursements will continue. In particular, to the extent Other Expenses are
less than those shown, waivers and/or reimbursements of Management Fees, if
any, may decrease. Shareholders will be notified of any decrease that
materially increases Total Operating Expenses. If fee waivers and/or
reimbursements are decreased or discontinued, the amounts contained in the
"Examples" above may increase. Long-term shareholders of a Fund could pay more
in sales charges than the economic equivalent of the maximum front-end sales
charges applicable to mutual funds sold by members of the National Association
of Securities Dealers, Inc. For more complete descriptions of the Funds'
operating expenses, see "How The Funds Are Managed." For a more complete
description of the Rule 12b-1 and shareholder servicing fees payable by the
Funds, see "Shareholder Servicing And Distribution Plans."
Absent fee waivers and expense reimbursements, "Management Fees," "12b-1 Fees,"
"Other Expenses" and "Total Operating Expenses" for Investor C Shares of the
indicated Fund would have been as follows: Nations Florida Intermediate
Municipal Bond Fund -- .50%, .75%, .26% and 1.76%, respectively; Nations
Florida Municipal Bond Fund -- .60%, .75%, .30% and 1.90%, respectively;
Nations Georgia Intermediate Municipal Bond Fund -- .50%, .75%, .25% and 1.75%,
respectively; Nations Georgia Municipal Bond Fund -- .60%, .75%, .42% and
2.02%, respectively; Nations Maryland Intermediate Municipal Bond Fund -- .50%,
.75%, .30% and 1.80%, respectively; Nations Maryland Municipal Bond Fund --
.60%, .75%, .47% and 2.07%, respectively; Nations North Carolina Intermediate
Municipal Bond Fund -- .50%, .75%, .26% and 1.76%, respectively; Nations North
Carolina Municipal Bond Fund -- .60%, .75%, .33% and 1.93%, respectively;
Nations South Carolina Intermediate Municipal Bond Fund -- .50%, .75%, .25% and
1.75%, respectively; Nations South Carolina Municipal Bond Fund -- .60%, .75%,
.39% and 1.99%, respectively; Nations Tennessee Intermediate Municipal Bond
Fund -- .50%, .75%, .34% and 1.84%, respectively; Nations Tennessee Municipal
Bond Fund -- .60%, .75%, .60% and 2.20%, respectively; Nations Texas
Intermediate Municipal Bond Fund -- .50%, .75%, .25% and 1.75%, respectively;
Nations Texas Municipal Bond Fund -- .60%, .75%, .47% and 2.07%, respectively;
Nations Virginia Intermediate Municipal Bond Fund -- .50%, .75%, .24% and
1.74%, respectively; and Nations Virginia Municipal Bond Fund -- .60%, .75%,
.36% and 1.96%, respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST
OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
Objectives
Nations Florida Intermediate Municipal Bond Fund: Nations Florida Intermediate
Municipal Bond Fund's investment objective is to seek high current income
exempt from Federal income and the Florida state intangibles taxes consistent
with moderate fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
Nations Florida Municipal Bond Fund: Nations Florida Municipal Bond Fund's
investment objective is to seek high current income exempt from Federal income
and the Florida state intangibles taxes with the potential for principal
fluctuation associated with investments in long-term municipal securities. The
Fund invests in investment grade, long-term municipal securities.
Nations Georgia Intermediate Municipal Bond Fund: Nations Georgia Intermediate
Municipal Bond Fund's investment objective is to seek high current income
exempt from Federal and Georgia state income taxes consistent with moderate
fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
9
<PAGE>
Nations Georgia Municipal Bond Fund: Nations Georgia Municipal Bond Fund's
investment objective is to seek high current income exempt from Federal and
Georgia state income taxes with the potential for principal fluctuation
associated with investments in long-term municipal securities. The Fund invests
in investment grade, long-term municipal securities.
Nations Maryland Intermediate Municipal Bond Fund: Nations Maryland
Intermediate Municipal Bond Fund's investment objective is to seek high current
income exempt from Federal and Maryland state income taxes consistent with
moderate fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
Nations Maryland Municipal Bond Fund:
Nations Maryland Municipal Bond Fund's investment objective is to seek high
current income exempt from Federal and Maryland state income taxes with the
potential for principal fluctuation associated with investments in long-term
municipal securities. The Fund invests in investment grade, long-term municipal
securities.
Nations North Carolina Intermediate Municipal Bond Fund: Nations North Carolina
Intermediate Municipal Bond Fund's investment objective is to seek high current
income exempt from Federal and North Carolina state income taxes consistent
with moderate fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
Nations North Carolina Municipal Bond Fund:
Nations North Carolina Municipal Bond Fund's investment objective is to seek
high current income exempt from Federal and North Carolina state income taxes
with the potential for principal fluctuation associated with investments in
long-term municipal securities. The Fund invests in investment grade, long-term
municipal securities.
Nations South Carolina Intermediate Municipal Bond Fund: Nations South Carolina
Intermediate Municipal Bond Fund's investment objective is to seek high current
income exempt from Federal and South Carolina state income taxes consistent
with moderate fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
Nations South Carolina Municipal Bond Fund:
Nations South Carolina Municipal Bond Fund's investment objective is to seek
high current income exempt from Federal and South Carolina state income taxes
with the potential for principal fluctuation associated with investments in
long-term municipal securities. The Fund invests in investment grade, long-term
municipal securities.
Nations Tennessee Intermediate Municipal Bond Fund: Nations Tennessee
Intermediate Municipal Bond Fund's investment objective is to seek high current
income exempt from Federal income tax and the Tennessee Hall Income Tax on
unearned income consistent with moderate fluctuation of principal. The Fund
invests in investment grade, intermediate-term municipal securities.
Nations Tennessee Municipal Bond Fund:
Nations Tennessee Municipal Bond Fund's investment objective is to seek high
current income exempt from Federal income tax and the Tennessee Hall Income Tax
on unearned income with the potential for principal fluctuation associated with
investments in long-term municipal securities. The Fund invests in investment
grade, long-term municipal securities.
Nations Texas Intermediate Municipal Bond Fund: Nations Texas Intermediate
Municipal Bond Fund's investment objective is to seek high current income
exempt from Federal income tax consistent with moderate fluctuation of
principal. The Fund invests in investment grade, intermediate-term municipal
securities.
Nations Texas Municipal Bond Fund: Nations Texas Municipal Bond Fund's
investment objective is to seek high current income exempt from Federal income
tax with the potential for principal fluctuation associated with investments in
long-term municipal securities. The Fund invests in investment grade, long-term
municipal securities.
Nations Virginia Intermediate Municipal Bond Fund: Nations Virginia
Intermediate Municipal Bond Fund's investment objective is to seek high current
income exempt from Federal and Virginia state income taxes consistent with
moderate fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
10
<PAGE>
Nations Virginia Municipal Bond Fund: Nations Virginia Municipal Bond Fund's
investment objective is to seek high current income exempt from Federal and
Virginia state income taxes with the potential for principal fluctuation
associated with investments in long-term municipal securities. The Fund invests
in investment grade, long-term municipal securities.
Nations Florida Intermediate Municipal Bond Fund, Nations Georgia Intermediate
Municipal Bond Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations
North Carolina Intermediate Municipal Bond Fund, Nations South Carolina
Intermediate Municipal Bond Fund, Nations Tennessee Intermediate Municipal Bond
Fund, Nations Texas Intermediate Municipal Bond Fund and Nations Virginia
Intermediate Municipal Bond Fund are sometimes collectively referred to as the
"State Intermediate Municipal Bond Funds," and Nations Florida Municipal Bond
Fund, Nations Georgia Municipal Bond Fund, Nations Maryland Municipal Bond
Fund, Nations North Carolina Municipal Bond Fund, Nations South Carolina
Municipal Bond Fund, Nations Tennessee Municipal Bond Fund, Nations Texas
Municipal Bond Fund and Nations Virginia Municipal Bond Fund are sometimes
collectively referred to as the "State Municipal Bond Funds."
Although the Adviser will seek to achieve the investment objective of each
Fund, there is no assurance that it will be able to do so. No single Fund
should be considered, by itself, to provide a complete investment program for
any investor. The net asset value of the shares of each Fund will fluctuate
based on market conditions. Investments in the Funds are not insured against
loss of principal.
How Objectives Are Pursued
Under normal market conditions, at least 80% of the net assets of the State
Intermediate Municipal Bond Funds and the State Municipal Bond Funds will be
invested in obligations issued by or on behalf of states, territories and
possessions of the United States, the District of Columbia and their political
subdivisions, agencies, instrumentalities and authorities, the interest on
which, in the opinion of counsel to the issuer or bond counsel, is exempt from
regular Federal income tax ("Municipal Securities"). In addition, at least 80%
of each Fund's net assets will be invested in debt instruments, issued by or on
behalf of the pertinent state and its political subdivisions, agencies,
instrumentalities and authorities.
Under normal market conditions, the average dollar-weighted maturity and
duration of the State Intermediate Municipal Bond Funds are expected to be
between three and 10 years and between three and six years, respectively; the
State Municipal Bond Funds' average dollar-weighted maturity is expected to be
greater than 8.5 years and duration between six and nine years.
Each of the State Intermediate Municipal Bond Funds and the State Municipal
Bond Funds operates as a non-diversified fund (except to the extent
diversification is required for Federal income tax purposes).
Dividends paid by each of these Funds which are derived from interest
attributable to tax-exempt obligations of the pertinent state and that state's
political subdivisions, agencies, instrumentalities and authorities, as well as
certain other governmental issuers such as Puerto Rico, will be exempt from
regular Federal income tax and (with the exception of Texas and Florida) the
income tax of the pertinent state. Texas and Florida do not impose a state
income tax; however, Florida imposes a state intangibles tax. Dividends derived
from interest on obligations of other governmental issuers will be exempt from
regular Federal income tax, but generally will be subject to state income tax
(with the exception of Texas and Florida). (See "How Dividends And
Distributions Are Made; Tax Information.") During normal market conditions and
as a matter of fundamental investment policy, each of these Funds will invest
at least 80% of its total net assets in obligations the interest on which will
be exempt from regular Federal income tax and (with the exception of Texas and
Florida) the income tax of the pertinent state.
11
<PAGE>
Municipal Securities acquired by the Funds will be rated investment grade at
the time of purchase by at least one nationally recognized statistical rating
organization ("NRSRO") or, if unrated, determined by the Adviser to be of
comparable quality at the time of purchase to rated obligations that may be
acquired by the Funds. Obligations rated in the lowest of the top four
investment grade rating categories (E.G. rated "BBB" by Standard Poor's
Corporation ("S&P") or "Baa" by Moody's Investor Services, Inc.("Moody's"))
have speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Subsequent to its purchase by a Fund, an issue of Municipal Securities may
cease to be rated, or its rating may be reduced below the minimum rating
required for purchase by a Fund. The Adviser will consider such an event in
determining whether a Fund should continue to hold the obligation. See
"Appendix B" below for a description of these rating designations.
During temporary defensive periods, the Funds may invest in short-term taxable
and non-taxable obligations in such proportions as, in the opinion of the
Adviser, prevailing market or economic conditions warrant. Taxable obligations
that may be acquired by the Funds include repurchase agreements and short-term
debt securities. Under normal market conditions, each Fund's investments in
taxable obligations and private activity bonds, the interest on which may be
treated as a specific tax preference item under the Federal alternative minimum
tax, will not exceed 20% of its net assets at the time of purchase.
General: Each Fund may invest in certain specified derivative securities,
including: interest rate swaps, caps and floors for hedging purposes;
exchange-traded options; over-the-counter options executed with primary
dealers, including long calls and puts and covered calls to enhance return; and
U.S. and foreign exchange-traded financial futures and options thereon approved
by the Commodity Futures Trading Commission (the "CFTC") for market exposure
risk-management. Each Fund also may lend its portfolio securities to qualified
institutional investors and may invest in restricted, private placement and
other illiquid securities. Additionally, each Fund may purchase securities
issued by other investment companies, consistent with the Fund's investment
objective and policies. The Funds may invest in instruments issued by certain
trusts, partnerships or other special purpose issuers, including pass-through
certificates representing participations in, or debt instruments backed by, the
securities and other assets owned by such issuers.
Certain government securities that have variable or floating interest rates or
demand, put or prepayment features or paydown schedules may be deemed to have
remaining maturities shorter than their nominal maturities for purposes of
determining the average weighted maturity and duration of the Funds.
Duration, as used in this Prospectus, means modified duration, which is a
measure of the expected life of fixed income securities on a present value
basis. Duration is used to estimate how much a State Municipal Bond Fund's or
State Intermediate Municipal Bond Fund's share price will fluctuate in response
to a change in interest rates. To see how a Fund's share price could shift,
multiply the Fund's duration by the change in rates. If interest rates rise by
one percentage point, for example, the share price of a Fund with a duration of
five years would decline by about 5%. If rates decrease by one percentage
point, the Fund's share price would rise by about 5%.
Average dollar-weighted maturity is the average length of time until fixed
income securities held by a Fund reach maturity and are repaid. In general, the
longer the average dollar-weighted maturity, the more a Fund's share price will
fluctuate in response to changes in interest rates.
For more information concerning these and other investments in which the Funds
may invest and the Funds' investment practices, see "Appendix A."
Portfolio Turnover: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. If a Fund's annual portfolio turnover rate exceeds 100%, it
may result in higher brokerage costs and possible tax consequences for the Fund
and its shareholders. For the Funds' portfolio turnover rates, see "Financial
Highlights."
12
<PAGE>
Risk Considerations: The value of a Fund's investments in debt securities,
including obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities ("U.S. Government Obligations"), 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 U.S. Government are subject to credit
risk, which is the risk that the issuer may not be able to pay principal and/or
interest when due. Since the Funds invest primarily in securities issued by
entities located in a single state, the Funds are more susceptible to changes
in value due to political or economic changes affecting that state or its
subdivisions.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index
or reference rate. There are certain types of derivative securities that can,
under certain circumstances, significantly increase a purchaser's exposure to
market or other risks. The Adviser, however, only purchases derivative
securities in circumstances where it believes such purchases are consistent
with a 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."
Year 2000 Issue: Many computer programs employed throughout the world use two
digits to identify the year. Unless modified, these programs may not correctly
handle the change from "99" to "00" on January 1, 2000, and may not be able to
perform necessary functions. Any failure to adapt these programs in time could
hamper the Funds' operations. The Funds' principal service providers have
advised the Funds that they have been actively working on implementing
necessary changes to their systems, and that they expect that their systems
will be adapted in time, although there can be no assurance of success. Because
the Year 2000 issue affects virtually all organizations, the companies or
governmental entities in which the Funds invest could be adversely impacted by
the Year 2000 issue, although the extent of such impact cannot be predicted. To
the extent the impact on a portfolio holding is negative, a Fund's return could
be adversely affected.
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 a Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAI.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities and
tax-exempt securities issued by state or municipal governments and their
political subdivisions are not considered members of any industry.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 25% of the value of a Fund's total
assets would be invested in the securities of one issuer, and with respect to
50% of such Fund's total assets, more than 5% of its assets would be invested
in the securities of one issuer.
As a matter of fundamental policy, except during defensive periods, the Funds
will invest at least 80% of their respective total net assets in Municipal
Securities the interest on which is exempt from Federal income taxes and the
pertinent state's income taxes (with the exception of Texas and Florida). For
purposes of these fundamental policies, private activity bonds are included in
the term "Municipal Securities" only if the interest paid thereon is exempt
from Federal income tax and not treated as a specific tax preference item under
the Federal alternative minimum tax.
13
<PAGE>
The investment objective and policies of each Fund, unless otherwise specified,
may be changed without shareholder approval. If the investment objective or
policies of a Fund change, shareholders should consider whether the Fund
remains an appropriate investment in light of their current positions and
needs.
How Performance Is Shown
From time to time, a Fund may advertise the "total return", "yield" and
"tax-equivalent yield" on a class of shares. TOTAL RETURN, YIELD AND
TAX-EQUIVALENT YIELD FIGURES ARE BASED ON HISTORICAL DATA AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE. The "total return" of a class of shares of a
Fund may be calculated on an average annual total return basis or an aggregate
total return basis. Average annual total return refers to the average annual
compounded rates of return on a class of shares over one-, five-, and ten-year
periods or the life of a Fund (as stated in a Fund's advertisement) that would
equate an initial amount invested at the beginning of a stated period to the
ending redeemable value of the investment (reflecting the deduction of any
applicable deferred sales charge ("CDSC")), assuming the reinvestment of all
dividend and capital gain distributions. Aggregate total return reflects the
total percentage change in the value of the investment over the measuring
period, again assuming the reinvestment of all dividends and capital gain
distributions. Total return may also be presented for other periods or may not
reflect a deduction of any applicable CDSC.
"Yield" is calculated by dividing the annualized net investment income per
share during a recent 30-day (or one month) period of a class of shares of a
Fund by the maximum public offering price per share on the last day of that
period. The yield on a class of shares does not reflect deduction of any
applicable CDSC. The "tax-equivalent yield" of a class of shares of a Fund also
may be quoted from time to time, which shows the level of taxable yield needed
to produce an after-tax equivalent to the particular class's tax-free yield.
This is done by increasing such class's yield (as calculated above) by the
amount necessary to reflect the payment of Federal income tax at a stated tax
rate. The tax-equivalent yield of a class of shares of a State Municipal Bond
Fund or State Intermediate Municipal Bond Fund will always be higher than its
yield.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of the Fund's portfolio and the Fund's
operating expenses. Investment performance also often reflects the risks
associated with a Fund's investment objective and policies. These factors
should be considered when comparing a Fund's investment results to those of
other mutual funds and other investment vehicles. Since yields fluctuate, yield
data cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
Any fees charged by a selling agent and/or servicing agent directly to its
customers' accounts in connection with investments in the Funds will not be
included in calculations of total return or yield.
In addition to Investor C Shares, the Funds offer Primary A, Investor A and
Investor B Shares. Each Class of shares may bear different sales charges,
shareholder servicing fees and other expenses, which may cause the performance
of a class to differ from the performance of the other classes. Total return
and yield quotations will be computed separately for each class of a Fund's
shares. Any quotation of total return or yield not reflecting CDSCs would be
reduced if such sales charges were reflected. Each Fund's annual report
contains additional performance information and is available upon request
without charge from the Funds' distributor or an investor's selling agent or by
calling Nations Funds at the toll-free number indicated on the cover of this
Prospectus.
14
<PAGE>
How The Funds Are Managed
The business and affairs of Nations Fund Trust are managed under the direction
of its Board of Trustees. The SAI contains the names of and general background
information concerning each Trustee of Nations Fund Trust.
As described below, each Fund is advised by NBAI which is responsible for the
overall management and supervision of the investment management of each Fund.
Each Fund also is sub-advised by a separate investment sub-adviser, which as a
general matter is responsible for the day-to-day investment decisions for the
respective Fund.
Nations Funds 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.
NationsBank Corporation, the parent company of NationsBank has signed an
agreement to merge with BankAmerica Corporation. The proposed merger is subject
to certain regulatory approvals and must be approved by shareholders of both
holding companies. The merger is expected to close in the second half of 1998.
NationsBank and NBAI have advised the Funds that the merger will not reduce the
level or quality of advisory and other services provided to the Funds.
Investment Adviser: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza Charlotte, North Carolina 28255, serves as investment sub-
adviser to the Funds. TradeStreet is a wholly owned subsidiary of NationsBank.
TradeStreet provides investment management services to individuals,
corporations and institutions.
Subject to the general supervision of Nations Fund Trust's Board of Trustees,
and in accordance with each Fund's investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions
with respect to and places orders for each Fund's purchases and sales of
portfolio securities and maintains records relating to such purchases and
sales. The Adviser is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with the
Adviser or which have sold shares in such Funds, if the Adviser believes that
the quality of the transactions and the commissions are comparable to what they
would be with other qualified brokerage firms. From time to time, to the extent
consistent with their investment objectives, policies and restrictions, each
Fund may invest in securities of companies with which NationsBank has a lending
relationship.
For the services provided pursuant to an investment advisory agreement, NBAI is
entitled to receive advisory fees, computed daily and paid monthly, at the
annual rates of: .50% of the average daily net assets of the State Intermediate
Municipal Bond Funds; and .60% of the average daily net assets of the State
Municipal Bond Funds.
For the services provided pursuant to an investment sub-advisory agreement,
NBAI will pay TradeStreet sub-advisory fees, computed daily and paid monthly,
at the annual rates of .07% of the average daily net assets of each Fund.
From time to time, NBAI (and/or TradeStreet) may waive or reimburse (either
voluntarily or pursuant to applicable state limitations) advisory fees and/or
expenses payable by a Fund.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid NBAI under the investment advisory agreement, advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations
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Florida Intermediate Municipal Bond Fund -- .26%, Nations Georgia Intermediate
Municipal Bond Fund -- .27%, Nations Maryland Intermediate Municipal Bond Fund
- -- .23%, Nations North Carolina Intermediate Municipal Bond Fund -- .26%,
Nations South Carolina Intermediate Municipal Bond Fund -- .27%, Nations
Tennessee Intermediate Municipal Bond Fund -- .18%, Nations Texas Intermediate
Municipal Bond Fund -- .27%, Nations Virginia Intermediate Municipal Bond Fund
- -- .28%, Nations Florida Municipal Bond Fund -- .32%, Nations Georgia
Municipal Bond Fund -- .20%, Nations Maryland Municipal Bond Fund -- .14%,
Nations North Carolina Municipal Bond Fund -- .28%, Nations South Carolina
Municipal Bond Fund -- .22%, Nations Tennessee Municipal Bond Fund -- .02%,
Nations Texas Municipal Bond Fund -- .16% and Nations Virginia Municipal Bond
Fund -- .25%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers, NBAI
paid TradeStreet under the investment sub-advisory agreement, sub-advisory fees
at the indicated rates of the following Funds' average daily net assets:
Nations Florida Intermediate Municipal Bond Fund -- .07%, Nations Georgia
Intermediate Municipal Bond Fund -- .07%, Nations Maryland Intermediate
Municipal Bond Fund -- .07%, Nations North Carolina Intermediate Municipal Bond
Fund -- .07%, Nations South Carolina Intermediate Municipal Bond Fund -- .07%,
Nations Tennessee Intermediate Municipal Bond Fund -- .07%, Nations Texas
Intermediate Municipal Bond Fund -- .07%, Nations Virginia Intermediate
Municipal Bond Fund -- .07%, Nations Florida Municipal Bond Fund -- .07%,
Nations Georgia Municipal Bond Fund -- .07%, Nations Maryland Municipal Bond
Fund -- .07%, Nations North Carolina Municipal Bond Fund -- .07%, Nations South
Carolina Municipal Bond Fund -- .07%, Nations Tennessee Municipal Bond Fund --
.07%, Nations Texas Municipal Bond Fund -- .07%, Nations Virginia Municipal
Bond Fund -- .07%.
The Municipal Fixed Income Management Team of TradeStreet is responsible for
the day-to-day management of the Funds.
Morrison & Foerster LLP, counsel to Nations Funds and special counsel to
NationsBank, has advised Nations Funds and NationsBank that NationsBank and its
affiliates may perform the services contemplated by the investment advisory
agreement and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such federal or state statutes, regulations and
judicial or administrative decisions or interpretations, could prevent such
entities from continuing to perform, in whole or in part, such services. If any
such entity were prohibited from performing any such services, it is expected
that new agreements would be proposed or entered into 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 Funds pursuant to an administration agreement. Pursuant to the terms of
the administration agreement, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
First Data Investor Services Group, Inc. ("First Data"), 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
Funds pursuant to a co-administration agreement. Under the co-administration
agreement, First Data provides various administrative and accounting services
to the Funds, including performing calculations necessary to determine net
asset values and dividends, preparing tax returns and financial statements and
maintaining the portfolio records and certain general accounting records for
the Funds. For the services rendered pursuant to the administration and
co-administration agreements, Stephens and First Data are entitled to receive a
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combined fee at the annual rate of up to .10% of each Fund's average daily net
assets.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid its administrators combined fees at the indicated rates
of the following Funds' average daily net assets: Nations Florida Intermediate
Municipal Bond Fund -- .08%, Nations Georgia Intermediate Municipal Bond Fund
- -- .08%, Nations Maryland Intermediate Municipal Bond Fund -- .08%, Nations
North Carolina Intermediate Municipal Bond Fund -- .08%, Nations South Carolina
Intermediate Municipal Bond Fund -- .08%, Nations Tennessee Intermediate
Municipal Bond Fund -- .08%, Nations Texas Intermediate Municipal Bond Fund --
.08%, Nations Virginia Intermediate Municipal Bond Fund -- .08%, Nations
Florida Municipal Bond Fund -- .08%, Nations Georgia Municipal Bond Fund --
.08%, Nations Maryland Municipal Bond Fund -- .08%, Nations North Carolina
Municipal Bond Fund -- .08%, Nations South Carolina Municipal Bond Fund --
.08%, Nations Tennessee Municipal Bond Fund -- .08%, Nations Texas Municipal
Bond Fund -- .08% and Nations Virginia Municipal Bond Fund -- .08%.
NBAI serves as sub-administrator for the Funds pursuant to a sub-administration
agreement. Pursuant to the terms of the sub-administration agreement, NBAI
assists Stephens in supervising, coordinating and monitoring various aspects of
the Funds' administrative operations. For providing such services, NBAI 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. Nations Funds
has entered into distribution agreements with Stephens which provide that
Stephens has the exclusive right to distribute shares of the Funds. Stephens
may pay service fees or commissions to selling agents that assist customers in
purchasing Investor C Shares of the Funds. See "Shareholder Servicing And
Distribution Plans."
The Bank of New York ("BONY" or the "Custodian"), located at 90 Washington
Street, New York, New York 10286, provides custodial services for the assets of
all Nations Funds, except the international portfolios. In return for providing
custodial services to the Nations Funds Family, BONY is entitled to receive, in
addition to out-of-pocket expenses, fees at the rate of (i) 3/4 of one basis
point per annum on the aggregate net assets of all Nations Funds' non-money
market funds up to $10 billion; and (ii) 1/2 of one basis point on the excess,
including all Nations Funds' money market funds.
First Data serves as transfer agent (the "Transfer Agent") for the Funds'
Investor C Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
PricewaterhouseCoopers LLP serves as independent accountant to Nations Funds.
Their address is 160 Federal Street, Boston, Massachusetts 02110.
Expenses: The accrued expenses of each Fund are deducted from the Funds' total
accrued income before dividends are declared. These expenses include, but are
not limited to: fees paid to the Adviser, Stephens and First Data; taxes;
interest; fees (including fees paid to Nations Funds' Trustees and officers);
federal and state securities registration and qualification fees; brokerage
fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings;
other expenses which are not expressly assumed by the Adviser, Stephens or
First Data under their respective agreements with Nations Funds; and any
extraordinary expenses. Investor C Shares may bear certain class specific
expenses and also bear certain additional shareholder service and/or sales
support costs. Any general expenses of Nations Fund Trust that are not readily
identifiable as belonging to a particular investment portfolio are allocated
among all portfolios in the proportion that the assets of a portfolio bear to
the assets of Nations Fund Trust or in such other manner as the Board of
Trustees deems appropriate.
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Organization And History
The Funds are members of the Nations Funds Family, which consists of Nations
Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc., Nations
Institutional Reserves, Nations Annuity Trust and Nations LifeGoal Funds, Inc.
The Nations Funds Family currently has more than 60 distinct investment
portfolios and total assets in excess of $40 billion.
Nations Fund Trust was organized as a Massachusetts business trust on May 6,
1985. Nations Fund Trust's fiscal year end is March 31; prior to 1996, Nations
Fund Trust's fiscal year end was November 30. The Funds currently offer four
classes of shares -- Primary A Shares, Investor A Shares, Investor B Shares and
Investor C Shares. This Prospectus relates only to the Investor C Shares of the
following Funds of Nations Fund Trust: Nations Florida Intermediate Municipal
Bond Fund, Nations Florida Municipal Bond Fund, Nations Georgia Intermediate
Municipal Bond Fund, Nations Georgia Municipal Bond Fund, Nations Maryland
Intermediate Municipal Bond Fund, Nations Maryland Municipal Bond Fund, Nations
North Carolina Intermediate Municipal Bond Fund, Nations North Carolina
Municipal Bond Fund, Nations South Carolina Intermediate Municipal Bond Fund,
Nations South Carolina Municipal Bond Fund, Nations Tennessee Intermediate
Municipal Bond Fund, Nations Tennessee Municipal Bond Fund, Nations Texas
Intermediate Municipal Bond Fund, Nations Texas Municipal Bond Fund, Nations
Virginia Intermediate Municipal Bond Fund and Nations Virginia Municipal Bond
Fund. To obtain additional information regarding the Funds' other classes of
shares which may be available to you, contact your Selling Agent (as defined
below) or Nations Funds at 1-800-321-7854.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class of shares. See the SAI for examples of instances where
the Investment Company Act of 1940 (the "1940 Act") requires voting by fund.
As of August 1, 1998, 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 the SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders
entitled to vote at least 10% of the outstanding shares of Nations Fund Trust
entitled to be voted at such meeting.
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About Your Investment
How To Buy Shares
This Prospectus offers one class of shares to the general public. Investor C
Shares are sold without an initial sales charge and are subject to a CDSC upon
certain redemptions. Contact your Agent or Nations Funds at 1-800-321-7854 for
more information.
The Funds have established various procedures for purchasing Investor C Shares
in order to accommodate different investors. Purchase orders for Investor C
Shares may be placed through banks, broker/dealers or other financial
institutions (including certain affiliates of NationsBank) that have entered
into a shareholder servicing agreement ("Servicing Agreement") with Nations
Funds ("Servicing Agents") and/or a sales support agreement ("Sales Support
Agreement") with Stephens ("Selling Agents").
The Funds reserve the right, in their discretion, to make Investor C Shares
available to other categories of investors, including those who become eligible
in connection with a merger or reorganization.
There is a minimum initial investment of $1,000, except for investments
pursuant to the Systematic Investment Plan described below. The minimum
subsequent investment is $100, except for investments pursuant to the
Systematic Investment Plan.
Investor C Shares may be purchased at net asset value per share without the
imposition of a sales charge, but are subject to a CDSC if redeemed within one
year after purchase. Purchases may be effected on days on which the New York
Stock Exchange (the "Exchange") is open for business (a "Business Day").
The Servicing Agents will provide various shareholder services for, and the
Selling Agents will provide sales support assistance to, their respective
customers ("Customers") who own Investor C Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Funds may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.
Nations Funds and Stephens reserve the right to reject any purchase order. The
issuance of Investor C Shares is recorded on the books of the Funds and share
certificates are not issued unless expressly requested in writing. Certificates
are not issued for fractional shares.
Effective Time of Purchases: Purchase orders for Investor C Shares in the Funds
which are received by Stephens, the Transfer Agent or their respective agent
before the close of regular trading 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. In the event that the Exchange closes early, purchase
orders received prior to closing will be priced as of the time the Exchange
closes and purchase orders received after the Exchange closes will be deemed
received on the next Business Day and priced according to the net asset value
determined on the next Business Day. Purchase orders are not executed until
4:00 p.m., Eastern time, on the Business Day on which immediately available
funds in payment of the purchase price are received by the Funds' Custodian.
Such payment must be received no later than 4:00 p.m., Eastern time, by the
third Business Day following the receipt of the order, as determined above. If
funds are not received by such date, the order will not be accepted and notice
thereof will be given to the Agent placing the order. Payment for orders which
are not received or accepted will be returned after prompt inquiry to the
sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor C
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Funds.
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Systematic Investment Plan: The minimum initial investment is $100 for
investors participating on a monthly basis in the Systematic Investment Plan
("SIP"). Under the Funds' SIP, a shareholder may automatically purchase
Investor C Shares. On a bi-monthly, monthly or quarterly basis, shareholders
may direct cash to be transferred automatically from their checking or savings
account at any bank which is a member of the Automated Clearing House to their
Fund account. Transfers will occur on or about the 15th and/or the last day of
the applicable month. Subject to certain exceptions for employees of
NationsBank and its affiliates and pre-existing SIP accounts, the systematic
investment amount may be in any amount from $50 to $100,000. For more
information concerning the SIP, contact your Agent.
Telephone Transactions: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How to Redeem Shares" and "How To
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. Shareholders should be aware that by using the telephone transaction
feature, such shareholders may be giving up a measure of security that they may
have if they were to authorize written requests only. A shareholder may bear
the risk of any resulting losses from a telephone transaction. Nations Funds
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if Nations Funds and its service providers fail to
employ such measures, they may be liable for any losses due to unauthorized or
fraudulent instructions. Nations Funds requires a form of personal
identification prior to acting upon instructions received by telephone and
provides written confirmation to shareholders of each telephone share
transaction. In addition, Nations Funds reserves the right to record all
telephone conversations. Shareholders should be aware that during periods of
significant economic or market change, telephone transactions may be difficult
to complete.
Investor C Shares -- Charges and Features
Investor C Contingent Deferred Sales Charge:
Subject to certain waivers, Investor C Shares of the Funds that are redeemed
within one year of the date of purchase will be subject to a CDSC equal to
1.00% of the lesser of the net asset value or the purchase price of the shares
being redeemed. No CDSC is imposed on increases in net asset value above the
initial purchase price, including shares acquired by reinvestment of
distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor C Shares, all purchases during a month will be
aggregated and deemed to have been made on the last day of the month. In
determining whether a CDSC is applicable to a redemption, the calculation will
be made in the manner that results in the lowest possible charge being
assessed. In this regard, it will be assumed that the redemption is first of
shares held for the longest period of time or shares acquired pursuant to
reinvestment of dividends or distributions. The charge will not be applied to
dollar amounts representing an increase in the net asset value since the time
of purchase.
The CDSC will be waived on redemptions of Investor C Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as
amended (the "Code")) of a shareholder (including a registered joint owner),
(ii) in connection with the following retirement plan distributions: (a) lump-
sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or in the case of a "key employee" of a
"top heavy" plan, following attainment of age 59 1/2); (b) distributions from
an IRA, or Custodial Account under Section 403(b)(7) of the Code, following
attainment of age 59 1/2; (c) a tax-free return of an excess contribution to an
IRA; and (d) distributions from a qualified retirement plan that are not
subject to the 10% additional Federal withdrawal tax pursuant to Section
72(t)(2) of the Code,
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(iii) payments made to pay medical expenses which exceed 7.5% of income and
distributions to pay for insurance by an individual who has separated from
employment and who has received unemployment compensation under a federal or
state program for at least 12 weeks, (iv) effected pursuant to Nations Funds'
right to liquidate a shareholder's account, including instances where the
aggregate net asset value of the Investor C shares held in the account is less
than the minimum account size, (v) effected pursuant to the Automatic
Withdrawal Plan discussed below, provided that such redemptions do not exceed,
on an annual basis, 12% of the net asset value of the Investor C Shares in the
account, and (vi) in connection with the combination of Nations Funds with any
other registered investment company by a merger, acquisition of assets or by
any other transaction. In addition, the CDSC will be waived on Investor C
Shares purchased before September 30, 1994 by current or retired employees of
NationsBank and its affiliates or by current or former Trustees or Directors of
Nations Funds or other management companies managed by NationsBank.
Shareholders are responsible for providing evidence sufficient to establish
that they are eligible for any waiver of the CDSC.
Reinstatement Privilege: Within 120 days after a redemption of Investor C
Shares of the Fund, a shareholder may reinvest any portion of the proceeds of
such redemption in Investor C Shares of the Fund. The amount which may be so
reinvested is limited to an amount up to, but not exceeding, the redemption
proceeds (or to the nearest full share if fractional shares are not purchased).
A shareholder exercising this privilege would receive a pro rata credit for any
CDSC paid in connection with the prior redemption. A shareholder may not
exercise this privilege with the proceeds of a redemption of shares previously
purchased through the reinvestment privilege. In order to exercise this
privilege, a written order for the purchase of Investor C Shares must be
received by the Transfer Agent or by Stephens within 120 days after the
redemption.
Automatic Withdrawal Plan: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Fund if the value of the
Investor C Shares in his/her accounts within the Nations Funds Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor C Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis 12% of
the net value of the Investor C Shares in the account. Otherwise, any applicable
CDSC will be imposed on shares redeemed under the AWP. Shareholders who elect to
establish an AWP may receive a monthly, quarterly or annual check or automatic
transfer to a checking or savings account in a stated amount of not less than
$25 on or about the 10th or 25th day of the applicable month of withdrawal.
Investor C Shares will be redeemed (net of any applicable CDSC) as necessary to
meet withdrawal payments. Withdrawals will reduce principal and may eventually
deplete the shareholder's account. If a shareholder desires to establish an AWP
after opening an account, a signature guarantee will be required. An AWP may be
terminated by a shareholder on 30 days' written notice to his/her Agent or by
Nations Funds at any time.
How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders for
Investor C Shares of the Funds which are received by Stephens, the Transfer
Agent or their respective agents before the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on any Business Day are priced
according to the net asset value next determined after acceptance of the order.
In the event that the Exchange closes early, redemption orders received prior
to closing will be priced as of the time the Exchange closes and redemption
orders received after the Exchange closes will be deemed received on the next
Business Day and priced according to the net asset value determined on the next
Business Day.
Redemption orders are effected at the net asset value per share next determined
after receipt of the order by Stephens, the Transfer Agent or their
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respective agents. The Agents are responsible for transmitting redemption
orders to Stephens, the Transfer Agent or their respective agents and for
crediting their Customers' accounts with the redemption proceeds on a timely
basis. No charge for wiring redemption payments is imposed by Nations Funds.
There is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens, the Transfer Agent or
their respective agents. However, redemption proceeds for shares purchased by
check may not be remitted until at least 15 days after the date of purchase to
ensure that the check has cleared; a certified check, however, is deemed to be
cleared immediately.
Nations Funds may redeem a shareholder's Investor C Shares upon 60 days'
written notice if the balance in the shareholder's account drops below $500 as
a result of redemptions. Share balances also may be redeemed at the direction
of an Agent pursuant to arrangements between the Agent and its Customers.
Nations Funds also may redeem shares of a Fund involuntarily or make payment
for redemption in readily marketable securities or other property under certain
circumstances in accordance with the 1940 Act.
Prior to effecting a redemption of Investor C Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock
exchange, unless other arrangements satisfactory to Nations Funds have
previously been made. Nations Funds may require any additional information
reasonably necessary to evidence that a redemption has been duly authorized.
How To Exchange Shares
The exchange feature enables a shareholder of Investor C Shares of a Nations
Funds non-money market fund to acquire shares of the same class that are
offered by another non-money market fund of Nations Funds (other than an index
fund) or Daily Shares of any Nations Funds money market fund when he or she
believes that a shift between funds is an appropriate investment decision. A
qualifying exchange is based on the next calculated net asset value per share
of each fund after the exchange order is received.
If a shareholder acquires Investor C Shares of a non-money market fund through
an exchange, the CDSC applicable to that current fund will be applied to any
redemption of the acquired shares. However, if a shareholder acquires Daily
Shares of a money market fund through an exchange of Investor C Shares, the
CDSC applicable to the exchanged Investor C Shares will be applied on any
redemption of the acquired Daily Shares. Notwithstanding the foregoing, if a
shareholder redeems shares acquired through an exchange, the shareholder will
be subject to the highest CDSC applicable to any shares that were exchanged
within the 30 days prior to the redemption.
The Funds and each of the other funds of Nations Funds may limit the number of
times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Funds upon such notice as may be required by
applicable regulatory agencies (presently 60 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 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
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a capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within 90 days after the shares are purchased.
Nations Funds and Stephens reserve 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.
The Investor C Shares exchanged must have a current value of at least $1,000
(except for exchanges through the Automated Exchange Feature, which is
described below). Nations Funds and Stephens reserve the right to reject any
exchange request. Only shares that may legally be sold in the state of the
investor's residence may be acquired in an exchange. Only shares of a class
that is accepting investments generally may be acquired in an exchange. An
investor may telephone an exchange request by calling his/her Agent which is
responsible for transmitting such request to Stephens or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges
may be difficult to complete. In such event, shares may be exchanged by mailing
the request directly to the Agent through which the original shares were
purchased. An investor should consult his/her Agent or Stephens for further
information regarding exchanges.
Automatic Exchange Feature: Under the Funds' Automatic Exchange Feature
("AEF"), a shareholder may automatically exchange at least $25 on a monthly or
quarterly basis. A shareholder may direct proceeds to be exchanged from one
Fund of Nations Funds to another as allowed by the applicable exchange rules
within the prospectus. Exchanges will occur on or about the 15th or 30th day of
the applicable month. The shareholder must have an existing position in both
Funds in order to establish the AEF. This feature may be established by
directing a request to the Transfer Agent by telephone or in writing. For
additional information, an investor should contact his/her Selling Agent or
Nations Funds.
Shareholder Servicing And Distribution Plans
Pursuant to Rule 12b-1 under the 1940 Act, the Trustees have approved a
Distribution Plan with respect to Investor C Shares of the Funds. Pursuant to
the Distribution Plan, each Fund may compensate or reimburse Stephens for any
activities or expenses primarily intended to result in the sale of the Fund's
Investor C Shares. Payments under the Distribution Plan will be calculated
daily and paid monthly at a rate or rates set from time to time by the
Trustees, provided that the annual rate may not exceed .75% of the average
daily net asset value of each Fund's Investor C Shares.
The fees payable under the Distribution Plan are used (i) to compensate Selling
Agents for providing sales support assistance relating to Investor C Shares,
(ii) to pay for promotional activities intended to result in the sale of
Investor C Shares such as the preparation, printing and distribution of
prospectuses to other than current shareholders, and (iii) to compensate
Selling Agents for providing sales support services with respect to their
Customers who are, from time to time, beneficial and record holders of Investor
C Shares. Currently, substantially all fees paid pursuant to the Distribution
Plan are paid to compensate Selling Agents for providing the services described
in (i) and (iii) above, with any remaining amounts being used by Stephens to
partially defray other expenses incurred by Stephens in distributing Investor C
Shares. Fees received by Stephens pursuant to the Distribution Plan will not be
used to pay any interest expenses, carrying charges or other financing costs
(except to the extent permitted by the SEC) and will not be used to pay any
general and administrative expenses of Stephens.
Nations Funds and Stephens may suspend or reduce payments under the
Distribution Plan at any time, and payments are subject to the continuation of
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the Distribution Plan described above and the terms of the Sales Support
Agreement between Selling Agents and Stephens. See the SAI for more details on
the Distribution Plan.
The Trustees also have approved a shareholder servicing plan (the "Investor C
Servicing Plan") for each Fund which permits the Fund to compensate Servicing
Agents for services provided to their Customers that own Investor C Shares.
Payments under the Investor C Servicing Plan are calculated daily and paid
monthly at a rate or rates set from time to time by each Fund, provided that
the annual rate may not exceed .25% of the average daily net asset value of the
Fund's Investor C Shares.
The fees payable under the Investor C Servicing Plan are used primarily to
compensate or reimburse Servicing Agents for shareholder services provided, and
related expenses incurred, by such Servicing Agents. The shareholder services
provided by Servicing Agents may include: (i) aggregating and processing
purchase and redemption requests for Investor C Shares from Customers and
transmitting net purchase and redemption orders to Stephens or the Transfer
Agent; (ii) providing Customers with a service that invests the assets of their
accounts in Investor C Shares pursuant to specific or preauthorized
instructions; (iii) processing dividend and distribution payments from a Fund
on behalf of Customers; (iv) providing information periodically to Customers
showing their positions in Investor C Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services.
Nations Funds may suspend or reduce payments under the Investor C Servicing
Plan at any time, and payments are subject to the continuation of the Investor
C Servicing Plan described above and the terms of the Servicing Agreements. See
the SAI for more details on the Investor C Servicing Plan.
Nations Funds understands that Agents may charge fees to their Customers who
are the owners of the Funds' Investor Shares in connection with a Customer's
account. These fees would be in addition to any amounts received by a Selling
Agent under its Sales Support Agreement with Stephens or by a Servicing Agent
under its Servicing Agreement with Nations Funds. The Sales Support Agreements
and Servicing Agreements require Agents to disclose to their Customers any
compensation payable to the Agent by Stephens or Nations Funds and any other
compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.
The Adviser may also pay out of its own assets amounts to Stephens or other
broker/dealers in connection with the provision of administrative and/or
distribution related services to shareholders.
In addition, Stephens may, from time to time, at its expense or as an expense
for which it may be reimbursed under the Distribution Plan, pay a bonus or
other consideration or incentive to Agents who sell a minimum dollar amount of
shares of a Fund during a specified period of time. Stephens may also, from
time to time, pay additional consideration to dealers not to exceed .75% of the
offering price per share on all sales of Investor C Shares as an expense of
Stephens or for which Stephens may be reimbursed under the plan adopted
pursuant to Rule 12b-1 or upon receipt of a CDSC. Any such additional
consideration or incentive program may be terminated at any time by Stephens.
Stephens has also established a non-cash compensation program pursuant to which
broker/dealers or financial institutions that sell shares of the Funds may earn
additional compensation in the form of trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift certificates for
meals or merchandise. This non-cash compensation program may be amended or
terminated at any time by Stephens.
24
<PAGE>
How The Funds Value Their Shares
The Funds calculate the net asset value of a share of each class by dividing
the total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares of the Funds are valued as of the close of regular
trading on the Exchange (currently 4:00 p.m., Eastern time) on each Business
Day. In the event that the Exchange closes early, shares of the Funds will be
priced as of the time the Exchange closes. Currently, the days on which the
Exchange is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities for which market quotations are readily available are
valued at market value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following procedures
approved by the Trustees.
How Dividends And Distributions Are Made; Tax Information
Dividends and Distributions: Dividends from net investment income are declared
daily and paid monthly by the Funds. Each Fund's net realized capital gains
(including net short-term capital gains) are distributed at least annually.
Distributions from capital gains are made after applying any available capital
loss carryovers. Distributions paid by the Funds with respect to one class of
shares may be greater or less than those paid with respect to another class of
shares due to the different expenses of the different classes.
Investor C Shares of the 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.
The net asset value of Investor C Shares will be reduced by the amount of any
dividend or distribution. Certain Selling or Servicing Agents may provide for
the reinvestment of dividends in the form of additional Investor C Shares of
the same class of the same Fund. Dividends and distributions are paid in cash
within five Business Days of the end of the month to which the payment relates.
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
Investor C Shares in a Fund.
Tax Information: Each Fund intends to continue to qualify as a "regulated
investment company" under the Code. Such qualification relieves a Fund of
liability for Federal income tax on amounts distributed in accordance with the
Code.
As regulated investment companies, the Funds are permitted to pass through to
their shareholders tax-exempt income ("exempt-interest dividends") subject to
certain requirements which the Funds intend to satisfy. Distributions from
taxable income generally will be taxable as ordinary income to shareholders
whether such income is received in cash or reinvested in additional shares. The
policy of the Funds is to pay to their shareholders an amount equal to at least
90% of their exempt-interest income and their investment company taxable
income. Exempt-interest dividends may be treated by shareholders as items of
interest excludable from their Federal gross income under Section 103(a) of the
Code unless under the circumstances applicable to the particular shareholder
the exclusion would be disallowed. (See the SAI under "Additional Information
Concerning Taxes.") Distributions from the Funds will not qualify for the
dividends-received deduction for corporate shareholders.
Substantially all of a Fund's net realized long-term capital gains will be
distributed at least annually. The Funds generally will have no tax liabil-
25
<PAGE>
ity with respect to such gains, and the distributions will be taxable to
shareholders as net capital gain, regardless of how long the shareholders have
held the Fund's shares and whether such gains are received in cash or
reinvested in additional shares. Noncorporate shareholders may be taxed on such
distributions at preferential rates.
To the extent that dividends, if any, paid by the Funds to shareholders are
derived from taxable income or from long-term or short-term capital gains, such
dividends will not be exempt from Federal income tax.
Each year, shareholders will be notified as to the amount and federal tax
status of all dividends and capital gain distributions paid during the prior
year. Such dividends and capital gain distributions may be subject to state and
local taxes.
Dividends and distributions 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 and distributions are actually paid
during January of the following year.
Federal law requires Nations Funds to withhold 31% from any distributions
(other than exempt-interest dividends) paid by Nations Funds and/or redemptions
(including exchanges and redemptions in-kind) that occur in certain shareholder
accounts if the shareholder has not properly furnished a certified correct
Taxpayer Identification Number and has not certified that withholding does not
apply, or if the Internal Revenue Service has notified Nations Funds that the
Taxpayer Identification Number listed on a shareholder account is incorrect
according to its records, or that the shareholder is subject to backup
withholding. Amounts withheld are applied to the shareholder's Federal tax
liability, and a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes.
With respect to the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds, it is anticipated that exempt-interest dividends derived
from tax-exempt interest paid on municipal obligations of the pertinent state
and that state's political subdivisions, agencies, instrumentalities, and
authorities, and certain other issuers, including Puerto Rico and Guam, will be
exempt from individual state income tax with respect to those states which
impose a state income tax. Florida and Texas do not impose income taxes, but
Florida imposes a tax upon intangible personal property which may apply to
shares of Nations Florida Intermediate Municipal Bond Fund and Nations Florida
Municipal Bond Fund held by residents of that state. Florida has issued a
Technical Assistance Advisement indicating that shares of such Funds will not
be subject to Florida's intangibles tax, subject to certain requirements which
the Funds intend to satisfy. See the SAI for further details about state tax
treatment relevant to shareholders of the Funds.
In addition to annual disclosures as to Federal tax consequences of dividends
and distributions, shareholders of the State Intermediate Municipal Bond Funds
and the State Municipal Bond Funds will also be advised as to the state tax
consequences of dividends and distributions made each year.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisors with specific reference to their
own tax situations as well as with respect to foreign, state and local taxes.
Further tax information is contained in the SAI.
26
<PAGE>
Financial Highlights
The following financial information has been derived from the audited financial
statements of Nations Fund Trust. PricewaterhouseCoopers LLP is the independent
accountant to Nations Fund Trust. The reports of PricewaterhouseCoopers LLP for
Nations Fund Trust's most recent fiscal period accompany the financial
statements for such period and are incorporated by reference in the SAI, which
is available upon request. Shareholders of a Fund will receive unaudited
semi-annual reports describing the Fund's investment operations and annual
financial statements audited by the Funds' independent accountant.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Florida Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98(c) 03/31/97
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.40 $ 10.46
Net investment income 0.43 0.44
Net realized and unrealized gain/(loss) on
investments 0.37 ( 0.06)
Net increase/(decrease) in net asset value from
operations 0.80 0.38
Distributions:
Dividends from net investment income ( 0.43) ( 0.44)
Distributions from net realized capital gains -- --
Total dividends and distributions ( 0.43) ( 0.44)
Net asset value, end of period $ 10.77 $ 10.40
Total return++ 7.80% 3.71%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 188 $ 272
Ratio of operating expenses to average net
assets 1.20%(a) 1.00%(a)
Ratio of net investment income to average net
assets 4.04% 4.22%
Portfolio turnover rate 13% 16%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.46% 1.31%
<CAPTION>
PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
Investor C Shares 03/31/96(b) 11/30/95 11/30/94 11/30/93*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.63 $ 9.61 $ 10.50 $ 9.98
Net investment income 0.15 0.43 0.39 0.35
Net realized and unrealized gain/(loss) on
investments ( 0.17) 1.02 ( 0.88) 0.52
Net increase/(decrease) in net asset value from
operations ( 0.02) 1.45 ( 0.49) 0.87
Distributions:
Dividends from net investment income ( 0.15) ( 0.43) ( 0.39)# ( 0.35)
Distributions from net realized capital gains -- -- ( 0.01) --
Total dividends and distributions ( 0.15) ( 0.43) ( 0.40) ( 0.35)
Net asset value, end of period $ 10.46 $ 10.63 $ 9.61 $ 10.50
Total return++ ( 0.23)% 15.34% ( 4.81)% 8.80%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 275 $ 277 $ 614 $ 684
Ratio of operating expenses to average net
assets 1.00%+(a) 1.05%(a) 1.13%(a) 1.19%+
Ratio of net investment income to average net
assets 4.16%+ 4.20% 3.86% 3.53%+
Portfolio turnover rate 18% 27% 34% 15%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.36%+ 1.31% 1.34% 1.55%+
</TABLE>
* Nations Florida Intermediate Municipal Bond Fund Investor C Shares commenced
operations on December 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Amount includes distributions in excess of net investment income, which were
less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) Per share net investment income has been calculated using the monthly
average share method.
27
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Florida Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98(c) 03/31/97
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.48 $ 9.47
Net investment income 0.41 0.44
Net realized and unrealized gain/(loss) on investments 0.51 0.01
Net increase/(decrease) in net asset value from operations 0.92 0.45
Distributions:
Dividends from net investment income (0.41) (0.44)
Total dividends and distributions (0.41) (0.44)
Net asset value, end of period $ 9.99 $ 9.48
Total return++ 9.83% 4.78%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3 $ 40
Ratio of operating expenses to average net assets 1.33%(a) 1.10%(a)
Ratio of net investment income to average net assets 4.12% 4.57%
Portfolio turnover rate 19% 23%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.63% 1.43%
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.76 $ 8.40 $ 8.47
Net investment income 0.14 0.44 0.03
Net realized and unrealized gain/(loss) on investments (0.29) 1.36 (0.07)
Net increase/(decrease) in net asset value from operations (0.15) 1.80 (0.04)
Distributions:
Dividends from net investment income (0.14) (0.44) (0.03)
Total dividends and distributions (0.14) (0.44) (0.03)
Net asset value, end of period $ 9.47 $ 9.76 $ 8.40
Total return++ (1.52)% 21.80% (0.43)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 38 $ 38 $ 2
Ratio of operating expenses to average net assets 1.15%+(a) 1.14%(a) 0.96%+(a)
Ratio of net investment income to average net assets 4.48%+ 4.69% 4.80%+
Portfolio turnover rate 7% 13% 46%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.51%+ 1.70% 1.66%+
</TABLE>
* Nations Florida Municipal Bond Fund Investor C Shares commenced operations
on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) Per share net investment income has been calculated using the monthly
average share method.
28
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Georgia Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/98(c) 03/31/97 03/31/96(b)
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 10.58 $ 10.63 $ 10.81
Net investment income 0.42 0.45 0.15
Net realized and unrealized
gain/(loss) on investments 0.38 ( 0.05) ( 0.18)
Net increase/(decrease) in net
asset value from operations 0.80 0.40 ( 0.03)
Distributions:
Dividends from net investment
income ( 0.42) ( 0.45) ( 0.15)
Distributions from net realized
capital gains ( 0.04) -- --
Total dividends and distributions ( 0.46) ( 0.45) ( 0.15)
Net asset value, end of period $ 10.92 $ 10.58 $ 10.63
Total return++ 7.70% 3.81% ( 0.29)%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $1,034 $1,983 $2,445
Ratio of operating expenses to
average net assets 1.20% 1.00% 1.00%+
Ratio of operating expenses to
average net assets including
interest expense (a) (a) (a)
Ratio of net investment income to
average net assets 3.84% 4.22% 4.17%+
Portfolio turnover rate 25% 9% 3%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 1.45% 1.30% 1.33%+
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
Investor C Shares 11/30/95 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 9.82 $ 10.82 $ 10.29 $ 10.11
Net investment income 0.45 0.43 0.42 0.20
Net realized and unrealized
gain/(loss) on investments 0.99 ( 0.98) 0.56 0.18
Net increase/(decrease) in net
asset value from operations 1.44 ( 0.55) 0.98 0.38
Distributions:
Dividends from net investment
income ( 0.45) ( 0.43)# ( 0.42) ( 0.20)
Distributions from net realized
capital gains -- ( 0.02) ( 0.03) --
Total dividends and distributions ( 0.45) ( 0.45) ( 0.45) ( 0.20)
Net asset value, end of period $ 10.81 $ 9.82 $ 10.82 $ 10.29
Total return++ 14.85% ( 5.25)% 9.61% 3.82%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $2,606 $2,397 $2,990 $ 992
Ratio of operating expenses to
average net assets 1.05% 1.12% 1.21% 0.91%+
Ratio of operating expenses to
average net assets including
interest expense (a) 1.13% -- --
Ratio of net investment income to
average net assets 4.26% 4.16% 3.82% 4.21%+
Portfolio turnover rate 17% 22% 6% 12%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 1.30% 1.33% 1.52% 1.72%+
</TABLE>
* Nations Georgia Intermediate Municipal Bond Fund Investor C Shares commenced
operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount includes distributions in excess of net investment income, which were
less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) Per share net investment income has been calculated using the monthly
average share method.
29
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Georgia Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98(c) 03/31/97
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.50 $ 9.48
Net investment income 0.40 0.42
Net realized and unrealized gain/(loss) on investments 0.50 0.02
Net increase/(decrease) in net asset value from operations 0.90 0.44
Distributions:
Dividends from net investment income ( 0.40) (0.42)
Net asset value, end of period $ 10.00 $ 9.50
Total return++ 9.64% 4.77%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 27 $ 72
Ratio of operating expenses to average net assets 1.33%(a) 1.10%(a)
Ratio of net investment income to average net assets 4.09% 4.46%
Portfolio turnover rate 30% 19%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.75% 1.55%
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.72 $ 8.38 $ 8.45
Net investment income 0.14 0.44 0.03
Net realized and unrealized gain/(loss) on investments (0.24) 1.34 (0.07)
Net increase/(decrease) in net asset value from operations (0.10) 1.78 (0.04)
Distributions:
Dividends from net investment income (0.14) (0.44) (0.03)
Net asset value, end of period $ 9.48 $ 9.72 $ 8.38
Total return++ (1.03)% 21.59% (0.44)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 69 $ 69 $ 2
Ratio of operating expenses to average net assets 1.16%+(a) 1.15%(a) 0.96%+(a)
Ratio of net investment income to average net assets 4.40%+ 4.67% 4.85%+
Portfolio turnover rate 7% 26% 35%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.70%+ 1.84% 1.79%+
</TABLE>
* Nations Georgia Municipal Bond Fund Investor C Shares commenced operations
on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) Per share net investment income has been calculated using the monthly
average share method.
30
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Maryland Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/98 03/31/97 03/31/96(b)
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 10.70 $ 10.80 $ 10.95
Net investment income 0.43 0.45 0.15
Net realized and unrealized
gain/(loss) on investments 0.31 ( 0.10) ( 0.15)
Net increase/(decrease) in net
asset value from operations 0.74 0.35 0.00
Distributions:
Dividends from net investment
income ( 0.43) ( 0.45) ( 0.15)
Distributions from net realized
capital gains -- -- --
Distributions in excess of net
realized capital gains -- -- --
Total dividends and distributions ( 0.43) ( 0.45) ( 0.15)
Net asset value, end of period $ 11.01 $ 10.70 $ 10.80
Total return++ 7.07% 3.31% ( 0.01)%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 840 $2,017 $2,900
Ratio of operating expenses to
average net assets 1.20% 1.00%(a) 1.00%+(a)
Ratio of net investment income to
average net assets 3.93% 4.20% 4.12%+
Portfolio turnover rate 12% 10% 4%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 1.50% 1.28% 1.31%+
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
Investor C Shares 11/30/95 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 10.00 $ 11.09 $ 10.72 $ 10.58
Net investment income 0.45 0.44 0.40 0.19
Net realized and unrealized
gain/(loss) on investments 0.98 ( 0.99) 0.44 0.14
Net increase/(decrease) in net
asset value from operations 1.43 ( 0.55) 0.84 0.33
Distributions:
Dividends from net investment
income ( 0.45) ( 0.44) ( 0.40) ( 0.19)
Distributions from net realized
capital gains ( 0.03) ( 0.10) ( 0.07) --
Distributions in excess of net
realized capital gains -- ( 0.00)# -- --
Total dividends and distributions ( 0.48) ( 0.54) ( 0.47) ( 0.19)
Net asset value, end of period $ 10.95 $ 10.00 $ 11.09 $ 10.72
Total return++ 14.59% ( 5.20)% 8.30% 3.13%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $2,808 $2,570 $4,424 $1,796
Ratio of operating expenses to
average net assets 1.05%(a) 1.11%(a) 1.24% 1.16%+
Ratio of net investment income to
average net assets 4.26% 4.15% 3.98% 3.88%+
Portfolio turnover rate 11% 22% 26% 38%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 1.30% 1.31% 1.48% 1.44%+
</TABLE>
* Nations Maryland Intermediate Municipal Bond Fund Investor C Shares
commenced operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
31
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Maryland Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/98 03/31/97 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.41 $ 9.39 $ 9.63 $ 8.37 $ 8.44
Net investment income 0.39 0.42 0.13 0.41 0.03
Net realized and unrealized gain/(loss) on investments 0.53 0.02 (0.24) 1.26 (0.07)
Net increase/(decrease) in net asset value from operations 0.92 0.44 (0.11) 1.67 (0.04)
Distributions:
Dividends from net investment income (0.39) (0.42) (0.13) (0.41) (0.03)
Net asset value, end of period $ 9.94 $ 9.41 $ 9.39 $ 9.63 $ 8.37
Total return++ 9.88% 4.73% (1.13)% 20.29% (0.45)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3 $ 2 $ 2 $ 2 $ 2
Ratio of operating expenses to average net assets 1.33% 1.10% 1.16%+ 1.15% 0.96%+(a)
Ratio of net investment income to average net assets 3.88% 4.38% 4.16%+ 4.39% 4.73%+
Portfolio turnover rate 17% 18% 7% 11% 39%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.80% 1.62% 1.79%+ 2.01% 2.05%+
</TABLE>
* Nations Maryland Municipal Bond Fund Investor C Shares commenced operations
on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
32
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations North Carolina Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98 03/31/97
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.34 $ 10.36
Net investment income 0.42 0.42
Net realized and unrealized gain/(loss) on
investments 0.36 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.78 0.40
Distributions:
Dividends from net investment income ( 0.42) ( 0.42)
Distributions from net realized capital gains -- --
Total dividends and distributions ( 0.42) ( 0.42)
Net asset value, end of period $ 10.70 $ 10.34
Total return++ 7.64% 3.94%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 822 $1,364
Ratio of operating expenses to average net assets 1.20%(a) 1.00%(a)
Ratio of net investment income to average net assets 3.99% 4.07%
Portfolio turnover rate 21% 26%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.46% 1.32%
<CAPTION>
PERIOD YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
Investor C Shares 03/31/96(b) 11/30/95 11/30/94 11/30/93*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.51 $ 9.53 $ 10.46 $ 9.99
Net investment income 0.14 0.40 0.38 0.35
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.99 ( 0.88) 0.47
Net increase/(decrease) in net asset value from
operations ( 0.01) 1.39 ( 0.50) 0.82
Distributions:
Dividends from net investment income ( 0.14) ( 0.40)# ( 0.38) ( 0.35)
Distributions from net realized capital gains -- ( 0.01) ( 0.05) --
Total dividends and distributions ( 0.14) ( 0.41) ( 0.43) ( 0.35)
Net asset value, end of period $ 10.36 $ 10.51 $ 9.53 $ 10.46
Total return++ ( 0.12)% 14.84% ( 4.89)% 8.26%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,379 $1,366 $1,486 $1,592
Ratio of operating expenses to average net assets 1.00%+ 1.07%(a) 1.13%(a) 1.17%+
Ratio of net investment income to average net assets 3.97%+ 3.97% 3.80% 3.48%+
Portfolio turnover rate 3% 57% 37% 29%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.37%+ 1.34% 1.40% 1.60%+
</TABLE>
* Nations North Carolina Intermediate Municipal Bond Fund Investor C Shares
commenced operations on December 16, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Amount includes distributions in excess of net investment income, which were
less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
33
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations North Carolina Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98(c) 03/31/97
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.47 $ 9.49
Net investment income 0.40 0.42
Net realized and unrealized gain/(loss) on investments 0.54 (0.02)
Net increase/(decrease) in net asset value from operations 0.94 0.40
Distributions:
Dividends from net investment income ( 0.40) (0.42)
Net asset value, end of period $ 10.01 $ 9.47
Total return++ 10.07% 4.32%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3 $ 18
Ratio of operating expenses to average net assets 1.33 (a) 1.10%(a)
Ratio of net investment income to average net assets 4.05% 4.45%
Portfolio turnover rate 20% 28%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.66% 1.44%
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.73 $ 8.36 $ 8.45
Net investment income 0.14 0.43 0.03
Net realized and unrealized gain/(loss) on investments (0.24) 1.37 (0.09)
Net increase/(decrease) in net asset value from operations (0.10) 1.80 (0.06)
Distributions:
Dividends from net investment income (0.14) (0.43) (0.03)
Net asset value, end of period $ 9.49 $ 9.73 $ 8.36
Total return++ (1.04)% 21.93% (0.67)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 17 $ 2 $ 2
Ratio of operating expenses to average net assets 1.14%+ 1.13%(a) 0.96%+(a)
Ratio of net investment income to average net assets 4.32%+ 4.68% 4.78%+
Portfolio turnover rate 22% 40% 29%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.53%+ 1.71% 1.67%+
</TABLE>
* Nations North Carolina Municipal Bond Fund Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) Per share net investment income has been calculated using the monthly
average share method.
34
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations South Carolina Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/98 03/31/97 03/31/96(b)
<S> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 10.50 $ 10.52 $ 10.69
Net investment income 0.44 0.45 0.15
Net realized and
unrealized gain/(loss)
on investments ( 0.29) ( 0.02) ( 0.17)
Net increase/(decrease) in
net asset value from
operations 0.73 0.43 ( 0.02)
Distributions:
Dividends from net
investment income ( 0.44) ( 0.45) ( 0.15)
Distributions from net
realized capital gains ( 0.00)(c) -- --
Total dividends and
distributions ( 0.44) ( 0.45) ( 0.15)
Net asset value, end of
period $ 10.79 $ 10.50 $ 10.52
Total return++ 7.13% 4.20% ( 0.17)%
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $2,698 $5,089 $5,409
Ratio of operating
expenses to average net
assets 1.20%(a) 1.00%(a) 1.00%+(a)
Ratio of net investment
income to average net
assets 4.16% 4.30% 4.31%+
Portfolio turnover rate 16% 13% 6%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.45% 1.29% 1.32%+
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
Investor C Shares 11/30/95 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value,
beginning of period $ 9.76 $ 10.61 $ 10.18 $ 10.05
Net investment income 0.46 0.44 0.42 0.20
Net realized and
unrealized gain/(loss)
on investments 0.93 ( 0.84) 0.43 0.13
Net increase/(decrease) in
net asset value from
operations 1.39 ( 0.40) 0.85 0.33
Distributions:
Dividends from net
investment income ( 0.46) ( 0.44)# ( 0.42) ( 0.20)
Distributions from net
realized capital gains -- ( 0.01) -- --
Total dividends and
distributions ( 0.46) ( 0.45) ( 0.42) ( 0.20)
Net asset value, end of
period $ 10.69 $ 9.76 $ 10.61 $ 10.18
Total return++ 14.45% ( 3.94)% 8.51% 3.27%+++
Ratios to average net
assets/supplemental
data:
Net assets, end of period
(in 000's) $5,527 $6,167 $8,499 $4,436
Ratio of operating
expenses to average net
assets 1.05%(a) 1.12%(a) 1.20% 0.88%+
Ratio of net investment
income to average net
assets 4.42% 4.24% 3.93% 4.10%+
Portfolio turnover rate 11% 30% 11% 7%
Ratio of operating
expenses to average net
assets without waivers
and/or expense
reimbursements 1.25% 1.33% 1.50% 1.48%+
</TABLE>
* Nations South Carolina Intermediate Municipal Bond Fund Investor C Shares
commenced operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount includes distributions in excess of net investment income, which were
less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) Amount represents less than $0.01 per share.
35
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations South Carolina Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98 03/31/97
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.79 $ 9.77
Net investment income 0.42 0.44
Net realized and unrealized gain/(loss) on investments 0.47 0.02
Net increase/(decrease) in net asset value from operations 0.89 0.46
Distributions:
Dividends from net investment income ( 0.42) (0.44)
Distributions from net realized capital gains ( 0.00)# --
Total dividends and distributions ( 0.42) (0.44)
Net asset value, end of period $ 10.26 $ 9.79
Total return++ 9.29% 4.80%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 28 $ 247
Ratio of operating expenses to average net assets 1.33%(a) 1.10%(a)
Ratio of net investment income to average net assets 4.06% 4.49%
Portfolio turnover rate 9% 30%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.72% 1.50%
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.99 $ 8.65 $ 8.73
Net investment income 0.15 0.45 0.03
Net realized and unrealized gain/(loss) on investments (0.22) 1.34 (0.08)
Net increase/(decrease) in net asset value from operations (0.07) 1.79 (0.05)
Distributions:
Dividends from net investment income (0.15) (0.45) (0.03)
Distributions from net realized capital gains -- -- --
Total dividends and distributions (0.15) (0.45) (0.03)
Net asset value, end of period $ 9.77 $ 9.99 $ 8.65
Total return++ (0.76)% 21.01% (0.52)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 264 $ 20 $ 2
Ratio of operating expenses to average net assets 1.17%+(a) 1.15%(a) 0.96%+(a)
Ratio of net investment income to average net assets 4.39%+ 4.69% 4.73%+
Portfolio turnover rate 20% 13% 14%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.70%+ 1.83% 1.87%+
</TABLE>
* Nations South Carolina Municipal Bond Fund Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
36
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Tennessee Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/98 03/31/97 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.08 $ 10.09 $ 10.23 $ 9.30 $ 9.38
Net investment income 0.40 0.42 0.14 0.41 0.03
Net realized and unrealized gain/(loss) on investments 0.32 ( 0.01) ( 0.14) 0.93 (0.08)
Net increase/(decrease) in net asset value from operations 0.72 0.41 0.00 1.34 (0.05)
Distributions:
Dividends from net investment income ( 0.40) ( 0.42) ( 0.14) ( 0.41) (0.03)
Distributions from net realized capital gains -- -- -- -- --
Total dividends and distributions ( 0.40) ( 0.42) ( 0.14) ( 0.41) (0.03)
Net asset value, end of period $ 10.40 $ 10.08 $ 10.09 $ 10.23 $ 9.30
Total return++ 7.29% 4.08% ( 0.02)% 14.62% (0.53)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3 $ 2 $ 2 $ 2 $ 2
Ratio of operating expenses to average net assets 1.20% 1.00% 1.00%+ 1.07% 1.02%+
Ratio of operating expenses to average net assets including
interest expense (a) (a) -- (a) 1.03%+
Ratio of net investment income to average net assets 3.88% 4.05% 4.01%+ 4.15% 4.06%+
Portfolio turnover rate 38% 28% 3% 34% 41%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.54% 1.43% 1.52%+ 1.42% 1.39%+
</TABLE>
* Nations Tennessee Intermediate Municipal Bond Fund Investor C Shares
commenced operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
37
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Tennessee Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/98(c) 03/31/97 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.70 $ 9.68 $ 9.87 $ 8.58 $ 8.62
Net investment income 0.40 0.43 0.14 0.45 0.03
Net realized and unrealized gain/(loss) on investments 0.52 0.02 (0.19) 1.29 (0.04)
Net increase/(decrease) in net asset value resulting from
operations 0.92 0.45 (0.05) 1.74 (0.01)
Distributions:
Dividends from net investment income ( 0.40) (0.43) (0.14) (0.45) (0.03)
Net asset value, end of period $ 10.22 $ 9.70 $ 9.68 $ 9.87 $ 8.58
Total return++ 9.65% 4.71% (0.49)% 20.62% (0.07)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 42 $ 38 $ 37 $ 64 $ 2
Ratio of operating expenses to average net assets 1.33% 1.10% 1.18%+ 1.15% 0.96%+
Ratio of operating expenses to average net assets including
interest expenses (a) (a) 1.18%+ (a) (a)
Ratio of net investment income to average net assets 4.01% 4.41% 4.34%+ 4.74% 4.81%+
Portfolio turnover rate 19% 31% 2% 45% 38%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.93% 1.74% 2.05%+ 2.02% 1.95%+
</TABLE>
* Nations Tennessee Municipal Bond Fund Investor C Shares commenced operations
on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) Per share net investment income has been calculated usng the monthly average
share method.
38
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Texas Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98 03/31/97
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.18 $ 10.21
Net investment income 0.42 0.42
Net realized and unrealized gain/(loss) on investments 0.32 ( 0.03)
Net increase/(decrease) in net asset value from operations 0.74 0.39
Distributions:
Dividends from net investment income ( 0.42) ( 0.42)
Distributions from net realized capital gains -- --
Total dividends and distributions ( 0.42) ( 0.42)
Net asset value, end of period $ 10.50 $ 10.18
Total return++ 7.34% 3.87%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 293 $ 591
Ratio of operating expenses to average net assets 1.20% 1.00%
Ratio of net investment income to average net assets 4.04% 4.09%
Portfolio turnover rate 19% 34%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.45% 1.34%
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.36 $ 9.53 $ 9.55
Net investment income 0.14 0.41 0.03
Net realized and unrealized gain/(loss) on investments ( 0.15) 0.83 (0.02)
Net increase/(decrease) in net asset value from operations ( 0.01) 1.24 0.01
Distributions:
Dividends from net investment income ( 0.14) ( 0.41) (0.03)#
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.14) ( 0.41) (0.03)
Net asset value, end of period $ 10.21 $ 10.36 $ 9.53
Total return++ ( 0.12)% 13.27% 0.08%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 569 $ 570 $ 2
Ratio of operating expenses to average net assets 1.00%+ 1.07%(a) 1.05%+(a)
Ratio of net investment income to average net assets 4.02%+ 4.12% 3.90%+
Portfolio turnover rate 11% 64% 61%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.39%+ 1.33% 1.28%+
</TABLE>
* Nations Texas Intermediate Municipal Bond Fund Investor C Shares commenced
operations on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Amount includes distributions in excess of net investment income, which were
less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
39
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Texas Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
Investor C Shares 03/31/98(c) 03/31/97
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.48 $ 9.49
Net investment income 0.40 0.43
Net realized and unrealized gain/(loss) on investments 0.56 (0.01)
Net increase/(decrease) in net asset value from operations 0.96 0.42
Distributions:
Dividends from net investment income ( 0.40) (0.43)
Net asset value, end of period $ 10.04 $ 9.48
Total return++ 10.31% 4.47%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 80 $ 73
Ratio of operating expenses to average net assets 1.33%(a) 1.10%(a)
Ratio of net investment income to average net assets 4.10% 4.49%
Portfolio turnover rate 33% 52%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.80% 1.53%
<CAPTION>
PERIOD YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.70 $ 8.39 $ 8.46
Net investment income 0.14 0.43 0.03
Net realized and unrealized gain/(loss) on investments (0.21) 1.31 (0.07)
Net increase/(decrease) in net asset value from operations (0.07) 1.74 (0.04)
Distributions:
Dividends from net investment income (0.14) (0.43) (0.03)
Net asset value, end of period $ 9.49 $ 9.70 $ 8.39
Total return++ (0.74)% 21.15% (0.43)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 70 $ 70 $ 2
Ratio of operating expenses to average net assets 1.16%+ 1.14%(a) 0.97%+(a)
Ratio of net investment income to average net assets 4.36%+ 4.70% 4.77%+
Portfolio turnover rate 6% 50% 107%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.67%+ 1.80% 1.81%+
</TABLE>
* Nations Texas Municipal Bond Fund Investor C Shares commenced operations on
November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) Per share net investment income has been calculated usng the monthly average
share method.
40
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Virginia Intermediate Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
Investor C Shares 03/31/98(c) 03/31/97 03/31/96(b)
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 10.59 $ 10.69 $ 10.83
Net investment income 0.44 0.46 0.15
Net realized and unrealized
gain/(loss) on investments 0.33 ( 0.10) ( 0.14)
Net increase/(decrease) in net
asset value from operations 0.77 0.36 0.01
Distributions:
Dividends from net investment
income ( 0.44) ( 0.46) ( 0.15)
Distributions from net realized
capital gains -- -- --
Distributions in excess of net
realized capital gains -- -- --
Total dividends and distributions ( 0.44) ( 0.46) ( 0.15)
Net asset value, end of period $ 10.92 $ 10.59 $ 10.69
Total return++ 7.37% 3.40% 0.10%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $1,949 $6,463 $6,909
Ratio of operating expenses to
average net assets 1.20%(a) 1.00%(a) 1.00%+(a)
Ratio of net investment income to
average net assets 4.07% 4.29% 4.22%+
Portfolio turnover rate 21% 20% 2%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 1.44% 1.24% 1.26%+
<CAPTION>
YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED
Investor C Shares 11/30/95 11/30/94 11/30/93 11/30/92*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of
period $ 9.94 $ 10.99 $ 10.59 $ 10.44
Net investment income 0.46 0.44 0.44 0.19
Net realized and unrealized
gain/(loss) on investments 0.89 ( 0.96) 0.42 0.15
Net increase/(decrease) in net
asset value from operations 1.35 ( 0.52) 0.86 0.34
Distributions:
Dividends from net investment
income ( 0.46) ( 0.44) ( 0.44) ( 0.19)
Distributions from net realized
capital gains ( 0.00)# ( 0.09) ( 0.02) --
Distributions in excess of net
realized capital gains -- ( 0.00)# -- --
Total dividends and distributions ( 0.46) ( 0.53) ( 0.46) ( 0.19)
Net asset value, end of period $ 10.83 $ 9.94 $ 10.99 $ 10.59
Total return++ 13.82% ( 4.90)% 8.25% 3.36%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $7,152 $8,372 $11,176 $4,769
Ratio of operating expenses to
average net assets 1.06%(a) 1.19%(a) 1.32% 1.28%+
Ratio of net investment income to
average net assets 4.37% 4.18% 4.05% 3.99%+
Portfolio turnover rate 22% 14% 26% 13%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 1.24% 1.31% 1.44% 2.80%+
</TABLE>
* Nations Virginia Intermediate Municipal Bond Fund Investor C Shares
commenced operations on June 17, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) Per share net investment income has been calculated usng the monthly average
share method.
41
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Virginia Municipal Bond Fund
<TABLE>
<CAPTION>
YEAR YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
Investor C Shares 03/31/98(c) 03/31/97 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.40 $ 9.38 $ 9.62 $ 8.29 $ 8.38
Net investment income 0.40 0.43 0.14 0.44 0.03
Net realized and unrealized gain/(loss) on investments 0.55 0.02 (0.24) 1.33 (0.09)
Net increase/(decrease) in net asset value from operations 0.95 0.45 (0.10) 1.77 (0.06)
Distributions:
Dividends from net investment income (0.40) (0.43) (0.14) (0.44) (0.03)
Net asset value, end of period $ 9.95 $ 9.40 $ 9.38 $ 9.62 $ 8.29
Total return++ 10.31% 4.92% (1.03)% 21.71% (0.67)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3 $ 45 $ 43 $ 34 $ 2
Ratio of operating expenses to average net assets 1.32% 1.10% 1.16%+ 1.14% 0.96%+
Ratio of operating expenses to net assets including interest
expense (a) (a) 1.17%+ (a) (a)
Ratio of net investment income to average net assets 4.13% 4.60% 4.50%+ 4.76% 4.77%+
Portfolio turnover rate 9% 37% 8% 16% 61%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.69% 1.48% 1.63%+ 1.79% 1.74%+
</TABLE>
* Nations Virginia Municipal Bond Fund Investor C Shares commenced operations
on November 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year ended changed to March 31. Prior to this, the fiscal year end
was November 30.
(c) Per share net investment income has been calculated usng the monthly average
share method.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAI contains more
information concerning such investments.
Bank Instruments: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. Each Fund will limit its investments in
bank obligations so they do not exceed 25% of the Fund's total assets at the
time of purchase.
U.S. dollar-denominated obligations issued by foreign branches of domestic
banks ("Eurodollar" obligations) and domestic branches of foreign banks
("Yankee dollar" obligations) 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 for-
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eign 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. Pursuant to line of credit arrangements with BONY, the
Funds may borrow primarily for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities.
Fixed Income Investing: The performance of the fixed income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.
Futures, Options and Other Derivative Instruments: Each Fund may attempt to
reduce the overall level of investment risk of particular securities and
attempt to protect a Fund against adverse market movements by investing in
futures, options and other derivative instruments. These include the purchase
and writing of options on securities (including index options) and options on
foreign currencies, and investing in futures contracts for the purchase or sale
of instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and
swaps and swap-related products such as interest rate swaps, currency swaps,
caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable
position. Additional risks inherent in the use of futures, options, forward
contracts and swaps include: imperfect correlation between the price of
futures, options and forward contracts and movements in the prices of the
securities or currencies being hedged; the possible absence of a liquid
secondary market for any particular instrument at any time; and the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences. A Fund may not purchase put and call options which are traded on
a national stock exchange in an amount exceeding 5% of its net assets. Further
information on the use of futures, options and other derivative instruments,
and the associated risks, is contained in the SAI.
Illiquid Securities: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not hold more
than 15% of the value of their respective net assets in securities that are
illiquid. Repurchase agreements, time deposits and guaranteed investment
contracts that do not provide for payment to a Fund within seven days after
notice, and illiquid restricted securities, are subject to the limitation on
illiquid securities. In addition, interests in privately arranged loans
acquired by the State Intermediate Municipal Bond Funds and the State Municipal
Bond Funds may be subject to this limitation.
If otherwise consistent with their investment objectives and policies, the
Funds may purchase securities which are not registered under the Securities Act
of 1933, as amended (the "1933 Act") but which can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the 1933 Act, or which
were issued under Section 4(2) of the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by a Fund's Board of Trustees
or the Adviser, acting under guidelines approved and monitored by the Fund's
Board, 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 or other buyers cease purchasing such restricted securities
pursuant to
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Rule 144A or otherwise, 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 their
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 the
extent a specified index is below a predetermined interest rate, 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.
Money Market Instruments: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
Municipal Securities: The two principal classifications of Municipal Securities
are "general obligation" securities and "revenue" securities. General
obligation securities are secured by the issuer's pledge of its full faith,
credit, and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Private activity bonds held by a Fund are in most
cases revenue securities and are not payable from the unrestricted revenues of
the issuer. Consequently, the credit quality of private activity bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.
Municipal Securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal Securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by
a Fund will be determined by NationsBank to be of comparable quality at the
time of purchase to instruments rated "high quality" by any major rating
service. Where necessary to ensure that an instrument is of comparable "high
quality," a Fund will require that an issuer's obligation to pay the principal
of the
44
<PAGE>
note may be backed by an unconditional bank letter or line of credit,
guarantee, or commitment to lend.
Municipal Securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases."
Generally such loans are unrated, in which case they will be determined by the
Adviser to be of comparable quality at the time of purchase to rated
instruments that may be acquired by a Fund. Frequently, privately arranged
loans have variable interest rates and may be backed by a bank letter of
credit. In other cases, they may be unsecured or may be secured by assets not
easily liquidated. Moreover, such loans in most cases are not backed by the
taxing authority of the issuers and may have limited marketability or may be
marketable only by virtue of a provision requiring repayment following demand
by the lender. Such loans made by a Fund may have a demand provision permitting
the Fund to require payment within seven days. Participations in such loans,
however, may not have such a demand provision and may not be otherwise
marketable. To the extent these securities are illiquid, they will be subject
to each Fund's limitation on investments in illiquid securities. Recovery of an
investment in any such loan that is illiquid and payable on demand may depend
on the ability of the municipal borrower to meet an obligation for full
repayment of principal and payment of accrued interest within the demand
period, normally seven days or less (unless a Fund determines that a particular
loan issue, unlike most such loans, has a readily available market). As it
deems appropriate, the Adviser will establish procedures to monitor the credit
standing of each such municipal borrower, including its ability to meet
contractual payment obligations.
Municipal Securities may include units of participation in trusts holding pools
of tax-exempt leases. Municipal participation interests may be purchased from
financial institutions, and give the purchaser an undivided interest in one or
more underlying Municipal Security. To the extent that municipal participation
interests are considered to be "illiquid securities," such instruments are
subject to each Fund's limitation on the purchase of illiquid securities.
Municipal leases and participating interests therein which may take the form of
a lease or an installment sales contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying leases are exempt from Federal
income taxes.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/ dealers with respect to Municipal Securities held in their
portfolios. Under a stand-by commitment, a dealer would agree to purchase at a
Fund's option specified Municipal Securities at a specified price. A Fund will
acquire stand-by commitments solely to facilitate portfolio liquidity and do
not intend to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis, each
may invest more than 25% of its total assets in Municipal Securities the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Adviser. To the extent
that more than 25% of a Fund's total assets are invested in Municipal
Securities that are payable from the revenues of similar projects, a Fund will
be subject to the unique risks presented by such projects to a greater extent
than it would be if its assets were not so concentrated.
Since each of the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds will invest primarily in securities issued by issuers
located in one state, each of these Funds is susceptible to changes in value
due to political and economic factors affecting that state's issuers. A
comparable municipal bond fund which is not concentrated in obligations issued
by issuers located in one state would be less susceptible to these risks. If
any issuer of securities held by one of these Funds is unable to meets its
financial obligations, that Fund's income, capital, and liquidity may be
adversely affected.
Florida is the fourth most populous state with an estimated 1997 population of
14,700,000. By the year 2000, population will likely exceed 15.5 million.
Population growth has historically been driven by retirement migration with
local economies weighted heavily in tourism and agriculture. Over the past
twenty years, retirement, agriculture and tourism have been complemented by
high technology jobs, service sector jobs and international trade.
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<PAGE>
In the meantime, the three traditional industries have taken on a global
character. Trade and tourism have become international and this has fueled
foreign retirement migration. The character and dynamism of Florida has changed
considerably in recent decades and the state is considered a bellwether
indicator for the health of national economic trends.
Georgia's state financial health continues to be strong and stable after the
completion of the Olympic events as evidenced by the ratings given to General
Obligation Bonds which are rated by Moody's as "Aaa," "AAA" by S&P and "AAA" by
Fitch. Such high ratings are based upon: Georgia's stable and broad-based
trade, service, and transportation oriented economy, which has produced steady
economic and employment growth, and the state's history of satisfactory
finances and its moderate debt ratios. Although economic activity slowed after
the Olympic events, unemployment rates have remained low and continue to
outstrip the national rate. Strong population growth and in-migration continues
to fuel employment and is expected to continue, and state lottery proceeds,
some of which has been used to create a revenue reserve, continue to surpass
expectations.
Maryland is one of the wealthiest states in the U.S. and its General Obligation
Bonds have been rated "AAA" by Moody's, and "AAA" by S&P. This highest quality
rating reflects healthy fiscal 1998 revenues that are exceeding forecasts,
conservative outyear forecasts, carefully monitored debt, and an economy that
is improving as the pace of federal downsizing slows and growth in other
sectors emerges. According to most estimates Maryland is on track to log a
$317.2 million surplus for the 1998 fiscal year. This favorable economic trend
should aid in absorbing a costly tax cut that was passed in 1997 and
accelerated in the 1998 session. The rating outlook for Maryland is stable.
Maryland's conservative posture in forecasting its revenue and managing its
debt levels, as well as its strengthening economy, place the state on solid
financial ground.
North Carolina, rated "Aaa" by Moody's, and "AAA" by both S&P and Fitch, has
benefited from an inflow of people as well as businesses. This is due in part
to North Carolina's affordable housing, above-average growth in per capita
income and below-average cost of doing business. North Carolina's textile
industry has begun to give way to the high-tech and financial sectors, as
evidenced by the title of "Banking Center of the South." Consequently, high
wage job growth has been expanding at a pace greater than national averages and
is expected to continue to do so for the foreseeable future.
South Carolina is primarily a manufacturing state with the textile industry
being the major industrial employer in the State. Since 1950, however, the
State's economy has undergone a gradual transition to other activities and
tends to resemble more closely that of the United States. The economic base of
the State has diversified into other areas such as trade, health care services,
and durable goods manufacturing. The dominance of the manufacturing sector has
been both a positive and a negative for South Carolina. On the positive side,
the expansion of manufacturing, specifically autos and related parts, has
lessened the impact of the naval base closure in Charleston and provided a much
needed infusion of new jobs. On the negative side, the cyclical nature of South
Carolina's manufacturing economy has kept per capita income below national and
regional levels. That said, South Carolina's low debt burden, strong security
arrangements and lack of credit extension have led to an "Aaa" rating by
Moody's, "AAA" rating by S&P and an "AAA" rating by Fitch, for the state.
Combine this with a conservative plan of finance, and South Carolina looks to
be in a very strong financial position, despite its reliance on the
manufacturing sector.
Tennessee's very low debt burden, nearly exclusive use of general obligation
debt and conservative financial policies all combine to give the state of
Tennessee a "Aaa" rating by Moody's, "AA" rating by S&P, and a "AAA" rating by
Fitch. Tennessee's economy remains in a developing mode, as the state continues
to shift its growth in manufacturing output to autos (Tennessee ranks third in
the nation in automobile production) and related products from textiles.
Tennessee relies on sales tax revenues as a main source of funds. This could
prove to be a limiting factor were it not for Tennessee's strong pattern of job
growth and growing population.
Texas has proven its ability to adapt and rebound to a changing economic
environment, both within the state and abroad. Texas has also historically
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<PAGE>
taken a conservative approach to financial management, as is reflected in the
state's "Aaa" rating by Moody's, and "AAA" rating by S&P. Although Texas has
consistently led the U.S. in employment growth, unemployment in Texas is above
the national average. This is due, in part, to the heavy migration into the
state (in 1994 Texas replaced New York as the second most populous state). The
mix of job growth in Texas provides a strong base for sustainable growth
because the new jobs are largely in industries with bright prospects for
continued growth, such as knowledge-based services and manufacturing.
The state of Virginia has earned its highest "Aaa" rating by Moody's and "AAA"
rating by S&P for its General Obligation Bonds because of Virginia's manageable
debt, conservative fiscal stewardship, and healthy economy, despite substantial
structural changes. Virginia's financial position remains strong despite the
fact the the Commonwealth's debt levels are increasing due to certain large
highway and university construction projects. The Constitutionally dedicated
Revenue Stabilization Fund had a balance of $156.6 million as of June 30, 1997,
with another $58.3 million reserved from the fund balance to be deposited in
fiscal 1998. The outlook for the Commonwealth of Virginia is stable and
Virginia has achieved success in transitioning to an economy less dependent on
the federal government. However, it has plans to eliminate a car tax, which
when fully phased in by fiscal 2003, is estimated to cost the state over $2.8
billion. How the Commonwealth plans for this significant revenue loss will be
an ongoing part of Virginia credit evaluation by NRSROs.
There can be no assurance that the economic conditions on which the above
ratings for a specific state are based will continue or that particular bond
issues may not be adversely affected by changes in economic or political
conditions. More detailed information about matters relating to each of the
State Intermediate Municipal Bond Funds and State Municipal Bond Funds is
contained in the SAI.
Other Investment Companies: Each 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. Pursuant to an exemptive order issued by the SEC, the Nations
Funds' non-money market funds may purchase shares of Nations Funds' money
market funds.
Repurchase Agreements: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker/dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can
be liquidated on the open market. Repurchase agreements with a maturity 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 Funds.
Securities Lending: To increase return on portfolio securities, the Funds may
lend their portfolio securities to broker/dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned. There is a risk of delay in receiving collateral or
in recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Adviser to be credit worthy and when, in their
judgment, the income to be earned from the loan justifies the attendant risks.
The aggregate of all outstanding loans of a Fund may not exceed 33% of the
value of its total assets, which may include cash collateral received for
securities loans. Cash collateral received by a Nations Fund may be invested in
a Nations Funds' money market fund.
Stock Index, Interest Rate and Currency Futures Contracts: The Funds may
purchase and sell futures contracts and related options with respect
47
<PAGE>
to non-U.S. stock indices, 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. U.S.
Treasury obligations differ only in their interest rates, maturities and time
of issuance. Obligations of U.S. Government agencies, authorities and
instrumentalities are issued by government-sponsored agencies and enterprises
acting under authority of Congress. Although obligations of federal agencies,
authorities and instrumentalities are not debts of the U.S. Treasury, some are
backed by the full faith and credit of the U.S. Treasury, such as direct
pass-through certificates of the GNMA; some 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 are backed only by the credit of the issuer itself, such
as obligations of the FNMA. 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.
The market value of U.S. Government obligations may fluctuate due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
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 take
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
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Appendix B -- Description Of Ratings
The following summarizes the highest eight 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.
CCC, CC -- An obligation rated CCC is vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse conditions, the obligor is not likely to have the
capacity to meet its financial commitments on the obligation; an
obligation rated CC is highly vulnerable to nonpayment.
To provide more detailed indications of credit quality, the AA, A, BBB and CCC
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 eight ratings used by Moody's for
corporate and municipal bonds. The first four ratings denote investment grade
securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protec-
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tive 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.
Caa, Ca -- Bonds that are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest. Bonds that are rated Ca represent
obligations that are speculative in a high degree. Such issues are often
in default or have other marked shortcomings.
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 IBCA ("Fitch")
for bonds, each of which denotes that the securities are investment grade:
AAA -- "AAA" ratings denote the lowest expectation of credit risk. They
are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA -- "AA" ratings denote a very low expectation of credit risk. They
indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to
foreseeable events.
A -- "A" ratings denote a low expectation of credit risk. The capacity
for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher
ratings.
BBB -- "BBB" ratings indicate that there is currently a low expectation
of credit risk. The capacity for timely payment of financial commitments
is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
50
<PAGE>
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable-rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high
quality, with ample margins of protection although not so large as in
the preceding group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
are given a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are D-1, D-2 and D-3. D&P
employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-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." D-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.
D-1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. D-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. D-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 two highest rating categories used by Fitch for
short-term obligations:
F1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in
degree than issues rated F1+.
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. Commercial paper rated A-3
exhibits adequate protection parameters. However, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation. Commercial paper
rated A-3 or B correlates with the S&P Bond rankings (described above) of BBB/
BBB- and BB+, respectively.
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 obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of senior short-term 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. Issuers rated Prime-3 have an acceptable ability for
repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protec-
51
<PAGE>
tion measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
For commercial paper, D&P uses the short-term debt ratings described above.
For commercial paper, Fitch uses the short-term debt ratings described above.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the
rated instrument. The following are the 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 extremely high.
AA -- The second highest category; indicates a very strong 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 likelihood that
principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety
regarding timely repayment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and
interest in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
52
<PAGE>
(This Page Left Blank Intentionally)
<PAGE>
Prospectus
Investor C Shares
August 1, 1998
as supplemented on
, 1998
This Prospectus describes NATIONS MANAGED INDEX FUND, NATIONS MANAGED SMALLCAP
INDEX FUND, NATIONS MANAGED VALUE INDEX FUND and NATIONS MANAGED SMALLCAP VALUE
INDEX FUND (each a "Fund") of Nations Fund Trust, an open-end management
investment company in the Nations Funds Family ("Nations Funds" or "Nations
Funds Family"). This Prospectus describes one class of shares of each Fund --
Investor C Shares.
This Prospectus sets forth concisely the information about each Fund that a
prospective purchaser of Investor C Shares should consider before investing.
Investors should read this Prospectus and retain it for future reference.
Additional information about Nations Fund Trust is contained in a separate
Statement of Additional Information (the "SAI") that has been filed with the
Securities and Exchange Commission (the "SEC") and is available upon request
without charge by writing or calling Nations Funds at its address or telephone
number shown below. The SAI for Nations Funds, dated August 1, 1998, is
incorporated by reference in its entirety into this Prospectus. The SEC
maintains a Web site (http://www.sec.gov) that contains the SAI, material
incorporated by reference in this Prospectus and other information regarding
registrants that file electronically with the SEC. NationsBanc Advisors, Inc.
("NBAI") is the investment adviser to each of the Funds. TradeStreet Investment
Associates, Inc. ("TradeStreet") is the investment sub-adviser to the Funds. As
used herein the term "Adviser" shall mean NBAI and/or TradeStreet as the
context may require, see "How The Funds Are Managed."
SHARES OF NATIONS FUNDS 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 SERVICES TO NATIONS FUNDS,
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 FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Nations Managed Index Fund
Nations Managed SmallCap Index Fund
Nations Managed Value Index Fund
Nations Managed SmallCap Value Index Fund
For Fund information call:
1-800-321-7854
Nations Funds
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
[NATIONS FUNDS LOGO APPEARS HERE]
NF-96696-8/98
<PAGE>
Table Of Contents
About The Prospectus Summary 3
Funds -----------------------------------------------------
Expenses Summary 4
-----------------------------------------------------
Objectives 6
-----------------------------------------------------
How The Objectives Are Pursued 6
-----------------------------------------------------
How Performance Is Shown 11
-----------------------------------------------------
How The Funds Are Managed 13
-----------------------------------------------------
Organization And History 16
-----------------------------------------------------
About Your How To Buy Shares 17
Investment -----------------------------------------------------
Investor C Shares -- Charges and Features 18
-----------------------------------------------------
How To Redeem Shares 20
-----------------------------------------------------
How To Exchange Shares 20
-----------------------------------------------------
Shareholder Servicing And Distribution Plans 21
-----------------------------------------------------
How The Funds Value Their Shares 23
-----------------------------------------------------
How Dividends And Distributions are Made;
Tax Information 23
-----------------------------------------------------
Financial Highlights 25
-----------------------------------------------------
Appendix A -- Portfolio Securities 28
-----------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS, OR IN THE FUNDS' SAI INCORPORATED HEREIN
BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY NATIONS FUNDS OR
ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY NATIONS FUNDS OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Prospectus Summary
o TYPE OF COMPANY: Open-end management investment company.
o INVESTMENT AND POLICIES:
o Nations Managed Index Fund's investment objective is to seek, over the
long-term, to provide a total return that (gross of fees and expenses)
exceeds the total return of Standard & Poor's 500 Composite Stock Price
Index.
o Nations Managed SmallCap Index Fund's investment objective is to seek, over
the long-term, to provide a total return that (gross of fees and expenses)
exceeds the total return of Standard & Poor's SmallCap 600 Index.
o Nations Managed Value Index Fund's investment objective is to seek, over the
long-term, to provide a total return that (gross of fees and expenses)
exceeds the total return of the S&P 500/BARRA Value Index.
o Nations Managed SmallCap Value Index Fund's investment objective is to seek,
over the long-term, to provide a total return that (gross of fees and
expenses) exceeds the total return of the S&P SmallCap 600/BARRA Value
Index.
o When consistent with the Funds' objectives, the Funds will employ various
techniques to manage capital gain distributions.
o INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as the investment
adviser to the Funds. NBAI provides investment management services to more
than 60 investment company portfolios in the Nations Funds Family. TradeStreet
Investment Associates, Inc., an affiliate of NBAI, provides investment
sub-advisory services to the Funds. For more information about the investment
adviser and investment sub-adviser to the Nations Funds, see "How The Funds
Are Managed."
o DIVIDENDS AND DISTRIBUTIONS: Nations Managed SmallCap Index Fund, Nations
Managed Value Index Fund and Nations Managed SmallCap Value Index Fund declare
and pay dividends from net investment income each calendar quarter. Dividends
from net investment income are declared and paid monthly by Nations Managed
Index Fund. Each Fund's net realized capital gains, including net short-term
capital gains, are distributed at least annually.
o RISK FACTORS: Although NBAI, together with the sub-adviser, seek to achieve
the investment objective of each Fund, there is no assurance that they will be
able to do so. 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 risk, which is the risk that the value of the
stocks the Fund holds may decline over short or even extended periods. The
U.S. stock markets tend to be cyclical, with periods when stock prices
generally rise and periods when prices generally decline. As of the date of
this Prospectus, the stock markets, as measured by the S&P 500 Index (as
defined below) and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will continue.
Certain of the Funds' investments may constitute derivative securities.
Certain types of derivative securities can, under particular circumstances,
significantly increase an investor's
3
<PAGE>
exposure to market or other risks. For a discussion of these and other
factors, see "How Objectives Are Pursued -- Risk Considerations" and
"Appendix A."
o MINIMUM PURCHASE: $1,000 minimum initial investment for each of the Funds per
record holder except that the minimum initial investment is: $500 for
Individual Retirement Account ("IRA") investors; $250 for non-working spousal
IRAs or accounts established with certain fee-based investment advisers or
financial planners, including wrap fee accounts and other managed agency/asset
allocation accounts; and $100 for investors participating on a monthly basis
in the Systematic Investment Plan. There is no minimum investment amount for
investments by certain 401(k) and employee pension plans or salary reduction.
The minimum subsequent investment is $100, except for investments pursuant to
the Systematic Investment Plan. See "How To Buy Shares."
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds.
The following tables summarize shareholder transaction and operating expenses
for Investor C Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
NATIONS FUNDS INVESTOR C SHARES
<TABLE>
<CAPTION>
Nations
Nations Nations Nations Managed
Managed Managed Managed SmallCap
Index SmallCap Value Index Value Index
Shareholder Transaction Expenses Fund Index Fund Fund Fund
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases None None None None
Maximum Deferred Sales Charge (as a percentage of the lower of
the original purchase price or redemption proceeds)(1) 1.00% 1.00% 1.00% 1.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (After Fee Waivers) .30% .30% .30% .30%
Rule 12b-1 Fees (After Fee Waivers) .25% .25% .25% .25%
Shareholder Servicing Fees .25% .25% .25% .25%
Other Expenses (After Expense Reimbursements) .20% .20% .20% .20%
Total Operating Expenses (After Fee Waivers and Expense
Reimbursements) 1.00% 1.00% 1.00% 1.00%
</TABLE>
(1) Investor C Shares that are purchased at net asset value are subject to a
Deferred Sales Charge if redeemed within one year of purchase.
4
<PAGE>
Examples: You would pay the following expenses on a $1,000 investment in
Investor C Shares of the indicated Fund, assuming (1) a 5% annual return and
(2) redemption at the end of each time period.
<TABLE>
<CAPTION>
Nations
Nations Nations Managed
Nations Managed Managed SmallCap
Managed SmallCap Value Index Value Index
Index Fund Index Fund Fund Fund
<S> <C> <C> <C> <C>
1 Year $ 25 $ 25 $ 25 $ 25
3 Years $ 47 $ 47 $ 47 $ 47
5 Years $ 82 $ 82 $ 82 $ 82
10 Years $180 $180 $180 $180
</TABLE>
You would pay the following expenses on a $1,000 investment in Investor C
Shares of the indicated Fund, assuming (1) a 5% annual return and (2) no
redemption.
<TABLE>
<CAPTION>
Nations
Nations Nations Managed
Nations Managed Managed SmallCap
Managed SmallCap Value Index Value Index
Index Fund Index Fund Fund Fund
<S> <C> <C> <C> <C>
1 Year $ 15 $ 15 $ 15 $ 15
3 Years $ 47 $ 47 $ 47 $ 47
5 Years $ 82 $ 82 $ 82 $ 82
10 Years $180 $180 $180 $180
</TABLE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor C Shares will bear either directly or indirectly. The figures
contained in the above tables are based on amounts incurred during each Fund's
most recent fiscal year and have been adjusted as necessary to reflect current
service provider fees. There is no assurance that any fee waivers and/or
reimbursements will continue. In particular, to the extent Other Expenses are
less than those shown, waivers and/or reimbursements of Management Fees, if
any, may decrease. Shareholders will be notified of any decrease that
materially increases Total Operating Expenses. If fee waivers and/or
reimbursements are decreased or discontinued, the amounts contained in the
"Examples" above may increase. For a more complete description of the Funds'
operating expenses, see "How The Funds Are Managed." For a more complete
description of the Rule 12b-1 and shareholder servicing fees payable by the
Funds, see "Shareholder Servicing And Distribution Plan."
Absent fee waivers and expense reimbursements, "Management Fees," "12b-1 Fees,"
"Other Expenses" and "Total Operating Expenses" for Investor C Shares of the
indicated Fund would have been as follows: Nations Managed Index Fund -- .50%,
.75%, .30% and 1.80%, respectively; Nations Managed SmallCap Index Fund --
.50%, .75%, .53% and 2.03%, respectively; Nations Managed Value Index Fund --
.50%, .75%, 1.07% and 2.57%, respectively; and Nations Managed SmallCap Value
Index Fund -- .50%, .75%, 1.71% and 3.21%, respectively.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST
OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.
5
<PAGE>
Objectives
Nations Managed Index Fund: Nations Managed Index Fund's investment objective
is to seek, over the long-term, to provide a total return which (gross of fees
and expenses) exceeds the total return of Standard & Poor's 500 Composite Stock
Price Index1 ("S&P 500 Index").
Nations Managed SmallCap Index Fund:
Nations Managed SmallCap Index Fund's investment objective is to seek, over the
long-term, to provide a total return which (gross of fees and expenses) exceeds
the total return of Standard & Poor's SmallCap 600 Index (2) ("S&P 600 Index").
Nations Managed Value Index Fund: Nations Managed Value Index Fund's investment
objective is to seek, over the long-term, to provide a total return that (gross
of fees and expenses) exceeds the total return of the S&P 500/BARRA Value Index
("S&P/BARRA Value Index").
Nations Managed SmallCap Value Index Fund: Nations Managed SmallCap Value Index
Fund's investment objective is to seek, over the long-term, to provide a total
return that (gross of fees and expenses) exceeds the total return of the S&P
SmallCap 600/BARRA Value Index ("S&P/ BARRA SmallCap Value Index").
Although the Adviser will seek to achieve the investment objective of each
Fund, there is no assurance that it will be able to do so. No single fund
should be considered, by itself, to provide a complete investment program for
any investor. The net asset value of the shares of each Fund 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
participants in short-term swings in the stock market. Investments in the Funds
are not insured against loss of principal.
- ---------------------
(1) "Standard & Poor's" and "Standard & Poor's 500" are trademarks of The
McGraw-Hill Companies, Inc.
(2) "Standard & Poor's" and "Standard & Poor's SmallCap 600" are trademarks of
The McGraw-Hill Companies, Inc.
How The Objectives Are Pursued
Nations Managed Index Fund: In seeking to achieve its investment objective, the
Fund will invest in selected equity securities that are included in the S&P 500
Index. The S&P 500 Index is a market capitalization weighted index consisting
of 500 common stocks chosen for market size, liquidity and industry group
representation.
Unlike traditional index funds, the Fund has a "managed" overlay. The Adviser
believes that a managed equity index portfolio can provide investors with
positive incremental performance relative to the S&P 500 Index while minimizing
the downside risk of underperforming the S&P 500 Index over time.
The initial stock universe considered by the Adviser is the S&P 500 Index. The
Adviser ranks the attractiveness of each security according to a multi-factor
valuation model. Both value and momentum factors are considered in the ranking
process. Value factors such as book value, earnings yield and cash flow measure
a stock's intrinsic worth versus its market price, while momentum
characteristics such as price momentum, earnings growth and earnings
acceleration measure a stock relative to others in the same industry. A second
quantitative model which measures the earnings momentum of each security is
added to the screening process to serve as a validity check in the portfolio
construction process. Each stock is assigned a ranking from 1 to 10 (best to
worst). The Adviser then either underweights or eliminates the less attractive
securities and modestly emphasizes the most attractive stocks resulting in a
portfolio of 300 to 400 holdings that capture the overall investment
characteristics of the S&P 500 Index.
6
<PAGE>
Under normal conditions, the Adviser will attempt to invest as much of the
Fund's assets as is practical and, in any event, the Fund will invest at least
80% of its total assets, in common stocks that are included in the S&P 500
Index. The Fund is expected, however, to maintain a 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, obligations
issued or guaranteed as to payment of principal and interest by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Obligations")
and repurchase agreements.
Nations Managed SmallCap Index Fund: In seeking to achieve its investment
objective, the Fund will invest in selected equity securities that are included
in the S&P 600 Index. The S&P 600 Index is a market capitalization weighted
index consisting of 600 domestic stocks that capture the economic and industry
characteristics of small stock performance.
Unlike traditional index funds, the Fund has a "managed" overlay. The Adviser
believes that a managed equity index portfolio can provide investors with
positive incremental performance relative to the S&P 600 Index while minimizing
the downside risk of underperforming the S&P 600 Index over time.
From the initial S&P 600 Index stock universe the Adviser ranks the
attractiveness of each security according to a multi-factor valuation model.
Both value and momentum factors are considered in the ranking process. Value
factors such as book value, earnings yield and cash flow measure a stock's
intrinsic worth versus its market price, while momentum characteristics such as
price momentum, earnings growth and earnings acceleration measure a stock
relative to others in the same industry. A second quantitative model which
measures the earnings momentum of each security is added to the screening
process to serve as a validity check in the portfolio construction process.
Each stock is assigned a ranking from 1 to 10 (best to worst). The Adviser then
either underweights or eliminates the less attractive securities and modestly
emphasizes the most attractive stocks resulting in a portfolio of approximately
400-500 holdings that capture the investment characteristics of the S&P 600
Index.
Under normal conditions, substantially all of the Fund's assets, and, in any
event at least 80% of its total assets, will be invested in common stocks that
are included in the S&P 600 Index. The Fund is expected, however, to maintain a
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 Obligations and repurchase agreements.
Nations Managed Value Index Fund: In seeking to achieve its investment
objective, the Fund will invest in selected equity securities that are included
in the S&P/BARRA Value Index. The S&P/ BARRA Value Index is a subset of the
S&P 500 Index. The S&P 500 Index is a market capitalization weighted index
consisting of 500 common stocks chosen for market size, liquidity and industry
group representation. The S&P/BARRA Value Index is a market capitalization
weighted index consisting of approximately 340 common stocks selected from the
S&P 500 Index on the basis of a lower than average price-to-book ratio. Because
of their lower than average price-to-book ratios, stocks in the S&P/ BARRA
Value Index, on average, typically exhibit higher yields than stocks in the S&P
500 Index. Historically, stocks in the S&P/BARRA Value Index, on average, have
exhibited less short-term volatility than stocks in the S&P 500 Index.
S&P constructs the S&P/BARRA Value Index semi-annually by ranking all common
stocks included in the S&P 500 Index by their price-to-book ratios. The
resulting list is then divided in half by market capitalization. Stocks in the
half of the list that have lower price-to-book ratios are included in the
S&P/BARRA Value Index.
7
<PAGE>
Unlike traditional index funds, the Fund has a "managed" overlay. The Adviser
believes that a managed equity value index portfolio can provide investors with
positive incremental performance relative to the S&P/BARRA Value Index while
reducing the downside risk of underperforming the S&P/BARRA Value Index over
time.
The initial stock universe considered by the Adviser is the S&P/BARRA Value
Index. The Adviser ranks the attractiveness of each security according to a
multi-factor valuation model. Although the universe consists exclusively of
value stocks, both value and momentum factors are considered in the ranking
process. Value factors such as book value, earnings yield and cash flow measure
a stock's intrinsic worth versus its market price, while momentum
characteristics such as price momentum, earnings growth and earnings
acceleration are useful in determining a stock's value in relation to others in
the same industry. A second quantitative model which measures the earnings
momentum of each security is added to the screening process to serve as a
validity check in the portfolio construction process. Each stock is assigned a
ranking from 1 to 10 (best to worst). The Adviser then either underweights or
eliminates the less attractive securities and modestly emphasizes the most
attractive stocks resulting in a portfolio of 100 to 200 holdings that capture
the overall investment characteristics of the S&P/BARRA Value Index.
Under normal conditions, the Adviser will invest at least 80% of its total
assets, in common stocks that are included in the S&P/BARRA Value Index. The
Fund is expected, however, to maintain a 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 Obligations
and repurchase agreements.
Nations Managed SmallCap Value Index Fund: In seeking to achieve its investment
objective, the Fund will invest in selected equity securities that are included
in the S&P/BARRA SmallCap Value Index. The S&P/BARRA SmallCap Value Index is a
subset of the S&P 600 Index. The S&P 600 Index is a market capitalization
weighted index consisting of 600 domestic stocks which capture the economic and
industry characteristics of small stock performance. The S&P/BARRA SmallCap
Value Index is a market capitalization weighted index consisting of
approximately 375 companies selected from the S&P 600 Index on the basis of
price-to-book ratios. Those companies with lower price-to-book ratios make up
the S&P/BARRA SmallCap Value Index. The S&P/BARRA SmallCap Value Index is also
rebalanced semi-annually to reflect changes in the S&P 600 Index. Most of these
stocks are listed on either the New York, American or NASDAQ stock exchanges.
Unlike traditional index funds, the Fund has a "managed" overlay. The Adviser
believes that a managed equity index portfolio can provide investors with
positive incremental performance relative to the S&P/BARRA SmallCap Value Index
while reducing the downside risk of underperforming the S&P/ BARRA SmallCap
Value Index over time.
The initial stock universe considered by the Adviser is the S&P/BARRA SmallCap
Value Index. The Adviser ranks the attractiveness of each security according to
a multi-factor valuation model. Although the universe consists exclusively of
value stocks, both value and momentum factors are considered in the ranking
process. Value factors such as book value, earnings yield and cash flow measure
a stock's intrinsic worth versus its market price, while momentum
characteristics such as price momentum, earnings growth and earnings
acceleration are useful in determining a stock's value in relation to others in
the same industry. A second quantitative model which measures the earnings
momentum of each security is added to the screening process to serve as a
validity check in the portfolio construction process. Each stock is assigned a
ranking from 1 to 10 (best to worst). The Adviser then either underweights or
eliminates the less attractive securities and modestly emphasizes the most
attractive stocks resulting in a portfolio of 200 to 300 holdings that capture
the overall investment characteristics of the S&P/BARRA SmallCap Value Index.
Under normal conditions, the Adviser will invest at least 80% of its total
assets in common stocks that are included in the S&P/BARRA SmallCap
8
<PAGE>
Value Index. The Fund is expected, however, to maintain a 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 Obligations and repurchase agreements.
About the Indexes: The S&P 500 Index is composed of 500 common stocks chosen by
S&P on a statistical basis to be included in the Index. The S&P SmallCap 600
Index is composed of 600 domestic stocks chosen by S&P based on, among other
things, market size, liquidity and industry group representation. The S&P
SmallCap 600 Index is designed to be a benchmark of small capitalization stock
performance.
The S&P/BARRA Value Index and the S&P/BARRA SmallCap Value Index (collectively,
the "BARRA Value Indexes") are constructed by dividing the stocks in the S&P
500 Index and the S&P 600 Index, respectively, according to a single attribute:
price-to-book ratios. The BARRA Value Indexes are capitalization-weighted,
meaning that each stock is weighted in the approximate index in proportion to
its market value. Additionally, price-to-book ratios tend to be more stable
over time than alternative measures such as price-to-earnings ratios,
historical earnings growth rates, or return on equity, This results in indexes
with relatively low turnover. Generally, the companies in the BARRA Value
Indexes also exhibit characteristics associated with "value" stocks: lower
price-to-earnings ratios, higher dividend yields, and lower historical and
predicted earnings growth than the S&P 500 Index or the S&P 600 Index,
respectively.
The S&P/BARRA Value Index and the S&P/BARRA SmallCap Value Index are relatively
concentrated. The S&P/BARRA Value Index tends to be more heavily concentrated
in the Energy, Utility, and Financial sectors than the S&P 500 Index.
Additionally, the S&P/BARRA SmallCap Value Index tends to be more heavily
concentrated in the Utility and Financial Sectors than the S&P 600 Index.
The inclusion of a stock in the S&P 500 Index, the S&P 600 Index, S&P/BARRA
Value Index or the S&P/BARRA SmallCap Value Index in no way implies that S&P or
BARRA believes the stock to be an attractive investment. The Indexes are
determined, composed and calculated by S&P and BARRA without regard to the
Funds. Neither S&P nor BARRA is a sponsor of, or in any way affiliated with,
the Funds, and neither S&P nor BARRA makes any representation or warranty,
expressed or implied, on the advisability of investing in the Funds or as to
the ability of the Indexes to track general stock market performance. S&P and
BARRA disclaim all warranties of merchantability or fitness for a particular
purpose or use with respect to the Indexes or any data included therein.
General: Each of the Funds also may invest in certain specified derivative
securities including: exchange-traded options; over-the-counter options
executed with primary dealers, including long calls and puts and covered calls
to enhance return; and U.S. exchange-traded financial futures approved by the
Commodity Futures Trading Commission (the "CFTC") and options thereon for
market exposure risk management. Each Fund may lend its portfolio securities to
qualified institutional investors. Each Fund also may invest in restricted,
private placement and other illiquid securities. In addition, the Funds may
invest in securities issued by other investment companies, consistent with a
Fund's investment objective and policies.
In addition, when consistent with the Fund's respective investment objective,
each of the Funds will employ various techniques to manage capital gain
distributions. These techniques include utilizing a share identification
methodology whereby the Fund will specifically identify each lot of shares of
portfolio securities that it holds, which will allow the Fund to sell first
those specific shares with the highest tax basis in order to reduce the amount
of recognized capital gains as compared with a sale of identical portfolio
securities, if any, with a lower tax basis. The Fund will sell first those
shares with the highest tax basis only when it is in the best interest of the
Fund to do so, and reserves the right to sell other shares when appropriate. In
addition, the Fund may, at times, sell portfolio securities in order to realize
capital losses. Such capital losses would be used to offset realized capital
gains
9
<PAGE>
thereby reducing capital gain distributions. Additionally, the Adviser will,
consistent with the portfolio construction process discussed above, employ a
low portfolio turnover strategy designed to defer the realization of capital
gains.
NationsBank Corporation is currently included in the S&P 500 Index and the
S&P/BARRA Value Index. Subject to applicable law and SEC guidance, Nations
Managed Index Fund and Nations Managed Value Index Fund cannot presently
purchase stock of NationsBank Corporation unless relief from certain SEC
restrictions is obtained or confirmed.
Equity mutual funds, like other investors in equity securities, incur
transaction (brokerage) costs in connection with the purchase and sale of
portfolio securities. For some funds, these costs can have a material negative
impact on performance. The Adviser to the Funds will attempt to minimize these
transaction costs by utilizing program trades and computerized exchanges called
"crossing networks" which allow institutions to execute trades at the midpoint
of the bid/ask spread and at a reduced commission rate.
Portfolio Turnover: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. While it is not possible to predict exactly annual portfolio
turnover rates, it is expected that under normal market conditions, the annual
portfolio turnover rate for each Fund will not exceed 25%. For the Funds'
portfolio turnover rates, see "Financial Highlights."
Risk Considerations: Investments by a Fund in common stocks and other equity
securities are subject to stock market risk. The value of the stocks that a
Fund holds, like the broader stock market, may decline over short or even
extended periods. The U.S. stock markets tend to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline. As of
the date of this Prospectus, the stock markets, as measured by the S&P 500
Index and other commonly used indices, were trading at or close to record
levels. There can be no guarantee that these levels will continue.
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 particular 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 a 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.
The techniques employed by the Adviser to seek to manage capital gain
distributions will generally only have the effect of deferring the realization
of capital gains. For example, to the extent that the capital gains recognized
on a sale of portfolio securities arise from the sale of specifically-identified
securities with higher tax basis, subsequent sales of the same portfolio
securities will be calculated by reference to the lower tax basis securities
that remain in the portfolio. Under this scenario, an investor who purchases
shares of a Fund after the first sale could receive capital gain distributions
that are higher than the distributions that would have been received if this
methodology had not been used. Therefore, certain investors actually could be
disadvantaged by the techniques employed by the Fund to seek to manage capital
gain distributions, depending on the timing of their purchase of Fund shares.
Even if there are no subsequent sales, upon a redemption or exchange of Fund
shares an investor will have to recognize gain to the extent that the net asset
value of Fund shares at such time exceeds such investor's tax basis in his or
her Fund shares.
The various techniques employed by the Funds to manage capital gain
distributions may result in the accumulation of substantial unrealized gains in
the Funds' portfolios. Moreover, the realization of capital gains is not
entirely within a Fund's control because it is at least partly dependent on
shareholder purchase and redemption activity. Capital gain distributions may
vary considerably from year to year.
Furthermore, the U.S. Treasury has proposed legislation which would require
holders of substantially identical securities to determine their tax basis
using the average cost of all of their holdings in such securities. If enacted,
the legislation would
10
<PAGE>
prevent the Funds from specifically identifying each lot of shares that they
hold and from selling first those specific shares with the highest tax basis.
Thus, the legislation would restrict the Funds' ability to manage capital
gains.
Year 2000 Issue: Many computer programs employed throughout the world use two
digits to identify the year. Unless modified, these programs may not correctly
handle the change from "99" to "00" on January 1, 2000, and may not be able to
perform necessary functions. Any failure to adapt these programs in time could
hamper the Funds' operations. The Funds' principal service providers have
advised the Funds that they have been actively working on implementing
necessary changes to their systems, and that they expect that their systems
will be adapted in time, although there can be no assurance of success. Because
the Year 2000 issue affects virtually all organizations, the companies or
governmental entities in which the Funds invest could be adversely impacted by
the Year 2000 issue, although the extent of such impact cannot be predicted. To
the extent the impact on a portfolio holding is negative, a Fund's return could
be adversely affected.
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 each Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAI.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities are
not considered members of any industry.)
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to
25% of the value of the Fund's total assets may be invested without regard to
these limitations and with respect to 75% of such Fund's assets, the Fund will
not hold more than 10% of the voting securities of any issuer.
The investment objective and policies of each Fund, unless otherwise specified,
are non-fundamental and may be changed without shareholder approval. If the
investment objective or policies of a Fund change, shareholders should consider
whether the Fund remains an appropriate investment in light of their current
position and needs.
How Performance Is Shown
From time to time, the Funds may advertise the "total return" and "yield" on a
class of shares. BOTH TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL
DATA AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of
a class of shares of a Fund may be calculated on an average annual total return
basis or an aggregate total return basis. Average annual total return refers to
the average annual compounded rates of return on a class of shares over one-,
five-, and ten-year periods or the life of a Fund (as stated in a Fund's
advertisement) that would equate an initial amount invested at the beginning of
a stated period to the ending redeemable value of the investment (reflecting
the deduction of any applicable contingent deferred sales charge ("CDSC")),
assuming the reinvestment of all dividend and capital gain distributions.
Aggregate total return reflects the total percentage change in the value of the
investment over the measuring period, again assuming the rein-
11
<PAGE>
vestment of all dividends and capital gain distributions. Total return may also
be presented for other periods or may not reflect a deduction of any applicable
CDSC.
"Yield" is calculated by dividing the annualized net investment income per
share during a recent 30-day (or one month) period of a class of shares of a
Fund by the maximum public offering price per share on the last day of that
period. The yield on a class of shares does not reflect deduction of any
applicable CDSC.
Index Composite Performance: Set forth below is certain performance data for
Nations Managed Index Fund and Nations Municipal SmallCap Index Fund; the
Enhanced S&P 500 Index Composite and the Enhanced Small Cap Index Composite
(the "Composites"), which are each composites of accounts and commingled funds
managed by TradeStreet. (Prior to TradeStreet's formation in 1995, the
Composites were managed by NationsBank.) The performance data for the
Composites is deemed relevant because the accounts and commingled Funds in the
Enhanced S&P 500 Index Composite and Enhanced Small Cap Index Composite have
investment objectives and policies that are substantially similar to those of
Nations Managed Index Fund and Nations Managed SmallCap Index Fund,
respectively. Moreover, the management team at TradeStreet (which currently
manages the accounts and commingled Funds in the Composites, and Nations
Managed Index Fund and Nations Managed SmallCap Index Fund) employs the same
quantitative investment process for Nations Managed Index Fund and Nations
Managed SmallCap Index Fund that has, and continues to be, utilized in
connection with the Composites. THIS PERFORMANCE DATA REPRESENTS PAST
PERFORMANCE OF NATIONS MANAGED INDEX FUND, NATIONS MANAGED SMALLCAP INDEX FUND,
AND THE COMPOSITES AND IS NOT NECESSARILY INDICATIVE OF THE FUTURE PERFORMANCE
OF THE COMPOSITES, NATIONS MANAGED INDEX FUND OR NATIONS MANAGED SMALLCAP INDEX
FUND. The commingled funds and accounts that are included in the Composites are
not subject to the same types of expenses to which the Funds are subject nor to
the diversification requirements, specific tax restrictions and investment
limitations imposed by the 1940 Act or Subchapter M of the Internal Revenue
Code. Consequently, the performance results for the Composites could have been
adversely affected if the accounts included in the Composites had been
regulated as investment companies. In addition, the results presented below for
the Composites may not necessarily equate with the return experienced by any
particular account of TradeStreet.
Average Annual Total Returns for the Periods Indicated through March 31, 1998
<TABLE>
<CAPTION>
Since
One Year Three Year Five Year Inception***
<S> <C> <C> <C> <C>
Nations
Managed
Index
Fund 46.71% N/A N/A 40.48%
Enhanced
S&P 500
Index
Composite* 48.19% 33.25% 22.53% 19.72%
S&P 500
Index 47.99% 32.78% 19.32%
Lipper S&P
500 Index
Funds
Average** 47.07% 32.14% 21.86% 18.72%
</TABLE>
Annual Total Returns
<TABLE>
<CAPTION>
Enhanced Lipper S&P
Nations Equity Index 500 Index
Managed Common S&P 500 Funds
Year Index Fund Trust Fund* Index Average**
<S> <C> <C> <C> <C>
1989 N/A 34.28% 31.55% 30.58%
1990 N/A -1.52% -3.15% -3.57%
1991 N/A 30.86% 30.56% 29.65%
1992 N/A 5.55% 7.64% 7.12%
1993 N/A 10.52% 9.99% 9.52%
1994 N/A 0.69% 1.31% 0.90%
1995 N/A 37.84% 37.45% 36.82%
1996 N/A 24.12% 23.08% 22.30%
1997 32.96% 33.42% 33.23% 32.61%
</TABLE>
12
<PAGE>
Average Annual Total Returns for the Periods Indicated through March 31, 1998
<TABLE>
<CAPTION>
Since
One Year Inception***
<S> <C> <C>
Nations Managed
SmallCap Index Fund 47.10% 28.96%
Enhanced SmallCap Index
Composite* 47.67% 22.85%
S&P 600 Index 47.69% 21.31%
</TABLE>
* The total returns above reflect the deduction of 0.50% of fees and expenses
per annum [the reinvestment of all dividends, interest and income, and
realized or unrealized gains or losses]. The Composites are comprised of
equity only accounts and the equity portion of balanced accounts that are
valued in excess of $5 million.
** The Lipper S&P 500 Index Funds Average represents the average performance of
mutual funds with similar objectives monitored by Lipper Analytical
Services, Inc. during the periods shown.
*** Nations Managed Index Fund's inception was July 31, 1996; the Enhanced S&P
500 Index Composite's inception was December 31, 1988; Nations Managed
SmallCap Index Fund's inception was October 15, 1996; and the Enhanced
SmallCap Index Composite's inception was October 1, 1995.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and the Fund's
operating expenses. Investment performance also often reflects the risks
associated with such Fund's investment objective and policies. These factors
should be considered when comparing a Fund's investment results to those of
other mutual funds and other investment vehicles. Since yields fluctuate, yield
data cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
Any fees charged by a selling agent and/or servicing agent (as defined below)
directly to its customers' accounts in connection with investments in the Funds
will not be included in calculations of total return or yield.
In addition to Investor C Shares, the Funds offer Primary A, Primary B and
Investor A Shares. Each class of shares may bear different sales charges,
shareholder servicing fees and other expenses, which may cause the performance
of a class to differ from the performance of the other classes. Total return
and yield quotations will be computed separately for each class of a Fund's
shares. Any quotation of total return or yield not reflecting CDSCs would be
reduced if such sales charges were reflected. Each Fund's annual report
contains additional performance information and is available upon request
without charge from the Funds' distributor or your selling agent or by calling
Nations Funds at the toll-free number indicated on the cover of this
Prospectus.
How The Funds Are Managed
The business and affairs of Nations Fund Trust are managed under the direction
of its Board of Trustees. The SAI contains the names of and general background
information concerning each Trustee of Nations Fund Trust.
As described below, each Fund is advised by NBAI which is responsible for the
overall management and supervision of the investment management of each Fund.
Each Fund also is sub-advised by a separate investment sub-adviser, which as a
general matter is responsible for the day-to-day investment decisions for the
respective Fund.
Nations Funds 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.
NationsBank Corporation, the parent company of NationsBank, has signed an
agreement to merge with BankAmerica Corporation. The proposed merger is subject
to certain regulatory approvals and must be approved by shareholders of both
holding companies. The merger is expected to close in the second half of 1998.
NationsBank and NBAI have advised the Funds that the merger will not reduce the
level or quality of advisory and other services provided to the Funds.
Investment Adviser: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds. NBAI
13
<PAGE>
is a wholly owned subsidiary of NationsBank, which in turn is a wholly owned
banking subsidiary of NationsBank Corporation, a bank holding company organized
as a North Carolina corporation. NBAI has its principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as investment
sub-adviser to the Funds. TradeStreet is a wholly owned subsidiary of
NationsBank. TradeStreet provides investment management services to
individuals, corporations and institutions. TradeStreet has employed the
"managed index" style since 1989 and currently manages more than $1.5 billion
in this style on behalf of its clients, including the Funds.
Subject to the general supervision of Nations Fund Trust's Board of Trustees,
and in accordance with each Fund's investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions
with respect to and places orders for each Fund's purchases and sales of
portfolio securities and maintains records relating to such purchases and
sales. The Adviser is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with the
Adviser or which have sold shares in 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 has a lending
relationship.
For the services provided and expenses assumed pursuant to an investment
advisory agreement, NBAI is entitled to receive an advisory fee, computed daily
and paid monthly, at the annual rate of .50% of the average daily net assets of
each Fund.
For the services provided pursuant to an investment sub-advisory agreement,
NBAI will pay TradeStreet sub-advisory fees, computed daily and paid monthly,
at the annual rate of .10% of the average daily net assets of each Fund.
From time to time, NBAI (and/or TradeStreet) may waive or reimburse (either
voluntarily or pursuant to applicable state limitations) advisory fees and/or
expenses payable by a Fund.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid NBAI under the investment advisory agreement, advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Managed Index Fund -- .22%, Nations Managed SmallCap Index Fund --
.00%, Nations Managed Value Index Fund -- .03% and Nations Managed SmallCap
Value Index Fund -- .02%.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers, NBAI
paid TradeStreet under the investment sub-advisory agreements, sub-advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Managed Index Fund -- .10%, Nations Managed SmallCap Index Fund --
.10%, Nations Managed Value Index Fund -- .10% and Nations SmallCap Value Index
Fund -- .10%.
The Structured Products Management Team of TradeStreet is responsible for the
day-to-day management of Nations Managed Index Fund, Nations Managed SmallCap
Index Fund, Nations Managed Value Index Fund and Nations Managed SmallCap Value
Index Fund.
Morrison & Foerster LLP, counsel to Nations Funds and special counsel to
NationsBank, has advised Nations Funds and NationsBank that NationsBank and its
affiliates may perform the services contemplated by the investment advisory
agreement and this Prospectus without violation of the Glass-Steagall Act. 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 entities from continuing to
perform, in whole or in part, such services. If any such entity were prohibited
from performing any of such
14
<PAGE>
services, it is expected that new agreements would be proposed or entered into
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 Funds pursuant to an administration agreement. Pursuant to the terms of
the administration agreement, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
First Data Investor Services Group, Inc. ("First Data"), 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 Funds pursuant to a co-administration
agreement. Under the co-administration agreement, First Data 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 shares 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 First Data are
entitled to receive a combined fee at an annual rate of up to .10% of each
Fund's average daily net assets.
For the fiscal period from April 1, 1997 to March 31, 1998, after waivers,
Nations Fund Trust paid its administrators combined fees at the indicated rates
of the following Funds' average daily net assets: Nations Managed Index Fund --
.10%, Nations Managed SmallCap Index Fund -- .10%, Nations Managed Value Index
Fund -- .10% and Nations SmallCap Value Index Fund -- .10%.
NBAI serves as sub-administrator for the Funds pursuant to a sub-administration
agreement. Pursuant to the terms of the sub-administration agreement, NBAI
assists Stephens in supervising, coordinating and monitoring various aspects of
the Funds' administrative operations. For providing such services NBAI 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. Nations Funds
has entered into a distribution agreement with Stephens which provides that
Stephens has the exclusive right to distribute shares of the Funds. Stephens
may pay service fees or commissions to selling agents that assist customers in
purchasing Investor C Shares of the Funds. See "Shareholder Servicing And
Distribution Plan."
The Bank of New York ("BONY" or the "Custodian"), located at 90 Washington
Street, New York, New York 10286, provides custodial services for the assets of
all Nations Funds, except the international portfolios. In return for providing
custodial services to the Nations Funds Family, BONY is entitled to receive, in
addition to out-of-pocket expenses, fees at the rate of (i) 3/4 of one basis
point per annum on the aggregate net assets of all Nations Funds' non-money
market funds up to $10 billion; and (ii) 1/2 of one basis point on the excess,
including all Nations Funds' money market funds.
First Data serves as transfer agent (the "Transfer Agent") for the Funds'
Investor C Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.
PricewaterhouseCoopers LLP serves as independent accountant to Nations Funds.
Their address is 160 Federal Street, Boston, Massachusetts 02110.
Expenses: The accrued expenses of each Fund are deducted from the Funds' income
before dividends are declared. These expenses include, but are not limited to:
fees paid to the Adviser, Stephens and First Data; taxes; interest; fees
(including fees paid to Nations Funds' Trustees and officers); federal and
state securities registration and qualification fees; brokerage fees and
commissions; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; charges of the
Custodian and Transfer Agent; certain insurance premiums; outside auditing and
legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by the Adviser, Stephens
15
<PAGE>
or First Data under their respective agreements with Nations Funds; and any
extraordinary expenses. Investor C Shares bear certain class specific expenses
and also bear certain additional shareholder service and/or sales support
costs. Any general expenses of Nations Fund Trust that are not readily
identifiable as belonging to a particular investment portfolio are allocated
among all portfolios in the proportion that the assets of a portfolio bears to
the assets of Nations Fund Trust or in such other manner as the Board of
Trustees deems appropriate.
Organization And History
The Funds are members of the Nations Funds Family, which consists of Nations
Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc., Nations
Institutional Reserves, Nations Annuity Trust and Nations LifeGoal Funds, Inc.
The Nations Funds Family currently consists of more than 60 distinct investment
portfolios and total assets in excess of $40 billion.
Nations Fund Trust: Nations Fund Trust was organized as a Massachusetts
business trust on May 6, 1985. Nations Fund Trust's fiscal year end is March
31; prior to 1996, Nations Fund Trust's fiscal year end was November 30. The
Funds currently offer four classes of shares -- Primary A Shares, Primary B
Shares, Investor A Shares and Investor C Shares. This Prospectus relates only
to the Investor C Shares of the following Funds of Nations Fund Trust: Nations
Managed Index Fund, Nations Managed SmallCap Index Fund, Nations Managed Value
Index Fund and Nations Managed SmallCap Value Index Fund. To obtain additional
information regarding the Funds' other classes of shares which may be available
to you, contact your Agent (as defined below) or Nations Funds at
1-800-321-7854.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See the SAI for examples of when the Investment
Company Act of 1940, as amended (the "1940 Act") requires voting by fund.
As of August 1, 1998, NationsBank and its affiliates possessed or shared power
to dispose or vote with respect to more than 25% of the outstanding shares of
certain classes of shares of Nations Fund Trust and therefore could be
considered to be a controlling person of these classes and series 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 the SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders
entitled to vote at least 10% of the outstanding shares of Nations Fund Trust
entitled to be voted at such meeting.
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About Your Investment
How To Buy Shares
This Prospectus offers one class of shares to the general public. Investor C
Shares are sold without an initial sales charge and are subject to a CDSC upon
certain redemptions. Contact your Agent or Nations Funds at 1-800-321-7854 for
more information.
The Funds have established various procedures for purchasing Investor C Shares
in order to accommodate different investors. Purchase orders for Investor C
Shares may be placed through banks, broker/dealers or other financial
institutions (including certain affiliates of NationsBank) that have entered
into a shareholder servicing agreement ("Servicing Agreement") with Nations
Funds ("Servicing Agents") and/or a Sales Support Agreement ("Sales Support
Agreement") with Stephens ("Selling Agents").
The Funds reserve the right, in their discretion, to make Investor C Shares
available to other categories of investors, including those who become eligible
in connection with a merger or reorganization.
There is a minimum initial investment of $1,000, except that the minimum
initial investment is:
o $500 for "IRA" investors;
o $250 for non-working spousal IRAs;
o $250 for accounts established with certain fee-based investment advisers or
financial planners, including wrap fee accounts and other managed agency/asset
allocation accounts; and
o $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.
There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified
employee pension plans ("SAR-SEPs"), Savings Incentives Method Plans for
Employees ("SIMPLE IRAs"), salary reduction-Individual Retirement Account
("SAR-IRAs") or similar types of accounts. However, the assets of such plans
must reach an asset value of $1,000 ($500 for SEPs, SAR-SEPs, SIMPLE IRAs, and
SAR-IRAs) within one year of the account open date. If the assets of such plans
do not reach the minimum asset size within one year, Nations Funds reserves the
right to redeem the shares held by such plans on 60 days' written notice. The
minimum subsequent investment is $100, except for investments pursuant to the
Systematic Investment Plan described below.
Investor C Shares are purchased at net asset value per share without the
imposition of a sales charge but are subject to a CDSC if redeemed within one
year after purchase. Purchases may be effected on days on which the New York
Stock Exchange (the "Exchange") is open for business (a "Business Day").
The Servicing Agents will provide various shareholder services for, and the
Selling Agents will provide sales support assistance to, their respective
customers ("Customers") who own Investor C Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Funds may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.
Nations Funds and Stephens reserve the right to reject any purchase order. The
issuance of Investor C Shares is recorded on the books of the Funds, and share
certificates are not issued unless expressly requested in writing. Certificates
are not issued for fractional shares.
Effective Time of Purchases: Purchase orders for Investor C Shares in the Funds
which are received by Stephens, the Transfer Agent or their respective agents
before the close of regular trading on the Exchange (currently 4:00 p.m.,
Eastern time) on any Business Day are priced according to the
17
<PAGE>
net asset value determined on that day. In the event that the Exchange closes
early, purchase orders received prior to closing will be priced as of the time
the Exchange closes and purchase orders received after the Exchange closes will
be deemed received on the next Business Day and priced according to the net
asset value determined on the next Business Day. Purchase orders are not
executed until 4:00 p.m., Eastern time, on the Business Day on which
immediately available funds in payment of the purchase price are received by
the Funds' Custodian. Such payment must be received no later than 4:00 p.m.,
Eastern time, by the third Business Day following the receipt of the order, as
determined above. If funds are not received by such date, the order will not be
accepted and notice thereof will be given to the Agent placing the order.
Payment for orders which are not received or accepted will be returned after
prompt inquiry to the sending Agent.
The Agents are responsible for transmitting orders for purchases of Investor C
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Funds.
Systematic Investment Plan: Under the Funds' Systematic Investment Plan
("SIP"), a shareholder may automatically purchase Investor C Shares. On a
bi-monthly, monthly or quarterly basis, a shareholder may direct cash to be
transferred automatically from his/her checking or savings account at any bank
which is a member of the Automated Clearing House to his/her Fund account.
Transfers will occur on or about the 15th and/or the last day of the applicable
month. Subject to certain exceptions for employees of NationsBank and its
affiliates and pre-existing SIP accounts, the systematic investment amount may
be in any amount from $50 to $100,000. For more information concerning the SIP,
contact your Agent or Nations Funds.
Telephone Transactions: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How To Redeem Shares" and "How To
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. Shareholders should be aware that by using the telephone transaction
feature, such shareholders may be giving up a measure of security that they may
have if they were to authorize written requests only. A shareholder may bear
the risk of any resulting losses from a telephone transaction. Nations Funds
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if Nations Funds and its service providers fail to
employ such measures, they may be liable for any losses due to unauthorized or
fraudulent instructions. Nations Funds requires a form of personal
identification prior to acting upon instructions received by telephone and
provides written confirmation to shareholders of each telephone share
transaction. In addition, Nations Funds reserves the right to record all
telephone conversations. Shareholders should be aware that during periods of
significant economic or market change, telephone transactions may be difficult
to complete.
Investor C Shares -- Charges and Features
Investor C Contingent Deferred Sales Charge:
Subject to certain waivers, Investor C Shares of Nations Managed Index Fund,
Nations Managed SmallCap Index Fund, Nations Managed Value Index Fund, and
Nations Managed SmallCap Value Index Fund that are redeemed within one year of
the date of purchase will be subject to a CDSC equal to 1.00% of the lesser of
the net asset value or the purchase price of the shares being redeemed. No CDSC
is imposed on increases in net asset value above the initial purchase price,
including shares acquired by reinvestment of distributions.
Solely for purposes of determining the period of time that has elapsed from the
purchase of any Investor C Shares, all purchases during a month will be
aggregated and deemed to have been made on the last day of the month. In
determining whether
18
<PAGE>
a CDSC is applicable to a redemption, the calculation will be made in the
manner that results in the lowest possible charge being assessed. In this
regard, it will be assumed that the redemption is first of shares held for the
longest period of time or shares acquired pursuant to reinvestment of dividends
or distributions. The charge will not be applied to dollar amounts representing
an increase in the net asset value since the time of purchase.
The CDSC will be waived on redemptions of Investor C Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as
amended (the "Code")) of a shareholder (including a registered joint owner),
(ii) in connection with the following retirement plan distributions: (a) lump-
sum or other distributions from a qualified corporate or self-employed
retirement plan following retirement (or in the case of a "key employee" of a
"top heavy" plan, following attainment of age 59 1/2); (b) distributions from
an IRA, or Custodial Account under Section 403(b)(7) of the Code, following
attainment of age 59 1/2; (c) a tax-free return of an excess contribution to an
IRA; and (d) distributions from a qualified retirement plan that are not
subject to the 10% additional Federal withdrawal tax pursuant to Section
72(t)(2) of the Code, (iii) payments made to pay medical expenses which exceed
7.5% of income and distributions to pay for insurance by an individual who has
separated from employment and who has received unemployment compensation under
a federal or state program for at least 12 weeks, (iv) effected pursuant to
Nations Funds' right to liquidate a shareholder's account, including instances
where the aggregate net asset value of the Investor C shares held in the
account is less than the minimum account size, (v) effected pursuant to the
Automatic Withdrawal Plan discussed below, provided that such redemptions do
not exceed, on an annual basis, 12% of the net asset value of the Investor C
Shares in the account, and (vi) in connection with the combination of Nations
Funds with any other registered investment company by a merger, acquisition of
assets or by any other transaction. In addition, the CDSC will be waived on
Investor C Shares purchased before September 30, 1994 by current or retired
employees of NationsBank and its affiliates or by current or former Trustees or
Directors of Nations Funds or other management companies managed by
NationsBank. Shareholders are responsible for providing evidence sufficient to
establish that they are eligible for any waiver of the CDSC.
Reinstatement Privilege: Within 120 days after a redemption of Investor C
Shares of the Fund, a shareholder may reinvest any portion of the proceeds of
such redemption in Investor C Shares of the Fund. The amount which may be
so reinvested is limited to an amount up to, but not exceeding, the redemption
proceeds (or to the nearest full share if fractional shares are not purchased).
A shareholder exercising this privilege would receive a pro rata credit for any
CDSC paid in connection with the prior redemption. A shareholder may not
exercise this privilege with the proceeds of a redemption of shares previously
purchased through the reinvestment privilege. In order to exercise this
privilege, a written order for the purchase of Investor C Shares must be
received by the Transfer Agent or by Stephens within 120 days after the
redemption.
Automatic Withdrawal Plan: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Fund if the value of the
Investor C Shares in his/her accounts within the Nations Funds Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor C Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis 12% of
the net value of the Investor C Shares in the account. Otherwise, any applicable
CDSC will be imposed on shares redeemed under the AWP. Shareholders who elect to
establish an AWP may receive a monthly, quarterly or annual check or automatic
transfer to a checking or savings account in a stated amount of not less than
$25 on or about the 10th or 25th day of the applicable month of withdrawal.
Investor C Shares will be redeemed (net of any applicable CDSC) as necessary to
meet withdrawal payments. Withdrawals will reduce principal and may eventually
deplete the shareholder's account. If a shareholder desires to establish an AWP
after opening an account, a signature guarantee will be required. An AWP may be
terminated by a shareholder on 30 days' written notice to his/her Agent or by
Nations Funds at any time.
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How To Redeem Shares
Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders for
Investor C Shares of the Funds which are received by Stephens, the Transfer
Agent or their respective agents before the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on any Business Day are priced
according to the net asset value next determined after acceptance of the order.
In the event that the Exchange closes early, redemption orders received prior
to closing will be priced as of the time the Exchange closes and redemption
orders received after the Exchange closes will be deemed received on the next
Business Day and priced according to the net asset value determined on the next
Business Day. Redemption orders are effected at the net asset value per share
next determined after receipt of the order by Stephens, the Transfer Agent or
their respective agents, less any applicable CDSC. The Agents are responsible
for transmitting redemption orders to Stephens or to the Transfer Agent and for
crediting their Customers' accounts with the redemption proceeds on a timely
basis. No charge for wiring redemption payments is imposed by Nations Funds.
There is no redemption charge.
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens, the Transfer Agent or
their respective agents. However, redemption proceeds for shares purchased by
check may not be remitted until at least 15 days after the date of purchase to
ensure that the check has cleared; a certified check, however, is deemed to be
cleared immediately.
Nations Funds may redeem a shareholder's Investor C Shares upon 60 days'
written notice if the balance in the shareholder's account drops below $500 as
a result of redemptions. Share balances also may be redeemed at the direction
of an Agent pursuant to arrangements between the Agent and its Customers.
Nations Funds also may redeem shares of the Funds involuntarily or make payment
for redemption in readily marketable securities or other property under certain
circumstances in accordance with the 1940 Act.
Prior to effecting a redemption of Investor C Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock
exchange, unless other arrangements satisfactory to Nations Funds have
previously been made. Nations Funds may require any additional information
reasonably necessary to evidence that a redemption has been duly authorized.
How To Exchange Shares
The exchange feature enables a shareholder of Investor C Shares of a Nations
Funds non-money market fund to acquire shares of the same class that are
offered by another non-money market fund of Nations Funds or Daily Shares of
any Nations Funds money market fund when he or she believes that a shift
between funds is an appropriate investment decision. A qualifying exchange is
based on the next calculated net asset value per share of each fund after the
exchange order is received.
If a shareholder acquires Investor C Shares of a non-money market fund through
an exchange, the CDSC applicable to that current fund will be applied to any
redemption of the acquired shares. However, if a shareholder acquires Daily
Shares of a money market fund through an exchange of Investor C Shares, the
CDSC applicable to the exchanged Investor C Shares will be applied on any
redemption of the acquired Daily Shares. Notwithstanding the foregoing, if a
shareholder redeems shares acquired through an exchange, the shareholder will
be subject to the highest CDSC applicable to any shares that were exchanged
within the 30 days prior to the redemption.
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The Funds and each of the other funds of Nations Funds may limit the number of
times this exchange feature may be exercised by a shareholder within a
specified period of time. Also, the exchange feature may be terminated or
revised at any time by Nations Funds upon such notice as may be required by
applicable regulatory agencies (presently 60 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 describes its investment objective and
policies, and shareholders should obtain a copy and examine it carefully before
investing. Exchanges are subject to the minimum investment requirement and any
other conditions imposed by each fund. In the case of any shareholder holding a
share certificate or certificates, no exchanges may be made until all
applicable share certificates have been received by the Transfer Agent and
deposited in the shareholder's account. An exchange will be treated for Federal
income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
Nations Funds and Stephens reserve 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.
The Investor C Shares exchanged must have a current value of at least $1,000
(except for exchanges through the Automatic Exchange Feature, which is
described below). Nations Funds and Stephens reserve the right to reject any
exchange request. Only shares that may legally be sold in the state of the
investor's residence may be acquired in an exchange. Only shares of a class
that is accepting investments generally may be acquired in an exchange. An
investor may telephone an exchange request by calling his/her Agent which is
responsible for transmitting such request to Stephens or to the Transfer Agent.
During periods of significant economic or market change, telephone exchanges
may be difficult to complete. In such event, shares may be exchanged by mailing
the request directly to the Agent through which the original shares were
purchased. An investor should consult his/her Agent or Stephens for further
information regarding exchanges.
Shareholder Servicing And Distribution Plans
Pursuant to Rule 12b-1 under the 1940 Act, the Trustees have approved a
Distribution Plan with respect to Investor C Shares of the Funds. Pursuant to
the Distribution Plan, the Funds may compensate or reimburse Stephens for any
activities or expenses primarily intended to result in the sale of the Funds'
Investor C Shares. Payments under the Investor C Distribution Plan will be
calculated daily and paid monthly at a rate or rates set from time to time by
the Trustees, provided that the annual rate may not exceed .75% of the average
daily net asset value of the Funds' Investor C Shares.
The fees payable under the Distribution Plan are used (i) to compensate Selling
Agents for providing sales support assistance relating to Investor C Shares,
(ii) to pay for promotional activities intended to result in the sale of
Investor C Shares such as the preparation, printing and distribution of
prospectuses to other than current shareholders, and (iii) to compensate
Selling Agents for providing sales support services with respect to their
Customers who are, from time to time, beneficial and record holders of Investor
C Shares. Currently, substantially all fees paid pursuant to the Distribution
Plan are paid to compensate Selling Agents for providing the services described
in (i) and (iii) above, with any remaining amounts being used by Stephens to
partially defray other expenses incurred by Stephens in distributing Investor C
Shares. Fees
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received by Stephens pursuant to the Distribution Plan will not be used to pay
any interest expenses, carrying charges or other financing costs (except to the
extent permitted by the SEC) and will not be used to pay any general and
administrative expenses of Stephens.
Nations Funds and Stephens may suspend or reduce payments under the
Distribution Plan at any time, and payments are subject to the continuation of
the Distribution Plan described above and the terms of the Sales Support
Agreement between Selling Agents and Stephens. See the SAI for more details on
the Distribution Plan.
The Trustees also have approved a shareholder servicing plan ("Servicing Plan")
for the Funds which permits the Funds to compensate Servicing Agents for
services provided to their Customers that own Investor C Shares. Payments under
the Servicing Plan are calculated daily and paid monthly at a rate or rates set
from time to time by the Funds, provided that the annual rate may not exceed
.25% of the average daily net asset value of the Funds' Investor C Shares.
The fees payable under the Servicing Plan are used primarily to compensate or
reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents may include: (i) aggregating and processing purchase and
redemption requests for Investor C Shares from Customers and transmitting net
purchase and redemption orders to Stephens or the Transfer Agent; (ii)
providing Customers with a service that invests the assets of their accounts in
Investor C Shares pursuant to specific or preauthorized instructions; (iii)
processing dividend and distribution payments from the Funds on behalf of
Customers; (iv) providing information periodically to Customers showing their
positions in Investor C Shares; (v) arranging for bank wires; and (vi)
providing general shareholder liaison services.
Nations Funds may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Servicing Plan
described above and the terms of the Servicing Agreements. See the SAI for more
details on the Servicing Plan.
Nations Funds understands that Agents may charge fees to their Customers who
are the owners of Investor C Shares for various services provided in connection
with Customers' accounts. These fees would be in addition to any amounts
received by a Selling Agent under its Sales Support Agreement with Stephens or
by a Servicing Agent under its Servicing Agreement with Nations Funds. The
Sales Support Agreements and Servicing Agreements require Agents to disclose to
their Customers any compensation payable to the Agent by Stephens or Nations
Funds and any other compensation payable by the Customers for various services
provided in connection with their accounts. Customers should read this
Prospectus in light of the terms governing their accounts with their Agents.
The Adviser may also pay out of its own assets amounts to Stephens or other
broker/dealers in connection with the provision of administrative and/or
distribution related services to shareholders.
In addition, Stephens may, from time to time, at its expense or as an expense
for which it may be reimbursed under the Distribution Plan, pay a bonus or
other consideration or incentive to Agents who sell a minimum dollar amount of
shares of the Funds during a specified period of time. Stephens may also, from
time to time, pay additional consideration to Agents not to exceed .75% of the
offering price per share on all sales of Investor C Shares as an expense of
Stephens or for which Stephens may be reimbursed under the plan adopted
pursuant to Rule 12b-1 or upon receipt of a CDSC. Any such additional
consideration or incentive program may be terminated at any time by Stephens.
Stephens has also established a non-cash compensation program, pursuant to
which broker/dealers or financial institutions that sell shares of the Funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise. This non-cash compensation program may
be amended or terminated at any time by Stephens.
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How The Funds Value Their Shares
The net asset value of a share of each class is calculated by dividing the
total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares of the Funds are valued as of the close of regular
trading on the Exchange (currently 4:00 p.m., Eastern time) on each Business
Day. In the event that the Exchange closes early, shares of the Funds will be
priced as of the time the Exchange closes. Currently, the days on which the
Exchange is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities for which market quotations are readily available are
valued at market value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following procedures
approved by the Trustees.
How Dividends And Distributions Are Made; Tax Information
Dividends and Distributions: Even though the Funds seek to manage taxable
distributions, the Funds may be expected to earn and distribute taxable income
and may also be expected to realize and distribute capital gains from time to
time. Dividends from net investment income are declared and paid monthly by
Nations Managed Index Fund. Dividends from net investment income are declared
and paid each calendar quarter by Nations Managed SmallCap Index Fund, Nations
Managed Value Index Fund and Nations Managed SmallCap Value Index Fund. The
Funds' net realized capital gains (including net short-term capital gains) are
distributed at least annually. Distributions from capital gains are made after
applying any available capital loss carryovers. Distributions paid by the Funds
with respect to one class of shares may be greater or less than those paid with
respect to another class of shares due to the different expenses of the
different classes.
Investor C Shares of the Funds are eligible to receive dividends when declared,
provided however, that the purchase order for such shares is received at least
one day prior to the dividend declaration and such shares continue to be
eligible for dividends through and including the day before the redemption
order is executed.
The net asset value of Investor C Shares will be reduced by the amount of any
dividend or distribution. Accordingly, dividends and distributions on newly
purchased shares represent, in substance, a return of capital. However, such
dividends and distributions would nevertheless be taxable. Certain Agents may
provide for the reinvestment of dividends in the form of additional Investor C
Shares of the same class in the same Fund. Dividends and distributions are paid
in cash within five Business Days of the end of the month or quarter to which
the payment relates. Dividends and distributions payable to a shareholder are
paid in cash within five Business Days after a shareholder's complete
redemption of his/ her Investor C Shares.
Tax Information: Each Fund intends to continue to qualify as a "regulated
investment company" under the Code. Such qualification relieves a Fund of
liability for Federal income tax on amounts distributed in accordance with the
Code.
Each Fund intends to distribute substantially all of its net investment income
each taxable year. Distributions by a Fund of its net investment income and the
excess, if any, of its net short-term capital gain over its net long-term
capital loss generally are taxable as ordinary income to shareholders, whether
such income is received in cash or reinvested in additional shares.
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Corporate investors in a Fund may be entitled to the dividends-received
deduction on a portion of such Fund's dividends.
Substantially all of the Funds' net realized long-term capital gains will be
distributed at least annually. The Funds will generally have no tax liability
with respect to such gains, and the distributions generally will be taxable to
shareholders as net capital gain, regardless of how long the shareholders have
held such Funds' shares and whether such distributions are received in cash or
reinvested in additional shares. Noncorporate shareholders may be taxed on such
distributions at preferential rates.
Each year, shareholders will be notified as to the amount and Federal tax
status of all dividends and distributions paid during the prior year.
Dividends and distributions 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 and distributions are actually paid
during January of the following year.
Federal law requires Nations Funds to withhold 31% from any distributions paid
by Nations Funds and/or redemptions (including exchanges and redemptions
in-kind) that occur in certain shareholder accounts if the shareholder has not
properly furnished a certified correct Taxpayer Identification Number and has
not certified that withholding does not apply, or if the Internal Revenue
Service has notified Nations Funds that the Taxpayer Identification Number
listed on a shareholder account is incorrect according to its records, or that
the shareholder is subject to backup withholding. Amounts withheld are applied
to the shareholder's Federal tax liability, and a refund may be obtained from
the Internal Revenue Service if withholding results in overpayment of taxes.
Federal law also requires the Funds to withhold tax on dividends paid to
certain foreign shareholders.
The foregoing discussion is based on tax laws and regulations which were in
effect as of the date of this Prospectus and summarizes only some of the
important Federal tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning;
investors should consult their tax advisors with respect to their specific tax
situations as well as with respect to foreign, state and local taxes. Further
tax information is contained in the SAI.
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Financial Highlights
The following financial information has been derived from the audited financial
statements of Nations Fund Trust. PricewaterhouseCoopers LLP is the independent
accountant to Nations Fund Trust. The reports of PricewaterhouseCoopers LLP for
the most recent fiscal period of Nations Fund Trust accompany the financial
statements for such period and are incorporated by reference in the SAI, which
is available upon request. For more information see "Organization And History."
Shareholders of the Funds will receive unaudited semi-annual reports describing
the Funds' investment operations and annual financial statements audited by the
Funds' independent accountant.
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Managed Index Fund
<TABLE>
<CAPTION>
PERIOD PERIOD
ENDING ENDED
Investor C Shares 03/31/98 03/31/97 *
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.90 $ 10.00
Net investment income 0.10 0.11
Net realized and unrealized gain on investments 5.39 1.90
Net increase in net asset value from operations 5.49 2.01
Distributions:
Dividends from net investment income ( 0.10) ( 0.11)
Distributions from net realized capital gains ( 0.15) --
Total dividends and distributions ( 0.25) ( 0.11)
Net asset value, end of period $ 17.14 $ 11.90
Total return ++ 46.71% 20.11%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $4,284 $ 83
Ratio of operating expenses to average net assets 1.00%(a)(b) 1.00%+(a)
Ratio of net investment income to average net assets 0.76% 1.42%+
Portfolio turnover rate 30% 17%
Ratio of operating expenses to average net assets without waivers and/or expense
reimbursements 1.30%(a) 1.55%+(a)
</TABLE>
* Nations Managed Index Fund Investor C Shares commenced operations on July
31, 1996.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements was less than 0.01%.
(b) The effect of interest expense on the operating expense ratio was less than
0.01%.
25
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Nations Managed SmallCap Index Fund
<TABLE>
<CAPTION>
PERIOD PERIOD
ENDED ENDED
Investor C Shares 03/31/98 03/31/97 *
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.83 $ 10.00
Net investment income 0.01 0.03
Net realized and unrealized gain (loss) on investments 4.58 ( 0.17)
Net increase/(decrease) in net asset value from operations 4.59 ( 0.14)
Distributions:
Dividends from net investment income ( 0.02) ( 0.03)
Distributions from net realized capital gains ( 0.31) --
Total dividends and distributions ( 0.33) ( 0.03)
Net asset value, end of period $ 14.09 $ 9.83
Total return ++ 47.10% ( 1.46)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 524 $ 19
Ratio of operating expenses to average net assets 1.00%(a)(b) 1.00%+
Ratio of net investment income to average net assets 0.02% 0.55%+
Portfolio turnover rate 62% 18%
Ratio of operating expenses to average net assets without waivers and/or expense
reimbursements 1.52%(a) 1.71%+
</TABLE>
* Nations Managed SmallCap Index Fund Investor C Shares commenced operations
on October 15, 1996.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(b) The effect of interest expense on the operating expense ratio was 0.01%.
26
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT THE PERIOD
Nations Managed Value Index Fund
<TABLE>
<CAPTION>
PERIOD
ENDED
Investor C Shares 03/31/98 *
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.04
Net realized and unrealized gain on investments 1.33
Net increase in net asset value from operations 1.37
Distributions:
Dividends from net investment income ( 0.05)
Distributions from net realized capital gains --
Total dividends and distributions ( 0.05)
Net asset value, end of period $ 11.32
Total return ++ 13.69%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4
Ratio of operating expenses to average net assets 1.00%+(a)(b)
Ratio of net investment income to average net assets 1.22%+
Portfolio turnover rate 3%
Ratio of operating expenses to average net assets without waivers and/or expense 2.07%+(a)
reimbursements
</TABLE>
* Nations Managed Value Index Fund Investor C Shares commenced operations on
November 24, 1997.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements was less than 0.01%.
(b) The effect of interest expense on the operating expense ratio was less than
0.01%.
27
<PAGE>
FOR AN INVESTOR C SHARE OUTSTANDING THROUGHOUT THE PERIOD
Nations Managed SmallCap Value Index Fund
<TABLE>
<CAPTION>
PERIOD
ENDED
Investor C Shares 03/31/97*
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.01
Net realized and unrealized gain on investments 1.46
Net increase in net asset value from operations 1.47
Distributions:
Dividends from net investment income ( 0.01)
Distributions from net realized capital gains --
Total dividends and distributions ( 0.01)
Net asset value, end of period $ 11.46
Total return ++ 14.71%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 16
Ratio of operating expenses to average net assets 1.00%+(a)(b)
Ratio of net investment income to average net assets 0.28%+
Portfolio turnover rate 30%
Ratio of operating expenses to average net assets without waivers and/or expense 2.67%+(a)
reimbursements
</TABLE>
* Nations Managed SmallCap Value Index Fund Investor C Shares commenced
operations on November 24, 1997.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements was less than 0.01%.
(b) The effect of interest expense on the operating expense ratio was 0.04%.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAI contains more
information concerning such investments.
Bank Instruments: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. 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.
Borrowings: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Fund's total assets must be repaid prior to the purchase of
portfolio securities. Pursuant to line of credit arrangements with BONY, the
Funds may borrow primarily for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. Under the requirements of the 1940 Act, the Funds
are
28
<PAGE>
required to maintain an asset coverage (including the proceeds of the
borrowings) of at least 300% of all borrowings.
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 objective. 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: Each Fund 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.
Futures, Options and Other Derivative Instruments: 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 investing
in futures contracts for the purchase or sale of instruments based on financial
indices, including interest rate indices or indices of U.S. Government, equity
or fixed income securities ("futures contracts"), options on futures contracts,
forward contracts and swaps and swap-related products such as interest rate
swaps, currency swaps, caps, collars and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable
position. Additional risks inherent in the use of futures, options, forward
contracts and swaps include: imperfect correlation between the price of
futures, options and forward contracts and movements in the prices of the
securities or currencies being hedged; the possible absence of a liquid
secondary market for any particular instrument at any time; and the possible
need to defer closing out certain hedged positions to avoid adverse tax
consequences. A Fund may not purchase put and call options which are traded on
a national stock exchange in an amount exceeding 5% of its net assets.
Illiquid Securities: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not hold more
than 15% of the value of their respective net assets in securities that are
illiquid. Repurchase agreements, time deposits and guaranteed investment
contracts that do not provide for payment to a Fund within seven days after
notice, and illiquid restricted securities, are subject to the limitation on
illiquid securities.
If otherwise consistent with its investment objective and policies, the Funds
may purchase securities that are not registered under the Securities Act of
1933, as amended (the "1933 Act") but which can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the 1933 Act, or which
were issued under Section 4(2) of the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by a Fund's Board of Trustees
or the Adviser, acting under guidelines approved and monitored by such Fund's
Board of Trustees, 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 or other buyers cease purchasing such restricted
securities pursuant to Rule 144A or otherwise, the level of illiquidity of a
Fund holding such securities may increase during such period.
29
<PAGE>
Money Market Instruments: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
obligations, U.S. Government obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.
Other Investment Companies: Each 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. Pursuant to an exemptive order, the Nations Funds' non-money
market funds may purchase shares of Nations Funds' money market funds.
Repurchase Agreements: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker/dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can
be liquidated on the open market. Repurchase agreements with a maturity of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into repurchase agreements jointly with other
investment portfolios of Nations Funds.
Securities Lending: To increase return on portfolio securities, the Funds may
lend their portfolio securities to broker/dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned. There is a risk of delay in receiving collateral or
in recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Adviser to be credit worthy and when, in its
judgment, the income to be earned from the loan justifies the attendant risks.
The aggregate of all outstanding loans of a Fund may not exceed 33% of the
value of its total assets, which may include cash collateral received for
securities loans. Cash collateral received by a Nations Fund may be invested in
a Nations' money market fund.
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. U.S.
Treasury obligations differ only in their interest rates, maturities and time
of issuance. Obligations of U.S. Government agencies, authorities and
instrumentalities are issued by government-sponsored agencies and enterprises
acting under authority of Congress. Although obligations of federal agencies,
authorities and instrumentalities are not debts of the U.S. Treasury, some 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; some
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 are backed only by the
credit of the issuer itself, such as obligations of the Federal National
Mortgage Association. 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.
The market value of U.S. Government obligations may fluctuate due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government obligations, declines when market
interest rates increase
30
<PAGE>
and rises when market interest rates decrease. Certain types of U.S. Government
obligations are subject to fluctuations in yield or value due to their
structure or contract terms.
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 take
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.
31
<PAGE>
NATIONS FUND TRUST
FILE NOS. 2-97817; 811-4305
PART C
OTHER INFORMATION
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 Nations Government Money Market, Nations
Tax Exempt, Nations Value, Nations Capital Growth, Nations Emerging Growth,
Nations Disciplined Equity, Nations Equity Index, Nations Managed Index,
Nations Managed SmallCap Index, Nations Managed Value Index, Nations Managed
SmallCap Value Index, Nations Marsico Growth & Income, Nations Marsico
Focused Equities, Nations Balanced Assets, Nations Short-Intermediate
Government, Nations Short-Term Income, Nations Diversified Income, Nations
Strategic Fixed Income, 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 and Nations Virginia Municipal Bond Funds:
Schedule of Investments for March 31, 1998
Statements of Assets and Liabilities for March 31, 1998
Statements of Operations for the fiscal year ended March 31, 1998
Statements of Changes in Net Assets for the fiscal year ended March
31, 1998 and the fiscal period ended March 31, 1997
Schedule of Capital Stock Activity for the fiscal year ended March 31,
1998
Notes to Financial Statements
Report of Independent Accountants, dated May 28, 1997
<PAGE>
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 Post-Effective Amendment No. 57, filed November 5, 1998.
(1)(b) Certificate pertaining to classification of shares dated May 17,
1985, is incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(1)(c) Amendment dated July 27, 1987, to Declaration of Trust is
incorporated by reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(1)(d) Certificate and Amendment to Declaration of Trust, dated September
13, 1989, is incorporated by reference to Post-Effective Amendment
No. 57, filed November 5, 1998.
(1)(e) Certificate pertaining to classification of shares dated August 24,
1990, is incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(1)(f) Certificate and Amendment dated November 26, 1990 to Declaration of
Trust, is incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(1)(g) Certificate pertaining to classification of shares dated July 18,
1991, is incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(1)(h) Amendment dated March 25, 1992, to Declaration of Trust is
incorporated by reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(1)(i) Certificate relating to classification of shares dated March 26,
1992, is incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(1)(j) Amendment dated September 21, 1992, to Declaration of Trust is
incorporated by reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(1)(k) Certificate pertaining to classification of shares creating
"Investor B" Shares of the money market funds and creating "Investor
C Shares" of the Non-Money Market Funds and relating to the
establishment of Nations Intermediate Bond Fund and
2
<PAGE>
Nations Tennessee Municipal Bond Fund, dated March 26, 1993, is
incorporated by reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(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. 57, filed November 5, 1998.
(1)(m) Certificate relating to the establishment of the 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 21, 1993, is
incorporated by reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(1)(n) 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, dated March 24, 1994,
is incorporated by reference to Post-Effective Amendment No. 57,
filed November 5, 1998.
(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) Classification of Shares relating to the renaming of Nations Special
Equity Fund is incorporated by reference to Post-Effective Amendment
No. 57, filed November 5, 1998.
(1)(r) Certificate relating to the establishment of Nations Tax-Managed
Equity Fund's Series of Shares is incorporated by reference to
Post-Effective Amendment No. 57, filed November 5, 1998.
(2)(a) Amended and Restated Code of Regulations as approved and adopted by
Registrant's Board of Trustees and last amended April 13, 1995, is
incorporated by reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(3) None.
(4)(a) Specimen copies of share certificates, to be filed by amendment.
(5)(a) Investment Advisory Agreement between NationsBanc Advisors, Inc.,
("NBAI") and the Registrant, dated January 1, 1996, is incorporated
by reference to Post-Effective Amendment No. 57, filed November 5,
1998.
3
<PAGE>
(5)(b) Sub-Advisory Agreement among NBAI, TradeStreet Investment
Associates, Inc. ("TradeStreet") and the Registrant, dated January
1, 1996, is incorporated by reference to Post-Effective Amendment
No. 57, filed November 5, 1998.
(5)(c) Sub-Advisory Agreement among NBAI, Marsico Capital Management, LLC
and the Registrant, dated December 31, 1997, is incorporated by
reference to Post-Effective Amendment No. 57, filed November 5,
1998.
(6)(a) 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. 57, filed November 5, 1998.
(7) None.
(8) Mutual Fund Custody Agreement between Registrant and The Bank of New
York, dated October 19, 1998, is incorporated by reference to
Post-Effective Amendment No. 57, filed November 5, 1998.
(9)(a) Administration Agreement between Stephens Inc. and Registrant, dated
September 1, 1993, is incorporated by reference to Post-Effective
Amendment No. 57, filed November 5, 1998.
(9)(b) Co-Administration Agreement between The Boston Company Advisors,
Inc. and Registrant is incorporated by reference to Post-Effective
Amendment No. 57, filed November 5, 1998.
(9)(c) Shareholder Administration Agreement for Trust B Shares (now known
as Primary B Shares) is incorporated by reference to Post-Effective
Amendment No. 57, filed November 5, 1998.
(9)(d) Transfer Agency and Services Agreement dated June 1, 1995, between
Registrant and The Shareholder Services Group, Inc., is incorporated
by reference to Post-Effective Amendment No. 57, filed November 5,
1998.
(9)(e) Transfer Agency Agreement between Registrant and NationsBank Texas,
dated April 25, 1992, relating to the Trust Shares (now known as
Primary Shares) of the 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. 57, filed
November 5, 1998.
(9)(f) 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 (now known as Primary Shares) of
the Capital Growth Fund Emerging
4
<PAGE>
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. 57, filed November 5, 1998.
(9)(g) 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. 57, filed November 5, 1998.
(9)(h) Amendment No. 3 to the Transfer Agency Agreement 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.
57, filed November 5, 1998.
(9)(h)(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. 57, filed November 5, 1998.
(9)(i) Cross Indemnification Agreement dated June 27, 1995, between the
Trust, Nations Fund, Inc. and Nations Fund Portfolios, Inc., is
incorporated by reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(9)(j) Form of Shareholder Servicing Agreement relating to Primary B Shares
is incorporated by reference to Post-Effective Amendment No. 57,
filed November 5, 1998.
(9)(k) Shareholder Servicing Plan for Investor A Shares is incorporated by
reference to Post-Effective Amendment No. 57, filed November 5,
1998.
(9)(l) Forms of Shareholder Servicing Agreement for Investor A Shares are
incorporated by reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(9)(m) 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. 57, filed November 5, 1998.
(9)(n) 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. 57, filed November 5, 1998.
5
<PAGE>
(9)(o) Shareholder Servicing Plan for Investor C Shares of the money market
funds and Investor B Shares (formerly Investor N Shares) of the
non-money market funds, is incorporated by reference to
Post-Effective Amendment No. 57, filed November 5, 1998.
(9)(p) Forms of Shareholder Servicing Agreement for Investor C Shares of
the money market funds and Investor B Shares (formerly Investor N
Shares) of the non-money market funds are incorporated by reference
to Post-Effective Amendment No. 57, filed November 5, 1998.
(10) Opinion and Consent of Counsel is filed herewith.
(11) Consent of Independent Accountants, PricewaterhouseCoopers 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. 57, filed November 5,
1998.
(15)(b) Form of Sales Support Agreement for Investor A Shares is
incorporated by reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(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. 57, filed November 5, 1998.
(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. 57, filed November 5, 1998.
(15)(e) Distribution Plan for Investor B Shares (formerly Investor N Shares)
of the non-money market funds is incorporated by reference to
Post-Effective Amendment No. 57, filed November 5, 1998.
6
<PAGE>
(15)(f) Form of Sales Support Agreement for Investor B Shares (formerly
Investor N Shares) of the non-money market funds is incorporated by
reference to Post-Effective Amendment No. 57, filed November 5,
1998.
(15)(g) Shareholder Administration Plan for Primary B Shares is incorporated
by reference to Post-Effective Amendment No. 57, filed November 5,
1998.
(16)(a) Schedules for Computation of Primary A Shares is incorporated by
reference to Post-Effective Amendment No. 37, filed March 31, 1995.
(16)(b) Schedules for Computation of Primary 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 B Shares (formerly Investor N
Shares) is incorporated by reference to Post-Effective Amendment No.
37, filed March 31, 1995.
(16)(f) Schedules for Computation of Daily Shares (formerly 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 filed herewith.
Item 25. Persons Controlled By or Under Common Control with Registrant
Registrant is controlled by its Board of Trustees.
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 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 First Data Investors Services
Group, Inc.;
7
<PAGE>
3. Distribution Agreement with Stephens Inc.;
4. Custody Agreement with The Bank of New York;
5. Transfer Agency Agreement with NationsBank Texas; and
6. Transfer Agency and Registrar Agreement with First Data Investors
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
Primary 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 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
8
<PAGE>
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).
(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
9
<PAGE>
ADV filed by TradeStreet with the Securities and Exchange Commission pursuant to
the Investment Advisers Act of 1940 (file no. 801-50372).
(d) Marsico performs sub-investment advisory services for the Registrant
and certain other customers. Information with respect to each director and
officer of the sub-investment adviser is incorporated by reference to a Form ADV
filed by Marsico with the Securities and Exchange Commission pursuant to the
Investment Advisers Act of 1940 (file no. 801-54914).
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 Nations Fund, Inc., Nations Annuity Trust, Nations
Fund Portfolios, Inc., Nations Institutional Reserves, Nations LifeGoal Funds,
Inc., 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., Nations Government Income Term Trust 2003, Inc., Nations Government Income
Term Trust 2004, Inc. and Nations 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) Marsico, 1200 17th Street, Suite 1300, Denver, Colorado 80202 (records
relating to its function as sub-adviser to Nations Marscio Focused
Equities Fund and Nations Marsico Growth & Income Fund).
(4) Stephens Inc., 111 Center Street, Little Rock, Arkansas 72201 (records
relating to its function as Distributor).
(5) Stephens Inc., 111 Center Street, Little Rock, Arkansas 72201 (records
relating to its function as Administrator).
10
<PAGE>
(6) The First Data Investors Services Group, Inc., One Exchange Place,
Boston, Massachusetts 02109 (records relating to its function as
Co-Administrator and Transfer Agent).
(7) NationsBank, 1401 Elm Street, Dallas, Texas 75202 (records relating to
its function as Sub-Transfer Agent).
(7) The Bank of New York, 90 Washington Street, New York, New York 10286
(records relating to its function as Custodian)
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.
11
<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
13th day of November, 1998.
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 November 13, 1998
- ----------------------- of the Board of Trustees
(A. Max Walker) (Principal Executive Officer)
* Treasurer November 13, 1998
- ----------------------- Vice President
(Richard H. Rose) (Principal Financial and
Accounting Officer)
* Trustee November 13, 1998
- -----------------------
(Edmund L. Benson, III)
* Trustee November 13, 1998
- -----------------------
(James Ermer)
* Trustee November 13, 1998
- -----------------------
(William H. Grigg)
* Trustee November 13, 1998
- -----------------------
(Thomas F. Keller)
* Trustee November 13, 1998
- -----------------------
(Carl E. Mundy, Jr.)
* Trustee November 13, 1998
- -----------------------
(Charles B. Walker)
* Trustee November 13, 1998
- -----------------------
(Thomas S. Word)
* Trustee November 13, 1998
- -----------------------
(James B. Sommers)
/s/ Richard H. Blank, Jr.
- ----------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
EX-99.B10 Opinion and Consent of Counsel
EX-99.B11 Consent of Independent Accountants
EX-99.B18 Rule 18f-3 Plan
EX-99.B10
[MORRISON & FOERSTER LLP LETTERHEAD]
November 13, 1998
Nations Fund Trust
111 Center Street
Little Rock, Arkansas 72201
Re: Shares of Capital Stock of
Nations Fund Trust
Dear Ladies/Gentlemen:
We refer to Post-Effective Amendment No. 58 and Amendment No. 60 to the
Registration Statement on Form N-1A (SEC File Nos. 33-89742; 811-8982) (the
"Registration Statement") of Nations Fund Portfolios, Inc. (the "Company")
relating to the registration of an indefinite number of Shares of Capital Stock
of the Company's three portfolios, namely, Nations Global Government Income
Fund, Nations Pacific Growth Fund and Nations Emerging Markets Fund
(collectively, the "Shares").
We have been requested by the Company to furnish this opinion as Exhibit
10 to the Registration Statement.
We have examined such records, documents, instruments, and certificates of
public officials and of the Company, made such inquiries of the Company, and
examined such questions of law as we have deemed necessary for the purpose of
rendering the opinion set forth herein. We have also verified with the Company's
transfer agent the maximum number of shares issued by the Company during the
fiscal year ended March 31, 1998. 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.
<PAGE>
Nations Fund Trust
November 13, 1998
Page Two
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares by the Company have been duly and
validly authorized by all appropriate action, and assuming delivery by sale or
in accord with the Funds' 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.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we consent to the use of our name and to the reference to our
Firm under the heading "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 are 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 Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 58 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated May 28, 1998, relating to the financial
statements and financial highlights appearing in the March 31, 1998 Annual
Reports to Shareholders of Nations Fund Trust, which are also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the headings "Financial Highlights" and "How The Funds Are Managed
Other Service Providers" in the Prospectuses and under the heading "Independent
Accountant and Reports" in the Statement of Additional Information.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 13, 1998
NATIONS FUND TRUST
RULE 18f-3 MULTI-CLASS PLAN
I. Introduction.
- ------------------
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the following sets forth the method for allocating
fees and expenses among each class of shares in the investment portfolios of
Nations Fund Trust (the "Trust"). In addition, this Rule 18f-3 Multi-Class Plan
(the "Plan") sets forth the maximum initial sales loads, contingent deferred
sales charges, Rule 12b-1 distribution fees, shareholder servicing fees,
conversion features, exchange privileges and other shareholder services
applicable to a particular class of shares of the portfolios. The Plan also
identifies expenses that may be allocated to a particular class of shares to the
extent that they are actually incurred in a different amount by class or relate
to a different kind or degree of services provided to the class.
The Trust is an open-end series investment company registered under the
1940 Act, the shares of which are registered on Form N-1A under the Securities
Act of 1933 (Registration Nos. 2-97817 and 811-4305). The Trust elects to offer
multiple classes of shares in its investment portfolios pursuant to the
provisions of Rule 18f-3 and this Plan.
The Trust currently consists of the following thirty-nine separate
investment portfolios: Nations Government Money Market Fund and Nations Tax
Exempt Fund (the "Money Market Funds") and Nations Value Fund, Nations Strategic
Equity Fund, Nations Capital Growth Fund, Nations Emerging Growth Fund, Nations
Equity 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 Managed Index Fund, Nations Managed SmallCap Index Fund, Nations Managed
Value Index Fund, Nations Managed SmallCap Value Index Fund, Nations Marsico
Focused Equities Fund, Nations Marsico Growth & 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 Kansas Intermediate Municipal Bond
Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations Maryland
Municipal Bond Fund, Nations North Carolina Intermediate Municipal Bond Fund,
Nations North Carolina Municipal Bond Fund, Nations South Carolina Intermediate
Municipal Bond Fund, Nations South Carolina Municipal Bond Fund, Nations
Tennessee Intermediate Municipal Bond Fund, Nations Tennessee Municipal Bond
Fund, Nations Texas Intermediate Municipal Bond Fund, Nations Texas Municipal
Bond Fund, Nations Virginia Intermediate Municipal Bond Fund and Nations
Virginia Municipal Bond Fund (the "Non-Money Market Funds").
1
<PAGE>
The above-listed investment portfolios of the Trust (the "Funds") are
authorized to issue the following classes of shares representing interests in
the Funds:
(i) Nations Government Money Market Fund and Nations Tax Exempt
Fund -- Primary A Shares, Primary B Shares, Investor A Shares,
Investor B Shares, Investor C Shares and Daily Shares;
(ii) Nations Equity Index Fund -- Primary A Shares, Primary B
Shares and Investor A Shares;
(iii) Nations Managed Index Fund, Nations Managed SmallCap Index
Fund, Nations Managed Value Index Fund and Nations Managed
SmallCap Value Index Fund (collectively with Nations Equity
Index Fund, the "Index Funds") -- Primary A Shares, Primary B
Shares, Investor A Shares and Investor C Shares;
(iv) Nations Value Fund, Nations Capital Growth Fund, Nations
Emerging Growth 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
Marsico Focused Equities Fund, Nations Marisco Growth & 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 Kansas Intermediate Municipal Bond Fund,
Nations Maryland Intermediate Municipal Bond Fund, Nations
Maryland Municipal Bond Fund, Nations North Carolina
Intermediate Municipal Bond Fund, Nations North Carolina
Municipal Bond Fund, Nations South Carolina Intermediate
Municipal Bond Fund, Nations South Carolina Municipal Bond
Fund, Nations Tennessee Intermediate Municipal Bond Fund,
Nations Tennessee Municipal Bond Fund, Nations Texas
Intermediate Municipal Bond Fund, Nations Texas Municipal Bond
Fund, Nations Virginia Intermediate Municipal Bond Fund,
Nations Virginia Municipal Bond Fund, Nations Marsico Focused
Equities Fund and Nations Marsico Growth & Income Fund--
Primary A Shares, Primary B Shares, Investor A Shares,
Investor B Shares and Investor C Shares;
(v) Nations Strategic Equity Fund - Primary A Shares.
2
<PAGE>
II. Allocation of Expenses.
- ----------------------------
A. Pursuant to Rule 18f-3 under the 1940 Act, the Trust shall allocate to
each class of shares in a Fund (i) any fees and expenses incurred by the Trust
in connection with the distribution of such class of shares under a distribution
plan adopted for such class of shares pursuant to Rule 12b-1, and (ii) any fees
and expenses incurred by the Trust under a shareholder servicing plan in
connection with the provision of shareholder services to the holders of such
class of shares.
B. In addition, pursuant to Rule 18f-3, the Trust may allocate the
following fees and expenses to a particular class of shares in a single Fund:
(i) transfer agent fees identified by the transfer agent as being
attributable to such class of shares;
(ii) printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses, reports, and proxies to current shareholders of
such class of shares or to regulatory agencies with respect to
such class of shares;
(iii) blue sky registration or qualification fees incurred by such
class of shares;
(iv) Securities and Exchange Commission registration fees incurred
by such class of shares;
(v) the expense of administrative personnel and services
(including, but not limited to, those of a portfolio
accountant, custodian or dividend paying agent charged with
calculating net asset values or determining or paying
dividends) as required to support the shareholders of such
class of shares;
(vi) litigation or other legal expenses relating solely to such
class of shares;
(vii) fees of the Trust's Trustees incurred as result of issues
relating to such class of shares;
(viii) independent accountants' fees relating solely to such class of
shares; and
(ix) any other fees and expenses, not including advisory or
custodial fees or other expenses related to the management of
the Fund's assets, relating to (as defined below) such class
of shares.
C. For all purposes under this Plan, fees and expenses "relating to" a
class of shares are those fees and expenses that are actually incurred in a
different amount by the class or that relate to a different kind or degree of
services provided to the class. The proper officers of the Trust shall have the
authority to determine whether any or all of the fees and expenses described
3
<PAGE>
in Section B of this Part II should be allocated to a particular class of
shares. The Board of Trustees will monitor any such allocations to ensure that
they comply with the requirements of the Plan.
D. Income and any expenses of Nations Government Money Market Fund, Nations
Tax Exempt 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 Kansas
Intermediate Municipal Bond Fund, Nations Maryland Intermediate Municipal Bond
Fund, Nations Maryland Municipal Bond Fund, Nations Missouri Intermediate
Municipal Bond Fund, Nations North Carolina Intermediate Municipal Bond Fund,
Nations North Carolina Municipal Bond Fund, Nations South Carolina Intermediate
Municipal Bond Fund, Nations South Carolina Municipal Bond Fund, Nations
Tennessee Intermediate Municipal Bond Fund, Nations Tennessee Municipal Bond
Fund, Nations Texas Intermediate Municipal Bond Fund, Nations Texas Municipal
Bond Fund, Nations Virginia Intermediate Municipal Bond Fund and Nations
Virginia Municipal Bond Fund not allocated to a particular class of any such
Fund pursuant to this Plan shall be allocated to each class of the Fund on the
basis of the relative settled shares of that class in relation to the settled
shares of the Fund.
Realized and unrealized capital gains and losses of Nations Government
Money Market Fund, Nations Tax Exempt 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 Kansas Intermediate Municipal Bond Fund,
Nations Maryland Intermediate Municipal Bond Fund, Nations Maryland Municipal
Bond Fund, Nations Missouri Intermediate Municipal Bond Fund, Nations North
Carolina Intermediate Municipal Bond Fund, Nations North Carolina Municipal Bond
Fund, Nations South Carolina Intermediate Municipal Bond Fund, Nations South
Carolina Municipal Bond Fund, Nations Tennessee Intermediate Municipal Bond
Fund, Nations Tennessee Municipal Bond Fund, Nations Texas Intermediate
Municipal Bond Fund, Nations Texas Municipal Bond Fund, Nations Virginia
Intermediate Municipal Bond Fund and Nations Virginia Municipal Bond Fund not
allocated to a particular class of any such Fund pursuant to this Plan shall be
allocated to each class of the Fund on the basis of the relative net assets, as
defined in Rule 18f-3, of that class in relation to the net assets of the Fund.
Income, realized and unrealized capital gains and losses, and any expenses
of Nations Value Fund, Nations Strategic Equity Fund, Nations Capital Growth
Fund, Nations Emerging Growth Fund, Nations Equity Index Fund, Nations
Disciplined Equity Fund, Nations Balanced Assets Fund, Nations Managed Index
Fund, Nations Managed SmallCap Index Fund, Nations Managed Value Index Fund and
Nations Managed SmallCap Value Index Fund, Nations Marsico Focused Equities Fund
and Nations Marsico Growth & Income Fund not allocated to a particular
4
<PAGE>
class of any such Fund pursuant to this Plan shall be allocated to each class of
the Fund on the basis of the relative net assets, as defined in Rule 18f-3, of
that class in relation to the net assets of the Fund.
E. In certain cases, NationsBanc Advisors, Inc., TradeStreet Investment
Associates, Inc., NationsBank, N.A., Stephens Inc., First Data Investor Services
Group, Inc., or another service provider for a Fund may waive or reimburse all
or a portion of the expenses of a specific class of shares of the Fund. The
Board of Trustees will monitor any such waivers or reimbursements to ensure that
they do not provide a means for cross-subsidization between classes.
III. Class Arrangements.
- ------------------------
The following summarizes the maximum front-end sales charges, contingent
deferred sales charges, Rule 12b-1 distribution fees, shareholder servicing
fees, conversion features, exchange privileges and other shareholder services
applicable to each class of shares of the Trust. Additional details regarding
such fees and services are set forth in the relevant Funds' current
Prospectus(es) and Statement of Additional Information.
A. Primary A Shares -- All Funds.
--------------------------------
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge: None
3. Maximum Rule 12b-1 Distribution Fees: None
4. Maximum Shareholder Servicing Fees: None
5. Conversion Features: None
6. Exchange Privileges:
(a) Primary A Shares of a Fund may be exchanged for
Primary A Shares of any other fund of the Nations
Funds Family.
(b) From time to time, the Board of Trustees of the Trust
may modify, or ratify modifications to, the exchange
privileges of Primary A Shares of a Fund without
amending this Plan, provided that such exchange
privileges, as modified, are described in the
then-current prospectus for such shares of such Fund.
7. Other Shareholder Services: None
5
<PAGE>
B. Primary B Shares -- All Funds.
- -----------------------------------
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge: None
3. Maximum Rule 12b-1 Distribution Fees: None
4. Maximum Shareholder Servicing/Administration Fees:
(a) Money Market Funds: Pursuant to a Shareholder
Servicing Plan, the Primary B Shares of the Money
Market Funds each may pay shareholder servicing fees
of up to 0.25% of the average daily net assets of
such shares.
(b) Non-Money Market Funds: Pursuant to a Shareholder
Administration Plan, the Primary B Shares of Nations
Value Fund, Nations Strategic Equity 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 Diversified Income Fund, Nations Managed
Index Fund, Nations Managed SmallCap Index Fund,
Nations Managed Value Index Fund, Nations Managed
SmallCap Value Index Fund, Nations Marsico Focused
Equities Fund and Nations Marsico Growth & Income
Fund each may pay shareholder administration fees of
up to 0.60% of the average daily net assets of such
shares, provided that in no event may the portion of
such fee that constitutes a "service fee," as that
term is defined in Rule 2830 of the Conduct Rules of
the National Association of Securities Dealers, Inc.,
exceed 0.25% of the average daily net asset value of
such Primary B Shares of a Fund.
5. Conversion Features: Primary B Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Trustees of the Trust and described
in the then-current prospectus for such shares of such Fund.
6. Exchange Privileges:
(a) Primary B Shares of a Fund may be exchanged for
Primary B Shares of any other fund of Nations Funds
Family.
(b) From time to time, the Board of Trustees of the Trust
may modify, or ratify modifications to, the exchange
privileges of Primary B Shares of a Fund without
amending this Plan, provided that such
6
<PAGE>
exchange privileges, as modified, are described in
the then-current prospectus for such shares of such
Fund.
7. Other Shareholder Services: None
C. Investor A Shares -- Money Market Funds Only.
- --------------------------------------------------
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge: None
3. Maximum Rule 12b-1 Distribution Fees: Pursuant to a
Distribution Plan adopted under Rule 12b-1, Investor A Shares
of the Money Market Funds may pay distribution fees of up to
0.10% of the average daily net assets of such shares.
4. Maximum Shareholder Servicing Fees: Pursuant to a Shareholder
Servicing Plan, Investor A Shares of the Money Market Funds
may pay shareholder servicing fees of up to 0.25% of the
average daily net assets of such shares.
5. Conversion Features: Investor A Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Trustees of the Trust and described
in the then-current prospectus for such shares of such Fund.
6. Exchange Privileges:
(a) Investor A Shares of the Money Market Funds may be
exchanged for Investor A Shares of any other fund of
the Nations Funds Family, other than an Index Fund.
(b) Investor A Shares of the Money Market Funds acquired
through a Nations Funds Individual Retirement Account
("IRA") may be exchanged for Investor B Shares of any
non-money market fund offered by the Nations Funds
Family (collectively, the "Nations Funds Non-Money
Market Funds").
(c) From time to time, the Board of Trustees of the Trust
may modify, or ratify modifications to, the exchange
privileges of Investor A Shares of a Fund without
amending this Plan, provided that such exchange
privileges, as modified, are described in the
then-current prospectus for such shares of such Fund.
7. Other Shareholder Services. The Trust offers a Systematic
Investment Plan and Automatic Withdrawal Plan to holders of
Investor A Shares
7
<PAGE>
of the Funds. In addition, the Trust offers check-writing
privileges to holders of Investor A Shares of the Money Market
Funds.
D. Investor A Shares -- Non-Money Market Funds Only.
- ------------------------------------------------------
1. Maximum Initial Sales Load:
(a) Nations Value Fund, Nations Capital Growth Fund,
Nations Emerging Growth Fund, Nations Disciplined
Equity Fund, Nations Balanced Assets Fund, Nations
Marsico Focused Equities Fund, Nations Marsico Growth
& Income Fund: maximum of 5.75%.
(b) Nations Diversified Income Fund, Nations Municipal
Income Fund, Nations Florida Municipal Bond Fund,
Nations Georgia Municipal Bond Fund, Nations Maryland
Municipal Bond Fund, Nations North Carolina Municipal
Bond Fund, Nations South Carolina Municipal Bond
Fund, Nations Tennessee Municipal Bond Fund, Nations
Texas Municipal Bond Fund and Nations Virginia
Municipal Bond Fund: maximum of 4.75%.
(c) Nations Short-Intermediate Government Fund, Nations
Intermediate Municipal Bond Fund, Nations Florida
Intermediate Municipal Bond Fund, Nations Georgia
Intermediate Municipal Bond Fund, Nations Kansas
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 and
Nations Strategic Fixed Income Fund: maximum of
3.25%.
(d) Nations Short-Term Income Fund and Nations Short-Term
Municipal Income Fund: maximum of 1.00%.
(e) Nations Equity Index Fund, Nations Managed Index
Fund, Nations Managed SmallCap Index Fund, Nations
Managed Value Index Fund and Nations Managed SmallCap
Value Index Fund: None
2. Contingent Deferred Sales Charge (as a percentage of the lower
of the original purchase price or redemption proceeds): 1.00%
of purchases over $1 million if redeemed within one year of
purchase, declining to 0.50% in the second year after purchase
and eliminated thereafter.
3. Redemption Fee: 1.00% of the current net asset value of shares
purchased by a Substantial Investor (as such term is defined
in then-current
8
<PAGE>
prospectuses) between July 31, 1997 and November 15, 1998, and
redeemed within 18 months of purchase (excluding the Money
Market Funds and the Index Funds).
4. Maximum Rule 12b-1 Distribution/Shareholder Servicing Fees:
(a) Pursuant to a Shareholder Servicing and Distribution
Plan adopted under Rule 12b-1, Investor A Shares of
Nations Equity Index Fund and of each Non-Money
Market Fund (except Nations Short-Term Income Fund
and Nations Short-Term Municipal Income Fund) may pay
a combined distribution and shareholder servicing fee
of up to 0.25% of the average daily net assets of
such shares.
(b) Pursuant to a Shareholder Servicing Plan, Investor A
Shares of Nations Short-Term Income Fund and Nations
Short-Term Municipal Income Fund may pay shareholder
servicing fees of up to 0.25% of the average daily
net assets of such shares.
5. Conversion Features: Investor A Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Trustees of the Trust and described
in the then-current prospectus for such shares of such Fund.
6. Exchange Privileges:
(a) Investor A Shares of the Non-Money Market Funds
(other than Nations Short-Term Income Fund or Nations
Short-Term Municipal Income Fund acquired in exchange
from Investor B Shares of another Nations Funds
Non-Money Market Fund) may be exchanged for Investor
A Shares of any other Nations Funds Non-Money Market
Fund, other than an Index Fund, or any Nations Funds
Money Market Fund.
(b) Investor A Shares of Nations Equity Index Fund,
Nations Managed Index Fund, Nations Managed SmallCap
Index Fund, Nations Managed Value Index Fund and
Nations Managed SmallCap Value Fund (the "Managed
Index Funds") may be exchanged for Investor A Shares
of any other Managed Index Fund.
(c) Investor A Shares of Nations Short-Term Income Fund
and Nations Short-Term Municipal Income Fund acquired
in exchange from Investor B Shares of another Nations
Funds Non-Money Market Fund may be re-exchanged for
Investor B Shares of any other Nations Funds
Non-Money Market Fund or Investor C Shares of any
Nations Funds Money Market Fund.
9
<PAGE>
(d) From time to time, the Board of Trustees of the Trust
may modify, or ratify modifications to, the exchange
privileges of Investor A Shares of a Fund without
amending this Plan, provided that such exchange
privileges, as modified, are described in the
then-current prospectus for such shares of such Fund.
7. Other Shareholder Services. The Trust offers a Systematic
Investment Plan and Automatic Withdrawal Plan to holders of
Investor A Shares of the Funds.
E. Investor B Shares -- Money Market Funds Only.
- --------------------------------------------------
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge: None
3. Maximum Rule 12b-1 Distribution Fees: Pursuant to a
Distribution Plan adopted under Rule 12b-1, the Investor B
Shares of the Money Market Funds may pay distribution fees of
up to 0.10% of the average daily net assets of such shares.
4. Maximum Shareholder Servicing Fees: Pursuant to a Shareholder
Servicing Plan, the Investor B Shares of the Money Market
Funds may pay shareholder servicing fees of up to 0.25% of the
average daily net assets of such shares.
5. Conversion Features: Investor B Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Trustees of the Trust and described
in the then-current prospectus for such shares of such Fund.
6. Exchange Privileges:
(a) Investor B Shares of a Money Market Fund may be
exchanged for Investor B Shares of any other Nations
Funds Money Market Fund.
(b) From time to time, the Board of Trustees of the Trust
may modify, or ratify modifications to, the exchange
privileges of Investor B Shares of a Fund without
amending this Plan, provided that such exchange
privileges, as modified, are described in the
then-current prospectus for such shares of such Fund.
7. Other Shareholder Services: The Trust offers check-writing
services, a Systematic Investment Plan and an Automatic
Withdrawal Plan to holders of Investor B Shares of the Money
Market Funds.
10
<PAGE>
F. Investor B Shares -- Non-Money Market Funds Only.
- ------------------------------------------------------
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge (as a percentage of the lower
of the original purchase price or redemption proceeds):
(a) Nations Value Fund, Nations Capital Growth Fund,
Nations Emerging Growth Fund, Nations Disciplined
Equity Fund, Nations Balanced Assets Fund, Nations
Diversified Income Fund, Nations Strategic Fixed
Income Fund, Nations Marsico Focused Equities Fund,
Nations Marsico Growth & Income Fund, Nations
Municipal Income Fund, Nations Florida Municipal Bond
Fund, Nations Georgia Municipal Bond Fund, Nations
Maryland Municipal Bond Fund, Nations North Carolina
Municipal Bond Fund, Nations South Carolina Municipal
Bond Fund, Nations Tennessee Municipal Bond Fund,
Nations Texas Municipal Bond Fund, Nations Virginia
Municipal Bond Fund: 5.00% if redeemed within one
year of purchase, declining to 1.00% in the sixth
year after purchase and eliminated thereafter.
(b) Nations Strategic Fixed Income Fund, Nations
Short-Intermediate Government Fund, Nations
Intermediate Municipal Bond Fund, Nations Florida
Intermediate Municipal Bond Fund, Nations Georgia
Intermediate Municipal Bond Fund, Nations Kansas
Intermediate Municipal Bond Fund, Nations Maryland
Intermediate Municipal Bond Fund, Nations Missouri
Intermediate Municipal Bond Fund, Nations North
Carolina Intermediate Municipal Bond Fund, Nations
South Carolina Intermediate Municipal Bond Fund,
Nations Tennessee Intermediate Municipal Bond Fund,
Nations Texas Intermediate Municipal Bond Fund and
Nations Virginia Intermediate Municipal Bond Fund:
3.00% if redeemed within one year of purchase,
declining to 1.00% in the fourth year after purchase
and eliminated thereafter.
(c) Nations Short-Term Income Fund and Nations Short-Term
Municipal Income Fund: Not Available
3. Maximum Rule 12b-1 Distribution Fees: Pursuant to a
Distribution Plan adopted under Rule 12b-1, the Investor B
Shares of each Non-Money Market Fund may pay distribution fees
of up to 0.75% of the average daily net assets of such shares.
4. Maximum Shareholder Servicing Fees: Pursuant to a Shareholder
Servicing Plan, the Investor B Shares of each Non-Money Market
Fund
11
<PAGE>
may pay shareholder servicing fees of up to 0.25% of the
average daily net assets of such shares.
5. Conversion Features: Investor B Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Trustees of the Trust and described
in the then-current prospectus for such shares of such Fund.
6. Exchange Privileges:
(a) Investor B Shares of a Non-Money Market Fund (except
Nations Short-Term Income Fund and Nations Short-Term
Municipal Income Fund) may be exchanged for Investor
B Shares of any other Nations Funds Non-Money Market
Fund (except Nations Short-Term Income Fund and
Nations Short-Term Municipal Income Fund) or Investor
C Shares of any Nations Funds Money Market Fund.
(b) From time to time, the Board of Trustees of the Trust
may modify, or ratify modifications to, the exchange
privileges of Investor B Shares of a Fund without
amending this Plan, provided that such exchange
privileges, as modified, are described in the
then-current prospectus for such shares of such Fund.
7. Other Shareholder Services: The Trust offers a Systematic
Investment Plan and an Automatic Withdrawal Plan to holders of
Investor B Shares of the Non-Money Market Funds.
G. Investor C Shares -- Money Market Funds Only.
- --------------------------------------------------
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge: None
3. Maximum Rule 12b-1 Distribution Fees: None
4. Maximum Shareholder Servicing Fees: Pursuant to a Shareholder
Servicing Plan, the Investor C Shares of each Fund may pay
shareholder servicing fees of up to 0.25% of the average daily
net assets of such shares.
5. Conversion Features: Investor C Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Trustees of the Trust and described
in the then-current prospectus for such shares of such Fund.
12
<PAGE>
6. Exchange Privileges:
(a) Investor C Shares of a Money Market Fund that are
purchased directly through a servicing agent may not
be exchanged for shares of any other fund offered by
the Nations Funds Family.
(b) Investor C Shares of a Money Market Fund acquired
through a permissible exchange of Investor B Shares
of a Nations Funds Non-Money Market Fund or Investor
A Shares of Nations Short-Term Income Fund or Nations
Short-Term Municipal Income Fund may be re-exchanged
for Investor C Shares of any other Nations Funds
Money Market Fund, Investor B Shares of a Nations
Funds Non-Money Market Fund (except Nations
Short-Term Income Fund or Nations Short-Term
Municipal Income Fund) or Investor A Shares of
Nations Short-Term Income Fund or Nations Short-Term
Municipal Income Fund.
(c) From time to time, the Board of Trustees of the Trust
may modify, or ratify modifications to, the exchange
privileges of Investor C Shares of a Fund without
amending this Plan, provided that such exchange
privileges, as modified, are described in the
then-current prospectus for such shares of such Fund.
7. Other Shareholder Services: None
H. Investor C Shares -- Non-Money Market Funds Only.
- ------------------------------------------------------
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge (as a percentage of the lower
of the original purchase price or redemption proceeds): 1.00%
if redeemed within one year of purchase and eliminated
thereafter.
3. Maximum Rule 12b-1 Distribution Fees: Pursuant to a
Distribution Plan adopted under Rule 12b-1, Investor C Shares
of the Non-Money Market Funds may pay distribution fees of up
to 0.75% of the average daily net assets of such shares.
4. Maximum Shareholder Servicing Fees: Pursuant to a Shareholder
Servicing Plan, the Investor C Shares of each Fund may pay
shareholder servicing fees of up to 0.25% of the average daily
net assets of such shares.
5. Conversion Features: Investor C Shares of a Fund shall have
such conversion features, if any, as are determined by or
ratified by the Board of Trustees of the Trust and described
in the then-current prospectus for such shares of such Fund.
13
<PAGE>
6. Exchange Privileges:
(a) Investor C Shares of a Non-Money Market Fund may be
exchanged for Investor C Shares of any other Nations
Funds Non-Money Market Fund, other than any Index
Fund. However, Investor C Shares of a Non-Money
Market Fund (other than Nations Short-Term Income
Fund and Nations Short-Term Municipal Income Fund)
may not be exchanged for Investor C Shares of Nations
Short-Term Income Fund or Nations Short-Term
Municipal Income Fund until one year after purchase.
(b) In addition, Investor C Shares of a Non-Money Market
Fund, other than an Index Fund may be exchanged for
Daily Shares of any Nations Funds Money Market Fund.
(c) From time to time, the Board of Trustees of the Trust
may modify, or ratify modifications to, the exchange
privileges of Investor C Shares of a Fund without
amending this Plan, provided that such exchange
privileges, as modified, are described in the
then-current prospectus for such shares of such Fund.
7. Other Shareholder Services. The Trust offers a Systematic
Investment Plan and Automatic Withdrawal Plan to holders of
Investor C Shares of the Non-Money Market Funds.
I. Daily Shares -- Money Market Funds Only.
- ---------------------------------------------
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge: None
3. Maximum Rule 12b-1 Distribution Fees: Pursuant to a
Distribution Plan adopted under Rule 12b-1, Daily Shares of
the Money Market Funds may pay distribution fees of up to
0.45% of the average daily net assets of such shares.
4. Maximum Shareholder Servicing Fees: Pursuant to a Shareholder
Servicing Plan, the Daily Shares of the Money Market Funds may
pay shareholder servicing fees of up to 0.25% of the average
daily net assets of such shares.
5. Conversion Features: Daily Shares of a Fund shall have such
conversion features, if any, as are determined by or ratified
by the Board of Trustees of the Trust and described in the
then-current prospectus for such shares of such Fund.
6. Exchange Privileges:
14
<PAGE>
(a) Daily Shares of a Money Market Fund may be exchanged
for Daily Shares of any other Nations Funds Money
Market Fund or Investor C Shares of any Nations Funds
Non-Money Market Fund. However, Daily Shares of a
Money Market Fund may not be exchanged for Investor C
Shares of Nations Short-Term Income Fund or Nations
Short-Term Municipal Income Fund until one year after
purchase of the shares exchanged to acquire the
subject Daily Shares.
(b) From time to time, the Board of Trustees of the Trust
may modify, or ratify modifications to, the exchange
privileges of Daily Shares of a Fund without amending
this Plan, provided that such exchange privileges, as
modified, are described in the then-current
prospectus for such shares of such Fund.
7. Other Shareholder Services: The Trust offers an Automatic
Withdrawal Plan to holders of Daily Shares of the Money Market
Funds.
IV. Board Review.
- ------------------
The Board of Trustees of the Trust shall review this Plan as frequently as
it deems necessary. Prior to any material amendment(s) to this Plan, the Trust's
Board of Trustees, including a majority of the Trustees who are not interested
persons of the Trust, shall find that the Plan, as proposed to be amended
(including any proposed amendments to the method of allocating class and/or fund
expenses), is in the best interests of each class of shares of the Fund
individually and the Fund as a whole. In considering whether to approve any
proposed amendment(s) to the Plan, the Trustees of the Trust shall request and
evaluate such information as they consider reasonably necessary to evaluate the
proposed amendment(s) to the Plan.
Adopted: April 3, 1995
Last Amended November 5, 1998
15
