<PAGE> 1
[NATIONS FUNDS LOGO] [GRAPHIC OF TREE]
INVESTMENTS FOR A LIFETIME(SM)
GOVERNMENT Nations
& CORPORATE Short-Term
BOND FUNDS Income Fund
Nations
Short-Intermediate
Government Fund
Nations
Government
Securities Fund
Nations
Strategic
Fixed Income Fund
Nations
U.S. Government
Bond Fund
Nations
Diversified
Income Fund
Nations
SEMI-ANNUAL REPORT FOR THE PERIOD Global Government
ENDED SEPTEMBER 30, 1998 Income Fund
<PAGE> 2
[BACKGROUND GRAPHIC DEPICTING BASKETS]
THIS REPORT IS SUBMITTED FOR
THE GENERAL INFORMATION OF
SHAREHOLDERS OF NATIONS FUNDS.
THIS MATERIAL MUST BE PRECEDED OR
ACCOMPANIED BY A CURRENT NATIONS
FUNDS PROSPECTUS.
NATIONS FUNDS DISTRIBUTOR:
STEPHENS INC. STEPHENS INC., WHICH
IS NOT AFFILIATED WITH NATIONSBANK,
N.A., IS NOT A BANK, AND SECURITIES
OFFERED BY IT ARE NOT GUARANTEED BY
ANY BANK OR INSURED BY THE FDIC.
STEPHENS INC., MEMBER NYSE, SIPC.
NATIONS FUNDS INVESTMENT ADVISER:
NATIONSBANC ADVISORS, INC.
-----------------
NOT FDIC-
INSURED
-----------------
MAY LOSE VALUE
-----------------
NO BANK GUARANTEE
-----------------
<PAGE> 3
NATIONS FUNDS
DEAR SHAREHOLDER:
Thus far in 1998, equity investors have experienced a "roller-coaster" ride that
has been both dramatic and ugly. Stock mutual funds of almost every stripe and
color fell sharply during the third quarter. According to Lipper Analytical
Services, Inc., the average diversified U.S. stock fund posted a negative 15%
return during the quarter, with small company funds losing over 21%.
International equity funds also experienced downturns over the last three
months, with diversified international funds losing 16% on average and emerging
markets funds sliding a steep 23%.*
The three months ending September 30 represented the worst quarter for U.S.
stock funds since the third quarter of 1990. At that time, we were in a heated
showdown with Saddam Hussein and Iraq. The obvious question on everyone's mind
today is: what are the drivers causing the extreme volatility being experienced
in the markets? We think the answer may be as simple as a shift in psychology by
investors. From January 1997 through July 1998, investors were comfortable with
assuming risk -- almost too comfortable. Equity valuations reflected a close to
perfect environment. Bond yield comparisons to U.S. Treasuries also reflected a
comfort with credit risk. However, Russia's debt default in August 1998 was the
last in a combination of bad news and uncertainties that changed the prevailing
mind set and compelled investors to run for cover. Global anxieties were
sufficient overall to push investors in one direction: "risk avoidance."
As we look forward, several thoughts come to mind that lead us to remain
optimistic: 1) interest rates have dropped to thirty-year lows and the U.S.
economy is very rate sensitive; 2) inflation remains in check; 3) corporate
profits, while slowing, should pick up if our economy avoids recession; 4)
Japan's government is attacking its banking crisis with an approach similar to
that used in the U.S. savings and loan crisis in the 1980s, and 5) the Federal
Reserve Board has twice moved in the last months to lower the target on the
Federal Funds rate in an effort to fend off any "credit crunch."
While the risk for recession in 1999 is growing, we believe that conditions in
the U.S. will remain sound and that next year will be another year of positive
economic activity. Consistent monetary policy, a solid fiscal condition, low
inflation, and high employment are important ingredients for our economic
picture. Investors need to remain alert and appreciate the fact that changing
conditions may translate into further market volatility. On behalf of our
shareholders, we will stay vigilant in our work as we pursue the Funds'
objectives.
Sincerely,
/s/ A. Max Walker
A. MAX WALKER
President and Chairman of the Board
/s/ Robert H. Gordon
ROBERT H. GORDON
President NationsBanc Advisors, Inc.
September 30, 1998
Source for all statistical data: TradeStreet Investment Associates, Inc.
* Lipper Analytical Services, Inc. is an independent fund performance monitor.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
<PAGE> 4
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 5
Table
Of
Contents
<TABLE>
<S> <C>
FINANCIAL STATEMENTS
Statements of Net Assets 2
Statements of Operations 20
Statements of Changes in Net Assets 22
Schedules of Capital Stock Activity 26
Financial Highlights 34
Notes to Financial Statements 48
</TABLE>
<PAGE> 6
NATIONS FUNDS
Nations Short-Term Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 23.7%
$ 3,380 American Express Master Trust, Series
92-2, Class A,
6.600% 07/15/99........................ $ 3,413
4,300 Banc One Credit Card Master Trust,
Series 1994-C, Class A,
7.800% 11/15/98........................ 4,307
7,900 BankBoston RV Trust, Series 1997-1,
Class A7,
6.480% 07/15/08........................ 8,086
11,000 Chase Manhattan Auto Owner Trust, Series
1996-C, Class A4,
6.150% 03/15/02........................ 11,213
7,000 Discover Card Master Trust, Series
1995-2, Class A,
6.550% 02/15/03........................ 7,182
5,104 EQCC Home Equity Loan Trust, Series
1996-2, Class A2,
6.700% 09/15/08........................ 5,130
11,477 EQCC Home Equity Loan Trust, Series
1998-1, Class A4F,
6.459% 03/15/21........................ 11,731
12,000 GE Capital Mortgage Services Inc.,
Series 1997-HE4, Class A3,
6.590% 12/25/12........................ 12,240
102 Green Tree Financial Corporation, Series
1996-9, Class A2,
6.250% 01/15/28........................ 102
6,350 Household Affinity Credit Card Master
Trust I, Series 1993-1, Class B,
5.300% 09/15/00........................ 6,352
2,799 Keystone Auto Grantor Trust, Series
1996-B, Class A,
6.150% 04/15/03**...................... 2,816
10,400 Premier Auto, Series 1997-2, Class A5,
6.320% 03/06/02........................ 10,666
5,500 Prime Credit Card Master Trust, Series
1992-2, Class B2,
7.950% 11/15/02........................ 5,665
2,229 Sears Credit Account Master Trust,
Series 1995-4, Class A,
6.250% 01/15/03........................ 2,233
10,300 Spiegel Master Trust, Series 1995-A,
Class A,
7.500% 09/15/04........................ 10,638
5,150 Standard Credit Card Master Trust,
Series 1993-3, Class A,
5.500% 01/07/99........................ 5,152
--------
TOTAL ASSET-BACKED SECURITIES
(Cost $105,610)........................ 106,926
--------
CORPORATE BONDS AND NOTES -- 61.3%
BANKING -- 9.4%
9,300 Banponce Financial Corporation, MTN,
6.560% 04/22/99........................ 9,354
3,000 Chase Capital II,
6.188% 02/01/27........................ 2,840
9,600 First Chicago NBD Corporation, Sr.
Notes,
6.250% 07/21/00........................ 9,793
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
(000) (000)
<C> <S> <C>
BANKING -- (CONTINUED)
$ 6,000 GS Escrow Corporation,
6.750% 08/01/01**...................... $ 5,935
4,500 Norwest Financial Inc., Sr. Notes,
8.375% 01/15/00........................ 4,538
700 Southtrust Bank NA, Sr. Notes,
5.580% 02/06/06........................ 712
9,000 Union Planters National Bank, Notes,
6.470% 10/29/99........................ 9,149
--------
42,321
--------
BROKERAGE -- 9.8%
1,000 Donaldson Lufkin Jenrette, MTN,
5.625% 02/15/16........................ 1,027
3,400 Goldman Sachs Group LP, Notes,
5.900% 01/15/03**...................... 3,498
1,000 Goldman Sachs Group LP, Notes,
6.200% 12/15/00**...................... 1,028
8,475 Lehman Brothers Holdings Inc., MTN,
6.850% 10/08/99........................ 8,578
2,000 Lehman Brothers Holdings Inc., Notes,
6.330% 08/01/00........................ 1,995
2,000 Lehman Brothers Holdings Inc., Notes,
7.375% 05/15/07........................ 2,014
3,000 Morgan Stanley Dean Witter & Company,
MTN,
6.090% 03/09/01........................ 3,065
500 Morgan Stanley Dean Witter & Company,
Notes,
7.500% 09/01/99........................ 508
8,800 Paine Webber Group
7.700% 02/11/00........................ 9,085
3,000 Salomon Inc.,
7.000% 05/15/99........................ 3,034
10,000 Salomon Smith Barney Holdings Inc.,
7.980% 03/01/00........................ 10,350
--------
44,182
--------
CAPTIVE FINANCE -- 1.0%
4,500 AT&T Capital Corporation, MTN,
6.590% 08/04/00........................ 4,622
--------
ENERGY -- 1.1%
4,355 Coastal Corporation,
10.000% 02/01/01....................... 4,781
--------
FINANCIAL -- 15.1%
7,100 Aristar Inc., Notes,
6.125% 12/01/00........................ 7,192
3,500 American General Finance, MTN,
6.520% 06/23/00........................ 3,585
7,000 Avco Financial Services,
5.750% 01/23/01........................ 7,126
1,000 Caterpillar Financial Services, MTN,
6.840% 09/15/99........................ 1,016
11,000 Chrysler Financial Corporation, Notes,
6.375% 01/28/00........................ 11,157
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE> 7
NATIONS FUNDS
Nations Short-Term Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------
<C> <S> <C>
FINANCIAL -- (CONTINUED)
$ 7,000 Dean Witter Discover and Company, MTN,
7.580% 06/11/01........................ $ 7,351
6,500 Finova Capital Corporation,
6.250% 08/15/00........................ 6,591
1,500 Ford Motor Credit Company, MTN,
5.670% 02/15/01........................ 1,520
1,000 Ford Motor Credit Company, MTN,
6.110% 12/28/01........................ 1,028
1,000 General Motors Acceptance Corporation,
MTN,
5.630% 02/25/00........................ 1,008
3,250 General Motors Acceptance Corporation,
MTN,
6.700% 04/30/01........................ 3,374
5,000 General Motors Acceptance Corporation,
MTN,
7.375% 06/22/00........................ 5,192
8,850 Heller Financial Inc., MTN,
6.510% 09/20/99........................ 8,962
1,850 PACCAR Financial Corporation,
5.910% 10/15/99........................ 1,867
1,000 Transamerica Financial Corporation, Sr.
Notes,
6.375% 11/15/01........................ 1,024
--------
67,993
--------
HEALTHCARE -- 1.3%
5,600 HEALTHSOUTH Corporation,
6,875% 06/15/05**...................... 5,913
--------
INDEPENDENT FINANCE -- 1.8%
North American Mortgage Company, MTN:
2,500 5.800% 11/02/98......................... 2,496
5,500 5.840% 11/04/98......................... 5,488
--------
7,984
--------
INDUSTRIAL -- 12.6%
3,000 Black & Decker,
6.625% 11/15/00........................ 3,082
7,000 Comdisco Inc.,
6.130% 08/01/01........................ 7,142
6,000 Comdisco Inc., MTN,
6.500% 06/15/00........................ 6,106
3,000 Harris Corporation, Notes,
6.650% 08/01/06........................ 3,194
3,786 Hertz Corporation,
7.000% 04/15/01........................ 3,929
2,000 International Business Machines
Corporation, MTN,
6.037% 08/07/00........................ 2,036
6,250 PDV America Inc., Sr. Notes,
7.750% 08/01/00........................ 6,224
8,000 Paramount Communications, Sr. Notes,
7.500% 01/15/02........................ 8,379
9,100 Time Warner Pass-Thru,
6.100% 12/30/01**...................... 9,261
3,840 USA Waste Services, Inc., Notes
6.500% 12/15/02........................ 3,986
3,000 Viacom Inc., Sr. Notes,
7.750% 06/01/05........................ 3,240
--------
56,579
--------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
(000) (000)
<C> <S> <C>
RETAIL -- 2.2%
$ 1,500 Sears Roebuck Acceptance, MTN,
6.110% 11/15/05........................ $ 1,580
1,000 Sears Roebuck Acceptance, MTN,
6.150% 11/15/05........................ 1,030
7,300 Sears Roebuck & Company, MTN,
6.230% 07/12/00........................ 7,443
--------
10,053
--------
TRANSPORTATION -- 3.5%
10,100 ERAC USA Finance,
7.500% 06/15/03**...................... 11,039
1,586 Federal Express,
9.875% 04/01/02........................ 1,769
3,000 Ryder System Inc., MTN
7.320% 11/01/00........................ 3,131
--------
15,939
--------
UTILITY -- 3.5%
1,700 Arizona Public Service,
5.750% 09/15/00........................ 1,711
1,345 Carolina Power & Light,
6.125% 02/01/00........................ 1,361
8,299 Columbia Gas System, Series A,
6.390% 11/28/00........................ 8,480
900 Southern California Edison,
5.875% 01/15/01........................ 916
2,500 Transcontinental Gas Pipeline,
8.875% 09/15/02........................ 2,783
700 Virgina Electric Power, MTN,
7.910% 12/13/01........................ 756
--------
16,007
--------
TOTAL CORPORATE BONDS AND NOTES (Cost
$271,721).............................. 276,374
--------
FOREIGN BONDS AND NOTES -- 4.3%
8,000 Banco Latinoamericano,
7.000% 09/24/99**...................... 7,983
2,250 Banco Latinoamericano,
7.050% 07/19/99**...................... 2,247
7,000 Corporacion Andina De Fomento,
Eurobonds,
6.625% 10/14/98**...................... 7,001
2,000 Quebec Province,
7.500% 07/15/02........................ 2,153
--------
TOTAL FOREIGN BONDS AND NOTES (Cost
$19,281)............................... 19,384
--------
MORTGAGE-BACKED SECURITIES -- 4.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
CERTIFICATES -- 0.4%
935 5.500% 07/01/01......................... 935
682 7.500% 09/01/01......................... 690
--------
1,625
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE> 8
NATIONS FUNDS
Nations Short-Term Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------
<C> <S> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
CERTIFICATES -- 4.0%
$ 16,110 6.000% 06/01/01 -- 11/01/04
(4 Pools).............................. $ 16,145
864 6.500% 08/01/04......................... 878
1,101 7.500% 11/01/09......................... 1,134
--------
18,157
--------
RESIDENTIAL ACCREDITED LOANS INC.
(REMIC) -- 0.5%
2,500 6.750% 08/25/27......................... 2,520
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $22,219)......................... 22,302
--------
U.S. TREASURY OBLIGATIONS -- 3.8%
U.S. Treasury Notes:
2,500 5.625% 12/31/99......................... 2,532
11,500 5.875% 07/31/99......................... 11,609
3,000 5.875% 08/31/99......................... 3,034
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $17,036)......................... 17,175
--------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------
<C> <S> <C>
INVESTMENT COMPANY -- 1.6%
(Cost $7,416)
7,415,674 Nations Cash Reserves(a).................. 7,416
--------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(Cost $443,283*)................ 99.6% 449,577
--------
OTHER ASSETS AND
LIABILITIES (NET)............... 0.4%
Interest and dividend receivable......... $ 5,203
Receivable for Fund shares sold.......... 94
Other assets............................. 4
Payable for Fund shares redeemed......... (1,508)
Dividends payable........................ (1,793)
Investment advisory fee payable.......... (111)
Administration fee payable............... (37)
Shareholder servicing and distribution
fees payable............................ (15)
Accrued Trustees'/Directors' fees and
expenses................................ (18)
Accrued expenses and other liabilities... (196)
--------
TOTAL OTHER ASSETS AND
LIABILITIES (NET)....................... 1,623
--------
NET ASSETS....................... 100.0% $451,200
========
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
- -----------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and redemption
price per share ($425,605,000/43,040,017
shares outstanding)..................... $9.89
PRIMARY B SHARES:
Net asset value, offering and redemption
price per share ($0/1 shares
outstanding)#........................... $9.89
INVESTOR A SHARES:
Net asset value, offering and redemption
price per share ($18,593,000/1,880,218
shares outstanding)..................... $9.89
INVESTOR B SHARES:
Net asset value, offering price per share
($6,144,000/621,395 shares
outstanding)............................ $9.89
INVESTOR C SHARES:
Net asset value, offering and redemption
price per share ($858,000/86,740 shares
outstanding)............................ $9.89
AT SEPTEMBER 30, 1998,
NET ASSETS CONSIST OF:
Paid-in capital.......................... $450,970
Undistributed net investment
income/(distributions in excess of net
investment income)...................... 7
Accumulated net realized loss on
investments sold........................ (6,071)
Net unrealized appreciation of
investments............................. 6,294
--------
NET ASSETS............................... $451,200
========
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $6,769,000 and gross
depreciation of $475,000 for federal income tax purposes. At September 30,
1998, the aggregate cost of securities for federal income tax purposes was
$443,283,000.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
# Amount represents less than $500.
(a) Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment Associates,
Inc.
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE> 9
NATIONS FUNDS
Nations Short-Intermediate Government Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT GUARANTEED BOND -- 0.0%#
(Cost $255)
$ 253 Second Attransco Tanker Corporation
Series A,
8.500% 06/15/02....................... $ 258
--------
MORTGAGE-BACKED SECURITIES -- 29.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) CERTIFICATES -- 5.6%
5 6.500% 09/01/03........................ 5
GOLD:
9,287 6.500% 12/01/12........................ 9,490
28,931 7.000% 12/01/07 -- 12/01/25
(2 Pools)............................. 29,809
--------
39,304
--------
FEDERAL HOUSING AUTHORITY (FHA)
CERTIFICATES -- 0.1%
759 6.000% 07/15/04........................ 759
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
CERTIFICATES -- 16.5%
3,494 6.150% 03/01/08........................ 3,712
12,967 6.270% 06/01/08........................ 13,894
20,783 6.500% 02/28/28........................ 21,133
3,358 6.500% 04/01/26........................ 3,415
46,223 7.500% 06/01/28........................ 47,899
5,999 8.000% 12/01/09........................ 6,217
12,432 8.500% 04/01/17........................ 13,037
6,254 9.000% 04/01/16........................ 6,603
--------
115,910
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) CERTIFICATES -- 6.8%
23,658 6.000% 11/20/27........................ 24,036
19,344 7.500% 02/15/24 -- 04/15/26
(3 Pools)............................. 20,057
3,081 8.500% 02/15/05 -- 08/15/08
(27 Pools)............................ 3,250
--------
47,343
--------
TOTAL MORTGAGE-BACKED SECURITIES (Cost
$199,522)............................. 203,316
--------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 68.6%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 4.7%
32,000 6.625% 03/12/08........................ 33,170
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 10.3%
48,500 6.620% 11/13/07........................ 51,325
20,000 6.650% 11/14/07........................ 21,272
--------
72,597
--------
U.S. TREASURY INFLATION INDEX -- 0.7%
$ 5,000 3.625% 07/15/02........................ $ 5,020
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY NOTES -- 43.5%
8,000 5.250% 08/15/03........................ 8,357
130,000 5.500% 02/29/00........................ 131,808
5,000 5.625% 12/31/99........................ 5,065
30,000 5.625% 05/15/08........................ 32,813
69,500 6.375% 04/30/99........................ 70,173
56,500 6.500% 04/30/99........................ 57,092
--------
305,308
--------
U.S. TREASURY BONDS -- 9.4%
50,000 6.000% 06/30/99........................ 50,492
13,000 6.375% 08/15/27........................ 15,352
--------
65,844
--------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (Cost $472,670)........... 481,939
--------
SHORT TERM INVESTMENTS -- 0.1% (Cost $999)
1,000 Student Loan Marketing Association FRN
4.763%** 08/02/99...................... 997
--------
<CAPTION>
SHARES
- ----------
<C> <S> <C>
INVESTMENT COMPANY -- 1.5%
(Cost $10,342)
10,342,215 Nations Cash Reserves(a)............... 10,342
--------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(Cost $683,788*)................ 99.2% 696,852
--------
OTHER ASSETS
AND LIABILITIES (NET)........... 0.8%
Cash..................................... $ 1
Interest and dividend receivable......... 8,834
Receivable for Fund shares sold.......... 1,649
Receivable for investment securities
sold.................................... 5,530
Other assets............................. 55
Payable for Fund shares redeemed......... (1,173)
Payable for investment securities
purchased............................... (6,240)
Dividends payable........................ (2,770)
Investment advisory fee payable.......... (230)
Administration fee payable............... (58)
Shareholder servicing and distribution
fees payable............................ (84)
Accrued Trustees'/Directors' fees and
expenses................................ (38)
Accrued expenses and other liabilities... (23)
--------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)................................... 5,453
--------
NET ASSETS....................... 100.0% $702,305
-------
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE> 10
NATIONS FUNDS
Nations Short-Intermediate Government Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
(000)
- -----------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and redemption
price per share
($641,471,000/152,539,213 shares
outstanding)............................ $4.21
PRIMARY B SHARES:
Net asset value, offering and redemption
price per share ($274,000/65,145 shares
outstanding)............................ $4.21
INVESTOR A SHARES:
Net asset value, offering and redemption
price per share ($49,653,000/11,807,460
shares outstanding)..................... $4.21
INVESTOR B SHARES:
Net asset value, offering price per
share*** ($9,898,000/2,353,609 shares
outstanding)............................ $4.21
INVESTOR C SHARES:
Net asset value, offering and redemption
price per share ($1,009,000/239,898
shares outstanding)..................... $4.21
AT SEPTEMBER 30, 1998, NET ASSETS
CONSIST OF:
Paid-in capital.......................... $697,960
Undistributed net investment
income/(distributions in excess of net
investment income)...................... 33
Accumulated net realized (loss) on
investments sold........................ (8,752)
Net unrealized appreciation of
investments............................. 13,064
--------
NET ASSETS............................... $702,305
-------
-------
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $13,163,000 and gross
depreciation of $99,000 for federal income tax purposes. At September 30,
1998, the aggregate cost of securities for federal income tax purposes was
$683,788,000.
** Variable rate note. The interest rate shown reflects the rate in effect at
September 30, 1998.
*** Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
(a) Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment Associates,
Inc.
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE> 11
NATIONS FUNDS
Nations Government Securities Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------
<C> <S> <C>
AGENCY BONDS -- 8.7%
$ 1,591 Export Funding Trust,
8.210% 12/29/06......................... $ 1,913
5,000 Federal Home Loan Mortgage Corporation
(FHLMC) Certificate
7.440% 09/01/06......................... 5,370
5,000 Federal National Mortgage Association
(FNMA) Certificate
6.875% 09/24/12......................... 5,656
2,000 Federal National Mortgage Association
(FNMA) Certificate
6.960% 09/05/12......................... 2,271
--------
TOTAL AGENCY BONDS (Cost $13,824)........ 15,210
--------
COMMERCIAL MORTGAGE-BACKED SECURITY -- 6.0%
(Cost $10,021)
10,000 Allied Capital Commercial Mortgage Trust,
6.600% 07/25/04......................... 10,406
--------
MORTGAGE-BACKED SECURITIES -- 75.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) CERTIFICATES -- 18.0%
15,000 7.000% 11/13/28 TBA++.................... 15,394
980 6.500% 03/01/00 -- 1/01/09 (2 Pools)..... 995
11,523 7.000% 12/01/27 -- 12/01/27 (2 Pools).... 11,829
218 7.500% 06/01/09 -- 8/01/08 (2 Pools)..... 225
604 8.000% 08/01/07 -- 5/01/17 (4 Pools)..... 626
1,137 8.500% 09/01/01 -- 6/01/17 (6 Pools)..... 1,168
693 9.000% 02/01/02 -- 12/01/16 (3 Pools).... 725
306 9.500% 09/01/20 -- 6/01/21 (4 Pools)..... 332
100 10.000% 09/01/18......................... 106
--------
31,400
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) CERTIFICATES -- 19.7%
534 6.000% 05/01/01.......................... 535
6,597 6.500% 05/01/13 -- 6/01/28 (2 Pools)..... 6,715
4,762 6.750% 03/18/28.......................... 4,814
1,799 6.990% 06/01/23.......................... 1,952
12,900 7.000% 02/25/04 -- 08/01/25 (3 Pools).... 13,250
5,940 7.500% 09/01/27.......................... 6,128
162 8.000% 04/01/06.......................... 166
136 8.250% 04/01/09.......................... 142
578 8.500% 11/01/01 -- 7/01/21 (4 Pools)..... 598
203 9.000% 12/01/16.......................... 211
--------
34,511
--------
FREDDIE MAC CERTIFICATES -- 13.9%
4,931 Series 2023, Class B,
6.500% 01/15/13......................... 4,952
11,850 Series 2054, Class UA,
6.500% 09/15/25......................... 12,139
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------
<C> <S> <C>
FREDDIE MAC CERTIFICATES -- (CONTINUED)
$ 2,000 Series 1466, Class PI, REMIC,
7.000% 08/15/20......................... $ 2,082
5,000 Series 1999, Class PB,
7.500% 10/15/24......................... 5,206
--------
24,379
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) CERTIFICATES -- 18.7%
13,974 6.500% 11/15/27.......................... 14,302
6,288 7.000% 05/15/28 -- 6/15/23 (2 Pools)..... 6,491
9,992 7.500% 09/15/13 -- 07/15/28 (2 Pools).... 10,349
815 8.000% 02/15/23.......................... 851
31 9.000% 06/15/18.......................... 33
159 9.500% 03/15/04 -- 4/15/04 (2 Pools)..... 166
22 10.000% 10/15/18......................... 24
129 10.500% 12/15/20......................... 142
19 11.000% 03/15/01......................... 20
77 11.750% 09/15/00 -- 12/15/00 (2 Pools)... 79
73 13.000% 01/15/11 -- 4/15/11 (4 Pools).... 84
--------
32,541
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION II
(GNMA II) CERTIFICATE -- 0.0%#
55 11.000% 10/20/20......................... 60
--------
RESIDENTIAL FUNDING MORTGAGE, SEC I -- 5.6%
9,733 6.750% 06/25/28.......................... 9,842
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $130,702)......................... 132,733
--------
MUNICIPAL BOND -- 5.4%
1,315 Portsmouth Virginia, Taxable Ref.,
6.630% 07/15/14......................... 1,418
7,480 Texas State Department of Housing and
Community Affairs, Single Family
Revenue, (Teams-Taxable-Mortgage),
Series C, (MBIA Insured),
6.800% 09/01/29......................... 7,971
--------
TOTAL MUNICIPAL BONDS (Cost $8,772)...... 9,389
--------
</TABLE>
<TABLE>
SHARES
- ---------
<C> <S> <C> <C>
INVESTMENT COMPANY -- 0.9%
(Cost $1,574)
1,574,000 Nations Cash Reserves(a)................ 1,574
--------
TOTAL INVESTMENTS (Cost
$164,893*)..................... 96.9% 169,312
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE> 12
NATIONS FUNDS
Nations Government Securities Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
(000)
- -----------------------------------------------------------------
<C> <S> <C> <C>
OTHER ASSETS AND LIABILITIES
(NET).......................... 3.1%
Interest and dividend receivable........ $ 899
Receivable for Fund shares sold......... 51,050
Receivable for investment securities
sold................................... 126
Other assets............................ 24
Payable for Fund shares redeemed........ (351)
Payable for investment securities
purchased.............................. (45,265)
Dividends payable....................... (609)
Investment advisory fee payable......... (71)
Administration fee payable.............. (14)
Shareholder servicing and distribution
fees payable........................... (173)
Accrued Trustees'/Directors' fees and
expenses............................... (7)
Accrued expenses and other
liabilities............................ (114)
--------
</TABLE>
TOTAL OTHER ASSETS AND LIABILITIES
(NET).................................. 5,495
--------
NET ASSETS...................... 100.0% $174,807
========
PRIMARY A SHARES:
Net asset value, offering and redemption
price per share ($119,903,000/
11,628,854 shares outstanding)......... $10.31
PRIMARY B SHARES:
Net asset value, offering and redemption
price per share ($0/1 shares outstand-
ing)##................................. $10.31
INVESTOR A SHARES:
Net asset value, offering and redemption
price per share ($22,349,000/2,167,616
shares outstanding).................... $10.31
INVESTOR B SHARES:
Net asset value, offering price per
share** ($32,305,000/3,133,145 shares
outstanding)........................... $10.31
INVESTOR C SHARES:
Net asset value, offering and redemption
price per share ($250,000/24,209 shares
outstanding)........................... $10.31
<TABLE>
<CAPTION>
VALUE
(000)
- -----------------------------------------------------------------
<C> <S> <C> <C>
AT SEPTEMBER 30, 1998,
NET ASSETS CONSIST OF:
Paid-in capital........................ $174,726
Undistributed net investment income/
(distributions in excess of net
investment income).................... $(340)
Accumulated net realized loss on
investments sold...................... (3,998)
Net unrealized appreciation of invest-
ments................................. 4,419
--------
NET ASSETS............................. $174,807
========
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $4,453,000 and gross
depreciation of $34,000 for federal income tax purposes. At September 30,
1998, the aggregate cost of securities for federal income tax purposes was
$164,893,000.
** Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
(a) Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment Associates,
Inc.
# Amount represents less than 0.1%.
## Amount represents less than $500.
++ Security purchased on a when-issued or delayed delivery basis.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE> 13
NATIONS FUNDS
Nations Strategic Fixed Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------
<C> <S> <C>
ASSET-BACKED SECURITIES -- 14.7%
$ 13,588 Amresco Residential Securities
Mortgage Loan Trust, Series 1996-2,
Class A1,
7.425% 05/25/27..................... $ 14,059
15,000 BankBoston RV Asset Backed Trust,
Series 1997-1, Class A5,
6.350% 10/15/05..................... 15,122
8,579 Discover Card Master Trust,
Series 1996-3, Class B,
6.250% 08/18/08..................... 8,920
17,253 First Alliance Mortgage Loan Trust,
Series 1994-2, Class A1,
7.625% 07/25/25..................... 18,359
7,500 First Plus Home Loan Trust,
Series 1997-3, Class A4,
6.800% 03/10/12..................... 7,591
15,300 First Plus Home Loan Trust,
Series 1997-4, Class A4,
6.570% 04/10/13..................... 15,558
15,000 First USA Bank,
Series 1997-6, Class B,
6.580% 03/17/05..................... 15,656
15,000 Ford Auto Trust,
Series 1998-A, Class B,
5.950% 10/15/02..................... 15,277
10,000 Ford Credit Auto Owner Trust,
Series 1997-B, Class CTFS,
6.650% 04/15/03..................... 10,231
IMC Home Equity Loan Trust:
22,000 Series 1997-1, Class A3,
6.820% 10/25/11..................... 22,138
16,500 Series 1997-7, Class A3,
6.540% 11/20/12..................... 16,820
Metris Master Trust:
20,000 Series 1996-1, Class B,
6.800% 02/20/02..................... 20,362
15,000 Series 1997-1, Class B,
7.110% 10/20/05..................... 15,801
11,625 Premier Auto Trust,
Series 1998-1, Class B,
5.920% 10/06/04..................... 11,828
10,000 Prime Credit Card Master Trust,
Series 1992-2, Class B2,
7.950% 11/15/02..................... 10,300
21,300 Standard Credit Card Master Trust,
Series 1995-9, Class B,
6.650% 10/07/07..................... 22,664
214 The Money Store Home Equity Trust,
Series 1993-D Class A2,
5.075% 02/15/18..................... 213
WFS Financial Owner Trust:
15,000 Series 1997-B, Class CTFS,
6.550% 10/20/04..................... 15,342
10,000 Series 1997-C, Class A3,
6.100% 03/20/02..................... 10,066
10,000 World Financial Network Credit Card
Master Trust, Series 1996-B, Class
A,
6.950% 04/15/06..................... 10,709
----------
TOTAL ASSET-BACKED SECURITIES (Cost
$269,545)........................... 277,016
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 43.1%
AUTOMOTIVE -- 2.8%
$ 24,965 Auburn Hills Trust Certificates,
Deb.,
12.000% 05/01/20.................... $ 41,727
10,000 Ford Motor Company,
7.400% 11/01/46..................... 11,371
----------
53,098
----------
BANKING AND FINANCE -- 7.9%
13,000 ABN Amro Bank -- Chicago,
7.300% 12/01/26..................... 12,890
20,000 Banponce Financial
Corporation, MTN,
6.550% 10/10/00..................... 20,505
16,955 Crestar Financial Corporation,
6.500% 01/15/08..................... 17,601
12,500 FCB/NC Capital Trust I,
8.050% 03/01/28**................... 12,842
10,500 First Union Institutional
Capital Trust I,
8.040% 12/01/26..................... 11,398
13,650 General Motors Acceptance
Corporation,
8.750% 07/15/05..................... 16,205
7,500 Norwest Corp.,
6.750% 06/15/07..................... 8,109
11,000 Union Planters Bank,
6.500% 03/15/18..................... 11,282
15,000 Union Planters Capital Trust,
8.200% 12/15/26..................... 15,472
11,500 Wells Fargo Capital,
7.960% 12/15/26..................... 12,370
8,500 Wilmington Trust Corp.,
6.625% 05/01/08..................... 9,001
----------
147,675
----------
ENERGY -- OIL -- 0.5%
8,500 Occidental Petroleum,
6.400% 04/01/03..................... 8,831
----------
ENTERTAINMENT -- 2.3%
15,000 Time Warner Inc., Notes,
6.100% 12/30/01**................... 15,266
10,000 Time Warner Inc.,
7.750% 06/15/05..................... 11,149
15,000 Time Warner Inc.,
8.110% 08/15/06..................... 17,249
----------
43,664
----------
FINANCIAL SERVICES -- 6.4%
16,000 Bear Stearns Companies Inc.,
6.650% 12/01/04..................... 16,545
11,500 Goldman Sachs Group L.P., Notes,
6.600% 07/15/02**................... 12,090
15,000 Goldman Sachs Group LP,
6.625% 12/01/04**................... 16,046
15,000 Lehman Brothers Holdings, MTN,
6.650% 11/08/00..................... 14,950
16,500 Lehman Brothers Inc., Sr. Sub. Notes,
7.250% 04/15/03..................... 16,761
17,250 Morgan Stanley Dean Witter,
6.090% 03/09/11..................... 17,626
10,000 Paine Webber Group Inc., MTN,
7.300% 10/15/03..................... 10,897
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 14
NATIONS FUNDS
Nations Strategic Fixed Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
$ 15,250 Salomon Smith Barney, MTN,
6.625% 11/30/00..................... $ 15,611
----------
120,526
----------
HEALTHCARE -- 1.1%
19,750 HEALTHSOUTH Corporation,
6.875% 06/15/05**................... 20,853
----------
INDUSTRIAL -- 9.8%
10,000 Blount Inc.,
7.000% 06/15/05..................... 10,159
13,000 Comdisco Inc.,
6.130% 08/01/01..................... 13,264
14,000 Dresser Industries Inc.,
7.600% 08/15/99..................... 15,156
11,675 Georgia-Pacific,
9.875% 11/01/21..................... 13,317
8,500 News America Holdings Inc.:
10.125% 10/15/12.................... 10,002
10,315 Sr. Notes,
9.500% 07/15/24..................... 13,123
PDV America, Inc.:
Gtd. Sr. Notes:
10,000 7.750% 08/01/00..................... 9,959
15,000 7.875% 08/01/03..................... 14,645
12,500 Raytheon Company,
6.750% 08/15/07..................... 13,395
15,000 USA Waste Services Inc.,
7.125% 10/01/07..................... 16,346
20,000 Viacom Inc.,
7.750% 06/01/05..................... 21,597
10,818 Xerox Capital Trust I,
8.000% 02/01/27..................... 11,562
20,000 Zurich Capital Trust I,
8.376% 06/01/37**................... 21,877
----------
184,402
----------
INSURANCE -- 2.8%
13,250 American RE Corporation,
7.450% 12/15/26..................... 14,649
10,000 Liberty Mutual, Notes,
7.875% 10/15/26**................... 12,011
10,000 MBIA Inc.,
7.150% 07/15/27..................... 10,982
13,000 New England Mutual, Notes,
7.875% 02/15/24**................... 15,577
----------
53,219
----------
RETAIL -- 0.8%
15,000 Sears Roebuck Acceptance Corporation,
MTN,
6.690% 04/30/01..................... 15,559
----------
RETAIL -- FOOD -- 0.7%
13,000 Safeway Inc., Sr. Notes,
7.000% 09/15/07..................... 13,698
----------
TRANSPORTATION -- 2.0%
ERAC USA Finance Company,
15,750 6.950% 03/01/04**................... 16,549
19,500 6.625% 02/15/05**................... 20,256
----------
36,805
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION -- RAILROAD -- 0.7%
$ 12,200 Norfolk Southern Corporation,
7.350% 05/15/07..................... $ 13,706
----------
UTILITY -- 1.7%
10,569 Carolina Power and Light,
6.800% 08/15/07..................... 11,671
18,250 Dominion Capital Trust I,
7.830% 12/01/27**................... 19,018
----------
30,689
----------
UTILITY -- TELEPHONE -- 3.6%
13,000 Bell Atlantic Corporation,
9.375% 07/15/31..................... 14,927
6,100 Bell South Telecommunications,
8.250% 07/01/32..................... 6,883
15,500 GTE Corporation,
6.600% 09/22/05..................... 16,554
25,000 New England Telephone & Telegraph,
9.000% 08/01/31..................... 28,451
----------
66,815
----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $780,138)..................... 809,540
----------
FOREIGN BONDS -- 4.9%
17,500 AB Spintab,
7.500% 08/14/49**................... 18,127
12,000 Abbey National PLC,
7.350% 10/29/49..................... 13,292
15,000 Banco Latino Americano,
7.000% 9/24/99**.................... 14,968
10,000 Banco Latino Americano,
7.230% 04/17/00**................... 10,322
10,000 Bank of Scotland,
7.000%, 11/29/49**.................. 9,970
10,000 Enterprise Oil,
6.700% 09/15/07..................... 10,544
13,000 Skandinaviska Enskilda FRN,
8.125% 09/06/49**(b)................ 14,979
----------
TOTAL FOREIGN BONDS
(Cost $88,183)...................... 92,202
----------
MORTGAGE-BACKED SECURITIES -- 19.8%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
CERTIFICATES -- 4.7%
78 9.000% 04/01/01 -- 01/01/05
(3 Pools)............................ 81
Gold:
25,000 5.750% 07/15/03...................... 26,093
2,128 6.500% 04/01/11 -- 10/01/12
(3 Pools)............................ 2,179
53,433 7.000% 06/01/11 -- 07/01/28
(3 Pools)............................ 54,901
738 8.000% 11/01/09 -- 04/01/10
(2 Pools)............................ 761
3,850 8.500% 11/01/26...................... 4,012
----------
88,027
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE> 15
NATIONS FUNDS
Nations Strategic Fixed Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------
<C> <S> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
CERTIFICATES -- 9.2%
$ 4,800 5.640% 10/25/28...................... $ 4,876
5,500 5.960% 10/25/28...................... 5,723
84,178 6.500% 03/01/13 -- 09/01/27
(4 Pools)............................ 85,779
15,431 7.000% 03/01/27 -- 11/01/27
(3 Pools)............................ 15,855
34,741 7.500% 02/01/25...................... 35,849
24,310 8.000% 09/15/25 -- 12/01/09
(3 Pools)............................ 25,121
----------
173,203
----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA)
CERTIFICATES -- 5.9%
19,681 6.500% 05/15/28...................... 20,117
30,241 7.000% 07/15/28...................... 31,214
54,186 7.500% 12/15/23 -- 07/20/28
(2 Pools)............................ 56,108
263 8.000% 05/15/17 (2 Pools)............ 276
2,992 8.500% 02/15/25...................... 3,162
157 9.000% 07/15/17...................... 169
25 11.000% 07/15/00 -- 11/15/00
(2 Pools)............................ 26
54 13.000% 01/15/11 -- 02/15/11
(4 Pools)............................ 63
----------
111,135
----------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $365,716)..................... 372,365
----------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 15.3%
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 3.9%
27,000 6.270% 02/05/08...................... 28,316
43,920 6.590% 05/29/08...................... 45,677
----------
73,993
----------
U.S. TREASURY BONDS -- 1.2%
7,500 5.500% 08/15/28...................... 8,107
3,000 6.125% 11/15/27...................... 3,458
9,000 6.375% 08/15/27...................... 10,629
----------
22,194
----------
U.S. TREASURY NOTES -- 10.2%
10,200 5.375% 02/15/01...................... 10,431
43,500 6.250% 05/31/99...................... 43,935
119,000 7.500% 10/31/99...................... 122,533
13,750 7.875% 08/15/01...................... 15,031
----------
191,930
----------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (Cost $282,082)......... 288,117
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANY -- 5.7% (Cost $107,690)
107,690,001 Nations Cash Reserves(a)............... $ 107,690
----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS (Cost
$1,893,354*)................... 103.5% 1,946,930
----------
OTHER ASSETS AND LIABILITIES
(NET).......................... (3.5)%
Cash................................... $ 2
Interest and dividend receivable....... 26,360
Receivable for Fund shares sold........ 3,957
Receivable for investment securities
sold.................................. 3
Payable for Fund shares redeemed....... (1,532)
Payable for investment securities
purchased............................. (10,466)
Dividends payable...................... (7,720)
Collateral on securities loaned........ (75,680)
Investment advisory fee payable........ (764)
Administration fee payable............. (153)
Shareholder servicing and distribution
fees payable.......................... (47)
Accrued Trustees'/Directors' fees and
expenses.............................. (78)
Accrued expenses and other
liabilities........................... (408)
----------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)................................. (66,526)
----------
NET ASSETS...................... 100.0% $1,880,404
==========
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($1,839,166,000/ 179,521,926 shares
outstanding).......................... $10.24
PRIMARY B SHARES:
Net asset value, offering and
redemption price per share
($0/1 shares outstanding)#............ $10.24
INVESTOR A SHARES:
Net asset value, offering and
redemption price per share
($36,524,000/3,565,103 shares
outstanding).......................... $10.24
INVESTOR B SHARES:
Net asset value, offering price per
share*** ($3,474,000/339,158 shares
outstanding).......................... $10.24
INVESTOR C SHARES:
Net asset value, offering and
redemption price per share
($1,240,000/121,019 shares
outstanding).......................... $10.24
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE> 16
NATIONS FUNDS
Nations Strategic Fixed Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
(000)
- ------------------------------------------------------------------
<C> <S> <C> <C>
AT SEPTEMBER 30, 1998, NET
ASSETS CONSIST OF:
Paid-in capital........................ $1,820,630
Undistributed net investment
income/(distributions in excess of net
investment income).................... 245
Accumulated net realized gain on
investments sold...................... 5,953
Net unrealized appreciation of
investments........................... 53,576
----------
NET ASSETS............................. $1,880,404
==========
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $55,494,000 and gross
depreciation of $1,918,000 for federal income tax purposes. At September 30,
1998, the aggregate cost of securities for federal income tax purposes was
$1,893,354,000.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
*** Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
# Amount represents less than $500.
(a) Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment Associates,
Inc.
(b) Variable rate note. The interest rate shown reflects the rate in effect at
September 30, 1998.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE> 17
NATIONS FUNDS
Nations U.S. Government Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- ------------------------------------------------------------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS -- 31.8%
U.S. TREASURY BOND -- 21.2%
$ 19,875 8.000% 11/15/21........................ $ 27,272
--------
U.S. TREASURY NOTE -- 10.6%
13,280 6.250% 05/31/00........................ 13,658
--------
TOTAL TREASURY OBLIGATIONS
(Cost $38,443)......................... 40,930
--------
MORTGAGE-BACKED SECURITIES -- 65.9%
FEDERAL HOME LOAN BANK (FHLB) -- 7.3%
9,200 5.625% 03/19/01........................ 9,404
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
CERTIFICATES -- 27.6%
6,435 5.750% 07/15/03........................ 6,717
8,970 5.750% 04/15/08........................ 9,483
19,279 6.000% 09/15/13 -- 08/01/28
(3 Pools).............................. 19,344
--------
35,544
--------
FEDERAL NATIONAL MORTGAGE (FNMA)
CERTIFICATES -- 31.0%
2,500 5.750% 04/01/03........................ 2,608
12,266 6.000% 06/04/03 -- 03/01/13
(2 Pools).............................. 12,538
7,934 6.000% 09/01/13........................ 8,015
16,465 6.500% 06/01/03 -- 03/01/13
(2 Pools).............................. 16,742
--------
39,903
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $82,942).......................... 84,851
--------
<CAPTION>
SHARES
- ----------
<C> <S> <C>
INVESTMENT COMPANY -- 4.8% (Cost $6,114)
6,114,000 Nations Cash Reserves(a)................ 6,114
--------
</TABLE>
<TABLE>
TOTAL INVESTMENTS
(Cost $127,499*)............. 102.5% 131,895
--------
OTHER ASSETS AND
LIABILITIES (NET)............ (2.5)%
Interest and dividend receivable....... $ 1,969
Receivable for Fund shares sold........ 165
Other assets........................... 16
Payable for Fund shares redeemed....... (4)
Dividends payable...................... (492)
Collateral on securities loaned........ (4,829)
Investment advisory fee payable........ (33)
Administration fee payable............. (10)
Shareholder servicing and distribution
fees payable.......................... (14)
Accrued Trustees'/Directors' fees and
expenses.............................. (3)
Accrued expenses and other
liabilities........................... (14)
--------
TOTAL OTHER ASSETS AND
LIABILITIES (NET)..................... (3,249)
--------
NET ASSETS.................... 100.0% $128,646
========
<CAPTION>
VALUE
(000)
- -----------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($121,536,000/11,387,986 shares
outstanding).......................... $10.67
INVESTOR A SHARES:
Net asset value, offering and
redemption price per share
($2,345,000/219,707 shares
outstanding).......................... $10.67
INVESTOR B SHARES:
Net asset value, offering price per
share** ($3,406,000/319,104 shares
outstanding).......................... $10.67
INVESTOR C SHARES:
Net asset value, offering and
redemption price per share
($1,359,000/127,338 shares
outstanding).......................... $10.67
AT SEPTEMBER 30, 1998, NET
ASSETS CONSIST OF:
Paid-in capital........................ $121,588
Undistributed net investment
income/(distributions in excess of net
investment income).................... 24
Accumulated net realized gain on
investments sold...................... 2,638
Net unrealized appreciation of
investments........................... 4,396
--------
NET ASSETS............................. $128,646
========
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $4,396,000 for federal
income tax purposes. At September 30, 1998, the aggregate cost of securities
for federal income tax purposes was $127,499,000.
** Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
(a) Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment Associates, Inc.
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE> 18
NATIONS FUNDS
Nations Diversified Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 62.0%
AEROSPACE/DEFENSE -- 2.2%
$ 3,375 Raytheon Company,
7.375% 07/15/25....................... $ 3,478
5,025 Martin Marietta Technology,
7.750% 04/15/23....................... 5,097
--------
8,575
--------
BANKING AND FINANCE -- 12.1%
4,370 Amsouth Bank of Alabama,
6.450% 02/01/18....................... 4,667
5,385 Dominion Capital Trust I,
7.830% 12/01/27....................... 5,611
4,025 Erac USA Finance Company,
6.625% 02/15/05....................... 4,181
3,500 FCB/NB Capital Trust I,
8.050% 03/01/28....................... 3,596
6,000 GS Escrow Corporation,
7.125% 08/01/05**..................... 5,871
3,925 Popular Inc., MTD,
6.375% 09/15/03....................... 4,117
3,480 Union Planters Trust,
6.500% 03/15/18....................... 3,569
5,560 Washington Mutual Inc.,
8.206% 02/01/27....................... 6,038
4,465 Western Financial Savings Bank,
Sub. Deb.,
8.500% 07/01/03....................... 4,503
5,225 Wilmington Trust Corporation,
6.625% 05/01/08....................... 5,533
--------
47,686
--------
CONTAINERS -- 2.6%
4,500 BWAY Corporation, Sr. Sub. Notes,
10.250% 04/15/07 **................... 4,928
4,870 Owens-Illinois, Inc.,
7.150% 05/15/05....................... 4,959
--------
9,887
--------
ENERGY -- 2.7%
4,910 Barrett Resources Corporation, Sr.
Notes,
7.550% 02/01/07....................... 5,075
Occidental Petroleum Corporation:
2,450 Sr. Deb.,
9.250% 08/01/19....................... 2,890
2,000 Sr. Deb.,
10.125% 09/15/09...................... 2,557
--------
10,522
--------
ENTERTAINMENT -- 1.6%
5,035 Time Warner Entertainment,
8.375% 07/15/33....................... 6,322
--------
FINANCIAL SERVICES -- 6.9%
4,045 Bear Stearns Company,
6.625% 01/15/04....................... 4,168
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES -- (CONTINUED)
$ 4,500 Lehman Brothers Inc.,
11.625% 05/15/05...................... $ 5,473
6,490 Morgan Stanley Finance PLC,
Gtd. Sub. Deb.,
8.030% 02/28/17....................... 7,432
5,385 Paine Webber Group Inc., Sr. Notes,
7.625% 10/15/08....................... 5,842
3,735 Salomon Inc.,
7.300% 05/15/02....................... 3,948
--------
26,863
--------
GAS -- 1.5%
5,555 Louis Dreyfus Natural Gas Corporation,
Sr. Sub. Notes,
9.250% 06/15/04....................... 5,916
--------
HEALTH CARE -- 5.0%
4,100 Genesis Health Ventures Inc.,
Sr. Sub. Notes,
9.250% 10/01/06....................... 3,957
3,805 HEALTHSOUTH Corporation,
6.875% 06/15/05**..................... 4,018
6,490 Tenet Healthcare Corporation, Sr Notes,
8.000% 01/15/05....................... 6,587
4,795 Quorum Health Group, Inc.,
Sr. Sub. Notes,
8.750% 11/01/05....................... 4,915
--------
19,477
--------
INDUSTRIAL -- 11.3%
3,450 Alaris Medical Systems,
9.750% 12/01/06....................... 3,208
2,000 Auburn Hills Trust Certificates, Deb.,
12.000% 05/01/20...................... 3,343
4,840 Beckman Instruments Inc.,
7.050% 06/01/26....................... 5,017
3,805 Blount Inc.,
7.000% 06/15/05....................... 3,865
3,700 Coltec Industries Inc.,
7.500% 04/15/08**..................... 3,660
6,625 Comdisco Inc.,
6.130% 08/01/01....................... 6,759
2,600 Fisher Scientific International, Sr.
Notes,
7.125% 12/15/05....................... 2,430
3,850 Georgia-Pacific Corporation,
9.500% 12/01/11....................... 4,890
5,430 PDV America Inc., Gtd. Sr. Notes,
7.875% 08/01/03....................... 5,302
5,700 USA Waste Services Inc.,
7.125% 12/15/17....................... 5,947
--------
44,421
--------
INSURANCE -- 5.4%
5,750 Conseco Finance TR II,
8.700% 11/15/26....................... 5,985
5,580 Jefferson-Pilot Capital Trust,
8.140% 01/15/46**..................... 6,066
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE> 19
NATIONS FUNDS
Nations Diversified Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------
<C> <S> <C>
INSURANCE -- (CONTINUED)
$ 3,000 Leucadia National Corporation,
Sr. Sub. Notes,
8.250% 06/15/05....................... $ 3,322
5,075 Zurich Capital Trust I,
8.376% 06/01/37....................... 5,551
--------
20,924
--------
MEDIA -- 2.6%
4,735 Primedia Inc.,
7.6250% 04/01/08 **................... 4,593
5,145 Viacom Inc., Sr. Notes,
7.750% 06/01/05....................... 5,556
--------
10,149
--------
PUBLISHING -- 1.3%
4,190 News America Holdings Inc., Gtd. Deb.,
10.125% 10/15/12...................... 4,931
--------
TELECOMMUNICATIONS -- 4.2%
5,820 GTE Corporation
7.900% 02/01/27....................... 6,562
2,000 Jones Intercable Inc., Sr. Notes,
9.625% 03/15/02....................... 2,140
2,750 Paramount Communication,
7.500% 07/15/23....................... 2,713
4,500 Rogers Cablesystems Limited, Deb.,
10.000% 12/01/07...................... 4,950
--------
16,365
--------
TRANSPORTATION -- 1.3%
3,950 Federal Express Corporation, Notes,
9.650% 06/15/12....................... 4,931
--------
UTILITIES -- 1.3%
4,840 Niagara Mohawk Power,
7.250% 10/01/02....................... 4,932
--------
TOTAL CORPORATE BONDS AND NOTES (Cost
$237,468)............................. 241,901
--------
MUNICIPAL BONDS -- 3.6%
3,520 Massachusetts State Port Authority
Revenue, Taxable-Ref-Series-C,
6.350% 07/01/07....................... 3,715
5,875 Nebraska Investment Finance Authority,
Single Family Housing Revenue,
Taxable-Series-B,
6.550% 09/01/07....................... 6,165
4,000 Virginia State Housing Development
Authority Commonwealth Mortgage,
Taxable-Series F, Subseries F1,
6.550% 04/01/14++..................... 4,201
--------
TOTAL MUNICIPAL BONDS (Cost $13,354)... 14,081
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- -----------------------------------------------------------------
<C> <S> <C>
FOREIGN NOTE -- 0.9% (Cost $3,242)
$ 4,500 United Mexican States., Senior Notes,
6.250% 12/31/19....................... $ 3,409
--------
MORTGAGE-BACKED SECURITIES -- 18.7%
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
CERTIFICATES -- 4.6%
Gold:
7,531 6.500% 10/01/12........................ 7,700
9,911 7.000% 07/01/11 -- 07/01/28 (2
pools)................................. 10,184
--------
17,884
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
CERTIFICATES -- 8.8%
8,172 6.500% 05/01/26 -- 05/01/27
(3 pools).............................. 8,311
18,343 7.000% 05/01/11 -- 05/01/28
(5 pools).............................. 18,847
6,296 8.000% 01/01/28........................ 6,536
647 9.000% 05/01/27........................ 684
--------
34,378
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
CERTIFICATES -- 5.3%
10,519 7.500% 08/15/26 -- 09/15/28
(2 Pools).............................. 10,904
6,086 8.000% 07/15/24 -- 09/15/24
(2 Pools).............................. 6,342
3,026 9.000% 08/15/26........................ 3,234
--------
20,480
--------
TOTAL MORTGAGE-BACKED SECURITIES (Cost
$70,809).............................. 72,742
--------
U.S. TREASURY OBLIGATIONS -- 13.4%
U.S. TREASURY BONDS -- 11.9%
9,000 6.375% 08/15/27........................ 10,629
8,125 9.125% 05/15/09........................ 9,934
5,720 10.625% 08/15/15....................... 9,344
7,750 12.000% 08/15/13....................... 12,123
2,650 12.500% 08/15/14....................... 4,361
--------
46,391
--------
U.S. TREASURY STRIP -- 1.5%
15,000 Principal only, 02/15/16............... 5,979
--------
TOTAL U.S. TREASURY OBLIGATIONS (Cost
$49,569).............................. 52,370
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE> 20
NATIONS FUNDS
Nations Diversified Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -----------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANY -- 3.3% (Cost $13,015)
13,015,489 Nations Cash Reserves(a)............... $ 13,015
--------
</TABLE>
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS (Cost
$387,457*).................... 101.9% 397,518
--------
OTHER ASSETS AND LIABILITIES
(NET)......................... (1.9)%
Cash................................... $ 150
Interest and dividend receivable....... 6,278
Receivable for Fund shares sold........ 1,963
Receivable for investment securities
sold.................................. 190
Payable for investment securities
purchased............................. (103)
Dividends payable...................... (12,477)
Collateral on securities loaned........ (2,978)
Investment advisory fee payable........ (159)
Administration fee payable............. (32)
Shareholder servicing and distribution
fees payable.......................... (299)
Accrued Trustees'/Directors' fees and
expenses.............................. (16)
Accrued expenses and other
liabilities........................... (40)
--------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)................................. (7,523)
--------
NET ASSETS..................... 100.0% $389,995
-------
-------
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($307,198,000/28,622,404 shares
outstanding).......................... $10.73
PRIMARY B SHARES:
Net asset value, offering and
redemption price per share ($0/1
shares outstanding)#.................. $10.73
INVESTOR A SHARES:
Net asset value, offering and
redemption price per share
($13,154,000/1,225,596 shares
outstanding).......................... $10.73
INVESTOR B SHARES:
Net asset value, offering price per
share***
($68,019,000/6,336,959 shares
outstanding).......................... $10.73
INVESTOR C SHARES:
Net asset value, offering and
redemption price per share
($1,624,000/151,435 shares
outstanding).......................... $10.73
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000)
- -----------------------------------------------------------------
<C> <S> <C> <C>
AT SEPTEMBER 30, 1998, NET ASSETS CONSIST OF:
Paid-in capital........................ $378,888
Undistributed net investment
income/(distributions in excess of net
investment income).................... 30
Accumulated net realized gain on
investments sold...................... 1,016
Net unrealized appreciation of
investments........................... 10,061
--------
NET ASSETS............................. $389,995
-------
-------
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $11,964,000 and gross
depreciation of $1,903,000 for federal income tax purposes. At September 30
1998, the aggregate cost of securities for federal income tax purposes was
$387,457,000.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
*** Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
# Amount represents less than $500.
(a) Money market mutual fund registered under the Investment Company Act of
1940, as amended, and sub-advised by TradeStreet Investment Associates, Inc.
++ Security purchased on when-issued basis.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE> 21
NATIONS FUNDS
Nations Global Government Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- ----------------------------------------------------------------
<S> <C> <C> <C>
FOREIGN BONDS AND NOTES -- 90.4%
AUSTRIA -- 8.0%
DEM 1,000 Government of Austria,
8.000% 06/17/02....................... $ 683
USD 500 KFW International Finance,
7.500% 04/21/05....................... 564
-------
1,247
-------
BELGIUM -- 3.3%
USD 500 Kingdom of Belgium,
5.500% 11/05/03....................... 512
-------
CANADA -- 3.0%
CAD 680 Government of Canada,
8.500% 03/01/00....................... 468
-------
DENMARK -- 4.6%
DKK 4,500 Kingdom of Denmark,
6.000% 12/10/99....................... 720
-------
FINLAND -- 2.9%
GBP 250 Republic of Finland,
8.000% 04/07/03....................... 457
-------
FRANCE -- 2.3%
ECU 300 French Treasury Bill (BTAN 5 Year
Issue),
5.000% 03/16/99....................... 355
-------
GERMANY -- 23.0%
Federal Republic of Germany:
DEM 1,250 5.000% 05/21/01....................... 778
DEM 1,255 5.250% 01/04/08....................... 830
DEM 1,180 6.500% 07/15/03....................... 795
DEM 200 6.500% 07/04/27....................... 151
Rheinische Hypobanf AG,
USD 950 6.875% 06/18/07....................... 1,038
-------
3,592
-------
GREAT BRITAIN -- 6.0%
USD 250 BMW Capital PLC,
6.250% 08/14/00....................... 255
GBP 300 United Kingdom Treasury,
8.000% 09/27/13....................... 677
-------
932
-------
ITALY -- 7.6%
ITL 1,900,000 Italian Government,
7.500% 10/01/99....................... 1,191
-------
JAPAN -- 3.2%
USD 445 Japan Highway Public Corporation,
7.500% 04/28/05....................... 495
-------
PORTUGAL -- 5.8%
DEM 1,400 Government of Portugal,
5.375% 06/23/08....................... 911
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
- ----------------------------------------------------------------
<S> <C> <C> <C>
SPAIN -- 9.5%
Government of Spain:
ESP 70,000 7.800% 10/31/99....................... $ 514
ESP 25,000 12.250% 03/25/00...................... 198
USD 750 Telefonica Europe, Series EMTN,
6.375% 01/08/03....................... 775
-------
1,487
-------
SWEDEN -- 4.1%
SEK 4,000 Government of Sweden,
10.250% 05/05/03...................... 632
-------
SUPRANATIONAL -- 5.2%
JPY 70,000 World Bank,
4.500% 06/20/00....................... 550
JPY 35,000 International Bank Recon. &
Development,
0.00% 09/20/99........................ 256
-------
806
-------
UNITED STATES -- 1.9%
JPY 40,000 Federal National Mortgage Association
(FNMA) -- Global,
2.000% 12/20/99....................... 299
-------
TOTAL FOREIGN BONDS AND NOTES (Cost
$13,472).............................. 14,104
-------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
TOTAL INVESTMENTS (Cost
$13,472*)..................... 90.4% 14,104
-------
OTHER ASSETS AND LIABILITIES
(NET)......................... 9.6%
Cash................................... $ 1,149
Interest and dividend receivable....... 457
Receivable for Fund shares sold........ 3,194
Unamortized organization costs......... 61
Other assets........................... 8
Payable for Fund shares redeemed....... (73)
Payable for investment securities
purchased............................. (3,185)
Dividends payable...................... (39)
Net unrealized depreciation of forward
foreign exchange contracts............ (4)
Investment advisory fee payable........ (9)
Administration fee payable............. (1)
Shareholder servicing and distribution
fees payable.......................... (7)
Accrued Trustees'/Directors' fees and
expenses.............................. (18)
Accrued expenses and other
liabilities........................... (30)
-------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)................................. 1,503
-------
NET ASSETS..................... 100.0% $15,607
=======
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($238,000/23,009 shares
outstanding).......................... $10.36
PRIMARY B SHARES:
Net asset value, offering and
redemption price per share ($0/1
shares outstanding)#.................. $10.36
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE> 22
NATIONS FUNDS
Nations Global Government Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONTINUED) SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE
(000)
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTOR A SHARES:
Net asset value, offering and
redemption price per share
($15,288,000/1,475,079 shares
outstanding).......................... $10.36
INVESTOR B SHARES:
Net asset value, offering price per
share** ($17,000/1,679 shares
outstanding).......................... $10.36
INVESTOR C SHARES:
Net asset value, offering and
redemption price per share
($64,000/6,184 shares outstanding).... $10.36
AT SEPTEMBER 30, 1998, NET ASSETS
CONSIST OF:
Paid-in capital........................ $16,001
Undistributed net investment
income/(distributions in excess of net
investment income).................... (823)
Accumulated net realized loss on
investments sold...................... (203)
Net unrealized appreciation of
investments........................... 632
-------
NET ASSETS............................. $15,607
=======
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $792,000 and gross
depreciation of $160,000 for federal income tax purposes. At September 30,
1998, the aggregate cost of securities for federal income tax purposes was
$13,472,000.
** Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
# Amount represents less than $500.
Comprehensive Abbreviation listing for all 9/30/98 Nations Government &
Corporate Bond Funds.
ABBREVIATIONS:
<TABLE>
<S> <C>
ADR American Depositary Receipt
FRN Floating Rate Note
GOLD Payments are on accelerated 45 day payment cycle instead
of regular 75 day cycle.
MBIA Municipal Bond Insurance Association
MTN Medium Term Notes
REMIC Real Estate Mortgage Investment Conduit
TBA To Be Announced
</TABLE>
ABBREVIATIONS OF CURRENCY
THAT ISSUE IS HELD IN:
<TABLE>
<S> <C>
CAD Canadian Dollar
DEM German Deutschmark
DKK Danish Krona
ECU European Currency Unit
ESP Spanish Peseta
GBP Great Britain Pound
ITL Italian Lira
JPY Japanese Yen
SEK Swedish Krona
USD United States Dollar
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE> 23
[THIS PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE> 24
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHORT-
SHORT-TERM INTERMEDIATE GOVERNMENT
INCOME GOVERNMENT SECURITIES
------------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
INVESTMENT INCOME:
Interest.................................................... $13,067 $20,986 $ 5,093
Dividends................................................... 187 658 172
Securities lending.......................................... 2 144 --
------- ------- -------
Total investment income................................. 13,256 21,788 5,265
------- ------- -------
EXPENSES:
Investment advisory fee..................................... 1,288 2,136 499
Administration fee.......................................... 215 356 82
Transfer agent fees......................................... 98 152 37
Custodian fees.............................................. 23 45 15
Legal and audit fees........................................ 25 33 18
Registration and filing fees................................ 57 27 30
Trustees'/Directors' fees and expenses...................... 5 9 1
Amortization of organization costs.......................... -- -- --
Interest expense............................................ -- -- --*
Other....................................................... 11 21 8
------- ------- -------
Subtotal................................................ 1,722 2,779 690
Shareholder servicing and distribution fees:
Primary B Shares.......................................... -- 1 --
Investor A Shares......................................... 22 62 24
Investor B Shares......................................... 30 49 161
Investor C Shares......................................... 6 6 2
Fees waived by investment advisor and distributor........... (672) (738) (115)
------- ------- -------
Total expenses.......................................... 1,108 2,159 762
Fees reduced by credits allowed by the custodian............ (4) (20) (5)
------- ------- -------
Net expenses............................................ 1,104 2,139 757
------- ------- -------
NET INVESTMENT INCOME....................................... 12,152 19,649 4,508
------- ------- -------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) from:
Securities................................................ 146 4,516 3,951
Forward foreign exchange contracts........................ -- -- --
Foreign currencies and other net asset.................... -- -- --
------- ------- -------
Net realized gain/(loss) on investments..................... 146 4,516 3,951
------- ------- -------
Net change in unrealized appreciation/(depreciation) of:
Securities (Note 11)...................................... 5,260 10,084 3,011
Forward foreign exchange contracts, foreign currencies and
other net assets........................................ -- -- --
------- ------- -------
Net change in unrealized appreciation of investments........ 5,260 10,084 3,011
------- ------- -------
Net realized and unrealized gain on investments............. 5,406 14,600 6,962
------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $17,558 $34,249 $11,470
======= ======= =======
</TABLE>
* Amount represents less than $500.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 25
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
STRATEGIC GLOBAL
FIXED U.S. GOVERNMENT DIVERSIFIED GOVERNMENT
INCOME BOND INCOME INCOME
------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 60,267 $ 6,335 $12,667 $ 446
1,605 116 196 --
82 24 25 --
-------- ------- ------- ------
61,954 6,475 12,888 446
-------- ------- ------- ------
5,671 453 1,112 62
945 113 185 9
374 60 86 13
70 13 23 6
61 21 24 18
112 28 41 29
22 2 4 5
-- 1 -- 17
4 -- -- 1
41 14 11 3
-------- ------- ------- ------
7,300 705 1,486 163
-- -- -- --
39 3 16 18
15 11 333 1
6 7 9 --
(961) (31) (238) --*
-------- ------- ------- ------
6,399 695 1,606 182
-- -- (7) --
-------- ------- ------- ------
6,399 695 1,599 182
-------- ------- ------- ------
55,555 5,780 11,289 264
-------- ------- ------- ------
6,300 1,812 1,298 723
-- -- -- 46
-- -- -- (960)
-------- ------- ------- ------
6,300 1,812 1,298 (191)
-------- ------- ------- ------
38,626 6,844 6,591 1,477
-- -- -- 4
-------- ------- ------- ------
38,626 6,844 6,591 1,481
-------- ------- ------- ------
44,926 8,656 7,889 1,290
-------- ------- ------- ------
$100,481 $14,436 $19,178 $1,554
======== ======= ======= ======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 26
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SHORT-TERM INCOME SHORT-INTERMEDIATE GOVERNMENT
-------------------------------- --------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
09/30/98 YEAR ENDED 09/30/98 YEAR ENDED
(UNAUDITED) 03/31/98 (UNAUDITED) 03/31/98
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Net investment income................................. $ 12,152 $ 19,243 $ 19,649 $ 37,218
Net realized gain on investments...................... 146 720 4,516 11,733
Net change in unrealized appreciation/(depreciation)
of investments...................................... 5,260 1,879 10,084 7,139
-------- -------- -------- --------
Net increase in net assets resulting from
operations.......................................... 17,558 21,842 34,249 56,090
Distributions to shareholders from net investment
income:
Primary A Shares.................................... (11,484) (18,262) (18,063) (33,404)
Primary B Shares.................................... --* (25) (7) (633)
Investor A Shares................................... (477) (499) (1,318) (2,413)
Investor B Shares................................... (157) (270) (231) (427)
Investor C Shares................................... (33) (186) (31) (341)
Distributions to shareholders from net realized gain
on investments:
Primary A Shares.................................... -- -- -- --
Primary B Shares.................................... -- -- -- --
Investor A Shares................................... -- -- -- --
Investor B Shares................................... -- -- -- --
Investor C Shares................................... -- -- -- --
Net increase/(decrease) in net assets from Fund share
transactions........................................ 92,550 152,468 (37,488) 256,635
-------- -------- -------- --------
Net increase/(decrease) in net assets................. 97,957 155,068 (22,889) 275,507
NET ASSETS:
Beginning of period................................... 353,243 198,175 725,194 449,687
-------- -------- -------- --------
End of period......................................... $451,200 $353,243 $702,305 $725,194
======== ======== ======== ========
Undistributed net investment income/(distributions in
excess of net investment income) at end of period... $ 7 $ 6 $ 33 $ 33
======== ======== ======== ========
</TABLE>
* Amount represents less than $500.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 27
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES STRATEGIC FIXED INCOME
-------------------------------- --------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
09/30/98 YEAR ENDED 09/30/98 YEAR ENDED
(UNAUDITED) 03/31/98 (UNAUDITED) 03/31/98
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 4,508 $ 6,517 $ 55,555 $ 89,290
3,951 5,090 6,300 35,164
3,011 1,541 38,626 22,748
-------- -------- ---------- ----------
11,470 13,148 100,481 147,202
(3,180) (4,158) (54,573) (87,058)
--* (31) --* (963)
(539) (547) (875) (849)
(758) (1,711) (77) (121)
(31) (70) (30) (53)
-- -- (4,506) --
-- -- --* --
-- -- (71) --
-- -- (7) --
-- -- (2) --
50,413 6,945 128,414 667,457
-------- -------- ---------- ----------
57,375 13,576 168,754 725,615
117,432 103,855 1,711,650 986,035
-------- -------- ---------- ----------
$174,807 $117,431 $1,880,404 $1,711,650
======== ======== ========== ==========
$ (340) $ (340) $ 245 $ 245
======== ======== ========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 28
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
U.S. GOVERNMENT BOND
------------------------------------------------
SIX MONTHS ENDED
9/30/98 PERIOD ENDED PERIOD ENDED
(UNAUDITED) 3/31/98 5/16/97 (a)
------------------------------------------------
<S> <C> <C> <C>
Net investment income....................................... $ 5,780 $ 7,602 $ 5,972
Net realized gain/(loss) on investments..................... 1,812 6,491 923
Change in unrealized appreciation/(depreciation) of
investments............................................... 6,844 (2,480) 1,509
--------- -------- --------
Net increase in net assets resulting from operations........ 14,436 11,613 8,404
Distributions to shareholders from net investment income:
Primary A Shares.......................................... (5,656) (7,479) (5,885)
Primary B Shares.......................................... -- -- --
Investor A Shares......................................... (51) (57) (36)
Investor B Shares......................................... (46) (31) (51)
Investor C Shares......................................... (30) (36) --
Distributions to shareholders from net realized gain on
investments:
Primary A Shares.......................................... (5,118) (1,853) (7,085)
Primary B Shares.......................................... -- -- --
Investor A Shares......................................... (38) (16) (55)
Investor B Shares......................................... (20) -- (77)
Investor C Shares......................................... (26) (18) --
Distributions to shareholders in excess of net realized gain
on investments:
Primary A Shares.......................................... -- -- --
Primary B Shares.......................................... -- -- --
Investor A Shares......................................... -- -- --
Investor B Shares......................................... -- -- --
Investor C Shares......................................... -- -- --
Net increase/(decrease) in net assets from Fund share
transactions:............................................. (142,496) 115,224 8,195
--------- -------- --------
Net increase/(decrease) in net assets....................... (139,045) 117,346 3,410
NET ASSETS:
Beginning of period......................................... 267,691 $150,345 146,935
--------- -------- --------
End of period............................................... $ 128,646 $267,691 $150,345
========= ======== ========
Undistributed net investment income/(distributions in excess
of net investment income) at end of period................ $ 24 $ 27 $ 22
========= ======== ========
</TABLE>
- ---------------
(a) Represents financial information for the Pilot U.S. Government Securities
Fund, which was reorganized into U.S. Government Bond on May 23, 1997.
* Amount represents less than $500.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE> 29
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
DIVERSIFIED INCOME GLOBAL GOVERNMENT INCOME
-------------------------------- --------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
9/30/98 YEAR ENDED 9/30/98 YEAR ENDED
(UNAUDITED) 3/31/98 (UNAUDITED) 3/31/98
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 11,289 $ 17,450 $ 264 $ 1,595
1,298 4,926 (191) (750)
6,591 6,008 1,481 636
-------- -------- ------- -------
19,178 28,384 1,554 1,481
(9,081) (12,929) (212) (815)
--* (9) --* --
(372) (696) (63) (430)
(1,789) (3,659) (1) (4)
(56) (157) (2) --
(929) -- (28) (79)
--* -- --* --
(42) -- (30) (43)
(225) -- --* (1)
(7) -- --* --
-- -- -- (220)
-- -- -- --
-- -- -- (126)
-- -- -- (1)
-- -- -- --
40,194 94,444 (14,409) (14,406)
-------- -------- ------- -------
46,871 105,378 (13,191) (14,644)
343,124 237,746 28,798 43,442
-------- -------- ------- -------
$389,995 $343,124 $15,607 $28,798
======== ======== ======= =======
$ 30 $ 38 $ (823) $ (809)
======== ======== ======= =======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 30
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULES OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
SHORT-TERM INCOME
SIX MONTHS ENDED
SEPTEMBER 30, 1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
-------------------- -------------------
SHARES DOLLARS SHARES DOLLARS
-------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 4,425 $ 43,350 6,441 $ 62,959
Issued in exchange for assets of:
Common Trust Short Term Income (Note 11)................ -- -- 28,299 275,916
Emerald Short Term Income Fund (Note 11)................ 9,960 97,328
Issued as reinvestment of dividends....................... 121 1,184 381 3,717
Redeemed.................................................. (5,441) (53,321) (19,897) (194,447)
------ -------- ------- --------
Net increase.............................................. 9,065 $ 88,541 15,224 $148,145
====== ======== ======= ========
PRIMARY B SHARES:
Sold...................................................... -- $ -- 9 $ 86
Issued as reinvestment of dividends....................... -- -- 1 13
Redeemed.................................................. -- -- (108) (1,060)
------ -------- ------- --------
Net (decrease)............................................ -- $ -- (98) $ (961)
====== ======== ======= ========
INVESTOR A SHARES:
Sold...................................................... 569 $ 5,593 1,373 $ 13,399
Issued in exchange for assets of Emerald Short Term Income
Fund (Note 11).......................................... 394 3,850
Issued as reinvestment of dividends....................... 40 397 47 463
Redeemed.................................................. (524) (5,154) (657) (6,431)
------ -------- ------- --------
Net increase.............................................. 479 $ 4,686 763 $ 7,431
====== ======== ======= ========
INVESTOR B SHARES:
Sold...................................................... 294 $ 2,882 118 $ 1,154
Issued as reinvestment of dividends....................... 14 135 24 231
Redeemed.................................................. (158) (1,549) (243) (2,426)
------ -------- ------- --------
Net increase/(decrease)................................... 150 $ 1,468 (101) $ (1,041)
====== ======== ======= ========
INVESTOR C SHARES:
Sold...................................................... -- $ -- 132 $ 1,284
Issued as reinvestment of dividends....................... 2 19 12 118
Redeemed.................................................. (221) (2,164) (258) (2,508)
------ -------- ------- --------
Net (decrease)............................................ (219) $ (2,145) (114) $ (1,106)
====== ======== ======= ========
Total net increase........................................ 9,475 $ 92,550 15,674 $152,468
====== ======== ======= ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 31
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE GOVERNMENT
SIX MONTHS ENDED
SEPTEMBER 30, 1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
--------------------- --------------------
SHARES DOLLARS SHARES DOLLARS
---------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold...................................................... 13,653 $ 56,482 27,055 $ 111,321
Issued in exchange for:
Pilot Shares of Pilot Intermediate U.S. Government
Securities Fund (Note 11)............................. -- -- 57,273 230,815
Assets of Common Trust Short Intermediate U.S.
Government Fund (Note 11)............................. -- -- 67,261 275,769
Issued in exchange for assets of Common Trust ASB 2 Year
Government Fund (Note 11)............................... 1,373 5,670 -- --
Issued as reinvestment of dividends....................... 149 578 1,029 4,167
Redeemed.................................................. (23,812) (98,427) (84,345) (345,875)
------- -------- ------- ---------
Net increase/(decrease)................................... (8,637) $(35,697) 68,273 $ 276,197
======= ======== ======= =========
PRIMARY B SHARES:
Sold...................................................... -- -- 841 $ 3,495
Issued as reinvestment of dividends....................... 2 $ 7 121 499
Redeemed.................................................. -- -- (5,154) (21,231)
------- -------- ------- ---------
Net increase/(decrease)................................... 2 $ 7 (4,192) $ (17,237)
======= ======== ======= =========
INVESTOR A SHARES:
Sold...................................................... 1,076 $ 4,452 3,995 $ 16,125
Issued in exchange for:
Class A Shares of Pilot Intermediate U.S. Government
Securities Fund (Note 11)............................. -- -- 343 1,382
Issued as reinvestment of dividends....................... 229 949 402 1,664
Redeemed.................................................. (1,511) (6,254) (3,360) (13,463)
------- -------- ------- ---------
Net increase/(decrease)................................... (206) $ (853) 1,380 $ 5,708
======= ======== ======= =========
INVESTOR B SHARES:
Sold...................................................... 227 $ 939 141 $ 569
Issued as reinvestment of dividends....................... 34 141 71 289
Redeemed.................................................. (290) (1,203) (530) (2,150)
------- -------- ------- ---------
Net (decrease)............................................ (29) $ (123) (318) $ (1,292)
======= ======== ======= =========
INVESTOR C SHARES:
Sold...................................................... 47 $ 194 22 $ 91
Issued as reinvestment of dividends....................... 6 25 46 187
Redeemed.................................................. (252) (1,041) (1,716) (7,018)
------- -------- ------- ---------
Net (decrease)............................................ (199) $ (822) (1,648) $ (6,740)
======= ======== ======= =========
Total net increase/(decrease)............................. (9,069) $(37,488) 63,495 $ 256,636
======= ======== ======= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 32
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES
SIX MONTHS ENDED
SEPTEMBER 30, 1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
-------------------- ------------------
SHARES DOLLARS SHARES DOLLARS
------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold...................................................... 1,066 $ 10,689 1,578 $ 15,624
Issued in exchange for:
Assets of Emerald U.S. Government Securities Fund (Note
11)................................................... 4,567 45,329 -- --
Assets of Common Trust ASB Government Fund (Note 11).... 598 5,957 -- --
Issued in exchange for assets of Common Trust Mortgage
Backed Securities Fund (Note 11)........................ -- -- 4,714 45,209
Issued as reinvestment of dividends....................... 20 197 22 214
Redeemed.................................................. (2,276) (22,824) (4,265) (41,843)
------ -------- ------ --------
Net increase.............................................. 3,975 $ 39,348 2,049 $ 19,204
====== ======== ====== ========
PRIMARY B SHARES:
Sold...................................................... -- -- 11 $ 104
Issued as reinvestment of dividends....................... -- -- 1 5
Redeemed.................................................. -- -- (92) (902)
------ -------- ------ --------
Net (decrease)............................................ -- -- (80) $ (793)
====== ======== ====== ========
INVESTOR A SHARES:
Sold...................................................... 207 $ 2,081 225 $ 2,193
Issued in exchange for:
Assets of Emerald U.S. Government Securities Fund (Note
11)................................................... 1,879 18,654 -- --
Issued as reinvestment of dividends....................... 29 293 31 306
Redeemed.................................................. (807) (8,087) (446) (4,439)
------ -------- ------ --------
Net increase/(decrease)................................... 1,308 $ 12,941 (190) $ (1,940)
====== ======== ====== ========
INVESTOR B SHARES:
Sold...................................................... 128 $ 1,287 65 $ 646
Issued as reinvestment of dividends....................... 47 480 104 1,005
Redeemed.................................................. (313) (3,133) (1,033) (9,993)
------ -------- ------ --------
Net (decrease)............................................ (138) $ (1,366) (864) $ (8,342)
====== ======== ====== ========
INVESTOR C SHARES:
Sold...................................................... -- -- 1 $ 4
Issued as reinvestment of dividends....................... 1 $ 9 4 42
Redeemed.................................................. (51) (519) (126) (1,230)
------ -------- ------ --------
Net (decrease)............................................ (50) $ (510) (121) $ (1,184)
====== ======== ====== ========
Total net increase........................................ 5,095 $ 50,413 794 $ 6,945
====== ======== ====== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 33
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
STRATEGIC FIXED INCOME
SIX MONTHS ENDED
SEPTEMBER 30, 1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
---------------------- --------------------
SHARES DOLLARS SHARES DOLLARS
----------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold...................................................... 27,632 $ 278,149 47,819 $ 478,101
Issued in exchange for:
Assets of Emerald Managed Bond Fund (Note 11)........... 7,464 74,663 -- --
Pilot Shares of Pilot Diversified Bond Fund (Note 11)... -- -- 9,935 96,657
Assets of Common Trust Strategic Fixed Income Fund (Note
11)................................................... -- -- 99,909 987,102
Assets of Common Trust Fixed Income Fund for Personal
Trusts (Note 11)...................................... -- -- 2,475 24,459
Assets of Common Trust ASB Bond Fund (Note 11).......... 6,909 69,407
Assets of Common Trust ASB Intermediate Bond Fund (Note
11)................................................... 7,156 71,850
Issued as reinvestment of dividends....................... 837 8,437 2,279 22,603
Redeemed.................................................. (38,201) (384,828) (93,155) (930,753)
------- --------- ------- ---------
Net increase.............................................. 11,797 $ 117,678 69,262 $ 678,169
======= ========= ======= =========
PRIMARY B SHARES:
Sold...................................................... -- $ -- 319 $ 3,147
Issued as reinvestment of dividends....................... -- -- 63 622
Redeemed.................................................. -- -- (3,420) (34,139)
------- --------- ------- ---------
Net (decrease)............................................ -- $ -- (3,038) $ (30,370)
======= ========= ======= =========
INVESTOR A SHARES:
Sold...................................................... 1,184 $ 11,637 2,649 $ 26,507
Issued in exchange for:
Class A Shares of Pilot Diversified Bond Fund (Note
11)................................................... -- -- 18 179
Assets of Emerald Managed Bond Fund (Note 11)........... 258 2,853
Issued as reinvestment of dividends....................... 73 738 63 628
Redeemed.................................................. (548) (5,473) (792) (7,946)
------- --------- ------- ---------
Net increase.............................................. 967 $ 9,755 1,938 $ 19,368
======= ========= ======= =========
INVESTOR B SHARES:
Sold...................................................... 98 $ 980 77 $ 771
Issued in exchange for:
Class B Shares of Pilot Diversified Bond Fund (Note
11)................................................... -- -- 35 344
Issued as reinvestment of dividends....................... 6 64 10 101
Redeemed.................................................. (30) (334) (76) (755)
------- --------- ------- ---------
Net increase.............................................. 74 $ 710 46 $ 461
======= ========= ======= =========
INVESTOR C SHARES:
Sold...................................................... 67 $ 671 145 $ 1,446
Issued as reinvestment of dividends....................... 2 22 5 50
Redeemed.................................................. (42) (422) (167) (1,667)
------- --------- ------- ---------
Net increase/(decrease)................................... 27 $ 271 (17) $ (171)
======= ========= ======= =========
Total net increase........................................ 12,865 $ 128,414 68,191 $ 667,457
======= ========= ======= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 34
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
U.S. GOVERNMENT BOND
SIX MONTHS ENDED
SEPTEMBER 30, 1998 PERIOD ENDED PERIOD ENDED
(UNAUDITED) MARCH 31, 1998(a) MAY 16, 1997(b)
---------------------- ------------------- ------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold................................................. 892 $ 9,178 13,487 $139,974 2,306 $ 23,888
Issued in exchange for:
Primary A Shares of Peachtree Bond Fund (Note
11).............................................. -- -- -- -- -- --
Pilot Shares of Pilot Diversified Bond Fund (Note
11).............................................. -- -- -- -- -- --
Assets of Common Trust Strategic Fixed Income Fund
(Note 11)........................................ -- -- -- -- -- --
Assets of Common Trust Fixed Income Fund for
Personal Trusts (Note 11)........................ -- -- -- -- -- --
Issued as reinvestment of dividends.................. 240 2,490 102 1,062 42 436
Redeemed............................................. (15,149) (156,793) (2,714) (27,813) (1,599) (16,630)
------- --------- ------ -------- ------ --------
Net increase/(decrease).............................. (14,017) $(145,125) 10,875 $113,223 749 $ 7,694
======= ========= ====== ======== ====== ========
PRIMARY B SHARES:
Sold................................................. -- $ -- -- $ -- -- $ --
Issued as reinvestment of dividends.................. -- -- -- -- -- --
Redeemed............................................. -- -- -- -- -- --
------- --------- ------ -------- ------ --------
Net increase/(decrease).............................. -- $ -- -- $ -- -- $ --
======= ========= ====== ======== ====== ========
INVESTOR A SHARES:
Sold................................................. 49 $ 510 168 $ 1,746 52 $ 568
Issued in exchange for:
Class A Shares of Pilot Diversified Bond Fund (Note
11).............................................. -- -- -- -- -- --
Issued as reinvestment of dividends.................. 3 34 5 46 9 90
Redeemed............................................. (18) (193) (59) (612) (49) (501)
------- --------- ------ -------- ------ --------
Net increase......................................... 34 $ 351 114 $ 1,180 12 $ 157
======= ========= ====== ======== ====== ========
INVESTOR B SHARES:
Sold................................................. 242 $ 2,495 98 $ 1,029 38 $ 400
Issued in exchange for:
Class B Shares of Pilot Diversified Bond Fund (Note
11).............................................. -- -- -- -- -- --
Issued as reinvestment of dividends.................. 4 45 2 20 10 108
Redeemed............................................. (24) (251) (153) (1,564) (16) (164)
------- --------- ------ -------- ------ --------
Net increase/(decrease).............................. 222 $ 2,289 (53) $ (515) 32 $ 344
======= ========= ====== ======== ====== ========
INVESTOR C SHARES:
Sold................................................. 2 $ 21 146 $ 1,516 -- $ --
Issued as reinvestment of dividends.................. 2 20 2 25 -- --
Redeemed............................................. (5) (52) (20) (205) -- --
------- --------- ------ -------- ------ --------
Net increase/(decrease).............................. (1) $ (11) 128 $ 1,336 -- $ --
======= ========= ====== ======== ====== ========
Total net increase/(decrease)........................ (13,762) $(142,496) 11,064 $115,224 793 $ 8,195
======= ========= ====== ======== ====== ========
</TABLE>
- ---------------
(a) U.S. Government Bond Investor C Shares commenced operations on September 19,
1997.
(b) Represents financial information for the Pilot U.S. Government Securities
Fund which was reorganized into U.S. Government Bond on May 23, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 35
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
DIVERSIFIED INCOME
SIX MONTHS ENDED
SEPTEMBER 30, 1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
-------------------- ------------------
SHARES DOLLARS SHARES DOLLARS
------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold...................................................... 4,996 $ 52,871 12,275 $128,837
Issued as reinvestment of dividends....................... 513 5,440 881 9,155
Redeemed.................................................. (1,906) (20,205) (3,173) (33,726)
------ -------- ------ --------
Net increase.............................................. 3,603 $ 38,106 9,983 $104,266
====== ======== ====== ========
PRIMARY B SHARES:
Sold...................................................... -- $ -- 23 $ 233
Issued as reinvestment of dividends....................... -- -- 1 8
Redeemed.................................................. -- -- (28) (291)
------ -------- ------ --------
Net (decrease)............................................ -- $ -- (4) $ (50)
====== ======== ====== ========
INVESTOR A SHARES:
Sold...................................................... 249 $ 2,629 302 $ 3,115
Issued as reinvestment of dividends....................... 20 215 43 452
Redeemed.................................................. (175) (1,851) (366) (3,776)
------ -------- ------ --------
Net increase/(decrease)................................... 94 $ 993 (21) $ (209)
====== ======== ====== ========
INVESTOR B SHARES:
Sold...................................................... 766 $ 8,109 521 $ 5,490
Issued as reinvestment of dividends....................... 105 1,117 211 2,204
Redeemed.................................................. (721) (7,631) (1,529) (15,884)
------ -------- ------ --------
Net increase/(decrease)................................... 150 $ 1,595 (797) $ (8,190)
====== ======== ====== ========
INVESTOR C SHARES:
Sold...................................................... 40 $ 435 57 $ 603
Issued as reinvestment of dividends....................... 3 34 10 104
Redeemed.................................................. (90) (969) (199) (2,080)
------ -------- ------ --------
Net (decrease)............................................ (47) $ (500) (132) $ (1,373)
====== ======== ====== ========
Total net increase........................................ 3,800 $ 40,194 9,029 $ 94,444
====== ======== ====== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 36
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
GLOBAL GOVERNMENT INCOME
SIX MONTHS ENDED
SEPTEMBER 30, 1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
--------------------- ------------------
SHARES DOLLARS SHARES DOLLARS
-------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold...................................................... 13 $ 125 53 $ 524
Issued as reinvestment of dividends....................... 2 23 97 951
Redeemed.................................................. (1,455) (14,344) (1,560) (15,295)
------ --------- ------ --------
Net (decrease)............................................ (1,440) $ (14,196) (1,410) $(13,820)
====== ========= ====== ========
PRIMARY B SHARES:
Sold...................................................... -- $ -- -- $ --
Issued as reinvestment of dividends....................... -- -- -- --
Redeemed.................................................. -- -- (1) (5)
------ --------- ------ --------
Net (decrease)............................................ -- $ -- (1) $ (5)
====== ========= ====== ========
INVESTOR A SHARES:
Sold...................................................... 133 $ 1,301 17 $ 169
Issued as reinvestment of dividends....................... -- 1 2 20
Redeemed.................................................. (144) (1,412) (75) (741)
------ --------- ------ --------
Net (decrease)............................................ (11) $ (110) (56) $ (552)
====== ========= ====== ========
INVESTOR B SHARES:
Sold...................................................... 3 $ 27 -- $ --
Issued as reinvestment of dividends....................... -- 1 1 5
Redeemed.................................................. (18) (182) (4) (34)
------ --------- ------ --------
Net (decrease)............................................ (15) $ (154) (3) $ (29)
====== ========= ====== ========
INVESTOR C SHARES:
Sold...................................................... 5 $ 50 -- $ --
Issued as reinvestment of dividends....................... -- 1 -- --
Redeemed.................................................. -- -- -- --
------ --------- ------ --------
Net increase.............................................. 5 $ 51 -- $ --
====== ========= ====== ========
Total net decrease........................................ (1,461) $ (14,409) (1,470) $(14,406)
====== ========= ====== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 37
[THIS PAGE INTENTIONALLY LEFT BLANK]
33
<PAGE> 38
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
NET NET INCREASE/ DISTRIBUTIONS
ASSET NET REALIZED (DECREASE) DIVIDENDS IN EXCESS
VALUE NET AND UNREALIZED IN NET FROM NET OF NET
BEGINNING INVESTMENT GAIN/(LOSS) ON ASSET VALUE INVESTMENT INVESTMENT
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME INCOME
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM INCOME:
PRIMARY A SHARES:
Six months ended 09/30/98 (unaudited).. $ 9.77 $ 0.28 $ 0.12 $ 0.40 $(0.28) --
Year ended 03/31/1998.................. 9.68 0.56 0.09 0.65 (0.56) --
Year ended 03/31/1997#................. 9.76 0.58 (0.08) 0.50 (0.58) --
Period ended 03/31/1996(a)#............ 9.84 0.20 (0.08) 0.12 (0.20) --
Year ended 11/30/1995#................. 9.48 0.61 0.36 0.97 (0.61) --
Year ended 11/30/1994#................. 10.01 0.50 (0.51) (0.01) (0.48) $(0.02)
Year ended 11/30/1993.................. 9.75 0.53 0.26 0.79 (0.53) --
PRIMARY B SHARES:
Six months ended 09/30/98 (unaudited).. $ 9.77 $ 0.28 $ 0.12 $ 0.40 $(0.28) --
Year ended 03/31/1998.................. 9.68 0.53 0.09 0.62 (0.53) --
Period ended 03/31/1997*#.............. 9.71 0.41 (0.03) 0.38 (0.41) --
INVESTOR A SHARES:
Six months ended 09/30/98 (unaudited).. $ 9.77 $ 0.27 $ 0.12 $ 0.39 $(0.27) --
Year ended 03/31/1998.................. 9.68 0.54 0.09 0.63 (0.54) --
Year ended 03/31/1997#................. 9.76 0.56 (0.08) 0.48 (0.56) --
Period ended 03/31/1996(a)#............ 9.84 0.19 (0.08) 0.11 (0.19) --
Year ended 11/30/1995#................. 9.48 0.59 0.36 0.95 (0.59) --
Year ended 11/30/1994#................. 10.01 0.48 (0.51) (0.03) (0.46) $(0.02)
Year ended 11/30/1993.................. 9.75 0.51 0.26 0.77 (0.51) --
INVESTOR B SHARES:
Six months ended 09/30/98 (unaudited).. $ 9.77 $ 0.26 $ 0.12 $ 0.38 $(0.26) --
Year ended 03/31/1998.................. 9.68 0.53 0.09 0.62 (0.53) --
Year ended 03/31/1997#................. 9.76 0.55 (0.08) 0.47 (0.55) --
Period ended 03/31/1996(a)#............ 9.84 0.19 (0.08) 0.11 (0.19) --
Year ended 11/30/1995#................. 9.48 0.57 0.36 0.93 (0.57) --
Year ended 11/30/1994#................. 10.01 0.47 (0.51) (0.04) (0.45) $(0.02)
Period ended 11/30/1993*............... 9.94 0.22 0.07 0.29 (0.22) --
INVESTOR C SHARES:
Six months ended 09/30/98 (unaudited).. $ 9.77 $ 0.26 $ 0.12 $ 0.38 $(0.26) --
Year ended 03/31/1998.................. 9.68 0.53 0.09 0.62 (0.53) --
Year ended 03/31/1997#................. 9.76 0.55 (0.08) 0.47 (0.55) --
Period ended 03/31/1996(a)#............ 9.84 0.19 (0.08) 0.11 (0.19) --
Year ended 11/30/1995#................. 9.48 0.57 0.36 0.93 (0.57) --
Year ended 11/30/1994#................. 10.01 0.46 (0.51) (0.05) (0.44) $(0.02)
Year ended 11/30/1993.................. 9.75 0.48 0.26 0.74 (0.48) --
</TABLE>
- ---------------
* Short-Term Income Primary B, and Investor B Shares commenced operations on
June 28, 1996 and June 7, 1993, respectively.
+ 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 interest expense on the operating expense ratio was less than
0.01%.
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE> 39
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
----------------------
RATIO OF RATIO OF RATIO OF
TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING
DISTRIBUTIONS DIVIDENDS VALUE END OF EXPENSES INCOME PORTFOLIO EXPENSES TO
FROM AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER AVERAGE
CAPITAL DISTRIBUTIONS PERIOD RETURN++ (IN 000'S) NET ASSETS NET ASSETS RATE NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- $(0.28) $ 9.89 4.14% $425,605 0.50%(c) 5.67% 26% 0.80%(c)
-- (0.56) 9.77 6.89 331,961 0.56(b)(c) 5.75 66 0.86(c)
-- (0.58) 9.68 5.25 181,455 0.55(b) 5.97 172 0.85
-- (0.20) 9.76 1.19 179,957 0.55+ 6.07+ 73 0.88+
-- (0.61) 9.84 10.48 169,291 0.56 6.32 224 0.86
$(0.02) (0.52) 9.48 (0.11) 176,712 0.50 5.23 293 0.82
-- (0.53) 10.01 8.26 201,738 0.37 5.27 121 0.79
-- $(0.28) $ 9.89 4.14% $ 0(d) 0.50%(c) 5.67% 26% 0.80%(c)
-- (0.53) 9.77 6.58 0(d) 0.91(b)(c) 5.40 66 1.21(c)
-- (0.41) 9.68 3.95 953 0.90(b)+ 5.62+ 172 1.20+
-- $(0.27) $ 9.89 4.04% $ 18,593 0.70%(c) 5.47% 26% 1.05%(c)
-- (0.54) 9.77 6.67 13,688 0.76(b)(c) 5.55 66 1.06(c)
-- (0.56) 9.68 5.04 6,169 0.75(b) 5.77 172 1.05
-- (0.19) 9.76 1.13 2,810 0.75+ 5.87+ 73 1.08+
-- (0.59) 9.84 10.29 2,969 0.76 6.12 224 1.06
$(0.02) (0.50) 9.48 (0.33) 2,490 0.71 5.02 293 1.03
-- (0.51) 10.01 8.03 11,205 0.57 5.07 121 0.99
-- $(0.26) $ 9.89 3.96% $ 6,144 0.85%(c) 5.32% 26% 1.80%(c)
-- (0.53) 9.77 6.51 4,602 0.91(b)(c) 5.40 66 1.21(c)
-- (0.55) 9.68 4.89 5,536 0.90(b) 5.62 172 1.20
-- (0.19) 9.76 1.08 7,339 0.90+ 5.72+ 73 1.23+
-- (0.57) 9.84 10.10 8,873 0.91 5.97 224 1.21
$(0.02) (0.49) 9.48 (0.46) 16,550 0.85 4.88 293 1.17
-- (0.22) 10.01 2.96 39,861 0.72+ 4.92+ 121 1.14+
-- $(0.26) $ 9.89 3.96% $ 858 0.85%(c) 5.32% 26% 1.80%(c)
-- (0.53) 9.77 6.51 2,992 0.91(b)(c) 5.40 66 1.21(c)
-- (0.55) 9.68 4.89 4,063 0.90(b) 5.62 172 1.20
-- (0.19) 9.76 1.07 6,121 0.90+ 5.72+ 73 1.23+
-- (0.57) 9.84 10.08 6,056 0.91 5.97 224 1.21
$(0.02) (0.48) 9.48 (0.51) 8,102 0.89 4.84 293 1.21
-- (0.48) 10.01 7.73 19,851 0.87 4.77 121 1.29
</TABLE>
- ---------------
(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) Amount is less than $1,000.
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE> 40
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME CAPITAL GAINS
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-INTERMEDIATE GOVERNMENT:
PRIMARY A SHARES:
Six months ended 09/30/98
(unaudited)...................... $4.12 $ 0.11 $ 0.09 $ 0.20 $(0.11) --
Year ended 03/31/1998.............. 3.99 0.23 0.13 0.36 (0.23) --
Year ended 03/31/1997#............. 4.07 0.23 (0.08) 0.15 (0.23) --
Period ended 03/31/1996(b)#........ 4.14 0.07 (0.07) 0.00 (0.07)(a) --
Year ended 11/30/1995#............. 3.93 0.24 0.21 0.45 (0.24)(a) --
Year ended 11/30/1994.............. 4.28 0.23 (0.33) (0.10) (0.23)(a) $(0.02)
Year ended 11/30/1993.............. 4.16 0.23 0.14 0.37 (0.23) (0.02)
PRIMARY B SHARES:
Six months ended 09/30/98
(unaudited)...................... $4.12 $ 0.11 $ 0.09 $ 0.20 $(0.11) --
Year ended 03/31/1998.............. 3.99 0.21 0.13 0.34 (0.21) --
Period ended 03/31/1997*#.......... 4.02 0.16 (0.03) 0.13 (0.16) --
INVESTOR A SHARES:
Six months ended 09/30/98
(unaudited)...................... $4.12 $ 0.11 $ 0.09 $ 0.20 $(0.11) --
Year ended 03/31/1998.............. 3.99 0.22 0.13 0.35 (0.22) --
Year ended 03/31/1997#............. 4.07 0.22 (0.08) 0.14 (0.22) --
Period ended 03/31/1996(b)#........ 4.14 0.07 (0.07) 0.00 (0.07)(a) --
Year ended 11/30/1995#............. 3.93 0.23 0.21 0.44 (0.23)(a) --
Year ended 11/30/1994.............. 4.28 0.22 (0.33) (0.11) (0.22)(a) $(0.02)
Year ended 11/30/1993.............. 4.16 0.22 0.14 0.36 (0.22) (0.02)
INVESTOR B SHARES:
Six months ended 09/30/98
(unaudited)...................... $4.12 $ 0.10 $ 0.09 $ 0.19 $(0.10) --
Year ended 03/31/1998.............. 3.99 0.20 0.13 0.33 (0.20) --
Year ended 03/31/1997#............. 4.07 0.20 (0.08) 0.12 (0.20) --
Period ended 03/31/1996(b)#........ 4.14 0.07 (0.07) 0.00 (0.07)(a) --
Year ended 11/30/1995#............. 3.93 0.21 0.21 0.42 (0.21)(a) --
Year ended 11/30/1994.............. 4.28 0.20 (0.33) (0.13) (0.20)(a) $(0.02)
Period ended 11/30/1993*........... 4.26 0.09 0.02 0.11 (0.09) --
INVESTOR C SHARES:
Six months ended 09/30/98
(unaudited)...................... $4.12 $ 0.10 $ 0.09 $ 0.19 $(0.10) --
Year ended 03/31/1998.............. 3.99 0.20 0.13 0.33 (0.20) --
Year ended 03/31/1997#............. 4.07 0.21 (0.08) 0.13 (0.21) --
Period ended 03/31/1996(b)#........ 4.14 0.07 (0.07) 0.00 (0.07)(a) --
Year ended 11/30/1995#............. 3.93 0.22 0.21 0.43 (0.22)(a) --
Year ended 11/30/1994.............. 4.28 0.20 (0.33) (0.13) (0.20)(a) $(0.02)
Year ended 11/30/1993.............. 4.16 0.20 0.14 0.34 (0.20) (0.02)
</TABLE>
- ---------------
* Short-Intermediate Government Primary B, and Investor B Shares commenced
operations on June 28, 1996 and June 7, 1993, respectively.
+ 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.
## Amount represents less than 0.01%.
(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 fees reduced by credits allowed by the custodian on the
operating expenses ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE> 41
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
----------------------
RATIO OF RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING
DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE
DISTRIBUTIONS END OF PERIOD RETURN++ (IN 000'S) ASSETS ASSETS RATE NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.11) $4.21 4.80% $641,471 0.57%(c) 5.55% 129% 0.78%(c)
(0.23) 4.12 9.11 663,833 0.61 5.53 538 0.81
(0.23) 3.99 3.72 371,118 0.63(c)(d) 5.73 529 0.83(d)
(0.07) 4.07 0.07 399,915 0.63+ 5.32+ 189 0.86+
(0.24) 4.14 11.70 425,200 0.60 5.88 328 0.80
(0.25) 3.93 (2.23) 433,278 0.59 5.76 133 0.80
(0.25) 4.28 9.03 443,426 0.55 5.40 92 0.79
$(0.11) $4.21 4.62% $ 274 0.92%(c) 5.20% 129% 1.38%(c)
(0.21) 4.12 8.74 261 0.96 5.18 538 1.16
(0.16) 3.99 3.31 16,980 0.98+(c)(d) 5.38+ 529 1.18+(d)
$(0.11) $4.21 4.70% $ 49,653 0.77%(c) 5.35% 129% 1.03%(c)
(0.22) 4.12 8.89 49,478 0.81 5.33 538 1.01
(0.22) 3.99 3.51 42,468 0.83(c)(d) 5.53 529 1.03(d)
(0.07) 4.07 0.00## 57,381 0.83+ 5.12+ 189 1.06+
(0.23) 4.14 11.48 64,848 0.80 5.68 328 1.00
(0.24) 3.93 (2.41) 77,128 0.77 5.58 133 0.98
(0.24) 4.28 8.85 173,449 0.70 5.25 92 0.94
$(0.10) $4.21 4.39% $ 9,898 1.37%(c) 4.75% 129% 1.78%(c)
(0.20) 4.12 8.35 9,815 1.34 4.80 538 1.54
(0.20) 3.99 3.10 10,788 1.23(c)(d) 5.13 529 1.43(d)
(0.07) 4.07 (0.13) 13,789 1.23+ 4.72+ 189 1.46+
(0.21) 4.14 11.02 14,893 1.20 5.28 328 1.40
(0.22) 3.93 (2.81) 10,974 1.19 5.16 133 1.40
(0.09) 4.28 2.65 8,847 1.15+ 4.80+ 92 1.39+
$(0.10) $4.21 4.46% $ 1,009 1.37%(c) 4.75% 129% 1.78%(c)
(0.20) 4.12 8.45 1,808 1.31 4.83 538 1.51
(0.21) 3.99 3.21 8,334 1.13(c)(d) 5.23 529 1.33(d)
(0.07) 4.07 (0.10) 11,820 1.13+ 4.82+ 189 1.36+
(0.22) 4.14 11.15 13,206 1.10 5.38 328 1.30
(0.22) 3.93 (2.80) 16,725 1.17 5.18 133 1.38
(0.22) 4.28 8.20 31,440 1.30 4.65 92 1.54
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE> 42
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS IN EXCESS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET OF NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT INVESTMENT
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME INCOME
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GOVERNMENT SECURITIES:
PRIMARY A SHARES:
Six months ended 09/30/98 (unaudited).... $ 9.90 $ 0.29 $ 0.41 $ 0.70 $(0.29) --
Year ended 03/31/1998.................... 9.39 0.55 0.51 1.06 (0.55) --
Year ended 03/31/1997#................... 9.67 0.60 (0.30) 0.30 (0.58) --
Period ended 03/31/1996(a)#.............. 9.86 0.52 (0.19) 0.33 (0.50) $(0.02)
Year ended 05/31/1995#................... 9.80 0.64 0.06 0.70 (0.60) --
Year ended 05/31/1994.................... 10.46 0.64 (0.61) 0.03 (0.58) (0.02)
Year ended 05/31/1993#................... 10.36 0.71 0.13 0.84 (0.70) --
PRIMARY B SHARES:
Six months ended 09/30/98 (unaudited).... $ 9.90 $ 0.29 $ 0.41 $ 0.70 $(0.29) --
Year ended 03/31/1998.................... 9.39 0.51 0.51 1.02 (0.51) --
Period ended 03/31/1997*#................ 9.51 0.40 (0.12) 0.28 (0.40) --
INVESTOR A SHARES:
Six months ended 09/30/98 (unaudited).... $ 9.90 $ 0.27 $ 0.41 $ 0.68 $(0.27) --
Year ended 03/31/1998.................... 9.39 0.52 0.51 1.03 (0.52) --
Year ended 03/31/1997#................... 9.67 0.58 (0.30) 0.28 (0.56) --
Period ended 03/31/1996(a)#.............. 9.86 0.50 (0.19) 0.31 (0.48) $(0.02)
Year ended 05/31/1995#................... 9.80 0.61 0.06 0.67 (0.57) --
Year ended 05/31/1994.................... 10.46 0.62 (0.61) 0.01 (0.56) (0.02)
Year ended 05/31/1993#................... 10.36 0.66 0.16 0.82 (0.68) --
INVESTOR B SHARES:
Six months ended 09/30/98 (unaudited).... $ 9.90 $ 0.24 $ 0.41 $ 0.65 $(0.24) --
Year ended 03/31/1998.................... 9.39 0.47 0.51 0.98 (0.47) --
Year ended 03/31/1997#................... 9.67 0.54 (0.30) 0.24 (0.52) --
Period ended 03/31/1996(a)#.............. 9.86 0.47 (0.19) 0.28 (0.45) $(0.02)
Year ended 05/31/1995#................... 9.80 0.58 0.06 0.64 (0.54) --
Period ended 05/31/1994*................. 10.49 0.54 (0.64) (0.10) (0.49) (0.01)
INVESTOR C SHARES:
Six months ended 09/30/98 (unaudited).... $ 9.90 $ 0.24 $ 0.41 $ 0.65 $(0.24) --
Year ended 03/31/1998.................... 9.39 0.48 0.51 0.99 (0.48) --
Year ended 03/31/1997#................... 9.67 0.55 (0.30) 0.25 (0.53) --
Period ended 03/31/1996(a)#.............. 9.86 0.47 (0.19) 0.28 (0.45) $(0.02)
Year ended 05/31/1995#................... 9.80 0.57 0.06 0.63 (0.53) --
Year ended 05/31/1994.................... 10.46 0.55 (0.61) (0.06) (0.50) (0.01)
Period ended 05/31/1993*#................ 10.52 0.59 0.02 0.61 (0.63) --
</TABLE>
- ---------------
* Government Securities Primary B, Investor B and Investor C Shares commenced
operations on June 28, 1996, June 7, 1993 and July 6, 1992, respectively.
+ 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
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%.
(e) Amount is less than $1,000.
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE> 43
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF RATIO OF NET
DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING INVESTMENT
IN EXCESS OF DISTRIBUTIONS DIVIDENDS VALUE END OF EXPENSES INCOME PORTFOLIO
NET REALIZED FROM AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
CAPITAL GAINS CAPITAL DISTRIBUTIONS PERIOD RETURN++++ (IN 000'S) NET ASSETS NET ASSETS RATE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- $(0.29) $10.31 7.14% $119,903 0.73%(c)(d) 5.72% 388%
-- -- (0.55) 9.90 11.65 75,796 0.85(c)(d) 5.63 303
-- $(0.00)(b) (0.58) 9.39 3.18 52,606 0.80 6.28 468
-- -- (0.52) 9.67 3.41 55,962 0.80++ 6.36++ 199
-- (0.04) (0.64) 9.86 7.55 39,909 0.76 6.69 413
$(0.05) (0.04) (0.69) 9.80 0.06 44,536 0.73 6.08 56
(0.04) -- (0.74) 10.46 8.37 40,472 0.85 6.67 103
-- -- $(0.29) $10.31 7.14% $ --(e) 0.73%(c)(d) 5.72% 388%
-- -- (0.51) 9.90 11.23 --(e) 1.35(c)(d) 5.13 303
-- $(0.00)(b) (0.40) 9.39 2.90 755 1.30++ 5.78++ 468
-- -- $(0.27) $10.31 7.01% $ 22,349 0.98%(c)(d) 5.47% 388%
-- -- (0.52) 9.90 11.37 8,509 1.10(c)(d) 5.38 303
-- $(0.00)(b) (0.56) 9.39 2.92 9,852 1.05 6.03 468
-- -- (0.50) 9.67 3.20 11,662 1.05++ 6.11++ 199
-- (0.04) (0.61) 9.86 7.29 10,928 1.01 6.44 413
$(0.05) (0.04) (0.67) 9.80 (0.11) 14,044 0.90 5.91 56
(0.04) -- (0.72) 10.46 8.18 15,354 1.00 6.52 103
-- -- $(0.24) $10.31 6.69% $ 32,305 1.58%(c)(d) 4.87% 388%
-- -- (0.47) 9.90 10.78 32,391 1.63(c)(d) 4.85 303
-- $(0.00)(b) (0.52) 9.39 2.51 38,807 1.45 5.63 468
-- -- (0.47) 9.67 2.85 50,958 1.45++ 5.71++ 199
-- (0.04) (0.58) 9.86 6.86 56,155 1.41 6.04 413
$(0.05) (0.04) (0.59) 9.80 (1.09) 56,313 1.38++ 5.43++ 56
-- -- $(0.24) $10.31 6.69% $ 250 1.58%(c)(d) 4.87% 388%
-- -- (0.48) 9.90 10.84 735 1.58(c)(d) 4.90 303
-- $(0.00)(b) (0.53) 9.39 2.67 1,835 1.30 5.78 468
-- -- (0.47) 9.67 2.83 2,558 1.48++ 5.68++ 199
-- (0.04) (0.57) 9.86 6.76 2,945 1.51 5.94 413
$(0.05) (0.04) (0.60) 9.80 (0.69) 5,265 1.48 5.33 56
(0.04) -- (0.67) 10.46 5.37 5,998 1.60++ 5.92++ 103
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
----------------------
RATIO OF
DISTRIBUTIONS OPERATING
IN EXCESS OF EXPENSES TO
NET REALIZED AVERAGE
CAPITAL GAINS NET ASSETS
- ------------- ----------------------
<S> <C>
-- 0.85%(d)
-- 0.99(d)
-- 0.94
-- 0.95++
-- 0.94
$(0.05) 0.94
(0.04) 1.00
-- 0.85%(d)
-- 1.49(d)
-- 1.44++
-- 1.10%(d)
-- 1.24(d)
-- 1.19
-- 1.20++
-- 1.19
$(0.05) 1.11
(0.04) 1.15
-- 1.85%(d)
-- 1.77(d)
-- 1.59
-- 1.60++
-- 1.59
$(0.05) 1.59++
-- 1.85%(d)
-- 1.72(d)
-- 1.44
-- 1.63++
-- 1.69
$(0.05) 1.69
(0.04) 1.75++
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE> 44
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS IN EXCESS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET OF NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT INVESTMENT
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME INCOME
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STRATEGIC FIXED INCOME:
PRIMARY A SHARES:
Six months ended 09/30/98
(unaudited)........................ $10.03 $0.30 $ 0.24 $ 0.54 $(0.30) --
Year ended 03/31/1998................ 9.62 0.58 0.41 0.99 (0.58) --
Year ended 03/31/1997#............... 9.93 0.58 (0.20) 0.38 (0.58) --
Period ended 03/31/1996(a)........... 10.22 0.19 (0.29) (0.10) (0.19) --
Year ended 11/30/1995................ 9.32 0.59 0.90 1.49 (0.59) --
Year ended 11/30/1994................ 10.55 0.53 (0.89) (0.36) (0.51) $(0.02)
Year ended 11/30/1993................ 9.94 0.56 0.62 1.18 (0.56) --
PRIMARY B SHARES:
Six months ended 09/30/98
(unaudited)........................ $10.03 $0.30 $ 0.24 $ 0.54 $(0.30) --
Year ended 03/31/1998................ 9.62 0.55 0.41 0.96 (0.55) --
Period ended 03/31/1997*#............ 9.81 0.41 (0.08) 0.33 (0.41) --
INVESTOR A SHARES:
Six months ended 09/30/98
(unaudited)........................ $10.03 $0.29 $ 0.24 $ 0.53 $(0.29) --
Year ended 03/31/1998................ 9.62 0.56 0.41 0.97 (0.56) --
Year ended 03/31/1997#............... 9.93 0.56 (0.20) 0.36 (0.56) --
Period ended 03/31/1996(a)........... 10.22 0.18 (0.29) (0.11) (0.18) --
Year ended 11/30/1995................ 9.32 0.57 0.90 1.47 (0.57) --
Year ended 11/30/1994................ 10.55 0.51 (0.89) (0.38) (0.49) $(0.02)
Year ended 11/30/1993................ 9.94 0.54 0.62 1.16 (0.54) --
INVESTOR B SHARES:
Six months ended 09/30/98
(unaudited)........................ $10.03 $0.26 $ 0.24 $ 0.50 $(0.26) --
Year ended 03/31/1998................ 9.62 0.51 0.41 0.92 (0.51) --
Year ended 03/31/1997#............... 9.93 0.52 (0.20) 0.32 (0.52) --
Period ended 03/31/1996(a)........... 10.22 0.16 (0.29) (0.13) (0.16) --
Year ended 11/30/1995................ 9.32 0.53 0.90 1.43 (0.53) --
Year ended 11/30/1994................ 10.55 0.47 (0.89) (0.42) (0.45) $(0.02)
Period ended 11/30/1993*............. 10.39 0.21 0.17 0.38 (0.21) --
INVESTOR C SHARES:
Six months ended 09/30/98
(unaudited)........................ $10.03 $0.26 $ 0.24 $ 0.50 $(0.26) --
Year ended 03/31/1998................ 9.62 0.52 0.41 0.93 (0.52) --
Year ended 03/31/1997#............... 9.93 0.53 (0.20) 0.33 (0.53) --
Period ended 03/31/1996(a)........... 10.22 0.17 (0.29) (0.12) (0.17) --
Year ended 11/30/1995................ 9.32 0.54 0.90 1.44 (0.54) --
Year ended 11/30/1994................ 10.55 0.47 (0.89) (0.42) (0.45) $(0.02)
Year ended 11/30/1993................ 9.94 0.48 0.62 1.10 (0.48) --
<CAPTION>
DISTRIBUTIONS
FROM NET
REALIZED
CAPITAL GAINS
-------------
<S> <C>
STRATEGIC FIXED INCOME:
PRIMARY A SHARES:
Six months ended 09/30/98
(unaudited)........................ $(0.03)
Year ended 03/31/1998................ --
Year ended 03/31/1997#............... $(0.11)
Period ended 03/31/1996(a)........... --
Year ended 11/30/1995................ --
Year ended 11/30/1994................ (0.34)
Year ended 11/30/1993................ (0.01)
PRIMARY B SHARES:
Six months ended 09/30/98
(unaudited)........................ $(0.03)
Year ended 03/31/1998................ --
Period ended 03/31/1997*#............ $(0.11)
INVESTOR A SHARES:
Six months ended 09/30/98
(unaudited)........................ $(0.03)
Year ended 03/31/1998................ --
Year ended 03/31/1997#............... $(0.11)
Period ended 03/31/1996(a)........... --
Year ended 11/30/1995................ --
Year ended 11/30/1994................ (0.34)
Year ended 11/30/1993................ (0.01)
INVESTOR B SHARES:
Six months ended 09/30/98
(unaudited)........................ $(0.03)
Year ended 03/31/1998................ --
Year ended 03/31/1997#............... $(0.11)
Period ended 03/31/1996(a)........... --
Year ended 11/30/1995................ --
Year ended 11/30/1994................ (0.34)
Period ended 11/30/1993*............. (0.01)
INVESTOR C SHARES:
Six months ended 09/30/98
(unaudited)........................ $(0.03)
Year ended 03/31/1998................ --
Year ended 03/31/1997#............... $(0.11)
Period ended 03/31/1996(a)........... --
Year ended 11/30/1995................ --
Year ended 11/30/1994................ (0.34)
Year ended 11/30/1993................ (0.01)
</TABLE>
- ---------------
* Strategic Fixed Income Primary B, and Investor B Shares commenced operations
on June 28, 1996 and June 7, 1993, respectively.
++ 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.
(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%.
(e) Amount is less than $1,000.
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE> 45
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT
DISTRIBUTIONS DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO
FROM AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER
CAPITAL DISTRIBUTIONS END OF PERIOD RETURN++++ (IN 000'S) ASSETS ASSETS RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-- $(0.33) $10.24 5.42% $1,839,166 0.67%(c)(d) 5.88% 49%
-- (0.58) 10.03 10.53 1,681,990 0.72(c)(d) 5.86 244
$(0.00)(b) (0.69) 9.62 3.90 947,277 0.71(c) 5.98 368
-- (0.19) 9.93 (1.04) 823,890 0.72++ 5.49++ 133
-- (0.59) 10.22 16.45 823,098 0.71 6.05 228
-- (0.87) 9.32 (3.58) 550,697 0.68 5.43 307
-- (0.57) 10.55 12.05 545,538 0.61 5.40 161
-- $(0.33) $10.24 5.42% $ --(e) 0.67%(c)(d) 5.88% 49%
-- (0.55) 10.03 10.12 --(e) 1.22(c)(d) 5.36 244
$(0.00)(b) (0.52) 9.62 3.35 29,235 1.21(c)++ 5.48++ 368
-- $(0.32) $10.24 5.32% $ 36,524 0.87%(c)(d) 5.68% 49%
-- (0.56) 10.03 10.30 26,054 0.92(c)(d) 5.66 244
$(0.00)(b) (0.67) 9.62 3.70 6,345 0.91(c) 5.78 368
-- (0.18) 9.93 (1.11) 6,440 0.92++ 5.29++ 133
-- (0.57) 10.22 16.22 6,662 0.91 5.85 228
-- (0.85) 9.32 (3.76) 967 0.86 5.25 307
-- (0.55) 10.55 11.88 1,138 0.76 5.25 161
-- $(0.29) $10.24 5.00% $ 3,474 1.47%(c)(d) 5.08% 49%
-- (0.51) 10.03 9.73 2,662 1.47(c)(d) 5.11 244
$(0.00)(b) (0.63) 9.62 3.23 2,109 1.36(c) 5.33 368
-- (0.16) 9.93 (1.26) 2,496 1.37++ 4.84++ 133
-- (0.53) 10.22 15.70 2,578 1.36 5.40 228
-- (0.81) 9.32 (4.21) 2,145 1.33 4.78 307
-- (0.22) 10.55 3.64 1,620 1.26++ 4.75++ 161
-- $(0.29) $10.24 5.07% $ 1,240 1.47%(c)(d) 5.08% 49%
-- (0.52) 10.03 9.87 943 1.42(c)(d) 5.16 244
$(0.00)(b) (0.64) 9.62 3.38 1,068 1.21(c) 5.48 368
-- (0.17) 9.93 (1.22) 299 1.22++ 4.99++ 133
-- (0.54) 10.22 15.87 227 1.21 5.55 228
-- (0.81) 9.32 (4.14) 41 1.43 4.68 307
-- (0.49) 10.55 11.20 65 1.36 4.65 161
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
----------------------
RATIO OF
OPERATING
DISTRIBUTIONS EXPENSES TO
FROM AVERAGE
CAPITAL NET ASSETS
- ------------- ----------------------
<S> <C>
-- 0.77%(d)
-- 0.83(d)
$(0.00)(b) 0.81(d)
-- 0.83++
-- 0.81
-- 0.76
-- 0.77
-- 0.77%(d)
-- 1.33(d)
$(0.00)(b) 1.31(d)++
-- 1.02%(d)
-- 1.03(d)
$(0.00)(b) 1.01(d)
-- 1.03++
-- 1.01
-- 0.94
-- 0.92
-- 1.77%(d)
-- 1.58(d)
$(0.00)(b) 1.46(d)
-- 1.48++
-- 1.46
-- 1.41
-- 1.42++
-- 1.77%(d)
-- 1.53(d)
$(0.00)(b) 1.31(d)
-- 1.33++
-- 1.31
-- 1.51
-- 1.52
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE> 46
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME CAPITAL GAINS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT BOND:
PRIMARY A SHARES*:
Six months ended 09/30/98
(unaudited).................. $10.37 $0.26 $ 0.50 $0.76 $(0.26) $(0.20)
Period ended 03/31/1998........ 10.19 0.48 0.31 0.79 (0.48) (0.13)
Period ended 05/16/97.......... 10.53 0.41 0.17 0.58 (0.41) (0.51)
Year ended 08/31/96............ 11.20 0.61 (0.22) 0.39 (0.61) (0.45)
Period ended 08/31/1995(b)..... 10.00 0.56 1.20 1.76 (0.56)
INVESTOR A SHARES*:
Six months ended 09/30/98
(unaudited).................. $10.37 $0.25 $ 0.50 $0.75 $(0.25) $(0.20)
Period ended 03/31/1998........ 10.20 0.46 0.30 0.76 (0.46) (0.13)
Period ended 05/16/97.......... 10.54 0.39 0.17 0.56 (0.39) (0.51)
Year ended 08/31/96............ 11.19 0.59 (0.20) 0.39 (0.59) (0.45)
Period ended 08/31/1995(b)..... 10.48 0.37 0.71 1.08 (0.37) --
INVESTOR B SHARES*:
Six months ended 09/30/98
(unaudited).................. $10.37 $0.22 $ 0.50 $0.72 $(0.22) $(0.20)
Period ended 03/31/1998........ 10.19 0.41 0.31 0.72 (0.41) (0.13)
Period ended 05/16/97.......... 10.52 0.34 0.18 0.52 (0.34) (0.51)
Year ended 08/31/96............ 11.19 0.51 (0.22) 0.29 (0.51) (0.45)
Period ended 08/31/1995(b)..... 10.05 0.46 1.14 1.60 (0.46) --
INVESTOR C SHARES**:
Six months ended 09/30/98
(unaudited).................. $10.37 $0.23 $ 0.50 $0.73 $(0.23) $(0.20)
Period ended 03/31/1998........ 10.41 0.25 0.09 0.34 (0.25) (0.13)
</TABLE>
- ---------------
* The financial information for the fiscal periods prior to May 23, 1997
reflects the financial information for the Pilot U.S. Government Securities
Fund Pilot Shares, Class A Shares and Class B Shares, which were reorganized
into the Primary A Shares, Investor A Shares and Investor B Shares,
respectively, as of May 23, 1997.
** 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.
(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 Pilot U.S. Government Securities Fund Pilot Shares, Class A Shares and
Class B Shares commenced operations on November 7, 1994, February 7, 1995
and November 10, 1994, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE> 47
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
RATIO OF ----------------------
OPERATING RATIO OF RATIO OF
TOTAL NET ASSET NET ASSETS EXPENSES TO NET INVESTMENT OPERATING
DIVIDENDS VALUE END OF AVERAGE INCOME TO PORTFOLIO EXPENSES TO
AND END OF TOTAL PERIOD NET AVERAGE NET TURNOVER AVERAGE NET
DISTRIBUTIONS PERIOD RETURNED++++ (IN 000'S) ASSETS ASSETS RATE ASSETS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.46) $10.67 7.64% $121,536 0.60%(a) 5.12% 202% 0.62%(a)
(0.61) 10.37 7.84 263,428 0.60(a)++ 5.26++ 188 0.86(a)++
(0.92) 10.19 5.62 148,082 0.62++ 5.60++ 58 0.77++
(1.06) 10.53 3.46 145,066 0.65 5.61 87 0.82
(0.56) 11.20 18.03 137,261 0.62++ 6.45++ 132 0.87++
$(0.45) $10.67 7.51% $ 2,345 0.85%(a) 4.87% 202% 0.87%(a)
(0.59) 10.37 7.51 1,927 0.85(a)++ 5.01++ 188 1.11(a)++
(0.90) 10.20 5.44 734 0.87++ 5.35++ 58 1.07++
(1.04) 10.54 3.44 632 0.85 5.44 87 1.07
(0.37) 11.19 10.41 87 0.82++ 5.76++ 132 1.12++
$(0.42) $10.67 7.18% $ 3,406 1.10%(a) 4.62% 202% 1.27%(a)
(0.54) 10.37 7.14 1,004 1.40(a)++ 4.46++ 188 1.66(a)++
(0.85) 10.19 4.99 1,529 1.62++ 4.60++ 58 1.77++
(0.96) 10.52 2.43 1,237 1.65 4.60 87 1.82
(0.46) 11.19 16.19 146 1.62++ 5.19++ 132 1.87++
$(0.43) $10.67 7.29% $ 1,359 1.45%(a) 4.27% 202% 1.62%(a)
(0.38) 10.37 3.50 1,332 1.45(a)++ 4.41++ 188 1.71(a)++
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE> 48
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME CAPITAL GAINS
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DIVERSIFIED INCOME:
PRIMARY A SHARES:
Six months ended 09/30/98 (unaudited).. $10.55 $0.33 $ 0.22 $ 0.55 $(0.33) $(0.04)
Year ended 03/31/1998.................. 10.11 0.65 0.44 1.09 (0.65) --
Year ended 03/31/1997#................. 10.42 0.69 (0.18) 0.51 (0.69) (0.13)
Period ended 03/31/1996(b)............. 10.82 0.23 (0.40) (0.17) (0.23) --
Year ended 11/30/1995.................. 9.67 0.73 1.15 1.88 (0.73) --
Year ended 11/30/1994#................. 10.88 0.74 (1.06) (0.32) (0.74)(a) (0.15)
Year ended 11/30/1993#................. 9.97 0.78 0.91 1.69 (0.78) --
PRIMARY B SHARES:
Six months ended 09/30/98 (unaudited).. $10.55 $0.33 $ 0.22 $ 0.55 $(0.33) $(0.04)
Year ended 03/31/1998.................. 10.11 0.58 0.44 1.02 (0.58) --
Period ended 03/31/1997*#.............. 10.28 0.47 (0.04) 0.43 (0.47) (0.13)
INVESTOR A SHARES:
Six months ended 09/30/98 (unaudited).. $10.55 $0.32 $ 0.22 $ 0.54 $(0.32) $(0.04)*
Year ended 03/31/1998.................. 10.11 0.63 0.44 1.07 (0.63) --
Year ended 03/31/1997#................. 10.42 0.66 (0.18) 0.48 (0.66) (0.13)
Period ended 03/31/1996(b)............. 10.82 0.22 (0.40) (0.18) (0.22) --
Year ended 11/30/1995.................. 9.67 0.71 1.15 1.86 (0.71) --
Year ended 11/30/1994#................. 10.88 0.72 (1.06) (0.34) (0.72)(a) (0.15)
Year ended 11/30/1993#................. 9.96 0.76 0.92 1.68 (0.76) --
INVESTOR B SHARES:
Six months ended 09/30/98 (unaudited).. $10.55 $0.29 $ 0.22 $ 0.51 $(0.29) $(0.04)
Year ended 03/31/1998.................. 10.11 0.57 0.44 1.01 (0.57) --
Year ended 03/31/1997#................. 10.42 0.61 (0.18) 0.43 (0.61) (0.13)
Period ended 03/31/1996(b)............. 10.82 0.21 (0.40) (0.19) (0.21) --
Year ended 11/30/1995.................. 9.67 0.66 1.15 1.81 (0.66) --
Year ended 11/30/1994#................. 10.88 0.67 (1.06) (0.39) (0.67)(a) (0.15)
Period ended 11/30/1993*#.............. 10.59 0.30 0.29 0.59 (0.30) --
INVESTOR C SHARES:
Six months ended 09/30/98 (unaudited).. $10.55 $0.29 $ 0.22 $ 0.51 $(0.29) $(0.04)
Year ended 03/31/1998.................. 10.11 0.58 0.44 1.02 (0.58) --
Year ended 03/31/1997#................. 10.42 0.63 (0.18) 0.45 (0.63) (0.13)
Period ended 03/31/1996(b)............. 10.82 0.21 (0.40) (0.19) (0.21) --
Year ended 11/30/1995.................. 9.67 0.66 1.15 1.81 (0.66) --
Year ended 11/30/1994#................. 10.88 0.67 (1.06) (0.39) (0.67)(a) (0.15)
Year ended 11/30/1993#................. 9.96 0.70 0.92 1.62 (0.70) --
</TABLE>
- ---------------
* Diversified Income Primary B and Investor B Shares commenced operations on
June 28, 1996 and June 7, 1993, respectively.
++ 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) 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 the fees reduced by credits allowed by the custodian on the
operating expenses ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(d) Amount is less than $1,000.
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE> 49
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
----------------------
RATIO OF RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING
DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE
DISTRIBUTIONS END OF PERIOD RETURN++++ (IN 000'S) ASSETS ASSETS RATE NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.37) $10.73 5.30% $307,198 0.70%(c) 6.25% 71% 0.80%(c)
(0.65) 10.55 11.07 263,840 0.73(c) 6.27 203 0.83(c)
(0.82) 10.11 4.97 152,070 0.75(c) 6.73 278 0.85(c)
(0.23) 10.42 (1.59) 65,081 0.77++ 6.49++ 69 0.87++
(0.73) 10.82 20.11 64,800 0.80 7.03 96 0.93
(0.89) 9.67 (3.05) 22,298 0.74 7.31 144 0.95
(0.78) 10.88 17.40 28,553 0.55 7.02 86 0.95
$(0.37) $10.73 5.30% $ --(d) 0.70%(c) 6.25% 71% 0.80%(c)
(0.58) 10.55 10.29 --(d) 1.23(c) 5.77 203 1.33(c)
(0.60) 10.11 4.22 41 1.25+(c) 6.23++ 278 1.35(c)++
$(0.36) $10.73 5.17% $ 13,154 0.95%(c) 6.00% 71% 1.05%(c)
(0.63) 10.55 10.80 11,946 0.98(c) 6.02 203 1.08(c)
(0.79) 10.11 4.71 11,662 1.00(c) 6.48 278 1.10(c)
(0.22) 10.42 (1.67) 13,332 1.02++ 6.24++ 69 1.12++
(0.71) 10.82 19.82 13,150 1.05 6.78 96 1.18
(0.87) 9.67 (3.26) 10,819 0.96 7.09 144 1.17
(0.76) 10.88 17.32 13,291 0.70 6.87 86 1.10
$(0.33) $10.73 4.86% $ 68,019 1.55%(c) 5.40% 71% 1.80%(c)
(0.57) 10.55 10.18 65,248 1.55(c) 5.45 203 1.65(c)
(0.74) 10.11 4.18 70,631 1.50(c) 5.98 278 1.60(c)
(0.21) 10.42 (1.83) 84,692 1.52++ 5.74++ 69 1.62++
(0.66) 10.82 19.22 90,887 1.55 6.28 96 1.68
(0.82) 9.67 (3.77) 55,058 1.49 6.56 144 1.70
(0.30) 10.88 5.58 24,630 1.30++ 6.27++ 86 1.70++
$(0.33) $10.73 4.86% $ 1,624 1.55%(c) 5.40% 71% 1.80%(c)
(0.58) 10.55 10.27 2,090 1.46(c) 5.54 203 1.56(c)
(0.76) 10.11 4.44 3,343 1.25(c) 6.23 278 1.35(c)
(0.21) 10.42 (1.77) 3,454 1.33++ 5.93++ 69 1.43++
(0.66) 10.82 19.22 3,582 1.55 6.28 96 1.68
(0.82) 9.67 (3.77) 2,636 1.49 6.56 144 1.70
(0.70) 10.88 16.65 3,633 1.30 6.27 86 1.70
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE> 50
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME CAPITAL GAINS
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GLOBAL GOVERNMENT INCOME:
PRIMARY A SHARES:
Six months ended 09/30/98
(unaudited)............................ $ 9.70 $ 0.17 $ 0.68 $0.85 $(0.17) $(0.02)
Year ended 03/31/1998#................... 9.79 0.39 (0.06) 0.33 (0.31) (0.03)
Year ended 03/31/1997#................... 10.07 0.47 (0.03) 0.44 (0.46) (0.16)
Period ended 03/31/1996**................ 10.00 0.39 0.11 0.50 (0.37) (0.04)
PRIMARY B SHARES:
Six months ended 09/30/98
(unaudited)............................ $ 9.70 $ 0.17 $ 0.68 $0.85 $(0.17) $(0.02)
Year ended 03/31/1998#................... 9.79 0.39 (0.06) 0.33 (0.31) (0.03)
Period ended 03/31/1997**#............... 10.13 0.43 (0.22) 0.21 (0.32) (0.16)
INVESTOR A SHARES:
Six months ended 09/30/98
(unaudited)............................ $ 9.70 $ 0.15 $ 0.68 $0.83 $(0.15) $(0.02)
Year ended 03/31/1998#................... 9.79 0.36 (0.06) 0.30 (0.28) (0.03)
Year ended 03/31/1997#................... 10.07 0.44 (0.02) 0.42 (0.45) (0.16)
Period ended 03/31/1996**................ 10.00 0.37 0.11 0.48 (0.35) (0.04)
INVESTOR B SHARES:
Six months ended 09/30/98
(unaudited)............................ $ 9.70 $ 0.12 $ 0.68 $0.80 $(0.12) $(0.02)
Year ended 03/31/1998#................... 9.79 0.30 (0.06) 0.24 (0.22) (0.03)
Year ended 03/31/1997#................... 10.07 0.36 (0.02) 0.34 (0.38) (0.16)
Period ended 03/31/1996**................ 10.00 0.32 0.11 0.43 (0.30) (0.04)
INVESTOR C SHARES:
Six months ended 09/30/98
(unaudited)............................ $ 9.70 $ 0.12 $ 0.68 $0.80 $(0.12) $(0.02)
Year ended 03/31/1998#................... 9.79 0.32 (0.06) 0.26 (0.24) (0.03)
Year ended 03/31/1997#................... 10.07 0.42 (0.03) 0.39 (0.42) (0.16)
Period ended 03/31/1996**................ 10.00 0.33 0.11 0.44 (0.31) (0.04)
</TABLE>
- ---------------
** Global Government Income Primary A, Investor A, Investor B and Investor C
Shares commenced operations on June 30, 1995. Global Government Income
Primary B Shares commenced operations on June 28, 1996.
++ 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
shares method.
(a) The effect of interest expense on the operating expense ratio was 0.01%.
(b) Amount is less than $1,000.
(c) Absent waivers by the distributor, ratio of operating expenses to average
net assets would be 2.84%.
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE> 51
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF RATIO OF
DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT
IN EXCESS OF DIVIDENDS VALUE END OF EXPENSES TO INCOME TO PORTFOLIO
NET REALIZED AND END OF TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER
CAPITAL GAINS DISTRIBUTIONS PERIOD RETURN++++ (IN 000'S) ASSETS ASSETS RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-- $(0.19) $10.36 8.82% $ 238 1.84%(a) 3.21% 70%
$(0.08) (0.42) 9.70 3.38 14,200 1.31(a) 3.97 120
(0.10) (0.72) 9.79 4.25 28,130 1.26 4.60 100
(0.02) (0.43) 10.07 5.03 24,753 1.32++ 5.17++ 213
-- $(0.19) $10.36 8.82% $ --(b) 1.84%(a) 3.21% 70%
$(0.08) (0.42) 9.70 3.20 --(b) 1.81(a) 3.47 120
(0.07) (0.55) 9.79 1.93 5 1.76++ 4.10++ 100
-- $(0.17) $10.36 8.68% $15,288 2.09%(a) 2.96% 70%
$(0.08) (0.39) 9.70 3.12 14,425 1.56(a) 3.72 120
(0.09) (0.70) 9.79 3.99 15,104 1.51 4.35 100
(0.02) (0.41) 10.07 4.84 14,898 1.57++ 4.92++ 213
-- $(0.14) $10.36 8.36% $ 17 2.69%(a)(c) 2.36% 70%
$(0.08) (0.33) 9.70 2.45 163 2.21(a) 3.07 120
(0.08) (0.62) 9.79 3.22 193 2.26 3.60 100
(0.02) (0.36) 10.07 4.27 193 2.32++ 4.17++ 213
-- $(0.14) $10.36 8.34% $ 64 2.69%(a)(c) 2.36% 70%
$(0.08) (0.35) 9.70 2.63 10 2.03(a) 3.24 120
(0.09) (0.67) 9.79 3.73 9 1.76 4.10 100
(0.02) (0.37) 10.07 4.40 9 2.16++ 4.33++ 213
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE> 52
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Nations Fund Trust (the "Trust"), Nations Fund, Inc. (the "Company") and Nations
Fund Portfolios, Inc. ("Nations Portfolios") are registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as open-end investment
companies. At September 30, 1998, the Trust offered thirty-seven separate
portfolios, the Company offered nine separate portfolios and Nations Portfolios
offered three separate portfolios (each a "Fund" and collectively, the "Funds").
These financial statements pertain only to the U.S. and global government and
corporate bond portfolios of the Trust, the Company and Nations Portfolios.
Financial statements for the other portfolios of the Trust, the Company and
Nations Portfolios are presented under separate cover. The Funds currently offer
five classes of shares: Primary A Shares, Primary B Shares, Investor A Shares,
Investor B Shares and Investor C Shares. Shareholders of a Fund have equal
voting rights on matters affecting all shareholders of the Fund. In addition,
each class of shares of a Fund has exclusive voting rights on matters that
relate solely to its class and separate voting rights on matters in which the
interests of one class of shares differ from the interests of any other class.
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Funds in the preparation of
their financial statements.
Securities Valuation: Securities are valued using broker quotations or prices
provided by a pricing service approved by the Board of Trustees/Directors.
Certain prices provided by brokers or the pricing service may be based on a
matrix pricing system, which considers such factors as security prices, yields
and maturities. The value of mortgage-backed securities can be significantly
affected by changes in interest rates. The valuation of international securities
which trade on foreign exchanges are provided by an independent pricing service
approved by the Board of Trustees/Directors of each Fund. Certain securities may
be valued by one or more principal market makers. Securities for which market
quotations are not readily available are valued by the investment advisor under
the supervision of the Board of Trustees/Directors. Short-term investments that
mature in 60 days or less are valued at amortized cost.
Dollar Roll Transactions: Certain Funds may enter into dollar roll transactions
with financial institutions to take advantage of opportunities in the mortgage
market. Dollar roll transactions consist of the sale by the Fund of
mortgage-backed or other asset-backed securities, with a commitment to purchase
similar, but not identical, securities at a future date, at the same price. The
Funds are paid a fee for entering into a commitment to purchase the securities.
This fee accrues as income over the duration of the dollar roll contract. 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 in addition to the
proceeds of a dollar roll sale may not exceed transaction costs.
Foreign Currency Translation: The books and records of the Global Government
Income Fund are maintained in U.S. dollars. Foreign currencies, investments and
other assets and liabilities are translated into U.S. dollars at the current
exchange rates. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains and losses between trade date and
settlement date of securities transactions, foreign currency transactions and
the difference between the amounts of interest and dividends recorded on the
books of a Fund and the amounts actually received. The effects of changes in
foreign currency exchange rates on securities are not segregated in the
Statements of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on securities.
Forward Foreign Currency Transactions: Forward foreign currency contracts are
valued at the forward rate and are marked-to-market daily. The change in
48
<PAGE> 53
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
market value is recorded by the Fund as an unrealized gain or loss. When the
contract is closed or offset with the same counterparty, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed or offset.
Forward foreign currency contracts will be used primarily to protect the Fund
from adverse currency movements and will generally not be entered into for terms
greater than one year. The use of forward foreign currency contracts does not
eliminate fluctuations in the underlying prices of the Fund's investment
securities, however, it does establish a rate of exchange that can be achieved
in the future. The use of forward contracts involves the risk that anticipated
currency movements will not be accurately predicted. A forward contract would
limit the risk of loss due to a decline in the value of a particular currency,
however, it also would limit any potential gain that might result should the
value of the currency increase instead of decrease. These contracts may involve
market risk in excess of the unrealized gain or loss reflected in the Statements
of Net Assets. In addition, the Fund could be exposed to risks if counterparties
to the contracts are unable to meet the terms of their contracts. The
counterparty risk exposure is, therefore, closely monitored and contracts are
only executed with high credit quality financial institutions.
Securities Transactions and Investment Income: Securities transactions are
accounted for on trade date. Realized gains and losses are computed based on the
specific identification of securities sold. Interest income, adjusted for
accretion of discounts and amortization of premiums, is earned from settlement
date and recorded on the accrual basis. Dividend income is recorded on
ex-dividend date. Each Fund's investment income and realized and unrealized
gains and losses are allocated among its classes based upon the relative net
assets of each class of shares.
Securities purchased or sold on a when issued or delayed-delivery basis may be
settled a month or more after trade date; interest income is not accrued until
settlement date. Each Fund instructs the custodian to segregate assets with a
current value at least equal to the amount of its when-issued purchase
commitments.
Stripped mortgage-backed securities are derivative multi-class mortgage
securities structured so that one class receives most, if not all, of the
principal from the mortgage assets, while the other class receives most, if not
all, of the interest and the remainder of the principal. If the underlying
mortgage assets experience greater than anticipated prepayments of principal, a
Fund may fail to fully recoup its initial investment in an interest-only
security. The fair market value of these securities is unusually volatile in
response to changes in interest rates.
Dividends and Distributions to Shareholders: It is the policy of each Fund to
declare dividends from net investment income daily and to pay such dividends
monthly. Each Fund will distribute net realized capital gains (including net
short-term capital gains), annually after the fiscal year in which the capital
gains were earned, unless offset by any available capital loss carryforward.
Income distributions and capital gain distributions on a Fund level are
determined in accordance with Federal income tax regulations, which may differ
from generally accepted accounting principles.
Federal Income Tax: Each Fund intends to continue to qualify as a regulated
investment company by complying with the applicable requirements of the Internal
Revenue Code of 1986, as amended, and by distributing substantially all of its
earnings to its shareholders. Therefore, no provision is made for Federal income
or excise taxes. The Global Government Income Fund may be subject to foreign
taxes on income, gains on investments or currency repatriation, a portion of
which may be recoverable. The Global Government Income Fund will accrue such
taxes and recoveries as applicable, based upon its current interpretation of tax
rules and regulations that exist in the markets in which it invests.
Expenses: General expenses of the Trust, the Company or Nations Portfolios are
allocated to the Funds based upon their relative net assets. Expenses directly
attributable to a Fund or class of shares are charged to such Fund or class.
Expenses not directly attributable to any class of shares are prorated based on
the relative net assets of each class. The Funds bear all costs in connection
with their organization, including the fees and expenses of registering and
qualifying their shares for distribution under Federal and state
49
<PAGE> 54
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
securities regulations. All such costs are being amortized on a straight-line
basis over a period of five years from commencement of operations.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS
Each of the Trust, the Company and Nations Portfolios has entered into an
investment advisory agreement (the "Investment Advisory Agreements") with
NationsBanc Advisors, Inc. ("NBAI"), a wholly-owned subsidiary of NationsBank,
N.A. ("NationsBank"), pursuant to which NBAI provides investment advisory
services to the Funds. Under these Investment Advisory Agreements, NBAI is
entitled to receive an advisory fee, calculated daily and payable monthly based
on the following annual rates multiplied by the average daily net assets of each
Fund:
<TABLE>
<CAPTION>
ANNUAL
RATE
------
<S> <C>
Short-Term Income, Short-Intermediate Government,
Strategic Fixed Income, U.S. Government Bond,
Diversified Income..................................... 0.60%
Global Government Income................................ 0.70%
</TABLE>
<TABLE>
<CAPTION>
FEES ON FEES ON FEES ON
NET ASSETS NET ASSETS NET ASSETS
UP TO BETWEEN $100 EXCEEDING
$100 MILLION AND $250 MILLION $250 MILLION
----------------------------------------------
<S> <C> <C> <C>
Government Securities.... 0.65% 0.55% 0.50%
</TABLE>
Each of the Trust, the Company and Nations Portfolios has, on behalf of its
Funds, except for U.S. Government Bond Fund and Global Government Income Fund,
entered into a sub-advisory agreement with NBAI and TradeStreet Investment
Associates, Inc. ("TradeStreet"), a wholly-owned subsidiary of NationsBank,
pursuant to which TradeStreet is entitled to receive a sub-advisory fee from
NBAI at the annual rate of 0.15% of each Fund's average daily net assets.
Boatmen's Capital Management, Inc. ("Boatmen's"), a wholly-owned subsidiary of
NationsBank, serves as investment sub-advisor to the U.S. Government Bond Fund.
For services provided pursuant to a sub-advisory agreement, NBAI pays Boatmen's
a sub-advisory fee at the annual rate of 0.15% of the average daily net assets
of the U.S. Government Bond Fund.
Gartmore Global Partners ("Gartmore") serves as the sub-advisor for the Global
Government Income Fund. Gartmore is a joint venture structured as a general
partnership between NB Partner Corporation, a wholly-owned subsidiary of
NationsBank, and Gartmore U.S. Limited, an indirect wholly-owned subsidiary of
Gartmore Investment Management PLC ("Gartmore PLC"), which is a United Kingdom
("U.K.") holding company for a leading U.K. based international fund management
group of companies. National Westminster Bank PLC and its affiliated entities
own 100% of the equity of Gartmore PLC. For services provided pursuant to the
sub-advisory agreement, NBAI pays Gartmore a sub-advisory fee at the annual rate
of 0.54% of the average daily net assets of the Global Government Income Fund.
Stephens, Inc. ("Stephens") serves as the administrator of the Trust, the
Company and Nations Portfolios. First Data Investor Services Group, Inc. ("First
Data"), a wholly-owned subsidiary of First Data Corporation, serves as
co-administrator. Stephens and First Data are entitled to receive a combined
fee, computed daily and paid monthly, at the annual rate of 0.10% of each Fund's
average daily net assets. NBAI is the sub-administrator pursuant to an agreement
with Stephens. For the six months ended September 30, 1998, Stephens earned
$1,168,000 from the Funds for its administration services, of which $190,000 was
paid to NBAI for its services as sub-administrator.
The investment advisor, sub-advisor and administrator may, from time to time,
voluntarily reduce their fees payable by each Fund. For the six months ended
September 30, 1998, fee waivers were as follows:
<TABLE>
<CAPTION>
FEES WAIVED
BY ADVISOR
(000)
-----------
<S> <C>
Short-Term Income................................... $644
Short-Intermediate Government....................... 712
Government Securities............................... 91
Strategic Fixed Income.............................. 949
U.S. Government Bond................................ 28
Diversified Income.................................. 185
</TABLE>
NationsBank of Texas, N.A. ("NationsBank of Texas") served as the custodian of
the Trust's and the Company's assets until it merged with NationsBank on May 6,
1998. NationsBank began
50
<PAGE> 55
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
serving as custodian for the Trust's and the Company's assets on that date and
is providing the same services as were previously provided by NationsBank of
Texas. For the six months ended September 30, 1998, NationsBank of Texas and
NationsBank earned $4,000 and $14,000 respectively, for providing such services.
The Bank of New York ("BNY") has entered into agreements with each of the Trust,
the Company and NationsBank, whereby BNY serves as sub-custodian for the Funds,
except for Global Government Income Fund, where BNY serves as custodian. For the
six months ended September 30, 1998, expenses of the Funds were reduced by
$36,000 under expense offset arrangements with BNY. The Funds could have
invested a portion of the assets utilized in connection with the expense offset
arrangements in an income producing asset if they had not entered into such
arrangements.
First Data also serves as the transfer agent for the Funds' shares. NationsBank
of Texas also served as the sub-transfer agent for the Primary Shares of the
Funds until it merged with NationsBank on May 6, 1998. NationsBank began serving
as the sub-transfer agent for the Primary Shares of the Funds on that date and
is providing the same services as were previously provided by NationsBank of
Texas. For the six months ended September 30, 1998, NationsBank of Texas and
NationsBank earned approximately $3,000 and $13,000 respectively, for providing
such services.
Stephens serves as distributor of the Funds' shares. For the six months ended
September 30, 1998, the Funds were informed that the distributor received
$133,000 in contingent deferred sales charges from shares which were subject to
such charges. A substantial portion of these fees are paid to affiliates of
NationsBank and NBAI.
The Trust, the Company and Nations Portfolios pay each unaffiliated Trustee or
Director an annual fee of $1,000 ($3,000 for the Chairman of the Board), plus
$500 per Fund and an additional $1,000 for each in-person board meeting, and
$500 for each telephonic board meeting attended. The Trust, the Company and
Nations Portfolios also reimburse expenses incurred by each unaffiliated Trustee
or Director in attending such meetings.
The Trust's, Company's and Nations Portfolio's eligible Trustees or Directors
may participate in non-qualified deferred compensation and retirement plans
which may be terminated at any time. All benefits provided under these plans are
unfunded and any payments to plan participants are paid solely out of the Funds'
assets. Income earned on each plan participant's deferral account is tied to the
rate of return of the eligible mutual funds selected by the participants or, if
no funds are selected, to the rate of return of Nations Treasury Fund, a
portfolio of the Company. The expense for the deferred compensation and
retirement plans is included in "Trustees'/Directors' fees and expenses" in the
Statements of Operations.
Certain Funds have made daily investments of cash balances in the Nations Cash
Reserves, a portfolio of Nations Institutional Reserves, pursuant to an
exemptive order received from the Securities and Exchange Commission. For the
six months ended September 30, 1998, the Funds earned $2,934,000 in the
aggregate from such investments.
A significant portion of each Fund's Primary A Shares represent investments by
fiduciary accounts over which NationsBank has either sole or joint investment
discretion.
On September 30, 1998, NationsBank Corporation, the parent company of
NationsBank, merged with BankAmerica Corporation.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS
The Trust, the Company and Nations Portfolios each have adopted a shareholder
administration plan for Primary B Shares of each Fund and shareholder servicing
plans and distribution plans for the Investor A, Investor B and Investor C
Shares of each Fund. The administration plan permits the Funds to compensate
institutions for shareholder administration services provided to their customers
that own Primary B Shares. The shareholder servicing plans permit the Funds to
compensate or reimburse servicing agents for shareholder services provided by
the servicing agents. The distribution plans, adopted pursuant to Rule 12b-1
under the 1940 Act, permit the Funds to compensate or reimburse the distributor
(and for Investor A Shares, the distributor and/or
51
<PAGE> 56
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
selling agents) for activities or expenses primarily intended to result in the
sale of the classes' shares. Payments are made at an annual rate, as a
percentage of average daily net assets set from time to time by the Board of
Trustees/Directors, and are charged as expenses of each Fund directly to the
applicable class. A substantial portion of the expenses incurred pursuant to
these plans are paid to affiliates of NationsBank and NBAI.
For the six months September 30, 1998, the current rates and plan limits in
effect, as a percentage of average net daily assets, were as follows:
<TABLE>
<CAPTION>
PLAN
CURRENT RATE LIMIT
---------------------
<S> <C> <C>
Primary B Administration Plan:
Short-Term Income and Short-Intermediate
Government............................. 0.35% 0.60%
Other Income Funds(5).................... 0.50 0.60
Investor A Shareholder Servicing and
Distribution Plan:
Short-Term Income, Short-Intermediate
Government and Strategic Fixed
Income................................. 0.20 0.25
Other Income Funds(4).................... 0.25 0.25
Investor B and C Distribution Plans:
Short-Term Income........................ 0.10 0.75
Short-Intermediate Government and
Strategic Fixed Income................. 0.55 0.75
Other Income Funds (4)................... 0.60 0.75
Investor B and C Shareholder Servicing
Plans.................................... 0.25 0.25
</TABLE>
In addition, a shareholder servicing plan has been adopted for the Investor A
Shares of the Short-Term Income Fund. For the six months ended September 30,
1998, no fees were incurred by the Fund pursuant to the plan.
4. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
long-term U.S. government securities and short-term investments, for the six
months ended September 30, 1998 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
---------------------
<S> <C> <C>
Short-Term Income........................ $168,100 $ 86,873
Short-Intermediate Government............ -- 1,027
Government Securities.................... 55,295 32,029
Strategic Fixed Income................... 523,677 545,334
Diversified Income....................... 175,767 220,804
Global Government Income................. 11,980 25,699
</TABLE>
The aggregate cost of purchases and proceeds from sales of long-term U.S.
government securities for the six months ended September 30, 1998 were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
---------------------
<S> <C> <C>
Short-Term Income........................ $ 28,842 $ 19,747
Short-Intermediate Government............ 889,377 904,561
Government Securities.................... 596,459 577,336
Strategic Fixed Income................... 599,227 324,052
U.S. Government Bond..................... 441,134 570,340
Diversified Income....................... 122,334 35,098
</TABLE>
5. FORWARD FOREIGN CURRENCY
CONTRACTS
Under the terms of the forward foreign currency contracts open at September 30,
1998, Global Government Income Fund is obligated to deliver currency in exchange
for U.S. dollars as indicated in the following table:
<TABLE>
<CAPTION>
IN EXCHANGE NET UNREALIZED
LOCAL CURRENCY VALUE IN FOR DEPRECIATION OF
(DEM) U.S.$ U.S.$ CONTRACT
MATURITY DATE (000) (000) (000) (000)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10/06/98 2,667 $1,592 $1,596 $(4)
</TABLE>
6. SHARES OF BENEFICIAL INTEREST/CAPITAL STOCK
As of September 30, 1998, an unlimited number of shares without par value were
authorized for the Trust, 470,000,000,000 shares of $.001 par value capital
stock were authorized for the Company and 150,000,000,000 shares of $.001 par
value capital stock were authorized for Nations Portfolios. The Trust's
Declaration of Trust and the Company's and Nations Portfolios' Articles of
Incorporation authorize the Boards of Trustees/Directors to classify or
reclassify any authorized, but unissued shares into
52
<PAGE> 57
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
one or more additional classes or series of shares. See Schedule of Capital
Stock Activity.
7. FOREIGN SECURITIES
Global Government Income Fund may invest in foreign securities. Investing in
securities of foreign companies and foreign governments involves special risks
and considerations not typically associated with investing in U.S. companies and
the U.S. government. These risks include revaluation of currencies, less
reliable information about issuers, different securities transaction clearance
and settlement practices, and future adverse political and economic
developments. These risks are heightened for investments in emerging markets
countries. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the U.S. government.
8. LINE OF CREDIT
The Trust, the Company and Nations Portfolios participate in an uncommitted line
of credit provided by BNY under an agreement (the "Agreement") dated July 10,
1998. Advances under the Agreement are taken primarily for temporary or
emergency purposes, including the meeting of redemption requests that otherwise
might require the untimely disposition of securities. Interest on borrowings is
payable at the federal funds rate plus 0.50% on an annualized basis. Each
participating Fund maintains a ratio of no less than 4 to 1 net assets (not
including funds borrowed pursuant to the Agreement) to aggregate amount of
indebtedness pursuant to the Agreement.
At September 30, 1998, there were no loans outstanding under this Agreement. For
the six months ended September 30, 1998, borrowing by the Funds under the
Agreement was as follows:
<TABLE>
<CAPTION>
AVERAGE
AMOUNT AVERAGE AVERAGE AVERAGE
OUTSTANDING SHARES DEBT INTEREST
FUND (000) (000) PER SHARE RATE
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government
Securities.......... $ 4 15,938 $0.00(a) 6.04%
Strategic Fixed
Income.............. 39 186,355 0.00(a) 6.22%
Global Government
Income.............. 8 1,818 0.00(a) 5.97%
</TABLE>
- ---------------
(a) Amount represents less than $0.01 per share.
The average amount outstanding was calculated based on daily balances in the
period.
9. LENDING OF PORTFOLIO SECURITIES
Under an agreement with BNY, the Funds can lend their securities to approved
brokers, dealers and other financial institutions. Loans are collateralized by
cash, in an amount at least equal to the market value of the securities on loan.
The cash collateral received is invested in Nations Cash Reserves, a portfolio
of Nations Institutional Reserves. A portion of the income generated by the
investment of the collateral, net of any rebates paid by BNY to borrowers, is
remitted to BNY as lending agent, and the remainder is paid to the Fund.
Generally, in the event of counterparty default, the Fund has the right to use
the collateral to offset losses incurred. There would be a potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its right to
dispose of the collateral. The Fund bears risk in the event that invested
collateral is not sufficient to meet obligations due on the loans.
53
<PAGE> 58
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
At September 30, 1998, the following Funds had securities on loan:
<TABLE>
<CAPTION>
MARKET VALUE OF MARKET VALUE
LOANED SECURITIES OF COLLATERAL
FUND (000) (000)
- -------------------------------------------------------------------
<S> <C> <C>
Strategic Fixed Income.......... $74,477 $75,680
U.S. Government Bond............ 4,814 4,829
Diversified Income.............. 2,756 2,978
</TABLE>
10. CAPITAL LOSS CARRYFORWARD
At March 31, 1998, the following Funds had available for Federal income tax
purposes the following unused capital losses expiring March 31:
<TABLE>
<CAPTION>
2002 2003 2004 2005
FUND (000) (000) (000) (000)
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Income.......... $5,542 $ 651 -- $ 13
Short-Intermediate 5,968 -- -- 6,939
Government................
Government Securities...... -- 5,435 -- 2,302
</TABLE>
Under the current tax law, capital losses realized after October 31, may be
deferred and treated as occurring on the first day of the following fiscal year.
For the year ended March 31, 1998, the following Funds elected to defer losses
occurring between November 1, 1997 and March 31, 1998 under these rules:
<TABLE>
<CAPTION>
POST-OCTOBER CAPITAL
LONG TERM
LOSS DEFERRAL
FUND (000)
- --------------------------------------------------------------
<S> <C>
Short-Intermediate Government........... $330
Government Securities................... 211
</TABLE>
<TABLE>
<CAPTION>
POST-OCTOBER
CURRENCY
LOSS DEFERRAL
FUND (000)
- --------------------------------------------------------------
<S> <C>
Global Government Income................ $786
</TABLE>
11. REORGANIZATIONS
ACQUISITION OF PILOT FUNDS
On May 23, 1997, the U.S. Government Bond Fund, a newly established portfolio,
acquired the assets and certain liabilities of the Pilot U.S. Government
Securities Fund pursuant to a plan of reorganization approved by its
shareholders. The acquisition was accomplished by a tax-free exchange of shares
of the U.S. Government Bond Fund in an amount equal to the outstanding shares of
the Pilot U.S. Government Securities Fund. The financial statements of the U.S.
Government Bond Fund reflect the historical financial results of the Pilot U.S.
Government Securities Fund prior to the reorganization. Additionally, the fiscal
year-end of the Pilot U.S. Government Securities Fund was changed to coincide
with that of the Company.
On May 16, 1997 and May 23, 1997, certain Funds (each an "Acquiring Fund"),
acquired the assets and certain liabilities of the Pilot Funds (each an
"Acquired Fund"), in a tax-free exchange for shares of the Acquiring Fund,
pursuant to a plan of reorganization approved by the Acquired Funds'
shareholders. The number and value of shares issued by the Acquiring Fund are
presented in the Schedule of Capital Stock Activity. Net assets and unrealized
appreciation/(depreciation) as of the reorganization date were as follows:
<TABLE>
<CAPTION>
TOTAL NET
ASSETS OF ACQUIRED
TOTAL NET TOTAL NET ACQUIRING FUND
ASSETS OF ASSETS OF FUND UNREALIZED
ACQUIRED ACQUIRING AFTER APPRECIATION/
ACQUIRING ACQUIRED FUND FUND ACQUISITION (DEPRECIATION)
FUND FUND (000) (000) (000) (000)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short- Pilot Intermediate U.S. $232,196 $ 448,240 $ 680,437 $(2,073)
Intermediate Government Securities
Government Fund
Strategic Fixed Pilot Diversified Bond 97,180 976,333 1,073,513 378
Income Fund
</TABLE>
54
<PAGE> 59
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
ACQUISITION OF EMERALD FUNDS
On May 15, 1998, certain Funds (each an "Acquiring Fund"), acquired the assets
and liabilities of the Emerald Funds (each an "Acquired Fund"), in a tax-free
reorganization in exchange for shares of the Acquiring Fund, pursuant to a plan
of reorganization approved by the Acquired Fund's shareholders. The number and
volume of shares issued by the Acquiring Fund are presented in the Schedule of
Capital Stock Activity. Net assets as of the reorganization date were as
follows:
<TABLE>
<CAPTION>
TOTAL NET
TOTAL NET TOTAL NET ASSETS OF ACQUIRED
ASSETS OF ASSETS OF ACQUIRING FUND
ACQUIRED ACQUIRING FUND AFTER UNREALIZED
ACQUIRING ACQUIRED FUND FUND ACQUISITION APPRECIATION
FUND FUND (000) (000) (000) (000)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Term Income Emerald Short Term Income $101,178 $ 355,256 $ 456,434 $525
Fund
Government Emerald U.S. Government 63,983 122,410 186,393 856
Securities Securities Fund
Strategic Fixed Emerald Managed Bond Fund 77,246 1,848,855 1,926,101 9
Income
</TABLE>
CONVERSION OF COMMON TRUST FUNDS
On August 22, 1997 and November 12, 1997, certain Funds (each an "Acquiring
Fund"), acquired the assets of certain common trust funds managed by NationsBank
(each an "Acquired Fund"), in a tax-free exchange for shares of the Acquiring
Fund. The number and value of shares issued by the Acquiring Fund are presented
in the Schedule of Capital Stock Activity. Net assets and unrealized
appreciation/(depreciation) as of the conversion date were as follows:
<TABLE>
<CAPTION>
TOTAL NET
ASSETS OF ACQUIRED
TOTAL NET TOTAL NET ACQUIRING FUND
ASSETS OF ASSETS OF FUND UNREALIZED
ACQUIRED ACQUIRING AFTER APPRECIATION/
ACQUIRING ACQUIRED FUND FUND CONVERSION (DEPRECIATION)
FUND FUND (000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Term Income Common Trust Short-Term $275,916 $ 201,134 $ 477,050 $ 169
Income Fund
Government Common Trust Mortgage 45,209 100,213 145,422 (31)
Securities Backed Securities Fund
Strategic Fixed Common Trust Strategic 987,102 1,095,670 2,082,772 4,085
Income Fixed Income Fund
Strategic Fixed Common Trust Fixed Income 24,459 2,082,772 2,107,231 145
Income Fund for Personal Trusts
Short- Common Trust 275,770 609,542 885,312 1,293
Intermediate Short/Intermediate U.S.
Government Government Fund
</TABLE>
55
<PAGE> 60
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
On April 17, 1998, certain Funds (each an "Acquiring Fund"), acquired the assets
of certain common trust funds managed by NationsBank (each an "Acquired Fund"),
in a tax-free exchange for shares of the Acquiring Fund. The number and value of
shares issued by the Acquiring Fund are presented in the Schedule of Capital
Stock Activity. Net assets and unrealized appreciation/(depreciation) as of the
conversion date were as follows:
<TABLE>
<CAPTION>
TOTAL NET
ASSETS OF ACQUIRED
TOTAL NET TOTAL NET ACQUIRING FUND
ASSETS OF ASSETS OF FUND UNREALIZED
ACQUIRED ACQUIRING AFTER APPRECIATION/
ACQUIRING ACQUIRED FUND FUND CONVERSION (DEPRECIATION)
FUND FUND (000) (000) (000) (000)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Government Common Trust ABS 5,957 117,450 123,407 70
Securities Government Fund
Strategic Fixed Common Trust ASB Bond 69,407 1,705,412 1,774,819 398
Income Fund
Strategic Fixed Common Trust ASB 71,850 1,774,819 1,846,669 2
Income Intermediate Bond Fund
Short- Common Trust ASB 2 Year 5,670 722,445 728,116 11
Intermediate Government Fund
Government
</TABLE>
12. SUBSEQUENT EVENTS
Effective October 19, 1998, BNY began serving as the custodian for the Trust's
and the Company's assets and is providing the same services as were previously
provided by NationsBank. There no longer is a sub-custodian for the Trust or the
Company.
On November 5, 1998, the Trust's, Nations Portfolios' and the Company's Board of
Trustees/Directors approved changes in the Trust's, Nations Portfolios' and the
Company's administration arrangements whereby NBAI and Stephens Inc. will each
serve as co-administrators of the Trust, and BNY will serve as sub-administrator
of the Trust, Nations Portfolios and the Company under an agreement with the
Trust, Nations Portfolios, the Company and NBAI. These changes, which will
become effective for the Funds in the fourth quarter of 1998 and the first
quarter of 1999, will reflect an increase in the overall administration fees
paid by the Funds.
56
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57
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58
<PAGE> 63
[BACKGROUND GRAPHIC DEPICTING BASKETS]
<PAGE> 64
--------------
[NATIONS FUNDS LOGO] BULK RATE
P.O. BOX 32602 U.S. POSTAGE
CHARLOTTE, NC 28234-4602 PAID
TOLL FREE 1-800-982-2271 N READING, MA
PERMIT NO. 105
--------------
SAR5 97495 9/98
