NATIONS FUND TRUST, 497, 1998-01-15

NATIONS FUND TRUST
497, 1998-01-15

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<PAGE>
Prospectus

PRIMARY A SHARES
DECEMBER 31, 1997

Nations Marsico
Focused Equities
This Prospectus describes NATIONS MARSICO FOCUSED Fund
EQUITIES FUND and NATIONS MARSICO GROWTH & INCOME
FUND (the "Funds") of Nations Fund Trust, an
open-end management investment company in the Nations Marsico
Nations Funds Family ("Nations Funds" or Growth & Income
"Nations Funds Family"). This Prospectus Fund
describes one class of shares of the Funds --
Primary A Shares.

This Prospectus sets forth concisely the information
about the Funds that a prospective purchaser of
Primary A Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust is contained in a separate
Statement of Additional Information (the "SAI") that
has been filed with the Securities and Exchange
Commission (the "SEC") and is available upon request
without charge by writing or calling Nations Funds at
its address or telephone number shown below. The SAI,
dated December 31, 1997, is incorporated by reference
in its entirety into this Prospectus. The SEC
maintains a Web site (http://www.sec.gov) that
contains the SAI, material incorporated by reference
in this Prospectus and other information regarding
registrants that file electronically with the SEC.
NationsBanc Advisors, Inc. ("NBAI") is the investment
adviser to the Funds. Marsico Capital Management, LLC
("Marsico Capital") is investment sub-adviser to the
Funds. As used herein the term "Adviser" shall mean
NBAI and/or Marsico Capital as the context may require.

SHARES OF NATIONS FUNDS ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. ("NATIONSBANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S. For Fund information call:
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE 1-800-765-2668
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF Nations Funds
PRINCIPAL. c/o Stephens Inc.
One NationsBank Plaza
NATIONSBANK AFFILIATES PROVIDE SERVICES TO NATIONS 33rd Floor
FUNDS, FOR WHICH THEY ARE COMPENSATED. STEPHENS Charlotte, NC 28255
INC., WHICH IS NOT AFFILIATED WITH NATIONSBANK, IS
THE SPONSOR AND ADMINISTRATOR AND SERVES AS THE
DISTRIBUTOR FOR NATIONS FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY (Nations Fund logo
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY appears here)
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

TR-97665-1297

<PAGE>
Table Of Contents

Prospectus Summary 3
About The
Funds Expenses Summary 4

Objectives 5

How The Objectives Are Pursued 5

How Performance Is Shown 8

How The Funds Are Managed 8

Organization And History 11

How To Buy Shares 11
About Your
Investment How To Redeem Shares 12

How To Exchange Shares 12

How The Funds Value Their Shares 13

How Dividends And Distributions Are Made;
Tax Information 13

Appendix A -- Portfolio Securities 14

Appendix B -- Description of Ratings 21

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAI
INCORPORATED HEREIN BY REFERENCE, IN
CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY NATIONS FUNDS OR ITS DISTRIBUTOR.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
NATIONS FUNDS OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.

<PAGE>
About The Funds

Prospectus Summary

(Bullet) TYPE OF COMPANY: Open-end management investment company.

(Bullet) INVESTMENT OBJECTIVES AND POLICIES:

(BULLET) The investment objective of Nations Marsico Focused Equities
Fund is to seek long-term growth of capital. It is a
non-diversified fund that pursues its objective by normally
investing in a core position of 20-30 common stocks.

(Bullet) The investment objective of Nations Marsico Growth & Income
Fund is to seek long-term growth of capital with a limited
emphasis on income. Under normal circumstances, the Fund
pursues its objective by investing up to 75% of its assets in
equity securities selected primarily for their growth
potential and at least 25% of its assets in securities that
have income potential.

(Bullet) INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as the investment
adviser to the Funds. NBAI provides investment advice to more than 52
investment company portfolios in the Nations Funds Family. Marsico
Capital Management, LLC provides sub-advisory services to the Funds.
See "How The Funds Are Managed."

(Bullet) DIVIDENDS AND DISTRIBUTIONS: The Funds declare and pay dividends from
net investment income each calendar quarter. Each Fund's net realized
capital gains, including net short-term capital gains, are distributed
at least annually.

(Bullet) RISK FACTORS: Although the Adviser seeks to achieve the investment
objective of the Funds, there is no assurance that it will be able to
do so. Investments in the Funds are not insured against loss of
principal. Investments by the Funds in common stocks and other equity
securities are subject to stock market risk, which is the risk that the
value of the stocks the Funds hold may decline over short or even
extended periods. The U.S. stock market tends to be cyclical, with
periods when stock prices generally rise and periods when prices
generally decline. As of the date of this Prospectus, the stock market,
as measured by the Standard & Poor's 500 Composite Stock Price Index
("S&P 500 Index") and other commonly used indices, was trading at or
close to record levels. There can be no guarantee that these levels
will continue. Investments by a Fund in debt securities are subject to
interest rate risk, which is the risk that increases in market interest
rates will adversely affect a Fund's investments in debt securities.
The value of a Fund's investments in debt securities, including U.S.
Government Obligations (as defined herein), will tend to decrease when
interest rates rise and increase when interest rates fall. In general,
longer-term debt instruments tend to fluctuate in value more than
shorter-term debt instruments in response to interest rate movements.
In addition, debt securities which are not backed by the United States
Government are subject to credit risk, which is the risk that the
issuer may not be able to pay principal and/or interest when due. The
Funds' investment in lower rated debt securities may bear additional
risks. Certain of the Funds' permissible investments may constitute
derivative securities. Certain types of derivative securities can,
under certain circumstances, significantly increase an investor's
exposure to stock market or other risks. The Funds' investment in
foreign equity and debt securities may bear additional risks associated
with international investing, such as foreign currency fluctuations and
economic and political risks. For a discussion of these and other
factors, see "How Objectives Are Pursued -- Risk Considerations" and
"Appendix A -- Portfolio Securities."

(Bullet) MINIMUM PURCHASE: $250,000 minimum initial investment per record
holder. See "How to Buy Shares."

<PAGE>
Expenses Summary

Expenses are one of several factors to consider when investing in the Funds. The
following tables summarize shareholder transaction and operating expenses for
Primary A Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in Primary A Shares of the
indicated Fund over specified periods.

PRIMARY A SHARES

SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C> <C>
Nations Nations
Marsico Marsico
Focused Growth &
Equities Fund Income Fund

Maximum Sales Load Imposed on Purchases None None
Maximum Deferred Sales Load None None

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)

</TABLE>
<TABLE>
<CAPTION>

<S> <C> <C>
Management Fees .85% .85%
Other Expenses .25% .25%
Total Operating Expenses 1.10% 1.10%
</TABLE>

EXAMPLES:

You would pay the following expenses on a $1,000 investment in Primary A Shares
of the Funds, assuming (1) a 5% annual return and (2) redemption at the end of
each time period.

<TABLE>
<CAPTION>
<S> <C> <C>
Nations Nations
Marsico Marsico
Focused Growth &
Equities Fund Income Fund

1 Year $11 $11
3 Years $35 $35
</TABLE>

The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Primary A Shares will bear either directly or indirectly. The "Other Expenses"
figures in the above tables are based on estimates. For a more complete
description of the Funds' operating expenses, see "How The Funds Are Managed."

THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER OR LESS
THAN THOSE SHOWN.

<PAGE>
Objectives

NATIONS MARSICO FOCUSED EQUITIES FUND: The investment objective of Nations
Marsico Focused Equities Fund is to seek long-term growth of capital.

NATIONS MARSICO GROWTH & INCOME FUND: The investment objective of Nations
Marsico Growth & Income Fund is to seek long-term growth of capital with a
limited emphasis on income.

How The Objectives Are Pursued

NATIONS MARSICO FOCUSED EQUITIES FUND: Nations Marsico Focused Equities Fund is
a non-diversified fund that pursues its objective by normally investing in a
core position of 20-30 common stocks. Under normal circumstances, the Fund
invests at least 65% of its assets in large capitalization common stocks
selected for their growth potential. The Fund may invest to a lesser degree in
other types of securities, including preferred stock, warrants, convertible
securities and debt securities.

In building the portfolio, the Adviser seeks to identify individual companies
with earnings growth potential that may not be recognized by the market at
large. To identify such opportunities, the Adviser looks for a combination of
four characteristics:

(Bullet) Change -- The Adviser believes that extraordinary growth derives from
products, markets and technologies that are in flux.

(Bullet) Franchise -- The Adviser looks for strong brand franchises that can be
leveraged in a changing global environment.

(Bullet) Global reach -- The Adviser selects securities without geographic bias
in the belief that the global market is both a source of growth
opportunity and a hedge against fluctuations and dislocations of local
markets.

(Bullet) Themes -- The Adviser seeks companies that are moving with, not
against, the major social, economic and cultural shifts taking place
in the world.

Once an opportunity is identified, it is subjected to a disciplined analytic
process including both "top-down" and "bottom-up" elements. The "top-down" of
the process takes into consideration such macroeconomic factors as interest
rates, inflation, the regulatory environment and the global competitive
landscape, and also analyzes such factors as the most attractive global
opportunities, industry consolidation and the sustainability of economic trends.
With respect to the "bottom-up" element, the Adviser considers company
fundamentals such as commitment to research, market franchise and management's
strength and vision to determine the present and future value of the company as
an investment.

Realization of income is not a significant investment consideration. Any income
realized on the Fund's investments will be incidental to its objective.

NATIONS MARSICO GROWTH & INCOME FUND: Under normal circumstances, Nations
Marsico Growth & Income Fund pursues its objective by investing up to 75% of its
assets in equity securities selected primarily for their growth potential and at
least 25% of its assets in securities that have income potential. The Fund
typically emphasizes the growth component. However, in adverse market
conditions, the Fund may reduce the growth component of its portfolio to 25% of
its assets. The Fund may invest in any combination of common stock, preferred
stock, warrants, convertible securities and debt securities. However, it is
expected that the Fund will emphasize investments in large capitalization common
stocks. The Fund may shift assets between the growth and income components of
its portfolio based on the Adviser's analysis of relevant market, financial and
economic conditions. If the Adviser believes that growth securities will provide
better returns than the yields then available or expected on income-producing
securities, then the Fund will place a greater emphasis on the growth component.
In building the portfolio, the Adviser seeks to identify individual companies
with earnings growth potential that may not be recognized by the market at
large. To identify such opportunities, the Adviser looks for a combination of
four characteristics:

(Bullet) Change -- The Adviser believes that extraordinary growth derives from
products, markets and technologies that are in flux.

(Bullet) Franchise -- The Adviser looks for strong brand franchises that can be
leveraged in a changing global environment.

(Bullet) Themes -- The Adviser seeks companies that are moving with, not
against, the major social, economic and cultural shifts taking place
in the world.

<PAGE>
Once an opportunity is identified, it is subjected to a disciplined analytic
process including both "top-down" and "bottom-up" elements. The "top-down"
element of the process takes into consideration such macroeconomic factors as
interest rates, inflation, the regulatory environment and the global competitive
landscape, and also analyzes such factors as the most attractive global
opportunities, industry consolidation and the sustainability of economic trends.
With respect to the "bottom-up" element, the Adviser considers company
fundamentals such as commitment to research, market franchise and management's
strength and vision to determine the present and future value of the company as
an investment.

Because income is a part of the investment objective of the Fund, the Adviser
may also consider dividend-paying characteristics in selecting equity securities
for the Fund. The Fund may also find opportunities for capital growth from debt
securities because of anticipated changes in interest rates, credit standing,
currency relationships or other factors. Investors in the Fund should keep in
mind that the Fund is not designed to produce a consistent level of income.

GENERAL: The Funds may also invest up to 25% of their assets in mortgage- and
asset-backed securities, up to 10% of their assets in zero coupon, pay-in-kind
and step coupon securities, and may invest without limit in indexed/structured
securities. The Funds will invest no more than 35% of their assets in
high-yield/high-risk securities. The Funds may also purchase high-grade
commercial paper, certificates of deposit, and repurchase agreements. Such
securities may offer growth potential because of anticipated changes in interest
rates, credit standing, currency relationships or other factors. The Funds may
also invest in short-term debt securities as a means of receiving a return on
idle cash. See Appendix B for a description of ratings.

When the Adviser believes that market conditions are not favorable for
profitable investing or when the Adviser is otherwise unable to locate favorable
investment opportunities, the Funds may hold cash or cash equivalents and invest
without limit in obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government Obligations") and short-term
debt securities or money market instruments if the Adviser determines that a
temporary defensive position is advisable or to meet anticipated redemption
requests. In other words, the Funds do not always stay fully invested in stocks
and bonds. Cash or similar investments are a residual -- they represent the
assets that remain after the Adviser has committed available assets to desirable
investment opportunities. When the Funds' cash position increases, it may not
participate in stock market advances or declines to the extent that it would if
it remained more fully invested in common stocks.

The Funds may invest up to 25% of their assets in foreign equity and debt
securities. The Funds may invest directly in foreign securities denominated in a
foreign currency and not publicly traded in the United States. Other ways of
investing in foreign securities include depositary receipts or shares, and
passive foreign investment companies. Foreign securities are generally selected
on a company-by-company basis without regard to any defined allocation among
countries or geographic regions. However, certain factors such as expected
levels of inflation, government policies influencing business conditions, the
outlook for currency relationships, and prospects for economic growth among
countries, regions or geographic areas may warrant greater consideration in
selecting foreign securities. The Funds may use options, futures, forward
currency contracts, and other types of derivatives for hedging purposes. The
Funds may purchase securities on a when-issued, delayed delivery or forward
commitment basis.

PORTFOLIO TURNOVER: Generally, the Funds will purchase portfolio securities for
capital appreciation or investment income, or both, and not for short-term
trading profits. While it is not possible to predict exactly annual portfolio
turnover rates, it is expected that under normal market conditions, the annual
portfolio turnover rate for each Fund will not exceed 100%.

RISK CONSIDERATIONS: Although the Adviser will seek to achieve the investment
objective of each Fund, there is no assurance that it will be able to do so. No
single Fund should be considered, by itself, to provide a complete investment
program for any investor. Investments in a Fund are not insured against loss of
principal.

Investments by a Fund in common stocks and other equity securities are subject
to stock market risk. The value of the stocks that the Funds hold, like the
broader stock market, may decline over short or even extended periods. The U.S.
stock market tends to be cyclical, with periods when stock prices generally rise
and periods when prices generally decline. As of the date of this Prospectus,
the stock market, as measured by the S&P 500 Index and other commonly used
indices, was trading at or close to record levels. There can be no guarantee
that these levels will continue.

Nations Marsico Focused Equities Fund, as a non-diversified fund, may invest in
fewer issuers than diversified funds such as Nations Marsico Growth & Income
Fund. Therefore, appreciation or depreciation of an investment in a single
issuer could have a greater impact on the Fund's net asset value. The Fund
reserves the right to become a diversified fund by limiting the investments in
which more than 5% of its total assets are invested.

<PAGE>
ments tend to fluctuate in value more than shorter-term debt instruments in
response to interest rate movements. In addition, debt securities that are not
backed by the United States Government are subject to credit risk, which is the
risk that the issuer may not be able to pay principal and/or interest when due.
See Appendix B "Lower-Rated Securities" for a description of the risk associated
with investments in high-yield/high-risk securities.

Certain of the Funds' permissible investments may constitute derivative
securities, which are securities whose value is derived, at least in part, from
an underlying index or reference rate. There are certain types of derivative
securities that can, under certain circumstances, significantly increase a
purchaser's exposure to market or other risks. The Adviser, however, only
purchases derivative securities in circumstances where it believes such
purchases are consistent with a Fund's investment objective and do not unduly
increase the Fund's exposure to market or other risks.

Investing in foreign securities involves special risks. Investing in securities
denominated in foreign currencies and utilization of forward foreign currency
exchange contracts and other currency hedging techniques involve certain
considerations comprising both opportunities and risks not typically associated
with investing in U.S. dollar-denominated securities.

Risks unique to international investing include: (1) restrictions on foreign
investment and on repatriation of capital; (2) fluctuations in currency exchange
rates; (3) costs of converting foreign currency into U.S. dollars and U.S.
dollars into foreign currencies; (4) price volatility and less liquidity; (5)
settlement practices, including delays, which may differ from those customary in
United States markets; (6) exposure to political and economic risks, including
the risk of nationalization, expropriation of assets and war; (7) possible
imposition of foreign taxes and exchange control and currency restrictions; (8)
lack of uniform accounting, auditing and financial reporting standards; (9) less
governmental supervision of securities markets, brokers and issuers of
securities; (10) less financial information available to investors; and (11)
difficulty in enforcing legal rights outside the United States. These risks are
often heightened for investments in emerging or developing countries, such as
the countries of Eastern Europe.

For additional risk information regarding the Funds' investments in particular
instruments, see "Appendix A -- Portfolio Securities."

INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of each Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAI.

Each Fund may not:

1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry. (For purposes of this limitation, U.S. Government securities or
its agencies and instrumentalities are not considered members of any industry.)

2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.

Nations Marsico Focused Equities Fund may not:

Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 25% of the value of such Fund's total
assets would be invested in the securities of one issuer, and with respect to
50% of such Fund's total assets, more than 5% of its assets would be invested in
the securities of one issuer.

Nations Marsico Growth & Income Fund may not:

Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, the Fund will not
hold more than 10% of the voting securities of any issuer.

The investment objective and policies of each Fund, unless otherwise specified,
may be changed without shareholder approval. If the investment objective or
policies of a Fund change, shareholders should consider whether the Fund remains
an appropriate investment in light of their current position and needs.

<PAGE>
How Performance Is Shown

From time to time the Funds may advertise the total return and yield on a class
of shares. TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL DATA AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a class of
shares of a Fund may be calculated on an average annual total return basis or an
aggregate total return basis. Average annual total return refers to the average
annual compounded rates of return over one-, five-, and ten-year periods or the
life of a Fund (as stated in the Funds' advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment, assuming the reinvestment of all dividend
and capital gain distributions. Aggregate total return reflects the total
percentage change in the value of the investment over the measuring period again
assuming the reinvestment of all dividends and capital gain distributions. Total
return may also be presented for other periods.

"Yield" is calculated by dividing the annualized net investment income per share
during a recent 30-day (or one month) period of a class of shares of a Fund by
the maximum public offering price per share on the last day of that period.

Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and the Fund's
operating expenses. Investment performance also often reflects the risks
associated with such Fund's investment objective and policies. These factors
should be considered when comparing a Fund's investment results to those of
other mutual funds and other investment vehicles. Since yields fluctuate, yield
data cannot necessarily be used to compare an investment in a Fund with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.

In addition to Primary A Shares, the Funds offer Investor A, Investor B and
Investor C Shares. Each class of shares may bear different sales charges,
shareholder servicing fees and other expenses, which may cause the performance
of a class to differ from the performance of the other classes. Total return and
yield quotations will be computed separately for each class of the Fund's
shares. Any fees charged by an institution directly to its customers' accounts
in connection with investments in the Funds will not be included in calculations
of total return or yield. Each Fund's annual report contains additional
performance information and is available upon request without charge from the
Funds' distributor or your Institution (as defined herein) or by calling Nations
Funds at the toll-free number indicated on the cover of this Prospectus.

How The Funds Are Managed

The business and affairs of Nations Fund Trust are managed under the direction
of its Board of Trustees. Nations Fund Trust's SAI contains the names of and
general background information concerning each Trustee of Nations Fund Trust.

Nations Funds and the Adviser have adopted codes of ethics which contain
policies on personal securities transactions by "access persons," including
portfolio managers and investment analysts. These policies substantially comply
in all material respects with the recommendations set forth in the May 9, 1994
Report of the Advisory Group on Personal Investing of the Investment Company
Institute.

INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds pursuant to an Investment Advisory Agreement with the Trust
("Investment Advisory Agreement"). NBAI is a wholly owned subsidiary of
NationsBank, which in turn is a wholly owned banking subsidiary of NationsBank
Corporation, a bank holding company organized as a North Carolina corporation.
NBAI has its principal offices at One NationsBank Plaza, Charlotte, North
Carolina 28255.

Marsico Capital Management, LLC, located at 1200 17th Street, Suite 1300,
Denver, CO 80202, serves as the investment sub-adviser to the Funds pursuant to
an Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement") entered into
with the Trust, which provides that Marsico Capital will furnish continuous
investment advisory and management services to the Funds. Thomas F. Marsico is
Chairman and Chief Executive Officer of Marsico Capital and has voting control
of the company. Prior to forming Marsico Capital in September 1997, Mr. Marsico
had 18 years of experience as a securities analyst/portfolio manager.
NationsBank has an option to purchase up to 50% of Marsico Capital.

<PAGE>
purchases and sales. Marsico Capital is authorized to allocate purchase and sale
orders for portfolio securities to certain financial institutions, including, in
the case of agency transactions, financial institutions which are affiliated
with NBAI or which have sold shares in such Funds, if Marsico Capital believes
that the quality of the transaction and the commission are comparable to what
they would be with other qualified brokerage firms. From time to time, to the
extent consistent with its investment objective, policies and restrictions, each
Fund may invest in securities of companies with which NationsBank has a lending
relationship.

For the services provided pursuant to a Sub-Advisory Agreement, NBAI will pay
Marsico Capital sub-advisory fees, computed daily and paid monthly, at the
annual rate of .45% of the average daily net assets of Nations Marsico Focused
Equities Fund and .45% of the average daily net assets of Nations Marsico Growth
& Income Fund.

From time to time, NBAI (and/or Marsico Capital) may waive or reimburse (either
voluntarily or pursuant to applicable state limitations) advisory fees and/or
expenses payable by a Fund.

Mr. Marsico manages the investment program of the Funds and is primarily
responsible for the day-to-day management of the Funds' portfolios. Prior to
forming Marsico Capital, Mr. Marsico served as Portfolio Manager of the Janus
Twenty Fund from January 31, 1988 through August 11, 1997 and served in the same
capacity for the Janus Growth and Income Fund from May 31, 1991 through August
11, 1997. The average annual returns for the Janus Twenty Fund and the Janus
Growth and Income Fund ("Janus Funds") from the date on which Mr. Marsico began
serving as Portfolio Manager of each Janus Fund through August 7, 1997 (the last
date for which performance information is available) were 22.38% and 21.19%,
respectively. On August 11, 1997, the date on which Mr. Marsico ceased serving
as the Portfolio Manager to both the Janus Twenty Fund and the Janus Growth and
Income Fund, the Janus Twenty Fund had approximately $6 billion in net assets,
and the Janus Growth and Income Fund had approximately $1.7 billion in net
assets. As Executive Vice President and Portfolio Manager of the Janus Twenty
Fund and the Janus Growth and Income Fund, Mr. Marsico had full discretionary
authority over the selection of investments for those funds. Average annual
returns for the one-year, three-year and five-year periods ended August 7, 1997
and for the period during which Mr. Marsico managed those funds compared with
the performance of the S&P 500 Index were:

<TABLE>
<CAPTION>
Janus Janus
Twenty Growth and S&P 500
Fund (a) Income Fund (a) Index (b)
<S> <C> <C> <C>
One Year 48.21% 47.77% 46.41%
(8/8/96-8/7/97)
Three Years (8/11/94- 32.07% 31.13% 30.63%
8/7/97)
Five Years (8/13/92- 20.02% 21.16% 20.98%
8/7/97)
During Period of 22.38% 21.19% Janus Twenty:
Management by 18.20%(c)
Mr. Marsico (through Janus Growth
8/7/97) and Income:
18.59%(d)
</TABLE>

(a) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.

(b) The S&P 500 Index is an unmanaged index of common stocks that is considered
to be generally representative of the United States stock market. The S&P
500 Index is adjusted to reflect reinvestment of dividends.

(c) This figure represents the average annual return of the S&P 500 Index during
the period that Mr. Marsico managed the Janus Twenty Fund through August 7,
1997.

(d) This figure represents the average annual return of the S&P 500 Index during
the period that Mr. Marsico managed the Janus Growth and Income Fund through
August 7, 1997.

The Janus Twenty Fund has substantially similar investment policies, strategies,
and objectives as those of Nations Marsico Focused Equities Fund, while the
investment policies, strategies, and objectives of the Janus Growth and Income
Fund are substantially similar to those of Nations Marsico Growth & Income Fund.
Historical performance is not indicative of future performance. For a majority
of the periods shown above, the expenses of the Janus Twenty Fund and the Janus
Growth and Income Fund were lower than the anticipated expenses of Nations
Marsico Focused Equities Fund and Nations Marsico Growth & Income Fund,
respectively. Higher expenses, of course, would have resulted in lower
performance. The Janus Twenty Fund and the Janus Growth and Income Fund are
separate funds and their historical performance is not indicative of the
potential performance of Nations Marsico Focused Equities Fund and Nations
Marsico Growth & Income Fund, respectively. The Janus Twenty Fund and the Janus
Growth and Income Fund were the only investment vehicles that Mr. Marsico
managed during the period he was employed at Janus Capital Corporation that have
substantially similar objectives, policies, and strategies as those of the
Funds. Share prices and investment returns will fluctuate reflecting market
conditions, as well as changes in company-specific fundamentals of portfolio
securities.

<PAGE>
without violation of the Glass-Steagall Act. Such counsel has pointed out,
however, that there are no controlling judicial or administrative
interpretations or decisions and that future judicial or administrative
interpretations of, or decisions relating to, present federal or state statutes,
including the Glass-Steagall Act, and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as future
changes in such federal or state statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any of such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.

OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Funds pursuant to an Administration Agreement. Pursuant to the terms of
the Administration Agreement, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.

First Data Investor Services Group, Inc. ("First Data"), a wholly owned
subsidiary of First Data Corporation, with principal offices at One Exchange
Place, Boston, Massachusetts 02109, serves as the co-administrator of Nations
Funds pursuant to a Co-Administration Agreement. Under the Co-Administration
Agreement, First Data provides various administrative and accounting services to
the Funds including performing the calculations necessary to determine net asset
value per share and dividends of each class of shares of the Funds, preparing
tax returns and financial statements and maintaining the portfolio records and
certain of the general accounting records for the Funds.

For the services rendered pursuant to the Administration and Co-Administration
Agreements, Stephens and First Data are entitled to receive a combined fee at an
annual rate of up to .10% of each Fund's average daily net assets.

NBAI serves as sub-administrator for Nations Funds pursuant to a
Sub-Administration Agreement. Pursuant to the terms of the Sub-Administration
Agreement, NBAI assists Stephens in supervising, coordinating and monitoring
various aspects of the Funds' administrative operations. For providing such
services, NBAI shall be entitled to receive a monthly fee from Stephens based on
an annual rate of .01% of the Funds' average daily net assets.

Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker/dealer. Nations Funds
has entered into distribution agreements with Stephens which provide that
Stephens has the exclusive right to distribute shares of the Funds. Stephens may
pay service fees or commissions to Institutions which assist customers in
purchasing Primary A Shares of the Funds.

NationsBank of Texas, N.A. ("NationsBank of Texas" and, collectively with The
Bank of New York ("BONY"), called "Custodians") serves as Custodian for the
assets of all Nations Funds, except the international portfolios. NationsBank of
Texas is located at 1401 Elm Street, Dallas, Texas 75202, and is a wholly-owned
subsidiary of NationsBank Corporation. In return for providing custodial
services to the Nations Funds Family, NationsBank of Texas is entitled to
receive, in addition to out-of-pocket expenses, fees at the rate of (i) $300,000
per annum, to be paid monthly in payments of $25,000 for custodian services for
up to and including 50 Funds; and (ii) $6,000 per annum, to be paid in equal
monthly payments, for custodian services for each additional Fund above 50
Funds.

BONY has entered into an agreement with each of the Funds and NationsBank of
Texas, N.A., whereby BONY will serve as sub-custodian ("Sub-Custodian") for the
assets of all Nations Funds except the international portfolios, for which BONY
is already serving as Custodian. BONY is located at 90 Washington Street, New
York, New York 10286. In return for providing sub-custodial services, BONY
receives, in addition to out of pocket expenses, fees at the rate of (i) 3/4 of
one basis point per annum on the aggregate net assets of all Nations' Non-Money
Market Funds up to $10 billion; and (ii) 1/2 of one basis point on the excess,
including all Nations' Money Market Funds.

First Data serves as transfer agent (the "Transfer Agent") for the Funds'
Primary A Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109. NationsBank of Texas also serves as the sub-transfer agent
for each Fund's Primary Shares and is entitled to receive an annual fee of
$251,000 from First Data for performing such services.

Price Waterhouse LLP serves as independent accountant to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.

EXPENSES: The accrued expenses of each Fund are deducted from the Fund's total
accrued income before dividends are declared. These expenses include, but are
not limited to: fees paid to the Adviser, Stephens and First Data; taxes;
interest; Trustees' fees; federal and state securities registration and
qualification fees; brokerage fees and commissions; costs of preparing and
printing prospectuses for regulatory purposes and for distribution to existing
shareholders; charges of the
Cus-

<PAGE>
todian and Transfer Agent; certain insurance premiums; outside auditing and
legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by the Adviser, Stephens or First Data
under their respective agreements with Nations Funds; and any extraordinary
expenses. Any general expenses of Nations Fund Trust that are not readily
identifiable as belonging to a particular investment portfolio are allocated
among all portfolios in the proportion that the assets of a portfolio bears to
the assets of Nations Fund Trust or in such other manner as the Board of
Trustees deems appropriate.

Organization And History

The Funds are members of the Nations Funds Family, which consists of Nations
Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc., Nations
Institutional Reserves and Nations LifeGoal Funds, Inc. The Nations Funds Family
currently consists of more than 52 distinct investment portfolios and total
assets in excess of $30 billion.

NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. Nations Fund Trust's fiscal year end is March 31; prior to
1996, Nations Fund Trust's fiscal year end was November 30. The Funds currently
offer four classes of shares -- Primary A Shares, Investor A Shares, Investor B
Shares and Investor C Shares. This Prospectus relates only to the Primary A
Shares of Nations Marsico Focused Equities Fund and Nations Marsico Growth &
Income Fund of Nations Fund Trust. To obtain additional information regarding
the Funds' other classes of shares which may be available to you, contact your
Institution (as defined herein) or Nations Funds at 1-800-765-2668.

Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.

Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See the SAI for examples of when the Investment
Company Act of 1940, as amended (the "1940 Act") requires voting by fund.

As of December 31, 1997, NationsBank and its affiliates possessed or shared
power to dispose or vote with respect to more than 25% of the outstanding shares
of certain classes of shares of Nations Fund Trust and therefore could be
considered to be a controlling person of these classes and series of Nations
Fund Trust for purposes of the 1940 Act. For more detailed information
concerning the percentage of each class or series of shares over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see the SAI.

Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.

About Your Investment

How To Buy Shares

There is a minimum initial investment of $250,000 for each record holder; there
is no minimum subsequent investment.

Primary A Shares of the Funds may be sold to financial institutions (including
NationsBank and its affiliated and correspondent banks) and fee-based planners
acting on behalf of their customers, employee benefit plans, charitable
foundations, endowments and to other funds in the Nations Funds Family.

Primary A Shares are sold at net asset value without the imposition of a sales
charge. Financial institutions ("Institutions") acting on behalf of their
customers ("Customers") may establish certain procedures for processing
Customers' purchase orders and may charge

<PAGE>
their Customers for services provided to them in connection with their
investments.

Purchases may be effected on days on which the New York Stock Exchange (the
"Exchange") is open for business (a "Business Day").

Nations Funds and Stephens reserve the right to reject any purchase order. The
issuance of Primary A Shares is recorded on the books of the Funds, and share
certificates are not issued. It is the responsibility of Institutions, when
applicable, to record beneficial ownership of Primary A Shares and to reflect
such ownership in the account statements provided to their Customers.

EFFECTIVE TIME OF PURCHASES: Purchase orders for Primary A Shares of the Funds
which are received by Stephens or by the Transfer Agent or sub-transfer agent
before the close of regular trading hours on the Exchange (currently 4:00 p.m.,
Eastern time) on any Business Day are priced according to the net asset value
determined on that day but are not executed until 4:00 p.m., Eastern time, on
the Business Day on which immediately available funds in payment of the purchase
price are received by the Funds' Custodian. Such payment must be received no
later than 4:00 p.m., Eastern time, by the third Business Day following receipt
of the order. If funds are not received by such date, the order will not be
accepted and notice thereof will be given to the Institution or investor placing
the order. Payment for orders which are not received or accepted will be
returned after prompt inquiry to the sending Institution or investor. Primary A
Shares are purchased at the net asset value per share next determined after
receipt of the order by Stephens or by the Transfer Agent.

Institutions are responsible for transmitting orders for purchases of Primary A
Shares by their Customers, and for delivering required funds, on a timely basis.
It is Stephens' responsibility to transmit orders it receives to Nations Funds.
Institutions should be aware that during periods of significant economic or
market changes, telephone transactions may be difficult to complete.

How To Redeem Shares

Redemption proceeds are normally remitted in federal funds wired to the
redeeming Institution or investor within three Business Days following receipt
of the order. Institutions are responsible for transmitting redemption orders to
Stephens or to the Transfer Agent and for crediting their Customers' accounts
with the redemption proceeds on a timely basis. It is the responsibility of
Stephens to transmit orders it receives to Nations Funds. No charge for wiring
redemption payments is imposed by Nations Funds, although Institutions may
charge their Customer accounts for these or other services provided in
connection with the redemption of Primary A Shares and may establish additional
procedures. Information concerning any charges or procedures is available from
the Institutions. Redemption orders are effected at the net asset value per
share next determined after acceptance of the order by Stephens or by the
Transfer Agent.

Nations Funds may redeem a shareholder's Primary A Shares if the balance in such
shareholder's account with a Fund drops below $500 as a result of redemptions,
and the shareholder does not increase the balance to at least $500 on 60 days'
written notice. If a Customer has agreed with a particular Institution to
maintain a minimum balance in his or her account at the Institution, and the
balance in such Institution account falls below that minimum, the Customer may
be obliged to redeem all or a part of his or her Primary A Shares in such Fund
to the extent necessary to maintain the required minimum balance in such
Institution account. Nations Funds also may redeem shares involuntarily or make
payment for redemption in readily marketable securities or other property under
certain circumstances in accordance with the 1940 Act.

How To Exchange Shares

The exchange feature enables a shareholder of Primary A Shares of a Fund to
acquire Primary A Shares of another fund when that shareholder believes that a
shift between funds is an appropriate investment decision. An exchange of
Primary A Shares of a Fund for Primary A Shares of another fund is made on the
basis of the next calculated net asset value per share of each fund after the
exchange order is received.

The Funds and each of the other funds of Nations Funds may limit the number of
times this exchange feature may be exercised by a shareholder within a specified
period of time. Also, the exchange feature may be terminated or revised at any
time by Nations Funds upon such notice as may be required by applicable
regulatory agencies (presently 60 days for termination or material revision),
provided that the exchange feature may be terminated or materially revised
without notice under certain unusual circumstances.

<PAGE>
mum investment requirement and any other conditions imposed by each fund. In the
case of any shareholder holding a share certificate or certificates, no
exchanges may be made until all applicable share certificates have been received
by the Transfer Agent and deposited in the shareholder's account. An exchange
will be treated for Federal income tax purposes the same as a redemption of
shares, on which the shareholder may realize a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in situations
where there is an exchange of shares within 90 days after the shares are
purchased.

Nations Funds reserves the right to reject any exchange request. Only shares
that may legally be sold in the state of the investor's residence may be
acquired in an exchange. Only shares of a class that is accepting investments
generally may be acquired in an exchange.

If you have telephone exchange privileges, during periods of significant
economic or market change, telephone exchanges may be difficult to complete. In
such event, shares may be exchanged by mailing your request directly to the
entity through which the original shares were purchased. Investors should
consult their Institution or Stephens for further information regarding
exchanges.

Primary A Shares may be exchanged by directing a request directly to the
Institution, if any, through which the original Primary A Shares were purchased
or in other cases Stephens or the Transfer Agent. Investors should consult their
Institution, Stephens or the Transfer Agent for further information regarding
exchanges. Your exchange feature may be governed by your account agreement with
your Institution.

How The Funds Value Their Shares

The net asset value of a share of each class is calculated by dividing the total
value of its assets, less liabilities, by the number of shares in the class
outstanding. Shares of the Funds are valued as of the close of regular trading
on the Exchange (currently 4:00 p.m., Eastern time) on each Business Day.

Portfolio securities for which market quotations are readily available are
valued at market value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates market value. All other
securities are valued at their fair value following procedures approved by the
Trustees.

How Dividends And Distributions Are Made;
Tax Information

DIVIDENDS AND DISTRIBUTIONS: The Funds declare and pay dividends each calendar
quarter. The Funds' net realized capital gains (including net short-term capital
gains) are distributed at least annually. Distributions paid by the Funds with
respect to one class of shares may be greater or less than those paid with
respect to another class of shares due to the different expenses of the
different classes.

Primary A Shares of the Funds are eligible to receive dividends when declared,
provided, however, that the purchase order for such shares is received at least
one day prior to the dividend declaration and such shares continue to be
eligible for dividends through and including the day before the redemption order
is executed.

The net asset value of Primary A Shares will be reduced by the amount of any
dividend or distribution. Dividends and distributions are paid in cash within
five Business Days of the end of the quarter to which the payment relates.
Accordingly, dividends and distributions on newly purchased shares represent, in
substance, a return of capital. However, such dividends and distributions would
nevertheless be taxable. Certain purchasing Institutions may provide for the
reinvestment of dividends in additional Primary A Shares of the same Fund.
Dividends and distributions payable to a shareholder are paid in cash within
five Business Days after a shareholder's complete redemption of his or her
Primary A Shares in a Fund.

TAX INFORMATION: Distributions from a Fund's net investment income and net
short-term capital gain, if any, are generally designated as dividend
distributions and taxable to the Fund's shareholders as ordinary income.
Distributions from a Fund's net capital gain (for this purpose, the excess of
net long-term capital gain over net short-term capital loss) are designated as
capital gain distributions and taxable to the Fund's shareholders as long-term
capital gain. Under the Taxpayer Relief Act of 1997, noncorporate shareholders
may be taxed on such distributions at preferential rates. See "Additional
Information Concerning Taxes -- Capital Gain Distributions" in the SAI.
Distributions attributable to a Fund's dividend income which are paid to
corporate shareholders may be excludable pursuant to the "dividends-received
deduction" allowable to corporations. See "Additional Information Concerning
Taxes -- Corporate Shareholders" in the SAI. In general, distributions will be
taxable when paid, whether you take such distributions in cash or have them
automatically reinvested in additional Fund shares. However, distributions

<PAGE>
declared in October, November and December of one year and distributed in
January of the following year will be taxable as if they were paid to you in
December of the first year. At the end of each year, you will be notified as to
the Federal income tax status of your distributions from the Fund during the
year.

Your redemptions (including redemptions in-kind) and exchanges of Fund shares
will ordinarily result in a taxable capital gain or loss, depending on the
amount you receive for your shares (or are deemed to receive in the case of
exchanges) and the cost of your shares. See "Additional Information Concerning
Taxes -- Disposition of Fund Shares" in the SAI.

Foreign shareholders may be subject to different tax treatment, including
withholding taxes. See "Additional Information Concerning Taxes -- Foreign
Shareholders" in the SAI. In certain circumstances, U.S. residents may also be
subject to backup withholding. See "Additional Information Concerning
Taxes -- Backup Withholding" in the SAI.

The foregoing discussion regarding taxes is based on tax laws which were in
effect as of the date of this Prospectus and summarizes only some of the
important tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning; you
should consult your tax advisor with respect to your specific tax situation as
well as with respect to foreign, state and local taxes. Further federal tax
considerations are discussed in the SAI.

Appendix A -- Portfolio Securities

The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of the Prospectus
identifies each Fund's permissible investments, and the SAI contains more
information concerning such investments.

ASSET-BACKED SECURITIES: Asset-backed securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset-backed
securities consist of both mortgage- and non-mortgage-backed securities.
Interests in pools of these assets may differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal paid at maturity or specified call dates. Conversely,
asset-backed securities provide periodic payments which may consist of both
interest and principal payments.

The life of an asset-backed security varies depending upon rate of the
prepayment of the underlying debt instruments. The rate of such prepayments will
be a function of current market interest rates and other economic and
demographic factors. For example, falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while rising interest
rates generally decrease the rate of prepayments. An acceleration in prepayments
in response to sharply falling interest rates will shorten the security's
average maturity and limit the potential appreciation in the security's value
relative to a conventional debt security. Consequently, asset-backed securities
may not be as effective in locking in high, long-term yields. Conversely, in
periods of sharply rising rates, prepayments are generally slow, increasing the
security's average life and its potential for price depreciation.

MORTGAGE-BACKED SECURITIES: Mortgage-backed securities represent an ownership
interest in a pool of mortgage loans.

Mortgage pass-through securities may represent participation interests in pools
of residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
Government or one of its agencies, authorities or instrumentalities. Such
securities, which are ownership interests in the underlying mortgage loans,
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semi-annually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.

The guaranteed mortgage pass-through securities in which a Fund may invest may
include those issued or guaranteed by the Government National Mortgage
Association ("GNMA"), by the Federal National Mortgage Association ("FNMA") and
by the Federal Home Loan and Mortgage Corporation ("FHLMC"). Such Certificates
are mortgage-backed securities which represent a partial ownership interest in a
pool of mortgage loans issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations. Such mortgage loans may have fixed or
adjustable rates of interest.

The average life of a mortgage-backed security is likely to be substantially
less than the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal invested far in advance of
the maturity of the mortgages in the pool.

<PAGE>
pounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates and the rate at which principal so prepaid is reinvested. In
addition, prepayment of mortgages included in the mortgage pool underlying a
GNMA Certificate purchased at a premium may result in a loss to the Fund.

Mortgage-backed securities issued by private issuers, whether or not such
obligations are subject to guarantees by the private issuer, may entail greater
risk than obligations directly or indirectly guaranteed by the U.S. Government.

Collateralized Mortgage Obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class pass-
through securities are interests in a trust composed of Mortgage Assets and all
references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distribution on the multi-class pass-through securities.

Moreover, principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of the premium if any has been paid.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semiannual basis.

The principal and interest payments on the Mortgage Assets may be allocated
among the various classes of CMOs in several ways. Typically, payments of
principal, including any prepayments, on the underlying mortgages are applied to
the classes in the order of their respective stated maturities or final
distribution dates, so that no payment of principal is made on CMOs of a class
until all CMOs of other classes having earlier stated maturities or final
distribution dates have been paid in full.

Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities. A Fund will only invest in SMBS that are obligations backed by the
full faith and credit of the U.S. Government. SMBS are usually structured with
two classes that receive different proportions of the interest and principal
distributions from a pool of mortgage assets. A Fund will only invest in SMBS
whose mortgage assets are U.S. Government Obligations.

A common type of SMBS will be structured so that one class receives some of the
interest and most of the principal from the Mortgage Assets, while the other
class receives most of the interest and the remainder of the principal. If the
underlying Mortgage Assets experience greater than anticipated prepayments of
principal, a Fund may fail to fully recoup its initial investment in these
securities. The market value of any class which consists primarily or entirely
of principal payments generally is unusually volatile in response to changes in
interest rates.

The average life of mortgage-backed securities varies with the maturities of the
underlying mortgage instruments. The average life is likely to be substantially
less than the original maturity of the mortgage pools underlying the securities
as the result of mortgage prepayments, mortgage refinancings, or foreclosures.
The rate of mortgage prepayments, and hence the average life of the
certificates, will be a function of the level of interest rates, general
economic conditions, the location and age of the mortgage and other social and
demographic conditions. Such prepayments are passed through to the registered
holder with the regular monthly payments of principal and interest and have the
effect of reducing future payments. Estimated average life will be determined by
the Adviser and used for the purpose of determining the average weighted
maturity and duration of the Funds. For additional information concerning
mortgage backed securities, see the SAI.

The mortgage-backed securities in which the Funds invest are subject to
extension risk. This is the risk that when interest rates rise, prepayments of
the underlying obligations slow thereby lengthening duration and potentially
reducing the value of these securities. The debt securities held by the Funds
also may be subject to credit risk. Credit risk is the risk that the issuers of
securities in which a Fund invests may default in the payment of principal
and/or interest. Any such defaults or adverse changes in an issuer's financial
condition or credit rating may adversely affect the value of the Funds'
portfolio investments and, hence, the value of your investment in the
corresponding Fund.

NON-MORTGAGE ASSET-BACKED SECURITIES: Non-mortgage asset-backed securities
include interests in pools of receivables, such as motor vehicle installment
purchase obligations and credit card receivables. Such securities are generally
issued as pass-through certificates, which represent undivided fractional
ownership interests in the underlying pools of assets. Such securities also may
be debt instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt. Such securities also
may include instruments issued by certain trusts, partnerships or other special
purpose issuers, including pass-through certificates representing participations
in, or debt instruments backed by, the securities and other assets owned by such
issuers.

Non-mortgage-backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities.

<PAGE>
The purchase of non-mortgage-backed securities raises considerations peculiar to
the financing of the instruments underlying such securities. For example, most
organizations that issue asset-backed securities relating to motor vehicle
installment purchase obligations perfect their interests in their respective
obligations only by filing a financing statement and by having the servicer of
the obligations, which is usually the originator, take custody thereof. In such
circumstances, if the servicer were to sell the same obligations to another
party, in violation of its duty not to do so, there is a risk that such party
could acquire an interest in the obligations superior to that of the holders of
the asset-backed securities. Also, although most such obligations grant a
security interest in the motor vehicle being financed, in most states the
security interest in a motor vehicle must be noted on the certificate of title
to perfect such security interest against competing claims of other parties. Due
to the larger number of vehicles involved, however, the certificate of title to
each vehicle financed, pursuant to the obligations underlying the asset-backed
securities, usually is not amended to reflect the assignment of the seller's
security interest for the benefit of the holders of the asset-backed securities.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on those securities. In
addition, various state and Federal laws give the motor vehicle owner the right
to assert against the holder of the owner's obligation certain defenses such
owner would have against the seller of the motor vehicle. The assertion of such
defenses could reduce payments on the related asset-backed securities. Insofar
as credit card receivables are concerned, credit card holders are entitled to
the protection of a number of state and Federal consumer credit laws, many of
which give such holders the right to set off certain amounts against balances
owed on the credit card, thereby reducing the amounts paid on such receivables.
In addition, unlike most other asset-backed securities, credit card receivables
are unsecured obligations of the card holder.

BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. Each Fund will limit its investments in
bank obligations so that it does not exceed 25% of such Fund's total assets at
the time of purchase.

U.S. dollar-denominated obligations issued by foreign branches of domestic banks
("Eurodollar" obligations) and domestic branches of foreign banks ("Yankee
dollar" obligations) and other foreign obligations involve special investment
risks, including the possibility that liquidity could be impaired because of
future political and economic developments, the obligations may be less
marketable than comparable domestic obligations of domestic issuers, a foreign
jurisdiction might impose withholding taxes on interest income payable on such
obligations, deposits may be seized or nationalized, foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal of and interest on such obligations, the
selection of foreign obligations may be more difficult because there may be less
publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.

BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to the purchase of
portfolio securities. Pursuant to line of credit arrangements, certain of the
Funds may borrow primarily for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities.

Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker/dealer, in return
for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests without having to sell portfolio securities, or for
other temporary or emergency purposes. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.

<PAGE>
that are deemed by the Adviser to be creditworthy. Reverse repurchase agreements
are speculative techniques involving leverage, and are subject to asset coverage
requirements if the Funds do not establish and maintain a segregated account as
described above. Under the requirements of the 1940 Act, the Funds are required
to maintain an asset coverage (including the proceeds of the borrowings) of at
least 300% of all borrowings. Depending on market conditions, the Funds' asset
coverage and other factors at the time of a reverse repurchase, the Funds may
not establish a segregated account when the Adviser believes it is not in the
best interests of the Funds to do so. In this case, such reverse repurchase
agreements will be considered borrowings subject to the asset coverage described
above.

Dollar roll transactions consist of the sale by a Fund of mortgage-backed or
other asset-backed securities, together with a commitment to purchase similar,
but not identical, securities at a future date, at the same price. In addition,
a Fund is paid a fee as consideration for entering into the commitment to
purchase. If the broker/dealer to whom a Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Fund is required to repurchase may be worth
less than the security that the Fund originally held, and the return earned by
the Fund with the proceeds of a dollar roll may not exceed transaction costs.

COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and foreign commercial banks. Investments by a Fund in commercial
paper will consist of issues rated "Prime-1" by Moody's or "A-1" by S&P. In
addition, a Fund may acquire unrated commercial paper and corporate bonds that
are determined by the Adviser at the time of purchase to be of comparable
quality to rated instruments that may be acquired by a Fund. Commercial
instruments include variable-rate master demand notes, which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate, and variable- and floating-rate
instruments.

CONVERTIBLE SECURITIES, PREFERRED STOCK, AND WARRANTS: Each Fund may invest in
debt securities convertible into or exchangeable for equity securities,
preferred stocks or warrants. Preferred stocks are securities that represent an
ownership interest in a corporation providing the owner with claims on a
company's earnings and assets before common stock owners, but after bond or
other debt security owners. Warrants are options to buy a stated number of
shares of common stock at a specified price any time during the life of the
warrants.

FIXED INCOME INVESTING: The performance of the fixed income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.

FOREIGN CURRENCY TRANSACTIONS: The Funds may enter into foreign currency
exchange transactions to convert foreign currencies to and from the U.S. dollar.
A Fund either enters into these transactions on a spot (I.E., cash) basis at the
spot rate prevailing in the foreign currency exchange market, or uses forward
contracts to purchase or sell foreign currencies. A forward foreign currency
exchange contract is an obligation by a Fund to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract.

Foreign currency hedging transactions are an attempt to protect a Fund against
changes in foreign currency exchange rates between the trade and settlement
dates of specific securities transactions or changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. Neither spot transactions nor forward
foreign currency exchange contracts eliminate fluctuations in the prices of a
Fund's portfolio securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.

A Fund will generally enter into forward currency exchange contracts only under
two circumstances: (i) when such Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, to "lock" in the U.S.
dollar price of the security; and (ii) when the Adviser believes that the
currency of a particular foreign country may experience a substantial movement
against another currency. Under certain circumstances, a Fund may commit a
substantial portion of its portfolio to the execution of these contracts. The
Adviser will consider the effects such a commitment would have on the investment
program of such Fund and the flexibility of such Fund to purchase additional
securities. Although forward contracts will be used primarily to protect a Fund
from adverse currency movements, they also involve the risk that anticipated
currency movements will not be accurately predicted.

<PAGE>
ernmental restrictions which might adversely affect the payment of principal and
interest on such obligations. In addition, foreign issuers in general may be
subject to different accounting, auditing, reporting, and record keeping
standards than those applicable to domestic companies, and securities of foreign
issuers may be less liquid and their prices more volatile than those of
comparable domestic issuers.

Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign securities
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the United States.
Fixed commissions on foreign securities exchanges are generally higher than the
negotiated commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign securities exchanges, brokers, and
companies than in the United States. With respect to certain foreign countries,
there is a possibility of expropriation or confiscatory taxation, limitations on
the removal of funds or other assets, or diplomatic developments that could
affect investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.

The Funds may invest indirectly in the securities of foreign issuers through
sponsored or unsponsored American Depository Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), European Depository Receipts ("EDRs"), and
American Depositary Shares ("ADSs") or other securities representing securities
of companies based in countries other than the United States. Transactions in
these securities may not necessarily be settled in the same currency as the
underlying securities which they represent. Ownership of unsponsored ADRs, ADSs,
GDRs and EDRs may not entitle the Funds to financial or other reports from the
issuer, to which it would be entitled as the owner of sponsored ADRs, ADSs, GDRs
or EDRs. Generally, ADRs and ADSs in registered form, are designed for use in
the U.S. securities markets. GDRs are designed for use in both the U.S. and
European securities markets. EDRs, in bearer form, are designed for use in
European securities markets. ADRs, ADSs, GDRs and EDRs also involve certain
risks of other investments in foreign securities.

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS: The Funds may attempt to
reduce the overall level of investment risk of particular securities and attempt
to protect a Fund against adverse market movements by investing in futures,
options and other derivative instruments. These include the purchase and writing
of options on securities (including index options) and options on foreign
currencies, and investing in futures contracts for the purchase or sale of
instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and swaps
and swap-related products such as interest rate swaps, currency swaps, caps,
collars and floors.

The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable position.
Additional risks inherent in the use of futures, options, forward contracts and
swaps include: imperfect correlation between the price of futures, options and
forward contracts and movements in the prices of the securities or currencies
being hedged; the possible absence of a liquid secondary market for any
particular instrument at any time; and the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. A Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks, is
contained in the SAI.

ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Funds will not hold more
than 15% of the value of their respective net assets in securities that are
illiquid or such lower percentage as may be required by the states in which the
appropriate Fund sells its shares. The Adviser will take reasonable steps to
bring the Funds in compliance with this policy if the level of illiquid
investments exceeds 15% of the Funds' net assets. Repurchase agreements, time
deposits and guaranteed investment contracts that do not provide for payment to
a Fund within seven days after notice, and illiquid restricted securities, are
subject to the limitation on illiquid securities.

If otherwise consistent with their investment objectives and policies, certain
Funds may purchase securities which are not registered under the Securities Act
of 1933, as amended (the "1933 Act") but which can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the 1933 Act, or which
were issued under Section 4(2) of the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by a Fund's Board of Trustees or
the Adviser, acting under guidelines approved and monitored by the Fund's Board,
after considering trading activity, availability of reliable price information
and other relevant information, that an adequate trading market exists for that
security. To the extent that, for a period of time, qualified institutional or
other buyers cease purchasing such restricted securities pursuant to Rule 144A
or otherwise, the level of illiquidity of a Fund holding such securities may
increase during such period.

INDEXED/STRUCTURED SECURITIES: Indexed/structured securities are typically
short- to intermediate-term debt securities whose value at maturity or interest
rate is

<PAGE>
linked to currencies, interest rates, equity securities, indices, commodity
prices or other financial indicators. Such securities may be positively or
negatively indexed (i.e., their value may increase or decrease if the reference
index or instrument appreciates). Indexed/structured securities may have return
characteristics similar to direct investments in the underlying instruments and
may be more volatile than the underlying instruments. The Fund bears the market
risk of an investment in the underlying instruments, as well as the credit risk
of the issuer.

INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of their
portfolios from interest rate fluctuations, the Funds may enter into various
hedging transactions, such as interest rate swaps and the purchase or sale of
interest rate caps and floors. Interest rate swaps involve the exchange by a
Fund with another party of their respective commitments to pay or receive
interest, E.G., an exchange of floating-rate payments for fixed-rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.

The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. The Adviser expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.

LOWER-RATED DEBT SECURITIES: The Funds may invest in lower-rated debt
securities. Lower rated, high-yielding securities are those rated "Ba" or "B" by
Moody's or "BB" or "B" by S&P which are commonly referred to as "junk bonds."
These bonds provide poor protection for payment of principal and interest.
Lower-quality bonds involve greater risk of default or price changes due to
changes in the issuer's creditworthiness than securities assigned a higher
quality rating. These securities are considered to have speculative
characteristics and indicate an aggressive approach to income investing. The
Funds will not purchase debt securities rated below "CCC-" by S&P or "Caa" by
Moody's. Subsequent to its purchase by a Fund, an issue of debt securities may
cease to be rated, or its ratings may be reduced below the minimum rating
required for purchase by a Fund. The Adviser will consider such an event in
determining whether a Fund should continue to hold the security.

The Funds may also purchase unrated bonds of foreign and domestic issuers.

The market for lower-rated securities may be thinner and less active than that
for higher quality securities, which can adversely affect the price at which
these securities can be sold. If market quotations are not available, these
lower-rated securities will be valued in accordance with procedures established
by the Funds' Boards, including the use of outside pricing services. Adverse
publicity and changing investor perceptions may affect the ability of outside
pricing services used by a Fund to value its portfolio securities, and a Fund's
ability to dispose of these lower-rated bonds.

MONEY MARKET INSTRUMENTS: The term "money market instruments" refers to
instruments with remaining maturities of one year or less. Money market
instruments may include, among other instruments, certain U.S. Treasury
Obligations, U.S. Government Obligations, bank instruments, commercial
instruments, repurchase agreements and municipal securities. Such instruments
are described in this Appendix A.

OTHER INVESTMENT COMPANIES: Each Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
Pursuant to an exemptive order issued by the SEC, the Nations' Non-Money Market
Funds may purchase shares of Nations' Money Market Funds.

PASSIVE FOREIGN INVESTMENT COMPANIES: Passive foreign investment companies
("PFICs") are any foreign corporations which generate certain amounts of passive
income or hold certain amounts of assets for the production of passive income.
Passive income includes dividends, interest, royalties, rents and annuities.
Income tax regulations may require the Fund to recognize income associated with
the PFIC prior to the actual receipt of any such income.

PAY-IN-KIND BONDS: Pay-in-kind bonds are debt securities that normally give the
issuer an option to pay cash at a coupon payment date or give the holder of the
security a similar bond with the same coupon rate and a face value equal to the
amount of the coupon payment that would have been made.

<PAGE>
money to developers of properties, and passes any interest income it may earn to
its shareholders. REITs may be affected by changes in the value of the
underlying property owned or financed by the REIT, while Mortgage REITs also may
be affected by the quality of credit extended. Both Equity and Mortgage REITs
are dependent upon management skill and may not be diversified. REITs also may
be subject to heavy cash flow dependency, defaults by borrowers,
self-liquidation, and the possibility of failing to qualify for tax-free
pass-through of income under the Code.

REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker/dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
idle cash. A risk associated with repurchase agreements is the failure of the
seller to repurchase the securities as agreed, which may cause a Fund to suffer
a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Funds.

SECURITIES LENDING: To increase return on portfolio securities, the Funds may
lend their portfolio securities to broker/dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned. There is a risk of delay in receiving collateral or in
recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Adviser to be creditworthy and when, in its
judgment, the income to be earned from the loan justifies the attendant risks.
The aggregate of all outstanding loans of a Fund may not exceed 33% of the value
of its total assets. Cash collateral received by a Nations Fund may be invested
in a Nations' Money Market Fund.

STEP COUPON BONDS: Step coupon bonds are debt securities that trade at a
discount from their face value and pay coupon interest. The discount from the
face value depends on the time remaining until cash payments begin, prevailing
interest rates, liquidity of the security and the perceived credit quality of
the issuer.

STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Each Fund may
purchase and sell futures contracts and related options with respect to non-U.S.
stock indices, non-U.S. interest rates and foreign currencies, that have been
approved by the Commodities Futures Trading Commission ("CFTC") for investment
by U.S. investors, for the purpose of hedging against changes in values of a
Fund's securities or changes in the prevailing levels of interest rates or
currency exchange rates. The contracts entail certain risks, including but not
limited to the following: no assurance that futures contracts transactions can
be offset at favorable prices; possible reduction of a Fund's total return due
to the use of hedging; possible lack of liquidity due to daily limits on price
fluctuation; imperfect correlation between the contracts and the securities or
currencies being hedged; and potential losses in excess of the amount invested
in the futures contracts themselves.

Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
for which no common clearing facility exists and a trader may look only to the
broker for performance of the contract. In addition, unless a Fund hedges
against fluctuations in the exchange rate between the U.S. dollar and the
currencies in which trading is done on foreign exchanges, any profits that such
Fund might realize could be eliminated by adverse changes in the exchange rate,
or the Fund could incur losses as a result of those changes.

U.S. GOVERNMENT OBLIGATIONS: U.S. Government Obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. U.S. Treasury
obligations differ only in their interest rates, maturities and time of
issuance. Obligations of U.S. Government agencies, authorities and
instrumentalities are issued by government-sponsored agencies and enterprises
acting under authority of Congress. Although obligations of federal agencies,
authorities and instrumentalities are not debts of the U.S. Treasury, some are
backed by the full faith and credit of the U.S. Treasury, such as direct
pass-through certificates of the Government National Mortgage Association; some
are supported by the right of the issuer to borrow from the U.S. Government,
such as obligations of Federal Home Loan Banks, and some are backed only by the
credit of the issuer itself, such as obligations of the Federal National
Mortgage Association. No assurance can be given that the U.S. Government would
provide financial support to government-sponsored instrumentalities if it is not
obligated to do so by law.

The market value of U.S. Government Obligations may fluctuate due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government Obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government Obligations are subject to fluctuations in yield or
value due to their structure or contract terms.

WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities take
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that

<PAGE>
interest rates on debt securities at the time of delivery may be higher or lower
than those contracted for on the security purchased.

ZERO COUPON BONDS: Zero coupon bonds are debt securities that do not pay
interest at regular intervals, but are issued at a discount from face value. The
discount approximates the total amount of interest the security will accrue from
the date of issuance to maturity. The market value of these securities generally
fluctuates more in response to changes in interest rates than interest-paying
securities of comparable maturity.

Appendix B -- Description Of Ratings

The following summarizes the highest eight ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.

AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.

AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.

A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.

BB, B -- Bonds rated BB and B are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB represents the lowest
degree of speculation and B a higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.

CCC, CC -- An obligation rated CCC is vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation. In the
event of adverse conditions, the obligor is not likely to have the capacity
to meet its financial commitments on the obligation; an obligation rated CC
is highly vulnerable to nonpayment.

To provide more detailed indications of credit quality, the AA, A, BBB and CCC
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.

The following summarizes the highest eight ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.

Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.

Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.

A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Baa -- Bonds that are rated Baa are considered medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.

Caa, Ca -- Bonds that are rated Caa are of poor standing. Such issues may
be in default or there

<PAGE>
may be present elements of danger with respect to principal or interest.
Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.

Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa through B. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category. With regard to municipal bonds, those bonds
in the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aa1, A1 or Baa1,
respectively.

Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1. Commercial paper rated A-3 exhibits
adequate protection parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the obligor to
meet its financial commitment on the obligation. Commercial paper rated A-3 or B
correlates with the S&P Bond rankings (described above) of BBB/BBB- and BB+,
respectively.

The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term obligations. Issuers
rated Prime-2 (or related supporting institutions) are considered to have a
strong capacity for repayment of senior short-term obligations. This will
normally be evidenced by many of the characteristics of issuers rated Prime-1,
but to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained. Issuers rated Prime-3 have an acceptable ability for
repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

<PAGE>
Prospectus

INVESTOR A SHARES
DECEMBER 31, 1997

This Prospectus describes NATIONS MARSICO FOCUSED Nations Marsico
EQUITIES FUND and ATIONS MARSICO GROWTH & INCOME FUND Focused Equities
(the "Funds") of Nations Fund Trust, an open-end Fund
management investment company in the Nations Focused
Equities Funds Family ("Nations Funds" or "Nations Nations Marsico
Funds Family"). This Prospectus describes one Growth &
class of shares of the Funds -- Investor A Shares. Income Fund

This Prospectus sets forth concisely the
information about the Funds that a Nations Marsico
prospective purchaser of Investor A Shares should
consider before investing. Investors should read
this Prospectus and retain it for future reference.
Additional information about Nations Fund Trust is
contained in a separate Income Fund
Statement of Additional Information (the "SAI")
that has been filed with the Securities and
Exchange Commission (the "SEC") and is available
upon request without charge by writing or calling
Nations Funds at its address or telephone number
shown below. The SAI, dated December 31, 1997, is
incorporated by reference in its entirety into this
Prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI,
material incorporated by reference in this
Prospectus and other information regarding
registrants that file electronically with the SEC.
NationsBanc Advisors, Inc. ("NBAI") is the
investment adviser to the Funds. Marsico Capital
Management, LLC ("Marsico Capital") is investment
sub-adviser to the Funds. As used herein the term
"Adviser" shall mean NBAI and/or Marsico Capital as
the context may require.

NATIONSBANK AFFILIATES PROVIDE SERVICES TO NATIONS
FUNDS, FOR WHICH THEY ARE COMPENSATED. STEPHENS
INC., WHICH IS NOT AFFILIATED WITH NATIONSBANK, IS
THE SPONSOR AND ADMINISTRATOR AND SERVES AS THE
DISTRIBUTOR FOR NATIONS FUNDS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

For Fund information call:
1-800-321-7854
Nations Funds
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255

[Nations Funds Logo]

NF-97666-1297

<PAGE>
Table Of Contents

About The Prospectus Summary 3
Funds
Expenses Summary 4

Objectives 5

How The Objectives Are Pursued 5

How Performance Is Shown 9

How The Funds Are Managed 9

Organization And History 13

About Your How To Buy Shares 14
Investment
How To Redeem Shares 16

How To Exchange Shares 17

Shareholder Servicing And Distribution Plan 18

How The Funds Value Their Shares 19

How Dividends And Distributions are Made; Tax
Information 20

Appendix A -- Portfolio Securities 21

Appendix B -- Description of Ratings 30

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION
WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY NATIONS FUNDS OR ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
NATIONS FUNDS OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.

<PAGE>
About The Funds

Prospectus Summary

(Bullet) TYPE OF COMPANY: Open-end management investment company.

(Bullet) INVESTMENT OBJECTIVES AND POLICIES:

(Bullet) The investment objective of Nations Marsico Focused Equities
Fund is to seek long-term growth of capital. It is a
non-diversified fund that pursues its objective by normally
investing in a core position of 20-30 common stocks.

<PAGE>

(Bullet) MINIMUM PURCHASE: $1,000 minimum initial investment for each of the
Funds per record holder except that the minimum initial investment is:
$500 for Individual Retirement Account ("IRA") investors; $250 for
non-working spousal IRAs; and $100 for investors participating on a
monthly basis in the Systematic Investment Plan. There is no minimum
investment amount for investments by certain 401(k) and employee
pension plans or salary reduction -- Individual Retirement Accounts.
The minimum subsequent investment is $100, except for investments
pursuant to the Systematic Investment Plan. See "How To Buy Shares."

Expenses Summary

Expenses are one of several factors to consider when investing in the Funds. The
following tables summarize shareholder transaction and operating expenses for
Investor A Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in Investor A Shares of the
indicated Fund over specified periods.

INVESTOR A SHARES
<TABLE>
<CAPTION>
<S> <C> <C>
Nations Nations
Marsico Marsico
Focused Equities Growth & Income
SHAREHOLDER TRANSACTION EXPENSES Fund Fund

Maximum Sales Load Imposed on Purchases (as a percentage of offering price) None None
Maximum Deferred Sales Charge (as a percentage of the lower of the original purchase price
or redemption proceeds) None None
Redemption Fees Payable to the Fund(1) 1.00% 1.00%

<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C> <C>
(as a percentage of average net assets)

Management Fees .85% .85%
Rule 12b-1 Fees (including shareholder servicing fees) .25% .25%
Other Expenses .25% .25%
Total Operating Expenses 1.35% 1.35%
</TABLE>

(1) There is a 1% redemption fee retained by the Fund or Funds which is imposed
only on certain redemptions of Investor A Shares held less than 18 months.
See "How To Redeem Shares -- Redemption Fee."

EXAMPLES:

You would pay the following expenses on a $1,000 investment in Investor A Shares
of the Funds, assuming (1) a 5% annual return and (2) redemption at the end of
each time period.

<TABLE>
<CAPTION>
<S> <C> <C>
Nations Nations
Marsico Marsico
Focused Growth
Equities & Income
Fund Fund

1 Year $ 14 $ 14
3 Years $ 43 $ 43
</TABLE>

The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor A Shares will bear either directly or indirectly. The "Other Expenses"
figures in the above tables are based on estimates. For a more com-

<PAGE>
plete description of the Funds' operating expenses, see "How The Funds Are
Managed." For a more complete description of the Rule 12b-1 and shareholder
servicing fees payable by the Funds, see "Shareholder Servicing And Distribution
Plan."

THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.

Objectives

NATIONS MARSICO FOCUSED EQUITIES FUND: The investment objective of Nations
Marsico Focused Equities Fund is to seek long-term growth of capital.
NATIONS MARSICO GROWTH & INCOME FUND: The investment objective of Nations
Marsico Growth & Income Fund is to seek long-term growth of capital with a
limited emphasis on income.

How The Objectives Are Pursued

(Bullet) Change -- The Adviser believes that extraordinary growth derives from
products, markets and technologies that are in flux.

(Bullet) Franchise -- The Adviser looks for strong brand franchises that can be
leveraged in a changing global environment.

(Bullet) Themes -- The Adviser seeks companies that are moving with, not
against, the major social, economic and cultural shifts taking place
in the world.

Once an opportunity is identified, it is subjected to a disciplined analytic
process including both "top-down" and "bottom-up" elements. The "top-down"
element of the process takes into consideration such macroeconomic factors as
interest rates, inflation, the regulatory environment and the global competitive
landscape, and also analyzes such factors as the most attractive global
opportunities, industry consolidation and the sustainability of economic trends.
With respect to the "bottom-up" element, the Adviser considers company
fundamentals such as commitment to research, market franchise and management's
strength and vision to determine the present and future value of the company as
an investment.

Realization of income is not a significant investment consideration. Any income
realized on the Fund's investments will be incidental to its objective.

<PAGE>
NATIONS MARSICO GROWTH & INCOME FUND: Under normal circumstances, Nations
Marsico Growth & Income Fund pursues its objective by investing up to 75% of its
assets in equity securities selected primarily for their growth potential and at
least 25% of its assets in securities that have income potential. The Fund
typically emphasizes the growth component. However, in adverse market
conditions, the Fund may reduce the growth component of its portfolio to 25% of
its assets. The Fund may invest in any combination of common stock, preferred
stock, warrants, convertible securities and debt securities. However, it is
expected that the Fund will emphasize investments in large capitalization common
stocks. The Fund may shift assets between the growth and income components of
its portfolio based on the Adviser's analysis of relevant market, financial and
economic conditions. If the Adviser believes that growth securities will provide
better returns than the yields then available or expected on income-producing
securities, then the Fund will place a greater emphasis on the growth component.
In building the portfolio, the Adviser seeks to identify individual companies
with earnings growth potential that may not be recognized by the market at
large. To identify such opportunities, the Adviser looks for a combination of
four characteristics:

(Bullet) Change -- The Adviser believes that extraordinary growth derives from
products, markets and technologies that are in flux.

(Bullet) Franchise -- The Adviser looks for strong brand franchises that can be
leveraged in a changing global environment.

(Bullet) Themes -- The Adviser seeks companies that are moving with, not
against, the major social, economic and cultural shifts taking place
in the world.

GENERAL: The Funds may also invest up to 25% of their assets in mortgage- and
asset-backed securities, up to 10% of their assets in zero coupon, pay-in-kind
and step coupon securities, and may invest without limit in indexed/structured
securities. The Funds will invest no more than 35% of their assets in
high-yield/high-risk securities. The Funds may also purchase high-grade
commercial paper, certificates of deposit, and repurchase agreements. The Funds
may also invest in short-term debt securities as a means of receiving a return
on idle cash. See Appendix B for a description of ratings.

<PAGE>
investments are a residual -- they represent the assets that remain after the
Adviser has committed available assets to desirable investment opportunities.
When the Funds' cash position increases, it may not participate in stock market
advances or declines to the extent that it would if it remained more fully
invested in common stocks.

The Funds may invest up to 25% of their assets in foreign equity and debt
securities. The Funds may invest directly in foreign securities denominated in a
foreign currency and not publicly traded in the United States. Other ways of
investing in foreign securities include depositary receipts or shares, and
passive foreign investment companies. Foreign securities are generally selected
on a company-by-company basis without regard to any defined allocation among
countries or geographic regions. However, certain factors such as expected
levels of inflation, government policies influencing business conditions, the
outlook for currency relationships, and prospects for economic growth among
countries, regions or geographic areas may warrant greater consideration in
selecting foreign securities. The Funds may use options, futures, forward
currency contracts and other types of derivatives for hedging purposes. The
Funds may purchase securities on a when-issued, delayed delivery or forward
commitment basis.

The value of a Fund's investments in debt securities, including U.S. Government
Obligations, will tend to decrease when interest rates rise and increase when
interest rates fall. In general, longer-term debt instruments tend to fluctuate
in value more than shorter-term debt instruments in response to interest rate
movements. In addition, debt securities that are not backed by the United States
Government are subject to credit risk, which is the risk that the issuer may not
be able to pay principal and/or interest when due. See Appendix B "Lower-Rated
Securities" for a description of the risk associated with investments in
high-yield/high-risk securities.

<PAGE>
Investing in foreign securities involves special risks. Investing in securities
denominated in foreign currencies and utilization of forward foreign currency
exchange contracts and other currency hedging techniques involve certain
considerations comprising both opportunities and risks not typically associated
with investing in U.S. dollar-denominated securities.

For additional risk information regarding the Funds' investments in particular
instruments, see "Appendix A -- Portfolio Securities."

Each Fund may not:

Nations Marsico Focused Equities Fund may not:

Nations Marsico Growth & Income Fund may not:

Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, the Fund will not
hold more than 10% of the voting securities of any issuer.

<PAGE>
How Performance Is Shown

From time to time the Funds may advertise the total return and yield on a class
of shares. BOTH TOTAL RETURN AND YIELD FIGURES ARE BASED ON HISTORICAL DATA AND
ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" of a class
of shares of a Fund may be calculated on an average annual total return basis or
an aggregate total return basis. Average annual total return refers to the
average annual compounded rates of return on a class of shares over one-, five-,
and ten-year periods or the life of a Fund (as stated in the Funds'
advertisement) that would equate an initial amount invested at the beginning of
a stated period to the ending redeemable value of the investment, assuming the
reinvestment of all dividend and capital gain distributions. Aggregate total
return reflects the total percentage change in the value of the investment over
the measuring period, again assuming the reinvestment of all dividends and
capital gain distributions. Total return may also be presented for other
periods.

Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and a Fund's operating
expenses. Investment performance also often reflects the risks associated with
such Fund's investment objective and policies. These factors should be
considered when comparing a Fund's investment results to those of other mutual
funds and other investment vehicles. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in a Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time.

In addition to Investor A Shares, the Funds offer Primary A, Investor B and
Investor C Shares. Each class of shares may bear different sales charges,
shareholder servicing fees and other expenses, which may cause the performance
of a class to differ from the performance of the other classes. Total return and
yield quotations will be computed separately for each class of the Funds'
shares. Any fees charged by a selling agent and/or servicing agent directly to
its customers' accounts in connection with investments in the Funds will not be
included in calculations of total return or yield. Each Fund's annual report
contains additional performance information and is available upon request
without charge from the Funds' distributor or your Agent (as defined below) or
by calling Nations Funds at the toll-free number indicated on the cover of this
Prospectus.

How The Funds Are Managed

INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds pursuant to an Investment Advisory Agreement with the Trust
("Investment Advisory Agree-

<PAGE>
ment"). NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.

Subject to the general supervision of Nations Fund Trust's Board of Trustees,
NBAI, and in accordance with each Fund's investment policies, Marsico Capital
formulates guidelines and lists of approved investments for each Fund, makes
decisions with respect to and places orders for each Fund's purchases and sales
of portfolio securities and maintains records relating to such purchases and
sales. Marsico Capital is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the case
of agency transactions, financial institutions which are affiliated with NBAI or
which have sold shares in such Funds, if Marsico Capital believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objective, policies and restrictions, each Fund
may invest in securities of companies with which NationsBank has a lending
relationship.

For the services provided and expenses assumed pursuant to the Investment
Advisory Agreement, NBAI is entitled to receive an advisory fee, computed daily
and paid monthly, at the annual rate of .85% of the average daily net assets of
Nations Marsico Focused Equities Fund and .85% of the average daily net assets
of Nations Marsico Growth & Income Fund.

From time to time, NBAI (and/or Marsico Capital) may waive or reimburse (either
voluntarily or pursuant to applicable state limitations) advisory fees and/or
expenses payable by a Fund.

Mr. Marsico manages the investment program of the Funds and is primarily
responsible for the day-to-day management of the Funds' portfolios. Prior to
forming Marsico Capital Mr. Marsico served as Portfolio Manager of the Janus
Twenty Fund from January 31, 1988 through August 11, 1997 and served in the same
capacity for the Janus Growth and Income Fund from May 31, 1991 through August
11, 1997. The average annual returns for the Janus Twenty Fund and the Janus
Growth and Income Fund ("Janus Funds") from the date on which Mr. Marsico began
serving as Portfolio Manager of each Janus Fund through August 7, 1997 (the last
date for which performance information is available) were 22.38% and 21.19%,
respectively. On August 11, 1997, the date on which Mr. Marsico ceased serving
as the Portfolio Manager to both the Janus Twenty Fund and the Janus Growth and
Income Fund, the Janus Twenty Fund had approximately $6 billion in net assets,
and the Janus Growth and Income Fund had approximately $1.7 billion in net
assets. As Executive Vice President and Portfolio Manager of the Janus Twenty
Fund and the Janus Growth and Income Fund, Mr. Marsico had full discretionary
authority over the selection of investments for those funds. Average annual
returns for the one-year, three-year and five-year periods ended August 7, 1997
and for the entire period during which Mr. Marsico managed those funds compared
with the performance of the S&P 500 Index were:

<PAGE>

<TABLE>
<CAPTION>
Janus Janus
Twenty Growth and S&P 500
Fund (a) Income Fund (a) Index (b)
<S> <C> <C> <C>
One Year 48.21% 47.77% 46.41%
(8/8/96 - 8/7/97)
Three Years 32.07% 31.13% 30.63%
(8/11/94 -
8/7/97)
Five Years 20.02% 21.16% 20.98%
(8/13/92 -
(8/7/97)
During Period of 22.38% 21.19% Janus Twenty:
Management by Mr. 18.20%(c)
Marsico (through Janus Growth
8/7/97) and Income:
18.59%(d)
</TABLE>

(a) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.

(c) This figure represents the average annual return of the S&P 500 Index during
the period that Mr. Marsico managed the Janus Twenty Fund through August 7,
1997.

(d) This figure represents the average annual return of the S&P 500 Index during
the period that Mr. Marsico managed the Janus Growth and Income Fund through
August 7, 1997.

Morrison & Foerster LLP, counsel to Nations Funds and special counsel to
NationsBank, has advised Nations Funds and NationsBank that NationsBank and its
affiliates may perform the services contemplated by the Investment Advi-
sory Agreement and this Prospectus without violation of the Glass-Steagall Act.
Such counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in federal or state statutes, including the
Glass-Steagall Act, and regulations and judicial or administrative decisions or
interpretations thereof, could prevent such entities from continuing to perform,
in whole or in part, such services. If any such entity were prohibited from
performing any of such services, it is expected that new agreements would be
proposed or entered into with another entity or entities qualified to perform
such services.

<PAGE>
accounting services to the Funds including performing the calculations necessary
to determine the net asset value per share and dividends of each class of shares
of the Funds, preparing tax returns and financial statements and maintaining the
portfolio records and certain of the general accounting records for the Funds.

NBAI serves as sub-administrator for Nations Funds pursuant to a
Sub-Administration Agreement. Pursuant to the terms of the Sub-Administration
Agreement, NBAI assists Stephens in supervising, coordinating and monitoring
various aspects of the Funds' administrative operations. For providing such
services NBAI shall be entitled to receive a monthly fee from Stephens based on
an annual rate of .01% of the Funds' average daily net assets.

Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker/dealer. Nations Funds
has entered into a distribution agreement with Stephens which provides that
Stephens has the exclusive right to distribute shares of the Funds. Stephens may
pay service fees or commissions to selling agents that assist customers in
purchasing Investor A Shares of the Funds. See "Shareholder Servicing And
Distribution Plan."

NationsBank of Texas, N.A. ("NationsBank of Texas" and, collectively with The
Bank of New York ("BONY"), called "Custodians") serves as Custodian for the
assets of all Nations Funds, except the international portfolios. NationsBank of
Texas is located at 1401 Elm Street, Dallas, Texas 75202, and is a wholly-owned
subsidiary of NationsBank Corporation. In return for providing custodial
services, NationsBank of Texas is entitled to receive, in addition to
out-of-pocket expenses, fees at the rate of (i) $300,000 per annum, to be paid
monthly in payments of $25,000 for custodian services for up to and including 50
Funds; and (ii) $6,000 per annum, to be paid in equal monthly payments, for
custodian services for each additional Fund above 50 Funds.

BONY has entered into an agreement with each of the Funds and NationsBank of
Texas, whereby BONY will serve as sub-custodian ("Sub-Custodian") for the assets
of all Nations Funds except the international portfolios, for which BONY is
already serving as Custodian. BONY is located at 90 Washington Street, New York,
New York 10286. In return for providing sub-custodial services, BONY receives,
in addition to out of pocket expenses, fees at the rate of (i) 3/4 of one basis
point per annum on the aggregate net assets of all Nations' Non-Money Market
Funds up to $10 billion; and (ii) 1/2 of one basis point on the excess,
including all Nations' Money Market Funds.

First Data serves as transfer agent (the "Transfer Agent") for the Funds'
Investor A Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.

Price Waterhouse LLP serves as independent accountant to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.

EXPENSES: The accrued expenses of each Fund, as well as certain expenses
attributable to Investor A Shares, are deducted from accrued income before
dividends are declared. The Funds' expenses include, but are not limited to:
fees paid to the Adviser, Stephens and First Data; taxes; interest; trustees'
fees; federal and state securities registration and qualification fees;
brokerage fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by the Adviser, Stephens or First Data
under their respective agreements with Nations Funds; and any extraordinary
expenses. Investor A Shares bear certain class specific expenses and also bear
certain additional shareholder service and/or sales support costs. Any general
expenses of Nations Fund Trust that are not readily identifiable as belonging to
a particular investment portfolio are allocated among all portfolios in the
proportion that the assets of a portfolio bears to the assets of Nations Fund
Trust or in such other manner as the Board of Trustees deems appropriate.

<PAGE>
Organization And History

NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. Nations Fund Trust's fiscal year end is March 31; prior to
1996, Nations Fund Trust's fiscal year end was November 30. The Funds currently
offer four classes of shares -- Primary A Shares, Investor A Shares, Investor B
Shares and Investor C Shares. This Prospectus relates only to the Investor A
Shares of Nations Marsico Focused Equities Fund and Nations Marsico Growth &
Income Fund. To obtain additional information regarding the Funds' other classes
of shares which may be available to you, contact your Agent (as defined herein)
or Nations Funds at 1-800-321-7854.

<PAGE>
About Your Investment

How To Buy Shares

Investor A Shares are available to the following categories of Investors:

(Bullet) Investors who purchase through accounts established with certain
fee-based investment advisers or financial planners, including Nations
Funds Personal Investment Planner accounts, wrap fee accounts and
other managed agency/asset allocation accounts.

(Bullet) Directors, officers and employees of NationsBank Corporation, its
affiliates and subsidiaries.

(Bullet) Individuals investing a distribution received from a NationsBank trust
account and certain other rollovers or distributions received from
NationsBank fiduciary accounts.

(Bullet) Current Investor A Shareholders (other than Investor A Shareholders
who own such shares exclusively through a cash sweep option) who
purchased Investor A Shares prior to August 1, 1997.

(Bullet) Employee benefit plans making an initial investment of $1 million or
more in the Nations Funds Family.

(Bullet) Investors (other than those described above) investing $1 million or
more in the Nations Funds Family through an Agent (as defined below)
(a "Substantial Investor"). In determining whether an investor
qualifies as a Substantial Investor, all current holdings of Funds in
the Nations Funds Family other than the Nations Funds money market or
index funds, Nations Short-Term Income Fund and Nations Short-Term
Municipal Income Fund, will be considered.

Purchase orders for Investor A Shares may be placed directly with a Fund or
through banks, broker/dealers or other financial institutions (including certain
affiliates of NationsBank) that have entered into a shareholder servicing
agreement ("Servicing Agreement") with Nations Funds ("Servicing Agents") and/or
a sales support agreement ("Sales Support Agreement") with Stephens ("Selling
Agents"). Servicing Agents and Selling Agents are sometimes referred to
hereafter as "Agents."

Purchases of Investor A Shares through a Nations Funds Personal Investment
Planner account, which is a managed agency/asset allocation account established
with NBAI (an "Account"), are governed by the terms and conditions of the
Account, which are set forth in the Client Agreement and Disclosure Statement
provided by NBAI to each investor who establishes an Account. Because of the
nature of the Account, certain of the features described in this Prospectus are
not available to investors purchasing Investor A Shares through an Account.
Potential investors through an Account should refer to the Client Agreement and
Disclosure Statement for more information regarding the Account, including
information regarding the fees and expenses charged in connection with an
Account.

There is a minimum initial investment of $1,000 in each Fund, except that the
minimum initial investment is:

(Bullet) $500 for IRA investors;

(Bullet) $250 for non-working spousal IRAs; and

(Bullet) $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.

<PAGE>
or similar types of accounts. However, the assets of such plans must reach an
asset value of $1,000 ($500 for SEPs, SAR-SEPs, SIMPLE IRAs, and SAR-IRAs)
within one year of the account open date. If the assets of such plans do not
reach the minimum asset size within one year, Nations Funds reserves the right
to redeem the shares held by such plans on 60 days' written notice. The minimum
subsequent investment is $100, except for investments pursuant to the Systematic
Investment Plan described below.

Investor A Shares are purchased at net asset value per share. Purchases may be
effected on days on which the New York Stock Exchange (the "Exchange") is open
for business (a "Business Day").

Nations Funds and Stephens reserve the right to reject any purchase order. The
issuance of Investor A Shares is recorded on the books of the Funds, and share
certificates are not issued unless expressly requested in writing. Certificates
are not issued for fractional shares.

OPENING AN ACCOUNT DIRECTLY WITH THE FUND: Certain investors may open a regular
(non-retirement) account directly with a Fund, either by mail or by wire.

BY MAIL: Investors should complete a New Account Application and forward it,
along with a check made payable to the respective Fund, to:

Nations Funds
P.O. Box 34602
Charlotte, NC 28254-4602

BY WIRE: Investors should call Nations Funds at 1-800-321-7854 for an account
number and use the following wire instructions:

Nations Funds
c/o Boston Safe Deposit & Trust
ABA #011001234
DDA #154202

Account Name _________________________________
Account Number________________________________
Fund Name_____________________________________

Investors should complete a New Account Application and mail it to the address
above.

RETIREMENT ACCOUNTS: For IRAs and other retirement accounts, investors should
call Nations Funds at 1-800-321-7854.

ADDITIONAL PURCHASES: Additional purchases may be made by mail or wire. To
purchase additional shares by mail, send a check made payable to the respective
Fund with a reinvestment slip to the address set forth above. To purchase
additional shares by wire, follow the wiring instructions set forth above.

EFFECTIVE TIME OF PURCHASES: Purchase orders for Investor A Shares in the Funds
which are received by Stephens or by the Transfer Agent before the close of
regular trading hours on the Exchange (currently 4:00 p.m., Eastern time) on any
Business Day are priced according to the net asset value determined on that day
but are not executed until 4:00 p.m., Eastern time, on the Business Day on which
immediately available funds in payment of the purchase price are received by the
Funds' Custodian. Such payment must be received no later than 4:00 p.m., Eastern
time, by the third Business Day following receipt of the order. If funds are not
received by such date, the order will not be accepted and notice thereof will be
given to the Agent placing the order. Payment for orders which are not received
or accepted will be returned after prompt inquiry to the sending Agent.

The Agents are responsible for transmitting orders for purchases of Investor A
Shares by their customers ("Customers"), and delivering required funds, on a
timely basis. Stephens is responsible for transmitting orders it receives to
Nations Funds.

SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor A Shares. On a bi-monthly,
monthly or quarterly basis, a shareholder may direct cash to be transferred
automatically from his/her checking or savings account at any bank which is a
member of the Automated Clearing House to his/her Fund account. Transfers will
occur on or about the 15th and/or the last day of the applicable month. Subject
to certain exceptions for employees of NationsBank and its affiliates and pre-
existing SIP accounts, the systematic investment amount may be in any amount
from $50 to $100,000. For more information concerning the SIP, contact your
Agent or Nations Funds.

<PAGE>
TELEPHONE TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How To Redeem Shares" and "How To
Exchange Shares" below. Shareholders should be aware that by using the telephone
transaction feature, such shareholders may be giving up a measure of security
that they may have if they were to authorize written requests only. A
shareholder may bear the risk of any resulting losses from a telephone
transaction. Nations Funds will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and if Nations Funds and its
service providers fail to employ such measures, they may be liable for any
losses due to unauthorized or fraudulent instructions. Nations Funds requires a
form of personal identification prior to acting upon instructions received by
telephone and provides written confirmation to shareholders of each telephone
share transaction. In addition, Nations Funds reserves the right to record all
telephone conversations. Shareholders should be aware that during periods of
significant economic or market change, telephone transactions may be difficult
to complete.

How To Redeem Shares

For shareholders who open and maintain an account directly with a Fund,
redemption orders should be communicated to such Fund by calling Nations Funds
at 1-800-321-7854 or in writing. (Shareholders must have established telephone
features on their account in order to effect telephone transactions.) Redemption
proceeds are normally sent by mail or wired within three Business Days after
receipt of the order by a Fund. For shareholders who purchased their shares
through an Agent, redemption orders should be transmitted by telephone or in
writing through the same Agent. Redemption proceeds are normally wired to the
redeeming Agent within three Business Days after receipt of the order by
Stephens or by the Transfer Agent. Redemption orders are effected at the net
asset value per share next determined after receipt of the order by a Fund,
Stephens, or the Transfer Agent, as the case may be. The Agents are responsible
for transmitting redemption orders to Stephens or to the Transfer Agent and for
crediting their Customer's account with the redemption proceeds on a timely
basis. Redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately. No
charge for wiring redemption payments is imposed by Nations Funds. There is no
redemption charge.

Nations Funds may redeem a shareholder's Investor A Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of an Agent
pursuant to arrangements between the Agent and its Customers. Nations Funds also
may redeem shares of the Funds involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.

Prior to effecting a redemption of Investor A Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Funds have previously been
made. Nations Funds may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.

REINSTATEMENT PRIVILEGE: Within 120 days after a redemption of Investor A Shares
of a Fund, a shareholder may reinvest any portion of the proceeds of such
redemption in Investor A Shares of the same Fund. The amount which may be so
reinvested is limited to an amount up to, but not exceeding, the redemption
proceeds (or to the nearest full share if fractional shares are not purchased).
A shareholder exercising this privilege would receive a pro rata credit for any
CDSC paid in connection with the prior redemption. A shareholder may not
exercise this privilege with the proceeds of a redemption of shares

<PAGE>
previously purchased through the reinvestment privilege. In order to exercise
this privilege, a written order for the purchase of Investor A Shares must be
received by the Transfer Agent or by Stephens within 120 days after the
redemption.

REDEMPTION FEE: A redemption fee of 1% of the current net asset value will be
assesed on certain Investor A Shares redeemed within 18 months of the date of
purchase by a Substantial Investor. In addition, a 1% redemption fee will be
assesed on Investor A Shares purchased after such date by an employee benefit
plan that (i) made its initial investment after such date and (ii) redeemed such
shares within 18 months of purchase in connection with a complete liquidation of
such plan's holdings in the Nations Funds Family. This fee is retained by the
Fund or Funds for the benefit of the remaining shareholders and is intended to
encourage long-term investment in the Funds and to avoid transaction and other
expenses associated with short-term investments. The Funds reserve the right to
modify the terms of or terminate this fee at any time.

AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Funds if the value of the
Investor A Shares in his/her accounts within the Nations Funds Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Shareholders who elect to establish an AWP may receive a monthly,
quarterly or annual check or automatic transfer to a checking or savings account
in a stated amount of not less than $25 on or about the 10th or 25th day of the
applicable month of withdrawal. Investor A Shares will be redeemed as necessary
to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. An AWP may be terminated by a shareholder on 30 days' written notice
to his/her Agent or by Nations Funds at any time.

How To Exchange Shares

GENERAL: The exchange feature enables a shareholder of a fund of Nations Funds
to acquire shares of the same class that are offered by another fund of Nations
Funds when the shareholder believes that a shift between funds is an appropriate
investment decision. A shareholder may only exchange into Investor A Shares of
other Nations Funds to the extent the shareholder is eligible to purchase
Investor A Shares of such Funds. A qualifying exchange is based on the next
calculated net asset value per share of each fund after the exchange order is
received.

For shareholders who maintain an account directly with a Fund, exchange requests
should be communicated to such Fund by calling Nations Funds at 1-800-321-7854
or in writing. For shareholders who purchased their shares through an Agent,
exchange requests should be communicated to the Agent, who is responsible for
transmitting the request to Stephens or to the Transfer Agent.

<PAGE>
cates have been received by the Transfer Agent and deposited in the
shareholder's account. An exchange will be treated for Federal income tax
purposes the same as a redemption of shares, on which the shareholder may
realize a capital gain or loss. And, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within 90 days after the shares are purchased.

The Investor A Shares exchanged must have a current value of at least $1,000
(except for exchanges through the Automatic Exchange Feature, which is described
below). Nations Funds reserves the right to reject any exchange request. Only
shares that may legally be sold in the state of the shareholder's residence may
be acquired in an exchange. Only shares of a class that is accepting investments
generally may be acquired in an exchange. During periods of significant economic
or market change, telephone exchanges may be difficult to complete. In such
event, shareholders should consider communicating their exchange requests by
mail.

Investor A Shares of the Funds are offered without any Contingent Deferred Sales
Charge ("CDSC"). However, Investor A Shares of other funds within the Nations
Funds Family may have been sold subject to a CDSC. If a shareholder exchanges
any such shares (the "Exchanged Shares") for Investor A Shares of the Fund, the
shares of the Fund will be subject to the CDSC. The holding period of such
Investor A Shares (for purposes of determining whether a CDSC is applicable upon
redemption) will be computed from the time of the original purchase of the
Exchanged Shares (or, if the Exchanged Shares were acquired in an exchange, from
the time of the original purchase of Investor A Shares).

AUTOMATIC EXCHANGE FEATURE: Under the Funds' Automatic Exchange Feature ("AEF")
a shareholder may automatically exchange at least $25 on a monthly or quarterly
basis. A shareholder may direct proceeds to be exchanged from one fund of
Nations Fund to another as allowed by the applicable exchange rules within the
Prospectus. Exchanges will occur on or about the 15th or the last day of the
applicable month. The shareholder must have an existing position in both Funds
in order to establish the AEF. This feature may be established by directing a
request to the Transfer Agent by telephone or in writing. For additional
information, a shareholder should contact his/her Selling Agent or Nations
Funds.

Shareholder Servicing And Distribution
Plan

The Funds' Shareholder Servicing and Distribution Plan (the "Investor A Plan"),
adopted pursuant to Rule 12b-1 under the 1940 Act, permits the Funds to
compensate (i) Servicing Agents and Selling Agents for services provided to
their Customers that own Investor A Shares and (ii) Stephens for
distribution-related expenses incurred in connection with Investor A Shares.
Aggregate payments under the Investor A Plan are calculated daily and paid
monthly at a rate or rates set from time to time by the Funds, provided that the
annual rate may not exceed 0.25% of the average daily net asset value of the
Investor A Shares of the Funds.

The fees payable to Servicing Agents under the Investor A Plan are used
primarily to compensate or reimburse Servicing Agents for shareholder services
provided, and related expenses incurred, by such Servicing Agents. The
shareholder services provided by Servicing Agents may include: (i) aggregating
and processing purchase and redemption requests for Investor A Shares from
Customers and transmitting net purchase and redemption orders to Stephens or the
Transfer Agent; (ii) providing Customers with a service that invests the assets
of their accounts in Investor A Shares pursuant to specific or preauthorized
instructions; (iii) processing dividend and distribution payments from the Funds

<PAGE>
on behalf of Customers; (iv) providing information periodically to Customers
showing their positions in Investor A Shares; (v) arranging for bank wires; and
(vi) providing general shareholder liaison services. The fees payable to Selling
Agents are used primarily to compensate or reimburse Selling Agents for
providing sales support assistance in connection with the sale of Investor A
Shares to Customers, which may include forwarding sales literature and
advertising provided by Nations Funds to Customers.

The fees under the Investor A Plan also may be used to reimburse Stephens for
distribution-related expenses actually incurred by Stephens, including, but not
limited to, expenses of organizing and conducting sales seminars, printing
prospectuses and statements of additional information (and supplements thereto)
and reports for other than existing shareholders, preparation and distribution
of advertising and sales literature and the costs of administering the Investor
A Plan.

Stephens may, from time to time, at its expense or as an expense for which it
may be reimbursed under the Investor A Plan, pay a bonus or other consideration
or incentive to Agents who sell a minimum dollar amount of shares of the Funds
during a specified period of time. Stephens also may, from time to time, pay
additional consideration to Agents not to exceed 1.00% of the offering price per
share on all sales of Investor A Shares as an expense of Stephens or for which
Stephens may be reimbursed under the Investor A Plan. Any such additional
consideration or incentive program may be terminated at any time by Stephens.

In addition, Stephens has established a non-cash compensation program, pursuant
to which broker/dealers or financial institutions that sell shares of the Funds
may earn additional compensation in the form of trips to sales seminars or
vacation destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and gift
certificates for meals or merchandise. This non-cash compensation program may be
amended or terminated at any time by Stephens.

Nations Funds and Stephens may suspend or reduce payments under the Investor A
Plan at any time, and payments are subject to the continuation of the Investor A
Plan described above and the terms of the Servicing Agreement and Sales Support
Agreement. See the SAI for more details on the Investor A Plan.

Nations Funds understands that Agents may charge fees to their Customers who are
the owners of Investor A Shares for various services provided in connection with
a Customer's account. These fees would be in addition to any amounts received by
a Selling Agent under its Sales Support Agreement with Stephens or by a
Servicing Agent under its Servicing Agreement with Nations Funds. The Sales
Support Agreement and Servicing Agreement require Agents to disclose to their
Customers any compensation payable to the Agent by Stephens or Nations Funds and
any other compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.

How The Funds Value Their Shares

The Funds calculate the net asset value of a share of each class by dividing the
total value of its assets, less liabilities, by the number of shares in the
class outstanding. Shares are valued as of the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on each Business Day.

Portfolio securities for which market quotations are readily available are
valued at market value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following procedures
approved by the Trustees.

<PAGE>
How Dividends And Distributions Are
Made; Tax Information

Investor A Shares of the Funds are eligible to receive dividends when declared,
provided however, that the purchase order for such shares is received at least
one day prior to the dividend declaration and such shares continue to be
eligible for dividends through and including the day before the redemption order
is executed.

The net asset value of Investor A Shares will be reduced by the amount of any
dividend or distribution. Accordingly, dividends and distributions on newly
purchased shares represent, in substance, a return of capital. However, such
dividends and distributions would nevertheless be taxable. Certain Agents may
provide for the reinvestment of dividends in the form of additional Investor A
Shares of the same class in the same Fund. Dividends and distributions are paid
in cash within five Business Days of the end of the quarter to which the payment
relates. Dividends and distributions payable to a shareholder are paid in cash
within five Business Days after a shareholder's complete redemption of his/her
Investor A Shares.

<PAGE>
Appendix A -- Portfolio Securities

MORTGAGE-BACKED SECURITIES: Mortgage-backed securities represent an ownership
interest in a pool of mortgage loans.

The yield which will be earned on mortgage-backed securities may vary from their
coupon rates for the following reasons: (i) Certificates may be issued at a
premium or discount, rather

<PAGE>
than at par; (ii) Certificates may trade in the secondary market at a premium or
discount after issuance; (iii) interest is earned and compounded monthly which
has the effect of raising the effective yield earned on the Certificates; and
(iv) the actual yield of each Certificate is affected by the prepayment of
mortgages included in the mortgage pool underlying the Certificates and the rate
at which principal so prepaid is reinvested. In addition, prepayment of
mortgages included in the mortgage pool underlying a GNMA Certificate purchased
at a premium may result in a loss to the Fund.

Collateralized Mortgage Obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class
pass-through securities are interests in a trust composed of Mortgage Assets and
all references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distribution on the multi-class pass-through securities.

The mortgage-backed securities in which the Funds invest are subject to
extension risk. This is the risk that when interest rates rise, prepay-

<PAGE>
ments of the underlying obligations slow thereby lengthening duration and
potentially reducing the value of these securities. The debt securities held by
the Funds also may be subject to credit risk. Credit risk is the risk that the
issuers of securities in which a Fund invests may default in the payment of
principal and/or interest. Any such defaults or adverse changes in an issuer's
financial condition or credit rating may adversely affect the value of the
Funds' portfolio investments and, hence, the value of your investment in the
corresponding Fund.

The purchase of non-mortgage-backed securities raises considerations peculiar to
the financing of the instruments underlying such securities. For example, most
organizations that issue asset-backed securities relating to motor vehicle
installment purchase obligations perfect their interests in their respective
obligations only by filing a financing statement and by having the servicer of
the obligations, which is usually the originator, take custody thereof. In such
circumstances, if the servicer were to sell the same obligations to another
party, in violation of its duty not to do so, there is a risk that such party
could acquire an interest in the obligations superior to that of the holders of
the asset-backed securities. Also, although most such obligations grant a
security interest in the motor vehicle being financed, in most states the
security interest in a motor vehicle must be noted on the certificate of title
to perfect such security interest against competing claims of other parties. Due
to the larger number of vehicles involved, however, the certificate of title to
each vehicle financed, pursuant to the obligations underlying the asset-backed
securities, usually is not amended to reflect the assignment of the seller's
security interest for the benefit of the holders of the asset-backed securities.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on those securities. In
addition, various state and Federal laws give the motor vehicle owner the right
to assert against the holder of the owner's obligation certain defenses such
owner would have against the seller of the motor vehicle. The assertion of such
defenses could reduce payments on the related asset-backed securities. Insofar
as credit card receivables are concerned, credit card holders are entitled to
the protection of a number of state and Federal consumer credit laws, many of
which give such holders the right to set off certain amounts against balances
owed on the credit card, thereby reducing the amounts paid on such receivables.
In addition, unlike most other asset-backed securities, credit card receivables
are unsecured obligations of the card holder.

<PAGE>
ment risks, including the possibility that liquidity could be impaired because
of future political and economic developments, the obligations may be less
marketable than comparable domestic obligations of domestic issuers, a foreign
jurisdiction might impose withholding taxes on interest income payable on such
obligations, deposits may be seized or nationalized, foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal of and interest on such obligations, the
selection of foreign obligations may be more difficult because there may be less
publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.

At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Funds are obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by the Adviser to be creditworthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage requirements if the Funds do not establish and
maintain a segregated account as described above. Under the requirements of the
1940 Act, the Funds are required to maintain an asset coverage (including the
proceeds of the borrowings) of at least 300% of all borrowings. Depending on
market conditions, the Funds' asset coverage and other factors at the time of a
reverse repurchase, the Funds may not establish a segregated account when the
Adviser believes it is not in the best interests of the Funds to do so. In this
case, such reverse repurchase agree-

<PAGE>
ments will be considered borrowings subject to the asset coverage described
above.

<PAGE>
Under certain circumstances, a Fund may commit a substantial portion of its
portfolio to the execution of these contracts. The Adviser will consider the
effects such a commitment would have on the investment program of such Fund and
the flexibility of such Fund to purchase additional securities. Although forward
contracts will be used primarily to protect a Fund from adverse currency
movements, they also involve the risk that anticipated currency movements will
not be accurately predicted.

FOREIGN SECURITIES: Foreign securities include debt and equity obligations
(dollar- and non-dollar-denominated) of foreign corporations and banks as well
as obligations of foreign governments and their political subdivisions (which
will be limited to direct government obligations and government-guaranteed
securities). Such investments may subject a Fund to special investment risks,
including future political and economic developments, the possible imposition of
withholding taxes on income (including interest, distributions and disposition
proceeds), possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such obligations. In addition, foreign issuers in general may be
subject to different accounting, auditing, reporting, and record keeping
standards than those applicable to domestic companies, and securities of foreign
issuers may be less liquid and their prices more volatile than those of
comparable domestic issuers.

<PAGE>
("futures contracts"), options on futures contracts, forward contracts and swaps
and swap-related products such as interest rate swaps, currency swaps, caps,
collars and floors.

INDEXED/STRUCTURED SECURITIES: Indexed/ structured securities are typically
short- to intermediate-term debt securities whose value at maturity or interest
rate is linked to currencies, interest rates, equity securities, indices,
commodity prices or other financial indicators. Such securities may be
positively or negatively indexed (i.e., their value may increase or decrease if
the reference index or instrument appreciates). Indexed/structured securities
may have return characteristics similar to direct investments in the underlying
instruments and may be more volatile than the underlying instruments. The Fund
bears the market risk of an investment in the underlying instruments, as well as
the credit risk of the issuer.

<PAGE>
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. The Adviser expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.

The Funds may also purchase unrated bonds of foreign and domestic issuers.

<PAGE>
REAL ESTATE INVESTMENT TRUSTS: A real estate investment trust ("REIT") is a
managed portfolio of real estate investments which may include office buildings,
apartment complexes, hotels and shopping malls. An Equity REIT holds equity
positions in real estate, and it seeks to provide its shareholders with income
from the leasing of its properties, and with capital gains from any sales of
properties. A Mortgage REIT specializes in lending money to developers of
properties, and passes any interest income it may earn to its shareholders.
REITs may be affected by changes in the value of the underlying property owned
or financed by the REIT, while Mortgage REITs also may be affected by the
quality of credit extended. Both Equity and Mortgage REITs are dependent upon
management skill and may not be diversified. REITs also may be subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free pass-through of income under the
Code.

<PAGE>
exchange rate between the U.S. dollar and the currencies in which trading is
done on foreign exchanges, any profits that such Fund might realize could be
eliminated by adverse changes in the exchange rate, or the Fund could incur
losses as a result of those changes.

Appendix B -- Description Of Ratings

The following summarizes the highest eight ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.

AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.

AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhib-

<PAGE>
its adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.

The following summarizes the highest eight ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.

Caa, Ca -- Bonds that are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest. Bonds

<PAGE>
that are rated Ca represent obligations that are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

<PAGE>
Prospectus

INVESTOR B SHARES
DECEMBER 31, 1997

This Prospectus describes NATIONS MARSICO FOCUSED Nations Marsico
EQUITIES FUND and NATIONS MARSICO GROWTH & INCOME Focused Equities
FUND (the "Funds") of Nations Fund Trust, an open-end Fund
management investment company in the Nations Fund
Funds Family ("Nations Funds" or "Nations Funds Nations Marsico
Family"). This Prospectus describes one class of Growth & Income
shares of the Funds -- Investor B Shares. Fund

This Prospectus sets forth concisely the
information about the Funds that a prospective
purchaser of Investor B Shares should consider
before investing. Investors should read this
Prospectus and retain it for future reference.
Additional information about Nations Fund Trust is
contained in a separate Statement of Additional
Information (the "SAI"), that has been filed with
the Securities and Exchange Commission (the "SEC")
and is available upon request without charge by
writing or calling Nations Funds at its address or
telephone number shown below. The SAI, dated
December 31, 1997, is incorporated by reference in
its entirety into this Prospectus. The SEC
maintains a Web site (http://www.sec.gov) that
contains the SAI, material incorporated by
reference in this Prospectus and other information
regarding registrants that file electronically with
the SEC. NationsBanc Advisors, Inc. ("NBAI") is the
investment adviser to the Funds. Marsico Capital
Management, LLC ("Marsico Capital") is investment
sub-adviser to the Funds. As used herein the term
"Adviser" shall mean NBAI and/or Marsico Capital as
the context may require.

For Fund information call:
1-800-321-7854
Nations Funds
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255

[Nations Funds Logo]

NF-97667-1297

<PAGE>
Table Of Contents

About The Prospectus Summary 3
Funds
Expenses Summary 4

Objectives 6

How Objectives Are Pursued 6

How Performance Is Shown 9

How The Funds Are Managed 10

Organization And History 14

About Your How To Buy Shares 15
Investment
How To Redeem Shares 17

How To Exchange Shares 19

Shareholder Servicing And Distribution Plans 21

How The Funds Value Their Shares 22

How Dividends And Distributions Are Made; Tax
Information 22

Appendix A -- Portfolio Securities 23

Appendix B -- Description of Ratings 33

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION
WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY NATIONS FUNDS OR ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
NATIONS FUNDS OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.

<PAGE>
About The Funds

Prospectus Summary

(Bullet) TYPE OF COMPANY: Open-end management investment company.

(Bullet) INVESTMENT OBJECTIVES AND POLICIES:

(Bullet) RISK FACTORS: Although the Adviser seeks to achieve the investment
objective of each Fund, there is no assurance that it will be able to
do so. Investments in a Fund are not insured against loss of principal.
Investments by a Fund in common stocks and other equity securities are
subject to stock market risk, which is the risk that the value of the
stocks the Fund holds may decline over short or even extended periods.
The U.S. stock market tends to be cyclical, with periods when stock
prices generally rise and periods when prices generally decline. As of
the date of this Prospectus, the stock market, as measured by the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index") and
other commonly used indices, was trading at or close to record levels.
There can be no guarantee that these levels will continue. Investments
by a Fund in debt securities are subject to interest rate risk, which
is the risk that increases in market interest rates will adversely
affect a Fund's investments in debt securities. The value of a Fund's
investments in debt securities, including U.S. Government Obligations
(as defined herein), will tend to decrease when interest rates rise and
increase when interest rates fall. In general, longer-term debt
instruments tend to fluctuate in value more than shorter-term debt
instruments in response to interest rate movements. In addition, debt
securities which are not backed by the United States Government are
subject to credit risk, which is the risk that the issuer may not be
able to pay principal and/or interest when due. The Funds' investment
in lower rated debt securities may bear additional risks. Certain of
the Funds' permissible investments may constitute derivative
securities. Certain types of derivative securities can, under certain
circumstances, significantly increase an investor's exposure to stock
market or other risks. The Funds' investment in foreign equity and debt
securities may bear additional risks associated with international
investing, such as foreign currency fluctuations and economic and
political risks. For a discussion of these and other factors, see "How
Objectives Are Pursued -- Risk Considerations" and "Appendix
A -- Portfolio Securities."

<PAGE>
(Bullet) MINIMUM PURCHASE: $1,000 minimum initial investment for each of the
Funds per record holder except that the minimum initial investment is:
$500 for Individual Retirement Account ("IRA") investors; $250 for
non-working spousal IRAs; and $100 for investors participating on a
monthly basis in the Systematic Investment Plan. There is no minimum
investment amount for investments by certain 401(k) and employee
pension plans or salary reduction -- Individual Retirement Accounts.
Minimum subsequent investment is $100, except for investments pursuant
to the systematic investment plan. See "How To Buy Shares."

Expenses Summary

Expenses are one of several factors to consider when investing in the Funds. The
following table summarizes shareholder transaction and operating expenses for
Investor B Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in Investor B shares of the
indicated Fund over specified periods.

INVESTOR B SHARES

<TABLE>
<CAPTION>
<S> <C> <C>
Nations Nations
Marsico Marsico
Focused Growth
Equities & Income
Fund Fund
SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Load Imposed on Purchases (as a percentage of offering price) None None
Maximum Deferred Sales Charge (as a percentage of the lesser of the net asset value or of
the purchase price of the shares being redeemed)(1) 5.00% 5.00%

ANNUAL FUND
OPERATING EXPENSES
(as a percentage of
average net assets)

Management Fees .85% .85%
Rule 12b-1 Fees .75% .75%
Shareholder Servicing Fees .25% .25%
Other Expenses .25% .25%
Total Operating Expenses 2.10% 2.10%
</TABLE>

(1) Investor B Shares may be subject to a Deferred Sales Charge as set forth in
the applicable schedule. The Maximum Deferred Sales Charge is 5.00% in the
first year after purchase, declining to 1.00% in the sixth year after
purchase and eliminated thereafter. For the applicable Deferred Sales Charge
schedule see "How to Redeem Shares -- Contingent Deferred Sales Charge."

<PAGE>
EXAMPLES:

An investment of $1,000 would incur the following expenses, assuming (1) a 5%
annual return and (2) redemption at the end of each time period.

<TABLE>
<CAPTION>
<S> <C> <C>
Nations Nations
Marsico Marsico
Focused Growth
Equities & Income
Fund Fund
1 Year $ 71 $ 71
3 Years $ 96 $ 96
</TABLE>

An investment of $1,000 would incur the following expenses, assuming (1) a 5%
annual return and (2) no redemption.

<TABLE>
<CAPTION>
<S> <C> <C>
Nations Nations
Marsico Marsico
Focused Growth
Equities & Income
Fund Fund
1 Year $ 21 $ 21
3 Years $ 66 $ 66
</TABLE>

The purpose of the foregoing table is to assist an investor in understanding the
various shareholder transaction and operating expenses that an investor in
Investor B Shares will bear either directly or indirectly. The "Other Expenses"
figures in the above tables are based on estimates. For a more complete
description of the Funds' operating expenses, see "How The Funds Are Managed."
For a more complete description of the Rule 12b-1 and shareholder servicing fees
payable by the Funds, see "Shareholder Servicing and Distribution Plans."

THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.

<PAGE>
Objectives

NATIONS MARSICO FOCUSED EQUITIES FUND: The investment objective of Nations
Marsico Focused Equities Fund is to seek long-term growth of capital.

NATIONS MARSICO GROWTH & INCOME FUND: The investment objective of Nations
Marsico Growth & Income Fund is to seek long-term growth of capital with a
limited emphasis on income.

How Objectives Are Pursued

(Bullet) Change -- The Adviser believes that extraordinary growth derives from
products, markets and technologies that are in flux.

(Bullet) Franchise -- The Adviser looks for strong brand franchises that can be
leveraged in a changing global environment.

(Bullet) Themes -- The Adviser seeks companies that are moving with, not
against, the major social, economic and cultural shifts taking place
in the world.

Realization of income is not a significant investment consideration. Any income
realized on the Fund's investments will be incidental to its objective.

<PAGE>
ket, financial and economic conditions. If the Adviser believes that growth
securities will provide better returns than the yields then available or
expected on income-producing securities, then the Fund will place a greater
emphasis on the growth component. In building the portfolio, the Adviser seeks
to identify individual companies with earnings growth potential that may not be
recognized by the market at large. To identify such opportunities, the Adviser
looks for a combination of four characteristics:

(Bullet) Change -- The Adviser believes that extra-ordinary growth derives from
products, markets and technologies that are in flux.

(Bullet) Franchise -- The Adviser looks for strong brand franchises that can be
leveraged in a changing global environment.

(Bullet) Themes -- The Adviser seeks companies that are moving with, not
against, the major social, economic and cultural shifts taking place in
the world.

GENERAL: The Funds may also invest up to 25% of their assets in mortgage- and
asset-backed securities, up to 10% of their assets in zero coupon, pay-in-kind
and step coupon securities, and may invest without limit in indexed/structured
securities. The Funds will invest no more than 35% of their assets in
high-yield/high-risk securities. The Funds may also purchase high-grade
commercial paper, certificates of deposit, and repurchase agreements. The Funds
may also invest in short-term debt securities as a means of receiving a return
on idle cash. See Appendix B for a description of ratings.

<PAGE>
regard to any defined allocation among countries or geographic regions. However,
certain factors such as expected levels of inflation, government policies
influencing business conditions, the outlook for currency relationships, and
prospects for economic growth among countries, regions or geographic areas may
warrant greater consideration in selecting foreign securities. The Funds may use
options, futures, forward currency contracts and other types of derivatives for
hedging purposes. The Funds may purchase securities on a when-issued, delayed
delivery or forward commitment basis.

Investments by a Fund in common stocks and other equity securities are subject
to stock market risk. The value of the stocks that the Fund holds, like the
broader stock market, may decline over short or even extended periods. The U.S.
stock market tends to be cyclical, with periods when stock prices generally rise
and periods when prices generally decline. As of the date of this Prospectus,
the stock market, as measured by the S&P 500 and other commonly used indices,
was trading at or close to record levels. There can be no guarantee that these
levels will continue.

Certain of the Funds' permissible investments may constitute derivative
securities, which are securities whose value is derived, at least in part, from
an underlying index or reference rate. There are certain types of derivative
securities that can, under certain circumstances, significantly increase a
purchaser's exposure to market or other risks. The Adviser, however, only
purchases derivative securities in circumstances where it believes such
purchases are consistent with such Funds' investment objective and do not unduly
increase the Fund's exposure to market or other risks.

<PAGE>
nationalization, expropriation of assets and war; (7) possible imposition of
foreign taxes and exchange control and currency restrictions; (8) lack of
uniform accounting, auditing and financial reporting standards; (9) less
governmental supervision of securities markets, brokers and issuers of
securities; (10) less financial information available to investors; and (11)
difficulty in enforcing legal rights outside the United States. These risks are
often heightened for investments in emerging or developing countries, such as
the countries of Eastern Europe.

For additional risk information regarding the Funds' investments in particular
instruments, see "Appendix A -- Portfolio Securities."

INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAI.

Each Fund may not:

Nations Marsico Focused Equities Fund may not:

Nations Marsico Growth & Income Fund may not:

Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, such Fund will not
hold more than 10% of the voting securities of any issuer.

How Performance Is Shown

<PAGE>
(reflecting the deduction of any applicable contingent deferred sales charge
("CDSC")), assuming the reinvestment of all dividend and capital gain
distributions. Aggregate total return reflects the total percentage change in
the value of the investment over the measuring period again assuming the
reinvestment of all dividends and capital gain distributions. Total return may
also be presented for other periods or may not reflect a deduction of any
applicable CDSC.

Investment performance, which will vary, is based on many factors, including
market conditions, the composition of the Funds' portfolios and the Funds'
operating expenses. Investment performance also often reflects the risks
associated with the Funds' investment objective and policies. These factors
should be considered when comparing the Funds' investment results to those of
other mutual funds and other investment vehicles. Since yields fluctuate, yield
data cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.

In addition to Investor B Shares, the Funds offer Primary A, Investor A and
Investor C Shares. Each class of shares may bear different sales charges,
shareholder servicing fees and other expenses, which may cause the performance
of a class to differ from the performance of the other classes. Total return and
yield quotations will be computed separately for each class of the Funds'
shares. Any quotation of total return or yield not reflecting CDSCs would be
reduced if such sales charges were reflected.

Any fees charged by a selling agent and/or servicing agent directly to its
customers' accounts in connection with investments in the Funds will not be
included in calculations of total return or yield. The Funds' annual report
contains additional performance information and is available upon request
without charge from the Funds' distributor or your Selling Agent (as defined
below) or by calling Nations Funds at the toll-free number indicated on the
cover of this Prospectus.

How The Funds Are Managed

INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds pursuant to an Investment Advisory Agreement with the Trust
("Investment Advising Agreement"). NBAI is an indirect wholly owned subsidiary
of NationsBank, which in turn is a wholly owned banking subsidiary of
NationsBank Corporation, a bank holding company organized as a North Carolina
corporation. NBAI has its principal offices at One NationsBank Plaza, Charlotte,
North Carolina 28255.

<PAGE>
Thomas F. Marsico is Chairman and Chief Executive Officer of Marsico Capital and
has voting control of the company. Prior to forming Marsico Capital in September
1997, Mr. Marsico had 18 years of experience as a securities analyst/portfolio
manager. NationsBank has an option to purchase up to 50% of Marsico Capital.

For the services provided and expenses assumed pursuant to the Investment
Advisory Agreement, NBAI is entitled to receive advisory fees, computed daily
and paid monthly, at the annual rate of .85% of the average daily net assets of
Nations Marsico Focused Equities Fund and .85% of the average daily net assets
of Nations Marsico Growth & Income Fund.
For the services provided pursuant to a Sub-Advisory Agreement, NBAI will pay
Marsico Capital sub-advisory fees, computed daily and paid monthly, at the
annual rate of .45% of the average daily net assets of Nations Marsico Focused
Equities Fund and .45% of the average daily net assets of Nations Marsico Growth
& Income Fund.

From time to time, NBAI (and/or Marsico Capital) may waive or reimburse (either
voluntarily or pursuant to applicable state limitations) advisory fees and/or
expenses payable by a Fund.

Mr. Marsico manages the investment program of the Funds and is primarily
responsible for the day-to-day management of the Funds' portfolios. Prior to
forming Marsico Capital, Mr. Marsico served as Portfolio Manager of the Janus
Twenty Fund from January 31, 1988 through August 11, 1997 and served in the same
capacity for the Janus Growth and Income Fund from May 31, 1991, through August
11, 1997. The average annual returns for the Janus Twenty Fund and the Janus
Growth and Income Fund ("Janus Funds") from the date on which Mr. Marsico began
serving as Portfolio Manager of each Janus Fund through August 7, 1997 (the last
date for which performance information is available) were 22.38% and 21.19%,
respectively. On August 11, 1997, the date on which Mr. Marsico ceased serving
as the Portfolio Manager to both the Janus Twenty Fund and the Janus Growth and
Income Fund, the Janus Twenty Fund had approximately $6 billion in net assets,
and the Janus Growth and Income Fund had approximately $1.7 billion in net
assets. As Executive Vice President and Portfolio Manager of the Janus Twenty
Fund and the Janus Growth and Income Fund, Mr. Marsico had full discretionary
authority over the selection of investments for those funds. Average annual
returns for the one-year, three-year and five-year periods ended August 7, 1997
and for the period during which Mr. Marsico managed those funds compared with
the performance of the S&P 500 Index were:

<TABLE>
<CAPTION>
Janus Janus
Twenty Growth and S&P 500
Fund (a) Income Fund (a) Index (b)
<S> <C> <C> <C>
One Year 48.21% 47.77% 46.41%
(8/8/96 - 8/7/97)
Three Years 32.07% 31.13% 30.63%
(8/11/94 -
8/7/97)
Five Years 20.02% 21.16% 20.98%
(8/13/92 -
8/7/97)
During Period of 22.38% 21.19% Janus Twenty:
Management by Mr. 18.20%(c)
Marsico (through Janus Growth
8/7/97) and Income:
18.59%(d)
</TABLE>

<PAGE>
(a) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.

(c) This figure represents the average annual return of the S&P 500 Index during
the period that Mr. Marsico managed the Janus Twenty Fund through August 7,
1997.

(d) This figure represents the average annual return of the S&P 500 Index during
the period that Mr. Marsico managed the Janus Growth and Income Fund through
August 7, 1997.

The Janus Twenty Fund has substantially similar investment policies, strategies,
and objectives as those of Nations Marsico Focused Equities Fund, while the
investment policies, strategies, and objectives of the Janus Growth and Income
Fund are substantially similar to those of Nations Marsico Growth & Income Fund.
Historical performance is not indicative of future performance. For a majority
of the periods shown above, the expenses of the Janus Twenty Fund and the Janus
Growth and Income Fund were lower than the anticipated expenses of Nations
Marsico Focused Equities Fund and Nations Marsico Growth & Income Fund,
respectively. Higher expenses, of course, would have resulted in lower
performance. The Janus Twenty Fund and the Janus Growth and Income Fund are
separate funds and their historical performance is not indicative of the
potential performance of Nations Marsico Focused Equities Fund and Nations
Marsico Growth & Income Fund, respectively. The Janus Twenty Fund and the Janus
Growth and Income Fund were the only investment vehicles that Mr. Marisco
managed during the period he was employed at Janus Capital Corporation that have
substantially similar objectives, policies, and strategies as those of the
Funds. Share prices and investment returns will fluctuate reflecting market
conditions, as well as changes in company-specific fundamentals of portfolio
securities.

Morrison & Foerster LLP, counsel to Nations Funds and special counsel to
NationsBank has advised Nations Funds and NationsBank that NationsBank and its
affiliates may perform the services contemplated by the various Investment
Advisory Agreements, and this Prospectus without violation of the Glass-Steagall
Act. Such counsel has pointed out, however, that there are no controlling
judicial or administrative interpretations or decisions and that future judicial
or administrative interpretations of, or decisions relating to, present federal
or state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in federal or state statutes, including the
Glass-Steagall Act, and regulations and judicial or administrative decisions or
interpretations thereof, could prevent such entities from continuing to perform,
in whole or in part, such services. If any such entity were prohibited from
performing any of such services, it is expected that new agreements would be
proposed or entered into with another entity or entities qualified to perform
such services.

First Data Investor Services Group, Inc. ("First Data"), a wholly owned
subsidiary of First Data Corporation, with principal offices at One Exchange
Place, Boston, Massachusetts 02109, serves as the co-administrator of Nations
Funds pursuant to Co-Administration Agreements. Under the Co-Administration
Agreements, First Data provides various administrative and accounting services
to the Funds including performing the calculations necessary to determine the
net asset value per share and dividends of each class of shares of the Funds,
preparing tax returns and financial statements and maintaining the portfolio
records and certain of the general accounting records for the Funds.

<PAGE>
For the services rendered pursuant to the Administration and Co-Administration
Agreements, Stephens and First Data are entitled to receive a combined fee at
the annual rate of up to .10% of each Fund's average daily net assets.

Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker/dealer. Nations Funds
has entered into distribution agreements with Stephens which provide that
Stephens has the exclusive right to distribute shares of the Funds. Stephens may
pay, out of its own resources, service fees or commissions to selling agents
which assist customers in purchasing Investor B Shares of the Funds. See
"Shareholder Servicing and Distribution Plans."

NationsBank of Texas, N.A. ("NationsBank of Texas" and, collectively with The
Bank of New York ("BONY"), called "Custodians") serves as Custodian for the
assets of all Nations Funds except the international portfolios. NationsBank of
Texas is located at 1401 Elm Street, Dallas, Texas 75202, and is a wholly owned
subsidiary of NationsBank Corporation. In return for providing custodial
services to the Nations Funds Family, NationsBank of Texas is entitled to
receive, in addition to out of pocket expenses, fees at the rate of (i) $300,000
per annum, to be paid monthly in payments of $25,000 for custodian services for
up to and including 50 Funds; and (ii) $6,000 per annum, to be paid in equal
monthly payments, for custodian services for each additional Fund above 50
Funds.

BONY has entered into an agreement with each of the Funds and NationsBank of
Texas, whereby BONY will serve as sub-custodian ("Sub-Custodian") for the assets
of all the Funds except the international portfolios, for which BONY is already
serving as Custodian. BONY is located at 90 Washington Street, New York, New
York 10286. In return for providing sub-custodial services, BONY receives, in
addition to out of pocket expenses, fees at the rate of (i) 3/4 of one basis
point per annum on the aggregate net assets of all Nations' Non-Money Market
Funds up to $10 billion; and (ii) 1/2 of one basis point on the excess,
including all Nations' Money Market Funds.

First Data serves as transfer agent (the "Transfer Agent") for the Funds'
Investor B Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.

Price Waterhouse LLP serves as independent accountants to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.

EXPENSES: The accrued expenses of the Funds, as well as certain expenses
attributable to Investor B Shares, are deducted from accrued income before
dividends are declared. These Fund expenses include, but are not limited to:
fees paid to the Adviser, Stephens and First Data; interest; taxes; trustees'
fees; federal and state securities registration and qualification fees;
brokerage fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by the Adviser, Stephens or First Data
under their respective agreements with Nations Funds; and any extraordinary
expenses. Investor B Shares may bear certain class specific expenses and also
bear certain additional shareholder service and sales support costs. Any general
expenses of Nations Fund Trust that are not readily identifiable as belonging to
a particular investment portfolio are allocated among all portfolios in the
proportion that the assets of a portfolio bears to the assets of Nations Fund
Trust or in such other manner as the Board of Trustees deems appropriate.

<PAGE>
Organization And History

The Funds are members of the Nations Funds Family, which consists of Nations
Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc., Nations
Institutional Reserves and Nations LifeGoal Funds, Inc. The Nations Funds Family
currently has more than 52 distinct investment portfolios and total assets in
excess of $30 billion.

NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. Nations Fund Trust's fiscal year end is March 31; prior to
1996, Nations Fund Trust's fiscal year end was November 30. The Funds currently
offer four classes of shares -- Primary A Shares, Investor A Shares, Investor B
Shares and Investor C Shares. This Prospectus relates only to the Investor B
Shares of Nations Marsico Focused Equities Fund and Nations Marsico Growth &
Income Fund. To obtain additional information regarding the Funds' other classes
of shares which may be available to you, contact your Agent (as defined herein)
or Nations Funds at 1-800-321-7854.

Each share in Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.

As of December 31, 1997, NationsBank and its affiliates possessed or shared
power to dispose or vote with respect to more than 25% of the outstanding shares
of Nations Fund Trust and therefore could be considered to be a controlling
person of Nations Fund Trust for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series of shares over
which NationsBank and its affiliates possessed or shared power to dispose or
vote as of a certain date, see the SAI.

<PAGE>
About Your Investment

How To Buy Shares

The Funds have established various procedures for purchasing Investor B Shares
in order to accommodate different investors. Purchase orders may be placed
through banks, broker/dealers or other financial institutions (including certain
affiliates of NationsBank) that have entered into a shareholder servicing
agreement ("Servicing Agreement") with NationsBank ("Servicing Agents") and/or a
sales support agreement ("Sales Support Agreement") with Stephens ("Selling
Agents").

Certain investors desiring to invest $1 million or more (including current
holdings) in the Nations Funds Family may be eligible to purchase Investor A
Shares. See "How To Redeem Shares."

There is a minimum initial investment of $1,000 in the Funds, except that the
minimum initial investment is:

(Bullet) $500 for IRA investors;

(Bullet) $250 for non-working spousal IRAs; and

(Bullet) $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.

There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified employee
pension plans ("SAR-SEPs"), Savings Incentives Method Plans for Employees
("SIMPLE IRAs"), salary reduction-Individual Retirement Accounts ("SAR-IRAs") or
similar types of accounts. However, the assets of such plans must reach an asset
value of $1,000 ($500 for SEPs, SAR-SEPs, SIMPLE IRAs, and SAR-IRAs) within one
year of the account open date. If the assets of such plans do not reach the
minimum asset size within one year, Nations Funds reserves the right to redeem
the shares held by such plans on 60 days' written notice. The minimum subsequent
investment is $100, except for investments pursuant to the Systematic Investment
Plan described below.

Investor B Shares are purchased at net asset value per share without the
imposition of a sales charge. Purchases may be effected on days on which the New
York Stock Exchange (the "Exchange") is open for business (a "Business Day").

The Servicing Agents will provide various shareholder services for, and the
Selling Agents will provide sales support assistance to, their respective
customers ("Customers") who own Investor B Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Funds may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.

Nations Funds and Stephens reserve the right to reject any purchase order. The
issuance of Investor B Shares is recorded on the books of the Funds, and share
certificates are not issued unless expressly requested in writing. Certificates
are not issued for fractional shares.

EFFECTIVE TIME OF PURCHASES: Purchase orders for Investor B Shares of the Funds
which are received by Stephens or by the Transfer Agent before the close of
regular trading hours on the Exchange (currently 4:00 p.m., Eastern time) on any
Business Day are priced according to the net asset value determined on that day
but are not executed until 4:00 p.m., Eastern time, on the Business Day on which
immediately available funds in payment of the purchase price are received by the
Funds' Custodian. Such payment must be received no later than 4:00 p.m., Eastern
time, by the third Business Day following receipt of the order. If funds are not
received by such date, the order will not be accepted and notice thereof will be
given to the Agent placing the order. Payment for orders which are not

<PAGE>
received or accepted will be returned after prompt inquiry to the sending Agent.

The Agents are responsible for transmitting orders for purchases of Investor B
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Funds.

SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor B Shares. On a bi-monthly,
monthly or quarterly basis, shareholders may direct cash to be transferred
automatically from their checking or savings account at any bank which is a
member of the Automated Clearing House to their Fund account. Transfers will
occur on or about the 15th and/or the last day of the applicable month. Subject
to certain exceptions for employees of NationsBank and its affiliates and
pre-existing SIP accounts, the systematic investment amount may be in any amount
from $50 to $100,000. For more information concerning the SIP, contact your
Agent.

TELEPHONE TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How To Redeem Shares" and "How To
Exchange Shares" below. If a shareholder desires the telephone transaction
feature after opening an account, a signature guarantee will be required.
Shareholders should be aware that by using the telephone transaction feature,
such shareholders may be giving up a measure of security that they may have if
they were to request such transactions in writing. A shareholder may bear the
risk of any resulting losses from a telephone transaction. Nations Funds will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if Nations Funds and its service providers fail to
employ such measures, they may be liable for any losses due to unauthorized or
fraudulent instructions. Nations Funds requires a form of personal
identification prior to acting upon instructions received by telephone and
provides written confirmation to shareholders of each telephone share
transaction. In addition, Nations Funds reserves the right to record all
telephone conversations. Shareholders should be aware that during periods of
significant economic or market change, telephone transactions may be difficult
to complete.

CONVERSION FEATURE: Except for Investor B Shares held by employee benefit plans,
Investor B Shares that have been outstanding for the number of years set forth
in the schedule below will, at the end of the month in which the anniversary of
such share purchase occurs, automatically convert to Investor A Shares.

Upon conversion, shareholders will receive Investor A Shares having a total
dollar value equal to the total dollar value of their Investor B Shares, without
the imposition of any sales chage or other charge. The operating expenses
applicable to Investor A Shares, which are lower than those applicable to
Investor B Shares, shall thereafter be applied to such newly converted shares.
Shareholders holding converted shares will benefit from the lower annual
operating expenses of Investor A Shares, which will have a positive effect on
total returns. In each case, shareholders have the right to decline an automatic
conversion by notifying their Agent or the Transfer Agent within 90 days before
a conversion that they do not desire such conversion.

Reinvestments of dividends and distributions in Investor B Shares will be
considered a new purchase for purposes of the conversion schedules set forth
below. If a shareholder effects one or more exchanges among Investor B Shares of
the Non-Money Market Funds of Nations Funds during such period, the holding
period for shares so exchanged will be counted toward such period.

CONVERSION SCHEDULE

<TABLE>
<CAPTION>
<S> <C>
Amount of Purchase Year of Conversion
$0-$249,000 9th
$250,000-$499,999 6th
$500,000-$999,999 5th
</TABLE>

<PAGE>
How To Redeem Shares

Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders are
effected at the net asset value per share next determined after receipt of the
order by Stephens or by the Transfer Agent, less any applicable CDSC. The Agents
are responsible for transmitting redemption orders to Stephens or to the
Transfer Agent and for crediting their Customers' accounts with the redemption
proceeds on a timely basis. No charge for wiring redemption payments is imposed
by Nations Funds. Except for any CDSC which may be applicable upon redemption of
Investor B Shares, as described below, there is no redemption charge.

Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens or by the Transfer Agent.
However, redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately.

Nations Funds may redeem a shareholder's Investor B Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of an Agent
pursuant to arrangements between the Agent and its Customers. Nations Funds also
may redeem shares of the Funds involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.

Prior to effecting a redemption of Investor B Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Funds have previously been
made. Nations Funds may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.

RIGHTS OF ACCUMULATION: An investor may be entitled to a reduced CDSC or to
purchase Investor A Shares through Rights of Accumulation. To qualify for a
reduced CDSC or to purchase Investor A Shares, an investor must notify the
Servicing Agent through which the Investor B Shares are or would be purchased,
which in turn must notify Stephens or the Transfer Agent at the time of
purchase. Reductions in CDSCs or the availability of Investor A Shares may be
modified or terminated at any time and are subject to confirmation of an
investor's holdings. An investor who has previously invested in the Nations
Funds Family (excluding the Nations Funds money market and index funds, Nations
Short-Term Income Fund and Nations Short-Term Municipal Income Fund) may
aggregate holdings in such shares with current purchases to determine the
applicable CDSC schedule or the availability of Investor A Shares for current
purchases. An investor's aggregate investment in the Nations Funds Family for
this purpose is the total value (based on the higher of current net asset value
or the public offering price originally paid) of: (a) current purchases, and (b)
Investor A Shares, Investor B Shares or Investor C Shares that are already
beneficially owned by the investor (excluding the Nations Funds money market and
index funds, Nations Short-Term Income Fund and Nations Short-Term Municipal
Income Fund).

CONTINGENT DEFERRED SALES CHARGE: Subject to certain waivers specified below,
Investor B Shares may be subject to a CDSC if such shares are redeemed within
the years designated in the applicable CDSC schedule set forth below. No CDSC is
imposed on increases in net asset value above the initial purchase price, or
shares acquired by reinvestment of distributions. Subject to the waivers
described below, the amount of the CDSC is determined as a percentage of the
lesser of the net asset value or the purchase price

<PAGE>
of the shares being redeemed. The amount of the CDSC will depend on the number
of years since you invested, according to the following tables:

CDSC SCHEDULES

SHARES PURCHASED IN AMOUNT OF $0 -- $249,999

<TABLE>
<CAPTION>
<S> <C>
CDSC as a
Percentage of Dollar
Year Since Purchase Made Amount Subject to Charge
First 5.0%
Second 4.0%
Third 3.0%
Fourth 3.0%
Fifth 2.0%
Sixth 1.0%
Seventh and thereafter None
</TABLE>

SHARES PURCHASED IN AMOUNT OF $250,000 -- $499,999

<TABLE>
<CAPTION>
<S> <C>
CDSC as a
Percentage of Dollar
Year Since Purchase Made Amount Subject to Charge
First 3.0%
Second 2.0%
Third 1.0%
Fourth None
</TABLE>

SHARES PURCHASED IN AMOUNT OF $500,000 -- $999,999*

<TABLE>
<CAPTION>
<S> <C>
CDSC as a
Percentage of Dollar
Year Since Purchase Made Amount Subject to Charge
First 2.0%
Second 1.0%
Third None
</TABLE>

* Except as noted below, Investor B Shares are not available to purchasers
desiring to invest $1 million or more, other than employee benefit plans whose
initial investment is less than $1 million. Such employee benefit plans will
continue to be subject to this CDSC schedule even after their aggregate
holdings in the Nations Funds Family as described above reaches $1 million.

In determining whether a CDSC is payable on any redemption, the Funds will first
redeem shares not subject to any charge, and then shares resulting in the lowest
possible CDSC. Solely for purposes of determining the number of years from the
date of purchase of shares, all purchases are deemed to have been made on the
trade date of the transaction.

The CDSC will be waived on redemptions of Investor B Shares (i) following the
death or disability (as defined in the Internal Revenue Code of 1986, as amended
(the "Code")) of a shareholder (including a registered joint owner), (ii) in
connection with the following retirement plan distributions: (a) lump-sum or
other distributions from a qualified corporate or self-employed retirement plan
following retirement (or in the case of a "key employee" of a "top heavy" plan,
following attainment of age 59 1/2); (b) distributions from an IRA or Custodial
Account under Section 403(b)(7) of the Code following attainment of age 59 1/2;
(c) a tax-free return of an excess contribution to an IRA; and (d) distributions
from a qualified retirement plan that are not subject to the 10% additional
Federal withdrawal tax pursuant to Section 72(t)(2) of the Code, (iii) payments
made to pay medical expenses which exceed 7.5% of income and distributions to
pay for insurance by an individual who has separated from employment and who has
received unemployment compensation under a federal or state program for at least
12 weeks, (iv) effected pursuant to Nations Funds' right to liquidate a
shareholder's account, including instances where the aggregate net asset value
of the Investor B shares held in the account is less than the minimum account
size, (v) in connection with the combination of Nations Funds with any other
registered investment company by a merger, acquisition of assets or by any other
transaction, and (vi) effected pursuant to the Automatic Withdrawal Plan
discussed below, provided that such redemptions do not exceed, on an annual
basis, 12% of the net asset value of the Investor B Shares in the account. In
addition, the CDSC will be waived on Investor B Shares purchased before
September 30, 1994 by current or retired employees of NationsBank and its
affiliates or by current or former Trustees or Directors of Nations Funds or
other management companies managed by NationsBank. Shareholders are responsible
for providing evi-

<PAGE>
dence sufficient to establish that they are eligible for any waiver of the CDSC.

Stephens may, from time to time, at its expense or as an expense for which it
may be reimbursed under the plan adopted pursuant to Rule 12b-1 under the 1940
Act, pay a bonus or other consideration or incentive to Selling Agents who sell
a minimum dollar amount of shares of the Funds during a specified period of
time. Stephens also may, from time to time, pay additional consideration to
Selling Agents not to exceed 4.00% of the offering price per share on all sales
of Investor B Shares as an expense of Stephens or for which Stephens may be
reimbursed under the plan adopted pursuant to Rule 12b-1 or upon receipt of a
CDSC. Any such additional consideration or incentive program may be terminated
at any time by Stephens.

REINSTATEMENT PRIVILEGE: Within 120 days after a redemption of Investor B Shares
of a Fund, a shareholder may reinvest any portion of the proceeds of such
redemption in Investor B Shares of the same Fund. The amount which may be so
reinvested is limited to an amount up to, but not exceeding, the redemption
proceeds (or to the nearest full share if fractional shares are not purchased).
A shareholder exercising this privilege would receive a pro rata credit for any
CDSC paid in connection with the prior redemption. A shareholder may not
exercise this privilege with the proceeds of a redemption of shares previously
purchased through the reinvestment privilege. In order to exercise this
privilege, a written order for the purchase of Investor B Shares must be
received by the Transfer Agent or by Stephens within 120 days after the
redemption.

AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Funds if the value of the
Investor B Shares in his/her accounts within the Nations Funds Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Investor B Shares redeemed under the AWP will not be subject to a CDSC,
provided that the shares so redeemed do not exceed, on an annual basis, 12% of
the net asset value of the Investor B Shares in the account. Otherwise, any
applicable CDSC will be imposed on shares redeemed under the AWP. Shareholders
who elect to establish an AWP may receive a monthly, quarterly or annual check
or automatic transfer to a checking or savings account in a stated amount of not
less than $25 on or about the 10th or 25th day of the applicable month of
withdrawal. Investor B Shares will be redeemed (net of any applicable CDSC) as
necessary to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. An AWP may be terminated by a shareholder on 30 days' written notice
to his/her Selling Agent or by Nations Funds at any time.

How To Exchange Shares

The exchange feature enables a shareholder to exchange funds as specified below
when the shareholder believes that a shift between funds is an appropriate
investment decision. The exchange feature enables a shareholder of Investor B
Shares of a fund offered by Nations Funds to acquire shares of the same class
that are offered by another fund of Nations Funds (except Nations Short-Term
Income Fund and Nations Short-Term Municipal Income Fund), Investor A Shares of
Nations Short-Term Income Fund or Nations Short-Term Municipal

<PAGE>
Income Fund or Investor C Shares of a Nations Funds money market fund. A
qualifying exchange is based on the next calculated net asset value per share of
each fund after the exchange order is received.

No CDSC will be imposed in connection with an exchange of Investor B Shares that
meets the requirements discussed in this section. If a shareholder acquires
Investor B Shares of another fund through an exchange, any CDSC schedule
applicable (CDSCs may apply to shares purchased prior to January 1, 1996 or
after July 31, 1997) to the original shares purchased will be applied to any
redemption of the acquired shares. If a shareholder exchanges Investor B Shares
of a fund for Investor C Shares of a money market fund or Investor A Shares of
Nations Short-Term Income Fund or Nations Short-Term Municipal Income Fund, the
acquired shares will remain subject to the CDSC schedule applicable to the
Investor B Shares exchanged. The holding period (for purposes of determining the
applicable rate of the CDSC) does not accrue while the shares owned are Investor
C Shares of a Nations Funds money market fund or Investor A Shares of Nations
Short-Term Income Fund or Nations Short-Term Municipal Income Fund. As a result,
the CDSC that is ultimately charged upon a redemption is based upon the total
holding period of Investor B Shares of a fund that charges a CDSC.

The Funds and each of the other funds of Nations Funds may limit the number of
times this exchange feature may be exercised by a shareholder within a specified
period of time. Also the exchange feature may be terminated or revised at any
time by Nations Funds upon such notice as may be required by applicable
regulatory agencies (presently 60 days for termination or material revision),
provided that the exchange feature may be terminated or materially revised
without notice under certain unusual circumstances.

The current prospectus for each fund of Nations Funds describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.

The Investor B Shares exchanged must have a current value of at least $1,000.
Nations Funds and Stephens reserve the right to reject any exchange request.
Only shares that may legally be sold in the state of the investor's residence
may be acquired in an exchange. Only shares of a class that is accepting
investments generally may be acquired in an exchange. An investor may telephone
an exchange request by calling the investor's Selling Agent which is responsible
for transmitting such request to Stephens or to the Transfer Agent.

During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing the
request directly to the Selling Agent through which the original shares were
purchased. An investor should consult his/her Selling Agent or Stephens for
further information regarding exchanges.

<PAGE>
Shareholder Servicing And
Distribution Plans

SHAREHOLDER SERVICING PLAN: The Funds' shareholder servicing plan ("Servicing
Plan") permits the Funds to compensate Servicing Agents for services provided to
their Customers that own Investor B Shares. Payments under the Servicing Plan
are calculated daily and paid monthly at a rate or rates set from time to time
by the Funds, provided that the annual rate may not exceed 0.25% of the average
daily net asset value of the Investor B Shares.

The fees payable under the Servicing Plan are used primarily to compensate or
reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents may include: (i) aggregating and processing purchase and
redemption requests for Investor B Shares from Customers and transmitting net
purchase and redemption orders to Stephens or the Transfer Agent; (ii) providing
Customers with a service that invests the assets of their accounts in Investor B
Shares pursuant to specific or preauthorized instructions; (iii) processing
dividend and distribution payments from the Funds on behalf of Customers; (iv)
providing information periodically to Customers showing their positions in
Investor B Shares; (v) arranging for bank wires; and (vi) providing general
shareholder liaison services.

Nations Funds may suspend or reduce payments under the Servicing Plan at any
time, and payments are subject to the continuation of the Servicing Plan
described above and the terms of the Servicing Agreements. See the SAI for more
details on the Servicing Plan.

DISTRIBUTION PLAN: Pursuant to Rule 12b-1 under the 1940 Act, the Trustees and
Directors have approved a Distribution Plan with respect to Investor B Shares of
the Funds. Pursuant to the Distribution Plan, the Funds may compensate or
reimburse Stephens for any activities or expenses primarily intended to result
in the sale of the Funds' Investor B Shares. Payments under the Distribution
Plan will be calculated daily and paid monthly at a rate or rates set from time
to time by the Trustees and Directors provided that the annual rate may not
exceed 0.75% of the average daily net asset value of the Funds' Investor B
Shares.

The fees payable under the Distribution Plan are used primarily to compensate or
reimburse Stephens for distribution services provided by it, and related
expenses incurred, including payments by Stephens to compensate or reimburse
Selling Agents for sales support services provided, and related expenses
incurred, by such Selling Agents. Payments under the Distribution Plan may be
made with respect to the following expenses: the cost of preparing, printing and
distributing prospectuses, sales literature and advertising materials,
commissions, incentive compensation or other compensation to, and expenses of,
account executives or other employees of Stephens or the Selling Agents;
overhead and other office expenses; opportunity costs relating to the foregoing;
and any other costs and expenses relating to distribution or sales support
activities. The overhead and other office expenses referenced above may include,
without limitation, (i) the expenses of operating Stephens' or the Selling
Agents' offices in connection with the sale of Fund shares, including rent, the
salaries and employee benefit costs of administrative, operations and support
personnel, utility costs, communications costs and the costs of stationery and
supplies, (ii) the costs of client sales seminars and travel related to
distribution and sales support activities, and (iii) other expenses relating to
distribution and sales support activities.

Nations Funds and Stephens may suspend or reduce payments under the Distribution
Plan at any time, and payments are subject to the continuation of the
Distribution Plan described above and the terms of the Sales Support Agreements
between Selling Agents and Stephens. See

<PAGE>
the SAI for more details on the Distribution Plan.

Nations Funds understands that Agents may charge fees to their Customers who are
the owners of Investor B Shares for various services provided in connection with
a Customer's account. These fees would be in addition to any amounts received by
a Selling Agent under its Sales Support Agreement with Stephens or by a
Servicing Agent under its Servicing Agreement with Nations Funds. The Sales
Support Agreements and Servicing Agreements require Agents to disclose to their
Customers any compensation payable to the Agent by Stephens or Nations Funds and
any other compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.

How The Funds Value Their Shares

Portfolio securities for which market quotations are readily available are
valued at market value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following procedures
approved by the Trustees.

How Dividends And Distributions Are
Made; Tax Information

DIVIDENDS AND DISTRIBUTIONS: The Funds declare and pay dividends each calendar
quarter. Dividends from net investment income are declared and paid each
calendar quarter by the Funds. The Funds' net realized capital gains (including
net short-term capital gains) are distributed at least annually. Distributions
paid by the Funds with respect to one class of shares may be greater or less
than those paid with respect to another class of shares due to the different
expenses of the different classes.

Investor B Shares of the Funds are eligible to receive dividends when declared,
provided however, that the purchase order for such shares is received at least
one day prior to the dividend declaration and such shares continue to be
eligible for dividends through and including the day before the redemption order
is executed.

The net asset value of Investor B Shares will be reduced by the amount of any
dividend or distribution. Accordingly, dividends and distributions on newly
purchased shares represent, in substance, a return of capital. However, such
dividends and distributions would nevertheless be taxable. Certain Selling
Agents may provide for the reinvestment of dividends in the form of additional
Investor B Shares of the same Fund. Dividends and distributions are paid in cash
within five Business Days of the end of the quarter to which the payment
relates. Dividends and distributions payable to a shareholder are paid in cash
within five Business Days after a shareholder's complete redemption of his/her
Investor B Shares.

<PAGE>
short-term capital loss) are designated as capital gain distributions and
taxable to the Fund's shareholders as long-term capital gain. Under the Taxpayer
Relief Act of 1997, noncorporate shareholders may be taxed on such distributions
at preferential rates. See "Additional Information Concerning Taxes -- Capital
Gain Distributions" in the SAI. Distributions attributable to a Fund's dividend
income which are paid to corporate shareholders may be excludable pursuant to
the "dividends-received deduction" allowable to corporations. See "Additional
Information Concerning Taxes -- Corporate Shareholders" in the SAI. In general,
distributions will be taxable when paid, whether you take such distributions in
cash or have them automatically reinvested in additional Fund shares. However,
distributions declared in October, November and December of one year and
distributed in January of the following year will be taxable as if they were
paid to you in December of the first year. At the end of each year, you will be
notified as to the Federal income tax status of your distributions from the Fund
during the year.

Appendix A -- Portfolio Securities

<PAGE>
yields. Conversely, in periods of sharply rising rates, prepayments are
generally slow, increasing the security's average life and its potential for
price depreciation.

MORTGAGE-BACKED SECURITIES: Mortgage-backed securities represent an ownership
interest in a pool of mortgage loans.

The yield which will be earned on mortgage-backed securities may vary from their
coupon rates for the following reasons: (i) Certificates may be issued at a
premium or discount, rather than at par; (ii) Certificates may trade in the
secondary market at a premium or discount after issuance; (iii) interest is
earned and compounded monthly which has the effect of raising the effective
yield earned on the Certificates; and (iv) the actual yield of each Certificate
is affected by the prepayment of mortgages included in the mortgage pool
underlying the Certificates and the rate at which principal so prepaid is
reinvested. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium may result in a loss to the
Fund.

Collateralized Mortgage Obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class
pass-through securities are interests in a trust composed of Mortgage Assets and
all references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distribution on the multi-class pass-through securities.

<PAGE>
applied to the classes in the order of their respective stated maturities or
final distribution dates, so that no payment of principal is made on CMOs of a
class until all CMOs of other classes having earlier stated maturities or final
distribution dates have been paid in full.

<PAGE>
interests in their respective obligations only by filing a financing statement
and by having the servicer of the obligations, which is usually the originator,
take custody thereof. In such circumstances, if the servicer were to sell the
same obligations to another party, in violation of its duty not to do so, there
is a risk that such party could acquire an interest in the obligations superior
to that of the holders of the asset-backed securities. Also, although most such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the larger number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset-backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the asset-backed securities. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and Federal laws give
the motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related asset-backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and Federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike most
other asset-backed securities, credit card receivables are unsecured obligations
of the card holder.

<PAGE>
other temporary or emergency purposes. Generally, the effect of such a
transaction is that the Funds can recover all or most of the cash invested in
the portfolio securities involved during the term of the reverse repurchase
agreement, while they will be able to keep the interest income associated with
those portfolio securities. Such transactions are only advantageous if the
interest cost to the Funds of the reverse repurchase transaction is less than
the cost of obtaining the cash otherwise.

<PAGE>
rants are options to buy a stated number of shares of common stock at a
specified price any time during the life of the warrants.

<PAGE>
eign markets volume and liquidity are less than in the United States. Fixed
commissions on foreign securities exchanges are generally higher than the
negotiated commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign securities exchanges, brokers, and
companies than in the United States. With respect to certain foreign countries,
there is a possibility of expropriation or confiscatory taxation, limitations on
the removal of funds or other assets, or diplomatic developments that could
affect investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.

If otherwise consistent with their investment objectives and policies, certain
Funds may purchase securities which are not registered under

<PAGE>
the Securities Act of 1933, as amended (the "1933 Act") but which can be sold to
"qualified institutional buyers" in accordance with Rule 144A under the 1933
Act, or which were issued under Section 4(2) of the 1933 Act. Any such security
will not be considered illiquid so long as it is determined by a Fund's Board of
Trustees or Board of Directors or the Adviser, acting under guidelines approved
and monitored by the Fund's Board, after considering trading activity,
availability of reliable price information and other relevant information, that
an adequate trading market exists for that security. To the extent that, for a
period of time, qualified institutional or other buyers cease purchasing such
restricted securities pursuant to Rule 144A or otherwise, the level of
illiquidity of a Fund holding such securities may increase during such period.

The Funds may also purchase unrated bonds of foreign and domestic issuers.

The market for lower-rated securities may be thinner and less active than that
for higher qual-

<PAGE>
ity securities, which can adversely affect the price at which these securities
can be sold. If market quotations are not available, these lower-rated
securities will be valued in accordance with procedures established by the
Funds' Boards, including the use of outside pricing services. Adverse publicity
and changing investor perceptions may affect the ability of outside pricing
services used by a Fund to value its portfolio securities, and a Fund's ability
to dispose of these lower-rated bonds.

REAL ESTATE INVESTMENT TRUSTS: A real estate investment trust ("REIT") is a
managed portfolio of real estate investments which may include office buildings,
apartment complexes, hotels and shopping malls. An Equity REIT holds equity
positions in real estate, and it seeks to provide its shareholders with income
from the leasing of its properties, and with capital gains from any sales of
properties. A Mortgage REIT specializes in lending money to developers of
properties, and passes any interest income it may earn to its shareholders.
REITs may be affected by changes in the value of the underlying property owned
or financed by the REIT, while Mortgage REITs also may be affected by the
quality of credit extended. Both Equity and Mortgage REITs are dependent upon
management skill and may not be diversified. REITs also may be subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free pass-through of income under the
Code.

SECURITIES LENDING: To increase return on portfolio securities, the Funds may
lend their portfolio securities to broker/dealers and other institutional
investors pursuant to agreements

<PAGE>
requiring that the loans be continuously secured by collateral equal at all
times in value to at least the market value of the securities loaned. There is a
risk of delay in receiving collateral or in recovering the securities loaned or
even a loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
Adviser to be credit worthy and when, in its judgment, the income to be earned
from the loan justifies the attendant risks. The aggregate of all outstanding
loans of a Fund may not exceed 33% of the value of its total assets. Cash
collateral received by a Nations Fund may be invested in a Nations' Money Market
Fund.

STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Each Fund may
purchase and sell futures contracts and related options with respect to non-U.S.
stock indices, non-U.S. interest rates and foreign currencies, that have been
approved by the Commodity Futures Trading Commission ("CFTC") for investment by
U.S. investors, for the purpose of hedging against changes in values of a Fund's
securities or changes in the prevailing levels of interest rates or currency
exchange rates. The contracts entail certain risks, including but not limited to
the following: no assurance that futures contracts transactions can be offset at
favorable prices; possible reduction of a Fund's total return due to the use of
hedging; possible lack of liquidity due to daily limits on price fluctuation;
imperfect correlation between the contracts and the securities or currencies
being hedged; and potential losses in excess of the amount invested in the
futures contracts themselves.

WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase

<PAGE>
of new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities take
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.

Appendix B -- Description Of Ratings

The following summarizes the highest eight ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.

AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.

AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.

The following summarizes the highest eight ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.

<PAGE>
impair the fundamentally strong position of such issues.

Caa, Ca -- Bonds that are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest. Bonds that are rated Ca represent obligations that
are speculative in a high degree. Such issues are often in default or have
other marked shortcomings.

<PAGE>
tained. Issuers rated Prime-3 have an acceptable ability for repayment of senior
short-term obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and profitability
may result in changes in the level of debt protection measurements and may
require relatively high financial leverage. Adequate alternate liquidity is
maintained.

<PAGE>
Prospectus

INVESTOR C SHARES
DECEMBER 31, 1997

This Prospectus describes NATIONS MARSICO FOCUSED Nations Marsico
EQUITIES FUND and NATIONS MARSICO GROWTH & INCOME Focused Equities
FUND (the "Funds") of Nations Fund Trust, an open- Fund
end management investment company in the Nations
Funds Family ("Nations Funds" or "Nations Funds Nations Marsico
Family"). This Prospectus describes one class of Growth &
shares of the Funds -- Investor C Shares. Income Fund

This Prospectus sets forth concisely the
information about the Funds that a prospective
purchaser of Investor C Shares should consider
before investing. Investors should read this Prospectus
and retain it for future reference. Additional
information about Nations Fund Trust is contained
in a separate Statement of Additional Information
(the "SAI") that has been filed with the Securities and
Exchange Commission (the "SEC") and is available
upon request without charge by writing or calling
Nations Funds at its address or telephone number
shown below. The SAI, dated December 31, 1997, is
incorporated by reference in its entirety into this
Prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI,
material incorporated by reference in this
Prospectus and other information regarding
registrants that file electronically with the SEC.
NationsBanc Advisors, Inc. ("NBAI") is the
investment adviser to the Funds. Marsico Capital
Management, LLC ("Marsico Capital") is investment
sub-adviser to the Funds. As used herein the term
"Adviser" shall mean NBAI and/or Marsico Capital as
the context may require.

For Fund information call:
1-800-321-7854
Nations Funds
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255

[Nations Funds Logo]

NF-97668-1297

<PAGE>
Table Of Contents

About The Prospectus Summary 3
Funds
Expenses Summary 4

Objectives 5

How The Objectives Are Pursued 5

How Performance Is Shown 9

How The Funds Are Managed 10

Organization And History 13

About Your How To Buy Shares 14
Investment
How To Redeem Shares 15

How To Exchange Shares 16

Shareholder Servicing And Distribution Plans 17

How The Funds Value Their Shares 19

How Dividends And Distributions are Made; Tax
Information 19

Appendix A -- Portfolio Securities 20

Appendix B -- Description of Ratings 30

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION
WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY NATIONS FUNDS OR ITS DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
NATIONS FUNDS OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.

<PAGE>
About The Funds

Prospectus Summary

(Bullet) TYPE OF COMPANY: Open-end management investment company.

(Bullet) INVESTMENT OBJECTIVES AND POLICIES:

(Bullet) RISK FACTORS: Although the Adviser seeks to achieve the investment
objective of the Funds, there is no assurance that it will be able to
do so. Investments in the Funds are not insured against loss of
principal. Investments by the Funds in common stocks and other equity
securities are subject to stock market risk, which is the risk that the
value of the stocks the Funds hold may decline over short or even
extended periods. The U.S. stock market tends to be cyclical, with
periods when stock prices generally rise and periods when prices
generally decline. As of the date of this Prospectus, the stock market,
as measured by Standard & Poor's 500 Composite Stock Price Index ("S&P
500 Index") and other commonly used indices, was trading at or close to
record levels. There can be no guarantee that these levels will
continue. Investments by a Fund in debt securities are subject to
interest rate risk, which is the risk that increases in market interest
rates will adversely affect a Fund's investments in debt securities.
The value of a Fund's investments in debt securities, including U.S.
Government Obligations (as defined herein), will tend to decrease when
interest rates rise and increase when interest rates fall. In general,
longer-term debt instruments tend to fluctuate in value more than
shorter-term debt instruments in response to interest rate movements.
In addition, debt securities which are not backed by the United States
Government are subject to credit risk, which is the risk that the
issuer may not be able to pay principal and/or interest when due. The
Funds' investment in lower rated debt securities may bear additional
risks. Certain of the Funds' permissible investments may constitute
derivative securities. Certain types of derivative securities can,
under certain circumstances, significantly increase an investor's
exposure to stock market or other risks. The Funds' investment in
foreign equity and debt securities may bear additional risks associated
with international investing, such as foreign currency fluctuations and
economic and political risks. For a discussion of these and other
factors, see "How Objectives Are Pursued -- Risk Considerations" and
"Appendix A -- Portfolio Securities."

<PAGE>
(Bullet) MINIMUM PURCHASE: $1,000 minimum initial investment for each of the
Funds per record holder except that the minimum initial investment is:
$500 for Individual Retirement Account ("IRA") investors; $250 for
non-working spousal IRAs; and $100 for investors participating on a
monthly basis in the Systematic Investment Plan. There is no minimum
investment amount for investments by certain 401(k) and employee
pension plans or salary reduction -- Individual Retirement Accounts.
The minimum subsequent investment is $100, except for investments
pursuant to the Systematic Investment Plan. See "How To Buy Shares."

Expenses Summary

Expenses are one of several factors to consider when investing in the Funds. The
following tables summarize shareholder transaction and operating expenses for
Investor C Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in Investor C Shares of the
indicated Fund over specified periods.

INVESTOR C SHARES

<TABLE>
<CAPTION>
<S> <C> <C>
Nations Nations
Marsico Marsico
Focused Growth
Equities & Income
SHAREHOLDER TRANSACTION EXPENSES Fund Fund

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)

<TABLE>
<S> <C> <C>
Management Fees .85% .85%
Rule 12b-1 Fees .75% .75%
Shareholder Servicing Fees .25% .25%
Other Expenses .25% .25%
Total Operating Expenses 2.10% 2.10%
</TABLE>

<PAGE>
EXAMPLES:

You would pay the following expenses on a $1,000 investment in Investor C Shares
of the Funds, assuming (1) a 5% annual return and (2) redemption at the end of
each time period.

<TABLE>
<CAPTION>
<S> <C> <C>
Nations Nations
Marsico Marsico
Focused Growth
Equities & Income
Fund Fund

1 Year $ 21 $ 21
3 Years $ 66 $ 66
</TABLE>

The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Investor C Shares will bear either directly or indirectly. The "Other Expenses"
figures in the above tables are based on estimates. For a more complete
description of the Funds' operating expenses, see "How The Funds Are Managed."
For a more complete description of the Rule 12b-1 and shareholder servicing fees
payable by the Funds, see "Shareholder Servicing And Distribution Plan."

THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN.

Objectives

How The Objectives Are Pursued

(Bullet) Change -- The Adviser believes that extraordinary growth derives from
products, markets and technologies that are in flux.

(Bullet) Franchise -- The Adviser looks for strong brand franchises that can be
leveraged in a changing global environment.

(Bullet) Global reach -- The Adviser selects securities without geographic bias
in the belief that the

<PAGE>
global market is both a source of growth opportunity and a hedge
against fluctuations and dislocations of local markets.

(Bullet) Themes -- The Adviser seeks companies that are moving with, not
against, the major social, economic and cultural shifts taking place
in the world.

Realization of income is not a significant investment consideration. Any income
realized on the Fund's investments will be incidental to its objective.

(Bullet) Change -- The Adviser believes that extraordinary growth derives from
products, markets and technologies that are in flux.

(Bullet) Franchise -- The Adviser looks for strong brand franchises that can be
leveraged in a changing global environment.

(Bullet) Themes -- The Adviser seeks companies that are moving with, not
against, the major social, economic and cultural shifts taking place
in the world.

<PAGE>
should keep in mind that the Fund is not designed to produce a consistent level
of income.

The Funds may invest up to 25% of their assets in foreign equity and debt
securities. The Funds may invest directly in foreign securities denominated in a
foreign currency and not publicly traded in the United States. Other ways of
investing in foreign securities include depositary receipts or shares, and
passive foreign investment companies. Foreign securities are generally selected
on a company-by-company basis without regard to any defined allocation among
countries or geographic regions. However, certain factors such as expected
levels of inflation, government policies influencing business conditions, the
outlook for currency relationships, and prospects for economic growth among
countries, regions or geographic areas may warrant greater consideration in
selecting foreign securities. The Funds may use options, futures, forward
currency contracts and other types of derivatives for hedging purposes. The
Funds may purchase securities on a when-issued, delayed delivery or forward
commitment basis.

Investments by a Fund in common stocks and other equity securities are subject
to stock market risk. The value of the stocks that the Fund holds, like the
broader stock market, may decline over short or even extended periods. The U.S.
stock market tends to be cyclical, with periods when stock prices generally rise
and periods when prices generally decline. As of the date of this Prospectus,
the stock market, as measured by the S&P 500 Index and other commonly used
indices, was trading at or close to record levels. There can be no guarantee
that these levels will continue.

<PAGE>
become a diversified fund by limiting the investments in which more than 5% of
its total assets are invested.

For additional risk information regarding the Funds' investments in particular
instruments, see "Appendix A -- Portfolio Securities."

Each Fund may not:

<PAGE>
Nations Marsico Focused Equities Fund may not:

Nations Marsico Growth & Income Fund may not:

Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's total
assets would be invested in the securities of such issuer, except that up to 25%
of the value of the Fund's total assets may be invested without regard to these
limitations and with respect to 75% of such Fund's assets, the Fund will not
hold more than 10% of the voting securities of any issuer.

How Performance Is Shown

In addition to Investor C Shares, the Funds offer Primary A, Investor A and
Investor B Shares. Each class of shares may bear different sales charges,
shareholder servicing fees and other expenses, which may cause the performance
of a class to differ from the performance of the other classes. Total return and
yield quotations will be computed separately for each class of the Funds'
shares. Any fees charged by a selling agent and/or servicing agent directly to
its customers' accounts in connection with investments in the Funds will not be
included in calculations of total return or yield. Each Fund's annual report

<PAGE>
contains additional performance information and is available upon request
without charge from the Funds' distributor or your Selling Agent or by calling
Nations Funds at the toll-free number indicated on the cover of this Prospectus.

How The Funds Are Managed

INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds pursuant to an Investment Advisory Agreement ("Investment Advisory
Agreement") with the Trust. NBAI is a wholly owned subsidiary of NationsBank,
which in turn is a wholly owned banking subsidiary of NationsBank Corporation, a
bank holding company organized as a North Carolina corporation. NBAI has its
principal offices at One NationsBank Plaza, Charlotte, North Carolina 28255.

From time to time, NBAI (and/or Marsico Capital) may waive or reimburse (either
voluntarily

<PAGE>
or pursuant to applicable state limitations) advisory fees and/or expenses
payable by a Fund.

<TABLE>
<CAPTION>
Janus Janus
Twenty Growth and S&P 500
Fund (a) Income Fund (a) Index (b)
<S> <C> <C> <C>
One Year 48.21% 47.77% 46.41%
(8/8/96 - 8/7/97)
Three Years 32.07% 31.13% 30.63%
(8/11/94 -
8/7/97)
Five Years 20.02% 21.16% 20.98%
(8/13/92 -
8/7/97)
During Period of 22.38% 21.19% Janus Twenty:
Management by 18.20%(c)
Mr. Marsico Janus Growth
(through 8/7/97) and Income:
18.59%(d)
</TABLE>

(a) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.

(c) This figure represents the average annual return of the S&P 500 Index during
the period that Mr. Marsico managed the Janus Twenty Fund through August 7,
1997.

(d) This figure represents the average annual return of the S&P 500 Index during
the period that Mr. Marsico managed the Janus Growth and Income Fund through
August 7, 1997.

<PAGE>
lation of the Glass-Steagall Act. Such counsel has pointed out, however, that
there are no controlling judicial or administrative interpretations or decisions
and that future judicial or administrative interpretations of, or decisions
relating to, present federal or state statutes, including the Glass-Steagall
Act, and regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as future changes in federal or state
statutes, including the Glass-Steagall Act, and regulations and judicial or
administrative decisions or interpretations thereof, could prevent such entities
from continuing to perform, in whole or in part, such services. If any such
entity were prohibited from performing any of such services, it is expected that
new agreements would be proposed or entered into with another entity or entities
qualified to perform such services.

First Data Investor Services Group, Inc. ("First Data"), a wholly owned
subsidiary of First Data Corporation, with principal offices at One Exchange
Place, Boston, Massachusetts 02109, serves as the co-administrator of Nations
Funds pursuant to a Co-Administration Agreement. Under the Co-Administration
Agreement, First Data provides various administrative and accounting services to
the Funds including performing the calculations necessary to determine the net
asset value per share and dividends of each class of shares of the Funds,
preparing tax returns and financial statements and maintaining the portfolio
records and certain of the general accounting records for the Funds.

NBAI serves as sub-administrator for Nations Funds pursuant to a
Sub-Administration Agreement. Pursuant to the terms of the Sub-Administration
Agreement, NBAI assists Stephens in supervising, coordinating and monitoring
various aspects of the Funds' administrative operations. For providing such
services NBAI shall be entitled to receive a monthly fee from Stephens based on
an annual rate of .01% of the Funds' average daily net assets.

Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker/dealer. Nations Funds
has entered into a distribution agreement with Stephens which provides that
Stephens has the exclusive right to distribute shares of the Funds. Stephens may
pay service fees or commissions to selling agents that assist customers in
purchasing Investor C Shares of the Funds. See "Shareholder Servicing And
Distribution Plan."

<PAGE>
(i) 3/4 of one basis point per annum on the aggregate net assets of all Nations'
Non-Money Market Funds up to $10 billion; and (ii) 1/2 of one basis point on the
excess, including all Nations' Money Market Funds.

First Data serves as transfer agent (the "Transfer Agent") for the Funds'
Investor C Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109.

Price Waterhouse LLP serves as independent accountant to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.

EXPENSES: The accrued expenses of each Fund, as well as certain expenses
attributable to Investor C Shares, are deducted from accrued income before
dividends are declared. The Funds' expenses include, but are not limited to:
fees paid to the Adviser, Stephens and First Data; interest; taxes; Trustees'
fees; federal and state securities registration and qualification fees;
brokerage fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodian and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by the Adviser, Stephens or First Data
under their respective agreements with Nations Funds; and any extraordinary
expenses. Investor C Shares bear certain class specific expenses and also bear
certain additional shareholder service and/or sales support costs. Any general
expenses of Nations Fund Trust that are not readily identifiable as belonging to
a particular investment portfolio are allocated among all portfolios in the
proportion that the assets of a portfolio bears to the assets of Nations Fund
Trust or in such other manner as the Board of Trustees deems appropriate.

Organization And History

NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. Nations Fund Trust's fiscal year end is March 31; prior to
1996, Nations Fund Trust's fiscal year end was November 30. The Funds currently
offer four classes of shares -- Primary A Shares, Investor A Shares, Investor B
Shares and Investor C Shares. This Prospectus relates only to the Investor C
Shares of Nations Marsico Focused Equities Fund and Nations Marsico Growth &
Income Fund. To obtain additional information regarding the Funds' other classes
of shares which may be available to you, contact your Agent (as defined herein)
or Nations Funds at 1-800-321-7854.

<PAGE>
Investment Company Act of 1940, as amended (the "1940 Act") requires voting by
fund.

About Your Investment

How To Buy Shares

The Funds have established various procedures for purchasing Investor C Shares
in order to accommodate different investors. Purchase orders for Investor C
Shares may be placed through banks, broker/dealers or other financial
institutions (including certain affiliates of NationsBank) that have entered
into a shareholder servicing agreement ("Servicing Agreement") with Nations
Funds ("Servicing Agents") and/or a sales support agreement ("Sales Support
Agreement") with Stephens ("Selling Agents").

There is a minimum initial investment of $1,000, except that the minimum initial
investment is:

(Bullet) $500 for "IRA" investors;

(Bullet) $250 for non-working spousal IRAs; and

(Bullet) $100 for investors participating on a monthly basis in the Systematic
Investment Plan described below.

There is no minimum investment amount for investments by 401(k) plans,
simplified employee pension plans ("SEPs"), salary reduction-simplified employee
pension plans ("SAR-SEPs"), Savings Incentives Method Plans for Employees
("SIMPLE IRAs"), salary reduction-Individual Retirement Account ("SAR-IRAs") or
similar types of accounts. However, the assets of such plans must reach an asset
value of $1,000 ($500 for SEPs, SAR-SEPs, SIMPLE IRAs, and SAR-IRAs) within one
year of the account open date. If the assets of such plans do not reach the
minimum asset size within one year, Nations Funds reserves the right to redeem
the shares held by such plans on 60 days' written notice. The minimum subsequent
investment is $100, except for investments pursuant to the Systematic Investment
Plan described below.

Investor C Shares are purchased at net asset value per share without the
imposition of a sales charge. Purchases may be effected on days on which the New
York Stock Exchange (the "Exchange") is open for business (a "Business Day").

The Servicing Agents will provide various shareholder services for, and the
Selling Agents will provide sales support assistance to, their respective
customers ("Customers") who own Investor C Shares. Servicing Agents and Selling
Agents are sometimes referred to hereafter as "Agents." From time to time the
Agents, Stephens and Nations Funds may agree to voluntarily reduce the maximum
fees payable for sales support or shareholder services.

Nations Funds and Stephens reserve the right to reject any purchase order. The
issuance of
Inves-

<PAGE>
tor C Shares is recorded on the books of the Funds, and share certificates are
not issued unless expressly requested in writing. Certificates are not issued
for fractional shares.

EFFECTIVE TIME OF PURCHASES: Purchase orders for Investor C Shares of the Funds
which are received by Stephens or by the Transfer Agent before the close of
regular trading hours on the Exchange (currently 4:00 p.m., Eastern time) on any
Business Day are priced according to the net asset value determined on that day
but are not executed until 4:00 p.m., Eastern time, on the Business Day on which
immediately available funds in payment of the purchase price are received by the
Funds' Custodian. Such payment must be received no later than 4:00 p.m., Eastern
time, by the third Business Day following receipt of the order. If funds are not
received by such date, the order will not be accepted and notice thereof will be
given to the Agent placing the order. Payment for orders which are not received
or accepted will be returned after prompt inquiry to the sending Agent.

The Agents are responsible for transmitting orders for purchases of Investor C
Shares by their Customers, and delivering required funds, on a timely basis.
Stephens is responsible for transmitting orders it receives to Nations Funds.

SYSTEMATIC INVESTMENT PLAN: Under the Funds' Systematic Investment Plan ("SIP")
a shareholder may automatically purchase Investor C Shares. On a bi-monthly,
monthly or quarterly basis, a shareholder may direct cash to be transferred
automatically from his/her checking or savings account at any bank which is a
member of the Automated Clearing House to his/her Fund account. Transfers will
occur on or about the 15th and/or the last day of the applicable month. Subject
to certain exceptions for employees of NationsBank and its affiliates and pre-
existing SIP accounts, the systematic investment amount may be in any amount
from $50 to $100,000. For more information concerning the SIP, contact your
Agent.

TELEPHONE TRANSACTIONS: Investors may effect purchases, redemptions (up to
$50,000) and exchanges by telephone. See "How To Redeem Shares" and "How To
Exchange Shares" below. If a shareholder desires to elect the telephone
transaction feature after opening an account, a signature guarantee will be
required. Shareholders should be aware that by using the telephone transaction
feature, such shareholders may be giving up a measure of security that they may
have if they were to authorize written requests only. A shareholder may bear
the risk of any resulting losses from a telephone transaction. Nations Funds
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine, and if Nations Funds and its service providers fail to
employ such measures, they may be liable for any losses due to unauthorized or
fraudulent instructions. Nations Funds requires a form of personal
identification prior to acting upon instructions received by telephone and
provides written confirmation to shareholders of each telephone share
transaction. In addition, Nations Funds reserves the right to record all
telephone conversations. Shareholders should be aware that during periods of
significant economic or market change, telephone transactions may be difficult
to complete.

How To Redeem Shares

Redemption orders should be transmitted by telephone or in writing through the
same Agent that transmitted the original purchase order. Redemption orders are
effected at the net asset value per share next determined after receipt of the
order by Stephens or by the Transfer Agent. The Agents are responsible for
transmitting redemption orders to Stephens or to the Transfer Agent and for
crediting their Customers' accounts with the redemption proceeds on a timely
basis. No charge for wiring redemption payments is imposed by Nations Funds.

<PAGE>
Redemption proceeds are normally wired to the redeeming Agent within three
Business Days after receipt of the order by Stephens or by the Transfer Agent.
However, redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately.

Nations Funds may redeem a shareholder's Investor C Shares upon 60 days' written
notice if the balance in the shareholder's account drops below $500 as a result
of redemptions. Share balances also may be redeemed at the direction of an Agent
pursuant to arrangements between the Agent and its Customers. Nations Funds also
may redeem shares of the Funds involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.

Prior to effecting a redemption of Investor C Shares represented by
certificates, the Transfer Agent must have received such certificates at its
principal office. All such certificates must be endorsed by the redeeming
shareholder or accompanied by a signed stock power, in each instance with the
signature guaranteed by a commercial bank or a member of a major stock exchange,
unless other arrangements satisfactory to Nations Funds have previously been
made. Nations Funds may require any additional information reasonably necessary
to evidence that a redemption has been duly authorized.

REINSTATEMENT PRIVILEGE: Within 120 days after a redemption of Investor C Shares
of a Fund, a shareholder may reinvest any portion of the proceeds of such
redemption in Investor C Shares of the same Fund. The amount which may be so
reinvested is limited to an amount up to, but not exceeding, the redemption
proceeds (or to the nearest full share if fractional shares are not purchased).
A shareholder may not exercise this privilege with the proceeds of a redemption
of shares previously purchased through the reinvestment privilege. In order to
exercise this privilege, a written order for the purchase of Investor C Shares
must be received by the Transfer Agent or by Stephens within 120 days after the
redemption.

AUTOMATIC WITHDRAWAL PLAN: An Automatic Withdrawal Plan ("AWP") may be
established by a new or existing shareholder of the Funds if the value of the
Investor C Shares in his/her accounts within the Nations Funds Family (valued at
the net asset value at the time of the establishment of the AWP) equals $10,000
or more. Shareholders who elect to establish an AWP may receive a monthly,
quarterly or annual check or automatic transfer to a checking or savings account
in a stated amount of not less than $25 on or about the 10th or 25th day of the
applicable month of withdrawal. Investor C Shares will be redeemed as necessary
to meet withdrawal payments. Withdrawals will reduce principal and may
eventually deplete the shareholder's account. If a shareholder desires to
establish an AWP after opening an account, a signature guarantee will be
required. An AWP may be terminated by a shareholder on 30 days' written notice
to his/her Agent or by Nations Funds at any time.

How To Exchange Shares

The exchange feature enables a shareholder of Investor C Shares of a Nations
Funds non-money market fund to acquire shares of the same class that are offered
by another non-money market fund of Nations Funds or Daily Shares of any Nations
Funds money market fund when he or she believes that a shift between funds is an
appropriate investment decision. A qualifying exchange is based on the next
calculated net asset value per share of each fund after the exchange order is
received.

No CDSC will be imposed in connection with an exchange of Investor C Shares that
meets the requirements discussed in this section.

If a shareholder acquired Investor C Shares of a Nations Funds non-money market
fund or Daily Shares of a Nations Funds money market fund

<PAGE>
through an exchange, the CDSC applicable to the original shares purchased will
be applied to any redemption of the acquired shares. Additionally, when an
investor exchanges Investor C Shares of a Nations Funds non-money market fund
for shares of the same class of another non-money market fund or Daily Shares of
any money market fund of Nations Funds, the remaining period of time (if any)
that the CDSC is in effect will be computed from the time of the initial
purchase of the previously held Investor C Shares.

The Investor C Shares exchanged must have a current value of at least $1,000
(except for exchanges through the Automatic Exchange Feature, which is described
below). Nations Funds and Stephens reserve the right to reject any exchange
request. Only shares that may legally be sold in the state of the investor's
residence may be acquired in an exchange. Only shares of a class that is
accepting investments generally may be acquired in an exchange. An investor may
telephone an exchange request by calling his/her Agent which is responsible for
transmitting such request to Stephens or to the Transfer Agent.

During periods of significant economic or market change, telephone exchanges may
be difficult to complete. In such event, shares may be exchanged by mailing the
request directly to the Agent through which the original shares were purchased.
An investor should consult his/her Agent or Stephens for further information
regarding exchanges.

AUTOMATIC EXCHANGE FEATURE: Under the Funds' Automatic Exchange Feature ("AEF")
a shareholder may automatically exchange at least $25 on a monthly or quarterly
basis. A shareholder may direct proceeds to be exchanged from one Nations Funds
to another as allowed by the applicable exchange rules within the prospectus.
Exchanges will occur on or about the 15th or the last day of the applicable
month. The shareholder must have an existing position in both Funds in order to
establish the AEF. This feature may be established by directing a request to the
Transfer Agent by telephone or in writing. For additional information, an
investor should contact his/her Selling Agent or Nations Funds.

Shareholder Servicing And Distribution
Plans

Pursuant to Rule 12b-1 under the 1940 Act, the Trustees have approved a
Distribution Plan with respect to Investor C Shares of the Funds. Pursuant to
the Distribution Plan, the Funds may

<PAGE>
compensate or reimburse Stephens for any activities or expenses primarily
intended to result in the sale of the Funds' Investor C Shares. Payments under
the Investor C Distribution Plan will be calculated daily and paid monthly at a
rate or rates set from time to time by the Trustees, provided that the annual
rate may not exceed 0.75% of the average daily net asset value of the Funds'
Investor C Shares.

The fees payable under the Distribution Plan are used (i) to compensate Selling
Agents for providing sales support assistance relating to Investor C Shares,
(ii) to pay for promotional activities intended to result in the sale of
Investor C Shares such as the preparation, printing and distribution of
prospectuses to other than current shareholders, and (iii) to compensate Selling
Agents for providing sales support services with respect to their Customers who
are, from time to time, beneficial and record holders of Investor C Shares.
Currently, substantially all fees paid pursuant to the Distribution Plan are
paid to compensate Selling Agents for providing the services described in (i)
and (iii) above, with any remaining amounts being used by Stephens to partially
defray other expenses incurred by Stephens in distributing Investor C Shares.
Fees received by Stephens pursuant to the Distribution Plan will not be used to
pay any interest expenses, carrying charges or other financing costs (except to
the extent permitted by the SEC) and will not be used to pay any general and
administrative expenses of Stephens.

The Trustees also have approved a shareholder servicing plan ("Servicing Plan")
for the Funds which permits the Funds to compensate Servicing Agents for
services provided to their Customers that own Investor C Shares. Payments under
the Servicing Plan are calculated daily and paid monthly at a rate or rates set
from time to time by the Funds, provided that the annual rate may not exceed
.25% of the average daily net asset value of the Funds' Investor C Shares.

The fees payable under the Servicing Plan are used primarily to compensate or
reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents may include: (i) aggregating and processing purchase and
redemption requests for Investor C Shares from Customers and transmitting net
purchase and redemption orders to Stephens or the Transfer Agent; (ii) providing
Customers with a service that invests the assets of their accounts in Investor C
Shares pursuant to specific or preauthorized instructions; (iii) processing
dividend and distribution payments from the Funds on behalf of Customers; (iv)
providing information periodically to Customers showing their positions in
Investor C Shares; (v) arranging for bank wires; and (vi) providing general
shareholder liaison services.

Nations Funds understands that Agents may charge fees to their Customers who are
the owners of Investor C Shares for various services provided in connection with
Customers' accounts. These fees would be in addition to any amounts received by
a Selling Agent under its Sales Support Agreement with Stephens or by a
Servicing Agent under its Servicing Agreement with Nations Funds. The Sales
Support Agreements and Servicing Agreements require Agents to disclose to their
Customers any compensation payable to the Agent by Stephens or Nations Funds and
any other compensation payable by the Customers for various services provided in
connection with their accounts. Customers should read this Prospectus in light
of the terms governing their accounts with their Agents.

Stephens may, from time to time, at its expense or as an expense for which it
may be reimbursed under the Distribution Plan, pay a bonus or

<PAGE>
other consideration or incentive to Agents who sell a minimum dollar amount of
shares of the Funds during a specified period of time. Stephens also may, from
time to time, pay additional consideration to Agents not to exceed .75% of the
offering price per share on all sales of Investor C Shares as an expense of
Stephens or for which Stephens may be reimbursed under the Distribution Plan.
Any such additional consideration or incentive program may be terminated at any
time by Stephens.

How The Funds Value Their Shares

Portfolio securities for which market quotations are readily available are
valued at market value. Short-term investments that will mature in 60 days or
less are valued at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following procedures
approved by the Trustees.

How Dividends And Distributions Are
Made; Tax Information

Investor C Shares of the Funds are eligible to receive dividends when declared,
provided however, that the purchase order for such shares is received at least
one day prior to the dividend declaration and such shares continue to be
eligible for dividends through and including the day before the redemption order
is executed.

The net asset value of Investor C Shares will be reduced by the amount of any
dividend or distribution. Accordingly, dividends and distributions on newly
purchased shares represent, in substance, a return of capital. However, such
dividends and distributions would nevertheless be taxable. Certain Agents may
provide for the reinvestment of dividends in the form of additional Investor C
Shares of the same class in the same Fund. Dividends and distributions are paid
in cash within five Business Days of the end of the quarter to which the payment
relates. Dividends and distributions payable to a shareholder are paid in cash
within five Business Days after a shareholder's complete redemption of his/her
Investor C Shares.

<PAGE>
gain distributions and taxable to the Fund's shareholders as long-term capital
gain. Under the Taxpayer Relief Act of 1997, noncorporate shareholders may be
taxed on such distributions at preferential rates. See "Additional Information
Concerning Taxes -- Capital Gain Distributions" in the SAI. Distributions
attributable to a Fund's dividend income which are paid to corporate
shareholders may be excludable pursuant to the "dividends-received deduction"
allowable to corporations. See "Additional Information Concerning
Taxes -- Corporate Shareholders" in the SAI. In general, distributions will be
taxable when paid, whether you take such distributions in cash or have them
automatically reinvested in additional Fund shares. However, distributions
declared in October, November and December of one year and distributed in
January of the following year will be taxable as if they were paid to you in
December of the first year. At the end of each year, you will be notified as to
the Federal income tax status of your distributions from the Fund during the
year.

Appendix A -- Portfolio Securities

<PAGE>
yields. Conversely, in periods of sharply rising rates, prepayments are
generally slow, increasing the security's average life and its potential for
price depreciation.

MORTGAGE-BACKED SECURITIES: Mortgage-backed securities represent an ownership
interest in a pool of mortgage loans.

Collateralized Mortgage Obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class
pass-through securities are interests in a trust composed of Mortgage Assets and
all references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distribution on the multi-class pass-through securities.

<PAGE>
rants are options to buy a stated number of shares of common stock at a
specified price any time during the life of the warrants.

If otherwise consistent with their investment objectives and policies, certain
Funds may purchase securities which are not registered under

INDEXED/STRUCTURED SECURITIES: Indexed/
structured securities are typically short- to intermediate-term debt securities
whose value at maturity or interest rate is linked to currencies, interest
rates, equity securities, indices, commodity prices or other financial
indicators. Such securities may be positively or negatively indexed (i.e., their
value may increase or decrease if the reference index or instrument
appreciates). Indexed/structured securities may have return characteristics
similar to direct investments in the underlying instruments and may be more
volatile than the underlying instruments. The Fund bears the market risk of an
investment in the underlying instruments, as well as the credit risk of the
issuer.

The Funds may also purchase unrated bonds of foreign and domestic issuers.

The market for lower-rated securities may be thinner and less active than that
for higher
qual-

SECURITIES LENDING: To increase return on portfolio securities, the Funds may
lend their portfolio securities to broker/dealers and other institutional
investors pursuant to agreements

STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Each Fund may
purchase and sell futures contracts and related options with respect to non-U.S.
stock indices, non-U.S. interest rates and foreign currencies, that have been
approved by the Commodity Futures Trading Commission ("CFTC") for investment by
U.S. investors, for the purpose of hedging against changes in values of a Fund's
securities or changes in the prevailing levels of interest rates or currency
exchange rates. The contracts entail certain risks, including but not limited to
the following: no assurance that futures contracts transactions can be offset at
favorable prices; possible reduction of a Fund's total return due to the use of
hedging; possible lack of liquidity due to daily limits on price fluctuation;
imperfect correlation between the contracts and the securities or currencies
being hedged; and potential losses in excess of the amount invested in the
futures contracts themselves.

WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase

Appendix B -- Description Of Ratings

The following summarizes the highest eight ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.

AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.

AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.

The following summarizes the highest eight ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.

<PAGE>
impair the fundamentally strong position of such issues.

<PAGE>

NATIONS FUND TRUST

STATEMENT OF ADDITIONAL INFORMATION

NATIONS MARSICO FOCUSED EQUITIES FUND
NATIONS MARSICO GROWTH & INCOME FUND

INVESTOR SHARES AND PRIMARY SHARES
December 31, 1997

This Statement of Additional Information ("SAI") provides supplementary
information pertaining to the classes of shares representing interests in the
above-listed investment portfolios of Nations Fund Trust (each a "Fund" and
collectively, the "Funds"). This SAI is not a prospectus, and should be read
only in conjunction with the current prospectuses for the Funds related to the
class or series of shares in which one is interested, dated December 31, 1997
for the Investor A, Investor B, Investor C and Primary A Shares (each, a
"Prospectus" and collectively, the "Prospectuses"). All terms used in this SAI
that are defined in the Prospectuses will have the same meanings assigned in the
Prospectuses. Copies of the Prospectuses may be obtained by writing Nations
Funds, c/o Stephens Inc., One NationsBank Plaza, 33rd Floor, Charlotte, North
Carolina 28255, or by calling Nations Funds toll-free at 1-800-626-2275.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION...........................................................................1

FUND TRANSACTIONS AND BROKERAGE........................................................1

ADDITIONAL INFORMATION ON FUND INVESTMENTS.............................................5
Commercial Instruments..............................................................5
Repurchase Agreements...............................................................6
Reverse Repurchase Agreements.......................................................6
Lending Securities..................................................................6
American Depository Receipts........................................................7
Futures, Options And Other Derivative Instruments...................................7
When-Issued Purchases And Forward Commitments......................................11
Real Estate Investment Trusts......................................................12
Guaranteed Investment Contracts....................................................13
Variable- And Floating- Rate Instruments...........................................13
Variable- And Floating-Rate Government Securities..................................13
Dollar Roll Transactions...........................................................14
Foreign Currency Transactions......................................................15
Interest Rate Transactions.........................................................15
Illiquid Securities................................................................16
Other Securities...................................................................17
Additional Investment Limitations..................................................17

NET ASSET VALUE.......................................................................19
Exchange Privilege.................................................................20

DESCRIPTION OF SHARES.................................................................21
Dividends and Distributions........................................................22

ADDITIONAL INFORMATION CONCERNING TAXES...............................................22
General............................................................................23
Exercise Tax.......................................................................23
Private Letter Ruling..............................................................24
Taxation of Fund Investments.......................................................24
Foreign Taxes......................................................................25
Capital Gain Distributions.........................................................26
Other Distributions................................................................26
Disposition of Fund Shares.........................................................27
Federal Income Tax Rates...........................................................27
Corporate Shareholders.............................................................28

<PAGE>

Page
----
Foreign Shareholders...............................................................28
Backup Withholding.................................................................28
Tax-Deferred Plans.................................................................28
Other Matters......................................................................29

TRUSTEES AND OFFICERS.................................................................29
Compensation Table.................................................................34
Nations Funds Retirement Plan......................................................35
Nations Funds Deferred Compensation Plan...........................................36
Shareholder and Trustee Liability..................................................36

INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY, TRANSFER AGENCY, SHAREHOLDER
SERVICING AND DISTRIBUTION SERVICES AGREEMENTS........................................37
Investment Adviser.................................................................37
Administrator and Co-Administrator.................................................39
Custodian and Transfer Agent.......................................................40
Distribution Plans and Shareholder Servicing Arrangements for Investor Shares......41

DISTRIBUTOR...........................................................................46

INDEPENDENT ACCOUNTANTS AND REPORTS...................................................47

COUNSEL...............................................................................47

ADDITIONAL INFORMATION ON PERFORMANCE.................................................47
Yield Calculations.................................................................48
Total Return Calculations..........................................................49

MISCELLANEOUS.........................................................................51
Certain Record Holders.............................................................51

SCHEDULE A.............................................................................A

SCHEDULE B.............................................................................B

SCHEDULE C.............................................................................C
</TABLE>

iii

<PAGE>

INTRODUCTION

Nations Fund Trust (the "Trust") was organized on May 6, 1985 under the
name "MarketMaster Trust," in March 1992 changed its name to "Nations Fund," and
in September 1992 changed its name to "Nations Fund Trust." NationsBanc
Advisors, Inc. ("NBAI") is the investment adviser to the Funds. Marsico Capital
Management, LLC ("Marsico Capital") is the investment sub-adviser to the Funds.
As used herein the "Adviser" shall mean NBAI and/or Marsico as the context may
require.

The Trust currently consists of thirty-four different investment
portfolios. This SAI pertains to the Primary A, Investor A, Investor B and
Investor C Shares of Nations Marsico Focused Equities Fund ("Marsico Equities
Fund") and Nations Marsico Growth & Income Fund ("Marsico Growth & Income
Fund"). The Primary A Shares of the Funds are sometimes referred to as "Primary
Shares." The Investor A Shares, Investor B Shares and Investor C Shares of the
Funds are sometimes collectively referred to as "Investor Shares."

Much of the information contained in this SAI expands upon subjects
discussed in the Prospectuses. No investment in Primary A Shares or Investor
Shares should be made without first reading the related Prospectuses.

FUND TRANSACTIONS AND BROKERAGE

Subject to the general supervision of the Board of Trustees, the Adviser
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Funds.

Transactions on U.S. stock exchanges involve the payment of negotiated
brokerage commissions. On exchanges on which commissions are negotiated, the
cost of transactions may vary among different brokers. Transactions on foreign
stock exchanges involve payment of brokerage commissions which are generally
fixed.

Transactions in both foreign and domestic over-the-counter markets are
generally principal transactions with dealers, and the costs of such
transactions involve dealer spreads rather than brokerage commissions. With
respect to over-the-counter transactions, the Adviser, where possible, will deal
directly with dealers who make a market in the securities involved except in
those circumstances in which better prices and execution are available
elsewhere.

Securities purchased and sold by the Funds are generally traded in the
over-the-counter market on a net basis (i.e., without commission) through
dealers, or otherwise involve transactions directly with the issuer of an
instrument. The cost of securities purchased from underwriters includes an
underwriting commission or concession, and the prices at which securities are
purchased from and sold to dealers include a dealer's mark-up or mark-down.

<PAGE>

The Funds may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group. A
Fund will engage in this practice, however, only when the Adviser, in its sole
discretion, believes such practice to be otherwise in the Fund's interests.

In executing portfolio transactions and selecting brokers or dealers, the
Adviser will seek to obtain the best overall terms available for each Fund. In
assessing the best overall terms available for any transaction, the Adviser
shall consider factors deemed relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. The Adviser
may cause a Fund to pay a broker/dealer which furnishes brokerage and research
services a higher commission than that which might be charged by another
broker/dealer for effecting the same transaction, provided that the Adviser
determines in good faith that such commission is reasonable in relation to the
value of the brokerage and research services provided by such broker/dealer,
viewed in terms of either the particular transaction or the overall
responsibilities of the Adviser. Such brokerage and research services might
consist of reports and statistics relating to specific companies or industries,
general summaries of groups of stocks or bonds and their comparative earnings
and yields, or broad overviews of the stock, bond, and government securities
markets and the economy.

Supplementary research information so received is in addition to, and not
in lieu of, services required to be performed by the Adviser and does not reduce
the advisory fees payable by the Funds. The Board of Trustees will periodically
review the commissions paid by the Funds to consider whether the commissions
paid over representative periods of time appear to be reasonable in relation to
the benefits inuring to the Funds. It is possible that certain of the
supplementary research or other services received will primarily benefit one or
more other investment companies or other accounts for which investment
discretion is exercised. Conversely, a Fund may be the primary beneficiary of
the research or services received as a result of portfolio transactions effected
for such other account or investment company.

Under Section 28(e) of the Securities Exchange Act of 1934, an adviser
shall not be "deemed to have acted unlawfully or to have breached its fiduciary
duty" solely because under certain circumstances it has caused the account to
pay a higher commission than the lowest available. To obtain the benefit of
Section 28(e), the Adviser must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided . . . viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision-making responsibilities." Accordingly,
the price to a Fund in any transaction may be less favorable than that available
from another broker/dealer if the difference is reasonably justified by other
aspects of the portfolio execution services offered.

Broker/dealers utilized by the Adviser may furnish statistical, research
and other information or services which are deemed by the Adviser to be
beneficial to the Funds' investment programs.

<PAGE>

Research services received from brokers supplement the Adviser's own research
and may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities, markets,
specific industry groups and individual companies; information on political
developments; portfolio management strategies; performance information on
securities and information concerning prices of securities; and information
supplied by specialized services to the Adviser and to the Trust's Trustees with
respect to the performance, investment activities and fees and expenses of other
mutual funds. Such information may be communicated electronically, orally or in
written form. Research services may also include the providing of equipment used
to communicate research information, the arranging of meetings with management
of companies and the providing of access to consultants who supply research
information.

The outside research assistance is useful to the Adviser since the brokers
utilized by the Adviser as a group tend to follow a broader universe of
securities and other matters than the staff of the Adviser can follow. In
addition, this research provides the Adviser with a diverse perspective on
financial markets. Research services which are provided to the Adviser by
brokers are available for the benefit of all accounts managed or advised by the
Adviser. In some cases, the research services are available only from the broker
providing such services. In other cases, the research services may be obtainable
from alternative sources in return for cash payments. It is the opinion of the
Adviser that because the broker research supplements rather than replaces its
research, the receipt of such research does not tend to decrease its expenses,
but tends to improve the quality of its investment advice. However, to the
extent that the Adviser would have purchased any such research services had such
services not been provided by brokers, the expenses of such services to the
Adviser could be considered to have been reduced accordingly. Certain research
services furnished by broker/dealers may be useful to the Adviser with clients
other than the Funds. Similarly, any research services received by the Adviser
through the placement of portfolio transactions of other clients may be of value
to the Adviser in fulfilling its obligations to the Funds. It is the opinion of
the Adviser that this material is beneficial in supplementing its research and
analysis; and, therefore, it may benefit the Trust by improving the quality of
the Adviser's investment advice. The advisory fees paid by the Trust are not
reduced because the Adviser receives such services.

Some broker/dealers may indicate that the provision of research services
is dependent upon the generation of certain specified levels of commissions and
underwriting concessions by the Adviser's clients, including the Funds.

The Trust will not execute portfolio transactions through, or purchase or
sell portfolio securities from or to Stephens (the distributor), the Adviser,
the administrator, or the co-administrator, or their affiliates acting as
principal (including repurchase and reverse repurchase agreements), except to
the extent permitted by the Securities and Exchange Commission (the "SEC"). In
addition, the Trust will not give preference to correspondents of NationsBank,
N.A. ("NationsBank") or its affiliates with respect to such transactions or
securities. (However, the Adviser is authorized to allocate purchase and sale
orders for portfolio securities to certain financial institutions, including, in
the case of agency transactions, financial institutions which are affiliated
with NationsBank or its affiliates, and to take into account the sale of Fund
shares if the

<PAGE>

Adviser believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms.) In
addition, a Fund will not purchase securities during the existence of any
underwriting or selling group relating thereto of which the distributor, the
Adviser, administrator, or the co-administrator, or any of their affiliates, is
a member, except to the extent permitted by the SEC. Under certain
circumstances, the Funds may be at a disadvantage because of these limitations
in comparison with other investment companies which have similar investment
objectives but are not subject to such limitations.

Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Trust as a principal in the purchase and sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
Each of the Funds may purchase securities from underwriting syndicates of which
NationsBank or any of its affiliates is a member under certain conditions, in
accordance with the provisions of a rule adopted under the 1940 Act and any
restrictions imposed by the Board of Governors of the Federal Reserve System.

NationsBank has agreed to maintain its policy and practice of conducting
its trust department independently of its commercial department. In making
investment recommendations for the Funds, trust department personnel will not
inquire or take into consideration whether the issuer of securities proposed for
purchase or sale for those Funds' accounts are customers of the commercial
department. In dealing with commercial customers, the commercial department will
not inquire or take into consideration whether securities of those customers are
held by the Trust.

Investment decisions for each Fund are made independently from those for
the Trust's other investment portfolios, other investment companies, and
accounts advised or managed by the Adviser. Such other investment portfolios,
investment companies, and accounts may also invest in the same securities as the
Funds. When a purchase or sale of the same security is made at substantially the
same time on behalf of one or more of the Funds and another investment
portfolio, investment company, or account, the transaction will be averaged as
to price and available investments allocated as to amount, in a manner which the
Adviser believes to be equitable to each Fund and such other investment
portfolio, investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by a Fund or the size
of the position obtained or sold by the Fund. To the extent permitted by law,
the Adviser may aggregate the securities to be sold or purchased for the Funds
with those to be sold or purchased for other investment portfolios, investment
companies, or accounts in executing transactions.

The portfolio turnover rates described in the Prospectuses are calculated
by dividing the lesser of purchases or sales of portfolio securities for the
year by the monthly average value of the portfolio securities. The calculation
excludes all securities whose maturities at the time of acquisition were one
year or less. Fund turnover may vary greatly from year to year as well as within
a particular year, and may also be affected by the cash requirements for
redemptions of shares and by requirements which enable a Fund to receive certain
favorable tax treatment. Fund turnover will not be a limiting factor in making
portfolio decisions.

<PAGE>

ADDITIONAL INFORMATION ON FUND INVESTMENTS

COMMERCIAL INSTRUMENTS

Commercial Instruments consist of short-term U.S. dollar-denominated
obligations issued by domestic corporations or by foreign corporations and
foreign commercial banks.

Investments by a Fund in commercial paper will consist of issues rated in
a manner consistent with such Fund's investment policies and objective. In
addition, the Funds may acquire unrated commercial paper and corporate bonds
that are determined by the Adviser at the time of purchase to be of comparable
quality to rated instruments that may be acquired by these Funds as previously
described.

Variable-rate master demand notes are unsecured instruments that permit
the indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. While some of these notes are not rated by credit rating
agencies, issuers of variable-rate master demand notes must satisfy the Adviser
that criteria similar to the following are met: (a) if rated by at least two
Nationally Recognized Statistical Rating Organizations ("NRSROs"), the
instruments are rated in the highest rating category for short-term obligations
given by such organizations, or if only rated by one such organization, are
rated in the highest rating category for short-term debt obligations given by
such organization; or (b) if not rated are (i) comparable in priority and
security to a class of short-term instruments of the same issuer that has such
rating(s), or (ii) of comparable quality to such instruments as determined by
the Board of Trustees on the advice of the Adviser. Variable-rate instruments
acquired by a Fund will be rated at a level consistent with such Fund's
investment objective and policies of high quality as determined by a major
rating agency or, if not rated, will be of comparable quality as determined by
the Adviser. Substantial holdings of variable-rate instruments could reduce
portfolio liquidity.

Variable- and floating- rate instruments are unsecured instruments that
permit the indebtedness thereunder to vary. While there may be no active
secondary market with respect to a particular variable or floating-rate
instrument purchased by a Fund, a Fund may, from time to time as specified in
the instrument, demand payment of the principal or may resell the instrument to
a third party. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of an instrument if the issuer defaulted on its
payment obligation or during periods when a Fund is not entitled to exercise its
demand rights, and a Fund could, for these or other reasons, suffer a loss. The
instruments are not typically rated by credit rating agencies, but issuers of
variable- and floating-rate instruments must satisfy similar criteria to that
set forth above for issuers of commercial paper. A Fund may invest in variable-
and floating-rate instruments only when the Adviser deems the investment to
involve minimal credit risk. If such instruments are not rated, the Adviser will
consider the earning power, cash flows, and other liquidity ratios of the
issuers of such instruments and will continuously monitor their financial status
to meet payment on demand. In determining average weighted portfolio maturity,
an instrument will be deemed to have a maturity equal to the longer of the
period remaining to the next interest rate adjustment or the demand notice
period specified in the instrument.

<PAGE>

REPURCHASE AGREEMENTS

The repurchase price under the repurchase agreements described in the
Prospectuses generally equals the price paid by a Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Securities subject
to repurchase agreements will be held by the Trust's custodian, or a
sub-custodian, in a segregated account or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans by the Trust
under the 1940 Act.

REVERSE REPURCHASE AGREEMENTS

At the time a Fund enters into a reverse repurchase agreement, it may
establish a segregated account with its custodian bank in which it will maintain
cash, U.S. Government securities or other liquid high grade debt obligations
equal in value to its obligations in respect of reverse repurchase agreements.
Reverse repurchase agreements involve the risk that the market value of the
securities the Funds are obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. Reverse repurchase agreements are
speculative techniques involving leverage, and are subject to asset coverage
requirements if the Funds do not establish and maintain a segregated account (as
described above). In addition, some or all of the proceeds received by a Fund
from the sale of a portfolio instrument may be applied to the purchase of a
repurchase agreement. To the extent the proceeds are used in this fashion and a
common broker/dealer is the counterparty on both the reverse repurchase
agreement and the repurchase agreement, the arrangement might be recharacterized
as a swap transaction. Under the requirements of the 1940 Act, the Funds are
required to maintain an asset coverage (including the proceeds of the
borrowings) of at least 300% of all borrowings. Depending on market conditions,
the Funds' asset coverage and other factors at the time of a reverse repurchase,
the Funds may not establish a segregated account when the Adviser believes it is
not in the best interests of the Funds to do so. In this case, such reverse
repurchase agreements will be considered borrowings subject to the asset
coverage described above.

LENDING SECURITIES

When a Fund lends its securities, it continues to receive interest or
dividends on the securities loaned and may simultaneously earn interest on the
investment of the cash loan collateral which will be invested in readily
marketable, high quality, short-term obligations. Although any voting rights, or
rights to consent, that may be attendant to securities on loan, pass to the
borrower, such loans may be called at any time. Securities on loan that have
voting rights will be called so that they may be voted by the Fund if a material
event affecting the investment is to occur.

<PAGE>

AMERICAN DEPOSITORY RECEIPTS

The Funds may invest in American Depository Receipts ("ADRs"), which are
receipts issued by an American bank or trust company evidencing ownership of
underlying securities issued by a foreign issuer. ADRs may be listed on a
national securities exchange or may trade in the over-the-counter market. The
prices of ADRs are denominated in U.S. dollars; the underlying security may be
denominated in a foreign currency. The underlying security may be subject to
foreign government taxes which would reduce the yield on such securities.
Investments in such securities also involve certain inherent risks, including
those set forth in the Prospectuses for the Funds under "Appendix A -- Foreign
Securities."

FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS

The Funds may purchase put and call options which are traded on a national
securities exchange in an amount not exceeding 5% of its net assets. Such
options may relate to particular securities or to various stock or bond indices.
Purchasing options is a specialized investment technique which entails a
substantial risk of a complete loss of the amount paid as premiums to the writer
of the option.

FUTURES CONTRACTS AND RELATED OPTIONS. In addition, the Adviser may
determine that it would be in the interest of a Fund to purchase or sell futures
contracts, or options thereon, as a hedge against changes resulting from market
conditions in the value of the securities held by one of the Funds, or of
securities which one of them intends to purchase. For example, a Fund may enter
into transactions involving a stock or bond index futures contract, which is a
bilateral agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to a specified dollar amount times the difference
between the index value (which assigns relative values to the common stocks or
bonds included in the index) at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. No
physical delivery of the underlying stocks or bonds in the index is made. During
the coming fiscal year, each of these Funds intends to limit its transactions in
futures contracts and options thereon so that: (i) no more than 5% of a Fund's
total assets would be committed to initial margin deposits or premiums on such
contracts and (ii) immediately after entering into such contracts, no more than
30% of a Fund's total assets would be represented by such contracts.

OPTIONS TRADING. Call options written by a Fund give the holder the right
to buy the underlying securities from the Fund at a fixed exercise price up to a
stated expiration date or, in the case of certain options, on such date. Put
options give the holder the right to sell the underlying securities to the Fund
during the term of the option at a fixed exercise price up to a stated
expiration date or, in the case of certain options, on such date. Call options
are "covered" by a Fund, for example, when it owns the underlying securities and
put options are "covered" by a Fund, for example, when it has established a
segregated account of cash, cash equivalents or securities which can be
liquidated promptly to satisfy any obligation of a Fund to purchase the
underlying securities. A Fund also may write combinations of puts and calls on
the same underlying security.

<PAGE>

A Fund will receive a premium from writing a put or call option, which
increases the gross income of a Fund in the event the option expires unexercised
or is closed out at a profit. The amount of the premium will reflect, among
other things, the relationship of the exercise price to the market price and
volatility of the underlying security, the remaining term of the option, supply
and demand and interest rates. By writing a call option, a Fund limits its
opportunity to profit from any increase in the market value of the underlying
security above the exercise price of the option. By writing a put option, a Fund
assumes the risk that it may be required to purchase the underlying security for
an exercise price higher than its then current market value, resulting in a
potential capital loss unless the security subsequently appreciates in value.

A Fund may terminate an option that it has written prior to its expiration
by entering into a closing purchase transaction in which the Fund purchases an
option having the same terms as the option written. It is possible, however,
that illiquidity in the options markets may make it difficult from time to time
for a Fund to close out its written option positions.

A Fund also may purchase put or call options in anticipation of changes in
interest rates which may adversely affect the value of its portfolio or the
prices of securities that the Fund wants to purchase at a later date. The
premium paid for a put or call option plus any transaction costs will reduce the
benefit, if any, realized by a Fund upon exercise of the option and, unless the
price of the underlying security changes sufficiently, the option may expire
without value.

A Fund may write and purchase options on securities both for hedging
purposes and in an effort to increase current income. Options on securities that
are written or purchased by a Fund will be traded on U.S. and foreign exchanges
and over-the-counter.

The staff of the SEC has taken the position that purchased
over-the-counter options and assets used to cover written over-the-counter
options are illiquid and, therefore, together with other illiquid securities,
cannot exceed applicable limitations on the amount of a Fund's assets that may
be invested in illiquid securities. The Adviser intends to limit a Fund's
writing of over-the-counter options in accordance with the following procedure.
Each Fund intends to write over-the-counter options only with primary U.S.
Government securities dealers recognized by the Federal Reserve Bank of New
York. Also, the contracts which a Fund has in place with such primary dealers
will provide that the Fund has the absolute right to repurchase an option it
writes at any time at a price which represents the fair market value, as
determined in good faith through negotiation between the parties, but which in
no event will exceed a price determined pursuant to a formula in the contract.
Although the specific formula may vary between contracts with different primary
dealers, the formula will generally be based on a multiple of the premium
received by a Fund for writing the option, plus the amount, if any, of the
option's intrinsic value (i.e., the amount that the option is in-the-money). The
formula also may include a factor to account for the difference between the
price of the security and the strike price of the option if the option is
written out-of-the-money. A Fund will treat all or a part of the formula price
as illiquid for purposes of the applicable SEC test regarding illiquid
securities.

As stated in the related Prospectuses, each Fund may purchase put and call
options listed on a national securities exchange. This is a highly specialized
activity which entails greater than

<PAGE>

ordinary investment risks. Regardless of how much the market price of the
underlying security increases or decreases, the option buyer's risk is limited
to the amount of the original investment for the purchase of the option.
However, options may be more volatile than the underlying securities, and
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying securities. A listed
call option gives the purchaser of the option the right to buy from a clearing
corporation, and a writer has the obligation to sell to the clearing
corporation, the underlying security at the stated exercise price at any time
prior to the expiration of the option, regardless of the market price of the
security. The premium paid to the writer is in consideration for undertaking the
obligations under the option contract. A listed put option gives the purchaser
the right to sell to a clearing corporation the underlying security at the
stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. Put and call options purchased
by the Fund will be valued at the last sale price or, in the absence of such a
price, at the mean between bid and asked prices.

A Fund's obligation to sell a security subject to a covered call option
written by it, or to purchase a security subject to a secured put option written
by it, may be terminated prior to the expiration date of the option by the Fund
executing a closing purchase transaction, which is effected by purchasing on an
exchange an option of the same series (i.e., same underlying security, exercise
price, and expiration date) as the option previously written. Such a purchase
does not result in the ownership of an option. A closing purchase transaction
will ordinarily be effected to realize a profit on an outstanding option, to
prevent an underlying security from being called, to permit the sale of the
underlying security, or to permit the writing of a new option containing
different terms on such underlying security. The cost of such a liquidation
purchase plus transaction costs may be greater than the premium received upon
the original option, in which event the Fund will have incurred a loss in the
transaction. An option position may be closed out only on an exchange which
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option. A covered call option writer, unable to effect a closing
purchase transaction, will not be able to sell the underlying security until the
option expires or the underlying security is delivered upon exercise with the
result that the writer in such circumstances will be subject to the risk of
market decline in the underlying security during such period. A Fund will write
an option on a particular security only if the Adviser believes that a liquid
secondary market will exist on an exchange for options of the same series which
will permit the Fund to make a closing purchase transaction in order to close
out its position.

When a Fund writes a covered call option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of the deferred credit will be subsequently
marked-to-market to reflect the current value of the option written. The current
value of the traded option is the last sale price or, in the absence of a sale,
the average of the closing bid and asked prices. If an option expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold), and the
deferred credit related to such option will be eliminated. Any gain on a covered
call option may be offset by a decline in the market price of the underlying
security during the option period. If a covered

<PAGE>

call option is exercised, the Fund may deliver the underlying security held by
it or purchase the underlying security in the open market. In either event, the
proceeds of the sale will be increased by the net premium originally received,
and the Fund will realize a gain or loss. If a secured put option is exercised,
the amount paid by the Fund involved for the underlying security will be
partially offset by the amount of the premium previously paid to the Fund.
Premiums from expired options written by a Fund and net gains from closing
purchase transactions are treated as short-term capital gains for Federal income
tax purposes, and losses on closing purchase transactions are short-term capital
losses.

FUTURES CONTRACTS. A futures contract is a bilateral agreement providing
for the purchase and sale of a specified type and amount of a financial
instrument, or, in the case of futures contracts on indices of securities, for
the making and acceptance of a cash settlement, at a stated time in the future
for a fixed price. By its terms, a futures contract provides for a specified
settlement date on which, in the case of the majority of interest rate futures
contracts, the fixed income securities underlying a contract are delivered by
the seller and paid for by the purchaser, or on which, in the case of a stock
index futures contract, an amount equal to a dollar amount multiplied by the
difference between the value of a stock index at the close of the last trading
day of the contract and the value of such index at the time the futures contract
was originally entered into is settled between the purchaser and seller in cash.
The purchase or sale of a futures contract differs from the purchase or sale of
a security in that no purchase price is paid or received at the time the
contract is entered into. Instead, an amount of cash or cash equivalents, the
value of which may vary but is generally equal to 2% or less of the value of the
contract, must be deposited with the broker as initial deposit or "margin."
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index underlying the futures
contract fluctuates, making positions in the futures contract more or less
valuable, a process known as "marking to the market."

At any time prior to the expiration of a futures contract, a trader may
elect to close out a Fund's position by taking an opposite position, subject to
the availability of a secondary market, which will operate to terminate the
initial position. At that time, a final determination of variation margin is
made and any loss experienced by a party is required to be paid to the exchange
clearing corporation, while any profit due to a party must be delivered to it.

Futures contracts differ from options in that they are bilateral
agreements, with both the purchaser and the seller equally obligated to complete
the transaction. Futures contracts call for settlement only on the expiration
date, and cannot be "exercised" at any other time during their term.

OPTIONS ON FUTURES CONTRACTS. An option on a futures contract gives the
purchaser (the "holder") the right, but not the obligation, to enter into a
"long" position in the underlying futures contract (i.e., a purchase of such
futures contract) in the case of an option to purchase (a "call" option), or a
"short" position in the underlying futures contract (i.e., a sale of such
futures contract) in the case of an option to sell (a "put" option), at a fixed
price (the "strike price") up to a stated expiration date. The holder pays a
non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchase of the option assumes is equal to

<PAGE>

the premium plus related transaction costs, although this entire amount may be
lost. Upon exercise of the option by the holder, the exchange clearing
corporation establishes a corresponding long position in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of futures contracts, such as payment
of variation margin deposits. In addition, the writer of an option on a futures
contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.

An option, whether based on a futures contract, a stock index or an equity
security, becomes worthless to the holder when it expires. A position in an
option may be terminated by the purchaser or seller prior to expiration by
effecting a closing purchase or sale transaction subject to the availability of
a secondary market, which is the purchase or sale of an option of the same
series (i.e., the same exercise price and expiration date) as the option
previously purchased or sold. The difference between the premiums paid and
received represents the party's profit or loss on the transaction.

The use of futures contracts and options does involve certain transaction
costs and risks. A Fund's ability effectively to hedge all or a portion of its
portfolio through transactions in futures, options on futures or options on
stock indices depends on the degree to which movements in the value of the
securities or index underlying such hedging instrument correlate with movements
in the value of the relevant portion of the Fund's holdings. The trading of
futures and options on indices involves the additional risk of imperfect
correlation between movements in the futures or option price and the value of
the underlying index. While a Fund will establish a future or option position
only if there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular futures or option
contract at any specific time. In such event, it may not be possible to close
out a position held by a Fund, which could require such Fund to purchase or sell
the instrument underlying the position, make or receive a cash settlement, or
meet ongoing variation margin requirements. Investments in futures contracts on
fixed income securities and related indices involve the risk that if the
Adviser's investment judgment concerning the general direction of interest rates
is incorrect, a Fund's overall performance may be poorer than if it had not
entered into any such contract. Income earned from transactions in futures
contracts and options thereon would be treated in part as a short-term, and in
part as a long-term, capital gain and, if not offset by net realized capital
losses, generally would be subject to Federal income tax.

WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS

A Fund may agree to purchase securities on a when-issued basis or enter
into a forward commitment to purchase securities. When a Fund engages in these
transactions, its custodian will set aside cash, U.S. government securities or
other high quality debt obligations equal to the amount of the commitment in a
separate account. Normally, the custodian will set aside portfolio securities to
satisfy a purchase commitment, and in such a case a Fund may be required
subsequently to place additional assets in the separate account in order to
ensure that the value of the account remains equal to the amount of the Fund's
commitment. Because a Fund will set aside cash or liquid assets to satisfy its
purchase commitments in the manner described, the Fund's liquidity and ability
to manage its portfolio might be adversely affected in the event its

<PAGE>

commitments to purchase when-issued securities ever exceeded 25% of the value of
its assets. In the case of a forward commitment to sell portfolio securities,
the Fund's custodian will hold the portfolio securities themselves in a
segregated account while the commitment is outstanding.

A Fund will make commitments to purchase securities on a when-issued basis
or to purchase or sell securities on a forward commitment basis only with the
intention of completing the transaction and actually purchasing or selling the
securities. If deemed advisable as a matter of investment strategy, however, a
Fund may dispose of or renegotiate a commitment after it is entered into, and
may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a capital gain or loss.

When a Fund engages in when-issued and forward commitment transactions, it
relies on the other party to consummate the trade. Failure of such party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.

The value of the securities underlying a when-issued purchase or a forward
commitment to purchase securities, and any subsequent fluctuations in their
value, is taken into account when determining the net asset value of a Fund
starting on the date the Fund agrees to purchase the securities. The Fund does
not earn dividends on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When the Fund makes a forward
commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets. Fluctuations in the value of the
underlying securities are not reflected in the Fund's net asset value as long as
the commitment remains in effect.

REAL ESTATE INVESTMENT TRUSTS

A real estate investment trust ("REIT") is a managed portfolio of real
estate investments which may include office buildings, apartment complexes,
hotels and shopping malls. An Equity REIT holds equity positions in real estate,
and it seeks to provide its shareholders with income from the leasing of its
properties, and with capital gains from any sales of properties. A Mortgage REIT
specializes in lending money to developers of properties, and passes any
interest income it may earn to its shareholders.

REITs may be affected by changes in the value of the underlying property
owned or financed by the REIT, while Mortgage REITs also may be affected by the
quality of credit extended. Both Equity and Mortgage REITs are dependent upon
management skill and may not be diversified. REITs also may be subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free pass-through of income under the
Internal Revenue Code of 1986, as amended.

GUARANTEED INVESTMENT CONTRACTS

Guaranteed Investment Contracts ("GICs") are issued by highly rated U.S.
insurance companies. Pursuant to such contracts, a Fund makes cash contributions
to a deposit fund of the

<PAGE>

insurance company's general or separate accounts. The insurance company then
credits to a Fund on a monthly basis guaranteed interest. The insurance company
may assess periodic charges against a GIC for expense and service costs
allocable to it, and the charges will be deducted from the value of the deposit
fund. The purchase price paid for a GIC becomes part of the general assets of
the issuer, and the contract is paid from the general assets of the issuer.

A Fund will only purchase GICs from issuers which, at the time of
purchase, meet quality and credit standards established by the Adviser.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance companies, and an active secondary market in GICs does not
currently exist. Also, a Fund may not receive the principal amount of a GIC from
the insurance company on seven days' notice or less.
Therefore, GICs are considered to be illiquid investments.

VARIABLE- AND FLOATING-RATE INSTRUMENTS

The Funds may purchase variable-rate and floating-rate obligations as
described in the Prospectuses. If such instrument is not rated, the Adviser will
consider the earning power, cash flows, and other liquidity ratios of the
issuers and guarantors of such obligations and, if the obligation is subject to
a demand feature, will monitor their financial status to meet payment on demand.
In determining average weighted portfolio maturity, a variable-rate demand
instrument issued or guaranteed by the U.S. Government or an agency or
instrumentality thereof will be deemed to have a maturity equal to the period
remaining until the obligations next interest rate adjustment. Other
variable-rate obligations will be deemed to have a maturity equal to the longer
of the period remaining to the next interest rate adjustment or the time a Fund
can recover payment of principal as specified in the instrument.

The variable- and floating-rate demand instruments that the Funds may
purchase include participations in Municipal Securities purchased from and owned
by financial institutions, primarily banks. Participation interests provide a
Fund with a specified undivided interest (up to 100%) in the underlying
obligation and the right to demand payment of the unpaid principal balance plus
accrued interest on the participation interest from the institution upon a
specified number of days' notice, not to exceed 30 days. Each participation
interest is backed by an irrevocable letter of credit or guarantee of a bank
that the Adviser has determined meets the prescribed quality standards for the
Funds. The bank typically retains fees out of the interest paid on the
obligation for servicing the obligation, providing the letter of credit, and
issuing the repurchase commitment.

VARIABLE- AND FLOATING-RATE GOVERNMENT SECURITIES

Government securities that have variable or floating interest rates or
demand or put features may be deemed to have remaining maturities shorter than
their nominal maturities for purposes of determining a Fund's average weighted
maturity. The remaining maturities of such obligations will be determined as
follows: (i) a government security with a variable or floating-rate of interest
will be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate; (ii) a government security with a demand or
put feature that entitles the holder to

<PAGE>

receive the principal amount of the underlying security at the time of or
sometime after the holder gives notice of demand or exercise of the put will be
deemed to have a maturity equal to the period remaining until the principal
amount can be recovered through demand or exercise of the put; and (iii) a
government security with both a variable or floating rate of interest as
described in clause (i) and a demand or put feature as described in clause (ii)
will be deemed to have a maturity equal to the shorter of the period remaining
until the next readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand.

DOLLAR ROLL TRANSACTIONS

The Funds may enter into "dollar roll" transactions, which consist of the
sale by the Fund to a bank or broker/dealer (the "counterparty") of GNMA
certificates or other mortgage-backed or asset-backed securities, together with
a commitment to purchase from the counterparty similar, but not identical,
securities at a future date, at the same price. The counterparty receives all
principal and interest payments, including prepayments, made on the security
while it is the holder. Each Fund receives a fee from the counterparty as
consideration for entering into the commitment to purchase. Dollar rolls may be
renewed over a period of several months with a different repurchase price and a
cash settlement made at each renewal without physical delivery of securities.
Moreover, the transaction may be preceded by a firm commitment agreement
pursuant to which the Fund agrees to buy a security on a future date.

If the broker/dealer to whom the Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Fund is required to repurchase may be worth
less than the security that the Fund originally held, and the return earned by
the Fund with the proceeds of a dollar roll may not exceed transaction costs.

The entry into dollar rolls involves potential risks of loss that are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Fund's right to purchase
from the counterparty might be restricted. Additionally, the value of such
securities may change adversely before the Fund is able to purchase them.
Similarly, the Fund may be required to purchase securities in connection with a
dollar roll at a higher price than may otherwise be available on the open
market. Since, as noted above, the counterparty is required to deliver a
similar, but not identical security to the Fund, the security that the Fund is
required to buy under the dollar roll may be worth less than an identical
security. Finally, there can be no assurance that the Fund's use of the cash
that it receives from a dollar roll will provide a return that exceeds borrowing
costs.

FOREIGN CURRENCY TRANSACTIONS

The Funds may enter into foreign currency exchange transactions to convert
foreign currencies to and from the United States Dollar. A Fund either enters
into these transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market, or uses forward contracts to purchase
or sell foreign currencies.

<PAGE>

A forward foreign currency exchange contract is an obligation by a Fund to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract. Forward foreign currency exchange
contracts establish an exchange rate at a future date. These contracts are
transferable in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward foreign currency
exchange contract generally has no deposit requirement, and is traded at a net
price without commission. Each Fund maintains with its custodian a segregated
account of high grade liquid assets in an amount at least equal to its
obligations under each forward foreign currency exchange contract. Neither spot
transactions nor forward foreign currency exchange contracts eliminate
fluctuations in the prices of a Fund's portfolio securities or in foreign
exchange rates, or prevent loss if the prices of these securities should
decline.

The Funds also may purchase and write options on such futures contracts.
These investments will be used only to hedge against anticipated future changes
in interest rates which otherwise might either adversely affect the value of the
portfolio securities of a Fund or adversely affect the prices of securities
which a Fund intends to purchase at a later date. Should interest rates move in
an unexpected manner, a Fund may not achieve the anticipated benefits of futures
contracts or options on futures contracts or may realize a loss.

Foreign currency hedging transactions are an attempt to protect a Fund
against changes in foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. The precise matching of the forward
contract amount and the value of the securities involved will not generally be
possible because the future value of these securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and date it matures.

INTEREST RATE TRANSACTIONS

Among the strategic transactions into which the Funds may enter are
interest rate swaps and the purchase or sale of related caps and floors. Each
Fund expects to enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique or to protect
against any increase in the price of securities the Funds anticipate purchasing
at a later date. Each Fund intends to use these transactions as hedges and not
as speculative investments and will not sell interest rate caps or floors where
it does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating-rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the

15
<PAGE>

reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such floor to the
extent that a specified index falls below a predetermined interest rate or
amount.

A Fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps, and
floors are entered into for good faith hedging purposes, the Adviser and the
Fund believe such obligations do not constitute senior securities under the 1940
Act and, accordingly, will not treat them as being subject to its borrowing
restrictions. A Fund will not enter into any swap, cap, or floor transaction
unless, at the time of entering into such transaction, the unsecured long-term
debt of the counterparty, combined with any credit enhancements, is rated at
least "A" by S&P or Moody's or has an equivalent rating from an NRSRO or is
determined to be of equivalent credit quality by the Adviser. If there is a
default by the counterparty, a Fund may have contractual remedies pursuant to
the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been fully developed and, accordingly, they are less liquid than
swaps.

With respect to swaps, a Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade securities
having a value equal to the accrued excess. Caps and floors require segregation
of assets with a value equal to a Fund's net obligation, if any.

ILLIQUID SECURITIES

The Funds may invest up to 15% of its net assets in securities that are
considered illiquid because of the absence of a readily available market or due
to legal or contractual restrictions. Certain restricted securities that are not
registered for sale to the general public but that can be resold to
institutional investors may not be considered illiquid, provided that a dealer
or institutional trading market exists. The institutional trading market is
relatively new, and liquidity of each Fund's investments could be impaired if
trading does not develop or declines.

OTHER SECURITIES

For additional information regarding options and futures, see "Schedule
B." For additional information regarding mortgage-backed securities, see
"Schedule C."

ADDITIONAL INVESTMENT LIMITATIONS

In addition to the investment limitations disclosed in the Prospectuses,
each Fund is subject to the investment limitations enumerated in this subsection
which may be changed with respect to

16
<PAGE>

such Fund only by a vote of the holders of a majority of the Fund's outstanding
shares (as defined in this SAI).

Each Fund may not:

1. Borrow money or issue senior securities as defined in the 1940 Act
except that (a) a Fund may borrow money from banks for temporary
purposes in amounts up to one-third of the value of such Fund's
total assets at the time of borrowing, provided that borrowings in
excess of 5% of the value of such Fund's total assets will be
repaid prior to the purchase of portfolio securities by such Fund,
(b) a Fund may enter into commitments to purchase securities in
accordance with such Fund's investment program, including delayed
delivery and when-issued securities, which commitments may be
considered the issuance of senior securities, and (c) a Fund may
issue multiple classes of shares in accordance with SEC
regulations or exemptions under the 1940 Act. The purchase or sale
of futures contracts and related options shall not be considered
to involve the borrowing of money or issuance of senior
securities.

2. Purchase any securities on margin (except for such short-term
credits as are necessary for the clearance of purchases and sales
of portfolio securities) or sell any securities short (except
against the box). (For purposes of this restriction, the deposit
or payment by a Fund of initial or maintenance margin in
connection with futures contracts and related options and options
on securities is not considered to be the purchase of a security
on margin.)

3. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition
of such securities in accordance with a Fund's investment program
may be deemed an underwriting. This restriction shall not limit a
Fund's ability to invest in securities issued by other registered
investment companies.

4. Invest in real estate or real estate limited partnership interests
(a Fund may, however, purchase and sell securities secured by real
estate or interests therein or issued by issuers which invest in
real estate or interests therein). This restriction does not apply
to real estate limited partnerships listed on a national stock
exchange (e.g. the New York Stock Exchange).

5. Purchase or sell commodity contracts except that each Fund may, to
the extent appropriate under its investment policies, purchase
publicly traded securities of companies engaging in whole or in
part in such activities, may enter into futures contracts and
related options, may engage in transactions on a when issued or
forward commitment basis, and may enter into forward currency
contracts in accordance with its investment policies.

In addition, certain non-fundamental investment restrictions are
applicable, including the following:

17
<PAGE>

1. Each Fund will not purchase securities of companies for the
purpose of exercising control.

2. Each Fund will not invest more than 15% of the value of its net
assets in illiquid securities, including repurchase agreements
with remaining maturities in excess of seven days, time deposits
with maturities in excess of seven days, restricted securities,
and other securities which are not readily marketable. For
purposes of this restriction, illiquid securities shall not
include securities which may be resold under Rule 144A under the
Securities Act of 1933 that the Board of Trustees, or its
delegate, determines to be liquid, based upon the trading markets
for the specific security.

3. Each Fund will not mortgage, pledge or hypothecate any assets
except to secure permitted borrowings and then only in an amount
up to one-third of the value of a Fund's total assets at the time
of borrowing. For purposes of this limitation, collateral
arrangements with respect to the writing of options, futures
contracts, options on futures contracts, and collateral
arrangements with respect to initial and variation margin are not
considered to be a mortgage, pledge or hypothecation of assets.

4. Each Fund will not invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets and except to the extent
otherwise permitted by the 1940 Act.

NET ASSET VALUE

Generally, a security listed or traded on an exchange is valued at its
last sales price on the exchange where the security is principally traded or,
lacking any sales on a particular day, the security is valued at the mean
between the closing bid and asked prices on that day. Each security traded in
the over-the-counter market (but not including securities reported on the NASDAQ
National Market System) is valued at the mean between the last bid and asked
prices based upon quotes furnished by market makers for such securities. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date.

Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision of
the Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity are valued
at amortized cost, which approximates market value.

Generally, trading in foreign securities, as well as U.S. Government
securities, money market instruments and repurchase agreements, is substantially
completed each day at various times prior to the close of the New York Stock
Exchange (the "Exchange"). The values of such securities used in computing the
net asset value of the shares of a Fund is determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of the
Exchange. Occasionally, events affecting the value of such securities and such
exchange rates may occur between the times at which they are determined and the
close of the Exchange, which will not be

18
<PAGE>

reflected in the computation of net asset value. If during such periods events
occur which materially affect the value of such securities, the securities will
be valued at their fair market value as determined in good faith by the
Trustees. Currently, the days on which the Exchange is closed (other than
weekends) are: New Year's Day, Martin Luther King, Jr. Day, President's Day,
Good Friday, Memorial Day (observed), Independence Day, Veterans Day, Labor Day,
Thanksgiving Day and Christmas Day.

The Trust may redeem shares involuntarily to reimburse the Fund for any
loss sustained by reason of the failure of a shareholder to make full payment
for Investor Shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to Investor Shares as provided in the related Prospectuses from time
to time. The Trust also may make payment for redemptions in readily marketable
securities or other property if it is appropriate to do so in light of Nations
Fund Trust's responsibilities under the 1940 Act.

Under the 1940 Act, a Fund may suspend the right of redemption or postpone
the date of payment for Investor Shares or Primary Shares during any period when
(a) trading on the Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. (A Fund may also suspend or postpone
the recordation of the transfer of its shares upon the occurrence of any of the
foregoing conditions.)

EXCHANGE PRIVILEGE

By use of the exchange privilege, the holder of Investor Shares authorizes
the transfer agent or the shareholder's financial institution to rely on
telephone instructions from any person representing himself to be the investor
and reasonably believed to be genuine. The transfer agent's or a financial
institution's records of such instructions are binding. Exchanges are taxable
transactions for Federal income tax purposes; therefore, a shareholder will
realize a capital gain or loss depending on whether the Investor Shares being
exchanged have a value which is more or less than their adjusted cost basis.

The Funds and each of the other funds of Nations Funds may limit the
number of times the exchange privilege may be exercised by a shareholder within
a specified period of time. Also, the exchange privilege may be terminated or
revised at any time by the Trust upon such notice as may be required by
applicable regulatory agencies (presently sixty days for termination or material
revision), provided that the exchange privilege may be terminated or materially
revised without notice under certain unusual circumstances.

The current prospectuses for the Investor Shares of the Funds describe the
exchange privileges available to investors in such Investor Shares.

Primary Shares of the Funds are offered and sold on a continuous basis by
the Distributor acting as agent. As stated in the Prospectuses for the Primary
Shares, Primary Shares are sold to

19
<PAGE>

bank trust departments and other financial institutions (primarily to
NationsBank and its affiliated and correspondent banks) (collectively,
"Institutions") acting on behalf of customers maintaining a qualified trust
account or relationship at the Institution.

DESCRIPTION OF SHARES

Nations Fund Trust is a Massachusetts business trust. The Trust's
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of units of beneficial interest ("shares") and to classify or reclassify
any unissued shares of the Trust into one or more additional classes or series
by setting or changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption. Pursuant to
such authority, the Board of Trustees has authorized the issuance of thirty-four
series of shares, two of which -- Nations Marsico Focused Equities Fund and
Nations Marsico Growth & Income Fund -- are described in this SAI. These Funds
only issue Primary A Shares, Investor A Shares, Investor B Shares and Investor C
Shares.

Shares have no preemptive rights and only such conversion or exchange
rights as the Board of Trustees may grant in its discretion. When issued for
payment as described in the Prospectuses, the Trust's shares will be fully paid
and non-assessable. In the event of a liquidation or dissolution of the Trust or
the Funds, shareholders of the Funds are entitled to receive the assets
available for distribution belonging to the Funds, and a proportionate
distribution, based upon the relative asset values of the Trust's respective
investment portfolios, of any general assets of the Trust not belonging to any
particular investment portfolio which are available for distribution.
Shareholders of a Fund are entitled to participate, in proportion to the net
asset value of the class or series of shares held, in the net distributable
assets of a Fund if it is liquidated, based on the number of shares of such Fund
that are held by such shareholders.

As stated in the Prospectuses, shareholders of a Fund will vote in the
aggregate and not by class or series, except as otherwise expressly required by
law or when the Board of Trustees determines that the matter to be voted upon
affects only the interests of the holders of a particular class or series of
shares. In addition, shareholders of each investment portfolio of the Trust will
vote in the aggregate and not by portfolio, except as otherwise expressly
required by law or when the Board of Trustees determines that the matter to be
voted upon affects only the interests of shareholders of a particular portfolio.
Rule 18f-2 (the "Rule") under the 1940 Act provides that any matter required to
be submitted to the holders of the outstanding voting securities of an
investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each investment portfolio affected by the matter. An
investment portfolio is affected by a matter unless it is clear that the
interests of each investment portfolio in the matter are substantially identical
or that the matter does not affect any interest of the investment portfolio.
Under the Rule, the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to an investment portfolio only if approved by a majority of the outstanding
shares of such investment portfolio. However, the Rule also provides that the
ratification of the appointment of independent public accountants, the approval
of principal

20
<PAGE>

underwriting contracts, and the election of Trustees may be effectively acted
upon by shareholders of the Trust voting together in the aggregate without
regard to a particular investment portfolio. Under the Trust's Declaration of
Trust, when the Board of Trustees determines that a matter to be voted upon
affects only the interests of the shareholders of one or more but not all of the
Trust's investment portfolios, only the shareholders of the investment portfolio
or portfolios so affected will be entitled to vote on the matter.

The Trust's Declaration of Trust authorizes the Board of Trustees, without
shareholder approval (unless otherwise required by applicable law), to (a) sell
and convey the assets of a Fund to another management investment company for
consideration which may include securities issued by the purchaser and, in
connection therewith, to cause all outstanding shares of such Fund involved to
be redeemed at a price which is equal to their net asset value and which may be
paid in cash or by distribution of the securities or other consideration
received from the sale and conveyance; (b) sell and convert a Fund's assets into
money and, in connection therewith, to cause all outstanding shares of such Fund
involved to be redeemed at their net asset value; or (c) combine the assets
belonging to a Fund with the assets belonging to another investment portfolio of
the Trust, if the Board of Trustees reasonably determines that such combination
will not have a material adverse effect on shareholders of any investment
portfolio participating in such combination, and, in connection therewith, to
cause all outstanding shares of any such investment portfolio to be redeemed at
their net asset value or converted into shares of another class or series of the
Trust's shares at net asset value. In the event that shares are redeemed in cash
at their net asset value, a shareholder of a Fund may receive in payment for
such shares an amount that is more or less than his original investment due to
changes in the market prices of such Fund's portfolio securities. The exercise
of such authority by the Board of Trustees will be subject to the provisions of
the 1940 Act.

DIVIDENDS AND DISTRIBUTIONS

With respect to each Fund, net investment income for dividend purposes
consists of (i) interest accrued and original issue discount earned on a Fund's
assets, (ii) plus the amortization of market discount and minus the amortization
of market premium on such assets, (iii) less accrued expenses directly
attributable to the Fund and the general expenses of Nations Fund prorated to
the Fund on the basis of its relative net assets and (iv) dividend or
distribution income on such assets.

Shares of a Fund are eligible to receive dividends when declared, provided
however, that the purchase order for such shares is received at least one day
prior to the dividend declaration and such shares continue to be eligible for
dividends through and including the day before the redemption order is executed.

ADDITIONAL INFORMATION CONCERNING TAXES

The following information supplements and should be read in conjunction
with Prospectus section entitled "Tax Information." The Prospectus of the Funds
describes generally the tax

21
<PAGE>

treatment of dividends and other distributions by the Funds. This section of the
SAI includes additional information concerning dividends and other income taxes.

GENERAL

The Trust intend to qualify each Fund as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code")
as long as such qualification is in the best interest of the Fund's
shareholders. Each Fund will be treated as a separate entity for tax purposes
and thus the provisions of the Code applicable to regulated investment companies
will generally be applied to each Fund, rather than to the Trust as a whole. In
addition, net capital gains, net investment income, and operating expenses will
be determined separately for each Fund. As a regulated investment company, each
Fund will not be taxed on its net investment income and capital gains
distributed to its shareholders.

Qualification as a regulated investment company under the Code requires,
among other things, that (a) each Fund derive at least 90% of its annual gross
income from dividends, interest, certain payments with respect to securities
loans, gains from the sale or other disposition of stock or securities or
foreign currencies (to the extent such currency gains are directly related to
the regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; and (b) the Fund diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, government securities
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
obligations and the securities of other regulated investment companies), or in
two or more issuers which the Fund controls and which are determined to be
engaged in the same or similar trades or businesses.

The Funds must also distribute or be deemed to distribute to their
shareholders at least 90% of their net investment income earned in each taxable
year. In general, these distributions must actually or be deemed to be made in
the taxable year. However, in certain circumstances, such distributions may be
made in the 12 months following the taxable year. The Funds intend to pay out
substantially all of their net investment income and net realized capital gains
(if any) for each year.

In addition, a regulated investment company must, in general, derive less
than 30% of its gross income from the sale or other disposition of securities or
options thereon held for less than three months. However, this restriction has
been repealed with respect to a regulated investment company's taxable years
beginning after August 5, 1997.

EXCISE TAX

A 4% nondeductible excise tax will be imposed on each Fund (other than to
the extent of its tax-exempt interest income) to the extent it does not meet
certain minimum distribution

22
<PAGE>

requirements by the end of each calendar year. Each Fund intends to actually or
be deemed to distribute substantially all of its net investment income and net
capital gains by the end of each calendar year and, thus, expects not to be
subject to the excise tax.

PRIVATE LETTER RULING

In order for a Fund to maintain regulated investment company status under
the Code, its dividends, including--for this purpose--capital gain
distributions, must not constitute "preferential dividends," within the meaning
of Section 562(c) of the Code. The Trust has received a private letter ruling
from the Internal Revenue Service ("IRS") generally to the effect that the
following will not give rise to preferential dividends: differing fees imposed
on the different classes of shares with respect to servicing, distribution and
administrative support services, and transfer agency arrangements; differing
sales charges on purchases and redemptions of such shares; and conversion
features resulting in the Trust paying different dividends or distributions on
the different classes of shares.

TAXATION OF FUND INVESTMENTS

Except as provided herein, gains and losses on the sale of portfolio
securities by a Fund will generally be capital gains and losses. Such gains and
losses will ordinarily be long-term capital gains and losses if the securities
have been held by the Fund for more than one year at the time of disposition of
the securities.

Gains recognized on the disposition of a debt obligation (including
tax-exempt obligations purchased after April 30, 1993) purchased by the Fund at
a market discount (generally at a price less than its principal amount) will be
treated as ordinary income to the extent of the portion of market discount which
accrued, but was not previously recognized pursuant to an available election,
during the term the Fund held the debt obligation.

If an option granted by the Fund lapses or is terminated through a closing
transaction, such as a repurchase by the Fund of the option from its holder, the
Fund will realize a short-term capital gain or loss, depending on whether the
premium income is greater or less than the amount paid by the Fund in the
closing transaction. Some realized capital losses may be deferred if they result
from a position which is part of a "straddle," discussed below. If securities
are sold by the Fund pursuant to the exercise of a call option written by it,
the Fund will add the premium received to the sale price of the securities
delivered in determining the amount of gain or loss on the sale.

Under Section 1256 of the Code, the Fund will be required to "mark to
market" its positions in "Section 1256 contracts," which generally include
regulated futures contracts and listed options. In this regard, Section 1256
contracts will be deemed to have been sold at market value. Sixty percent (60%)
of any net gain or loss realized on all dispositions of Section 1256 contracts,
including deemed dispositions under the mark-to-market regime, will generally be
treated as long-term capital gain or loss, and the remaining forty percent (40%)
will be treated as short-term capital gain or loss. Transactions that qualify as
designated hedges are excepted from the mark-to-market and 60%/40% rules.

23
<PAGE>

Under Section 988 of the Code, a Fund will generally recognize ordinary
income or loss to the extent gain or loss realized on the disposition of
portfolio securities is attributable to changes in foreign currency exchange
rates. In addition, gain or loss realized on the disposition of a foreign
currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, will generally be treated as ordinary
income or loss. The Funds will attempt to monitor Section 988 transactions,
where applicable, to avoid adverse tax impact.

Offsetting positions held by a regulated investment company involving
certain financial forward, futures or options contracts may be considered, for
tax purposes, to constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax treatment
of "straddles" is governed by Section 1092 of the Code which, in certain
circumstances, overrides or modifies the provisions of Section 1256. If a
regulated investment company were treated as entering into "straddles" by
engaging in certain financial forward, futures or option contracts, such
straddles could be characterized as "mixed straddles" if the futures, forwards,
or options comprising a part of such straddles were governed by Section 1256 of
the Code. The regulated investment company may make one or more elections with
respect to "mixed straddles." Depending upon which election is made, if any, the
results with respect to the regulated investment company may differ. Generally,
to the extent the straddle rules apply to positions established by the regulated
investment company, losses realized by the regulated investment company may be
deferred to the extent of unrealized gain in any offsetting positions. Moreover,
as a result of the straddle and the conversion transaction rules, short-term
capital loss on straddle positions may be recharacterized as long-term capital
loss, and long-term capital gain may be characterized as short-term capital gain
or ordinary income.

If a Fund enters into a "constructive sale" of any appreciated position in
stock, a partnership interest, or certain debt instruments, the Fund must
recognize gain (but not loss) with respect to that position. For this purpose, a
constructive sale occurs when the Fund enters into one of the following
transactions with respect to the same or substantially identical property: (i) a
short sale; (ii) an offsetting notional principal contract; or (iii) a futures
or forward contract.

If a Fund purchases shares in a "passive foreign investment company"
("PFIC"), the Fund may be subject to Federal income tax and an interest charge
imposed by the IRS upon certain distributions from the PFIC or the Fund's
disposition of its PFIC shares. If the Fund invests in a PFIC, the Fund intends
to make an available election to mark-to-market its interest in PFIC shares.
Under the election, the Fund will be treated as recognizing at the end of each
taxable year the difference, if any, between the fair market value of its
interest in the PFIC shares and its basis in such shares. In some circumstances,
the recognition of loss may be suspended. The Fund will adjust its basis in the
PFIC shares by the amount of income (or loss) recognized. Although such income
(or loss) will be taxable to the Fund as ordinary income (or loss)
notwithstanding any distributions by the PFIC, the Fund will not be subject to
Federal income tax or the interest charge with respect to its interest in the
PFIC.

FOREIGN TAXES

Income and dividends received by the Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between

24
<PAGE>

certain countries and the United States may reduce or eliminate such taxes. If
more than 50% in value of a regulated investment company's total assets at the
close of its taxable year consist of securities of non-U.S. corporations, the
regulated investment company will be eligible to file an election with the IRS
pursuant to which the regulated investment company may pass-through to its
shareholders foreign taxes paid by the regulated investment company, which may
be claimed either as a credit or deduction by the shareholders. Only the Nations
Emerging Markets Fund, Nations Pacific Growth Fund and Nations Global Government
Income Fund expect to qualify for the election. However, even if a Fund
qualifies for the election, foreign taxes will only pass-through to a Fund
shareholder if (i) the shareholder holds the Fund shares for at least 16 days
during the 30 day period beginning 15 days prior to the date upon which the
shareholder becomes entitled to receive Fund dividends corresponding with the
pass-through of the foreign taxes paid by the Fund, and (ii), with respect to
foreign source dividends received by the Fund on shares giving rise to foreign
tax, the Fund holds the shares during the 30 day period beginning 15 days prior
to the date upon which the Fund becomes entitled to the dividend.

CAPITAL GAIN DISTRIBUTIONS

Distributions which are designated by a Fund as capital gain distributions
will be taxed to shareholders as long-term term capital gain (to the extent such
dividends do exceed the Fund's actual net capital gains for the taxable year),
regardless of how long a shareholder has held Fund shares. Such distributions
will be designated as capital gain distributions in a written notice mailed by
the Fund to its shareholders not later than 60 days after the close of the
Fund's taxable year.

The Taxpayer Relief Act of 1997 (the "1997 Act") created several new
categories of capital gains applicable to noncorporate taxpayers. Under prior
law, noncorporate taxpayers were generally taxed at a maximum rate of 28% on net
capital gain (generally, the excess of net long-term capital gain over net
short-term capital loss). Noncorporate taxpayers are now generally taxed at a
maximum rate of 20% on net capital gain attributable to gains realized on the
sale of property held for greater than 18 months, and a maximum rate of 28% on
net capital gain attributable to gain realized on the sale of property held for
greater than one year and 18 months or less. The 1997 Act retains the treatment
of short term capital gain or loss (generally, gain or loss attributable to
capital assets held for 1 year or less) and did not affect the taxation of
capital gains in the hands of corporate taxpayers.

Under the 1997 Act, the Treasury is authorized to issue regulations for
application of the reduced capital gains tax rates to pass-through entities,
including regulated investment companies, such as the Funds. Noncorporate
stockholders of the Funds may therefore qualify for the reduced rate of tax on
capital gain dividends paid by the Funds.

OTHER DISTRIBUTIONS

Although dividends will be declared daily based on each Money Market
Fund's and the Government Securities Fund's daily earnings, for Federal income
tax purposes, the Fund's earnings and profits will be determined at the end of
each taxable year and will be allocated pro rata over the entire year. For
Federal income tax purposes, only amounts paid out of earnings and

25
<PAGE>

profits will qualify as dividends. Thus, if during a taxable year a Fund's
declared dividends (as declared daily throughout the year) exceed the Fund's net
income (as determined at the end of the year), only that portion of the year's
distributions which equals the year's earnings and profits will be deemed to
have constituted a dividend. It is expected that each Fund's net income, on an
annual basis, will equal the dividends declared during the year.

DISPOSITION OF FUND SHARES

A disposition of Fund shares pursuant to redemption (including a
redemption in-kind) or exchanges will ordinarily result in a taxable capital
gain or loss, depending on the amount received for the Shares (or are deemed to
receive in the case of an exchange) and the cost of the shares.

If a shareholder exchanges or otherwise disposes of Fund shares within 90
days of having acquired such shares and if, as a result of having acquired those
shares, the shareholder subsequently pays a reduced sales charge on a new
purchase of shares of the Fund or a different regulated investment company, the
sales charge previously incurred acquiring the Fund's shares shall not be taken
into account (to the extent such previous sales charges do not exceed the
reduction in sales charges on the new purchase) for the purpose of determining
the amount of gain or loss on the disposition, but will be treated as having
been incurred in the acquisition of such other shares. Also, any loss realized
on a redemption or exchange of shares of the Fund will be disallowed to the
extent that substantially identical shares are acquired within the 61-day period
beginning 30 days before and ending 30 days after the shares are disposed of.

If a shareholder receives a designated capital gain distribution (to be
treated by the shareholder as a long-term capital gain) with respect to any Fund
share and such Fund share is held for six months or less, then (unless otherwise
disallowed) any loss on the sale or exchange of that Fund share will be treated
as a long-term capital loss to the extent of the designated capital gain
distribution. In addition, if a shareholder holds Fund shares for six months or
less, any loss on the sale or exchange of those shares will be disallowed to the
extent of the amount of exempt-interest dividends received with respect to the
shares. The Treasury Department is authorized to issue regulations reducing the
six months holding requirement to a period of not less than the greater of 31
days or the period between regular dividend distributions where a Fund regularly
distributes at least 90% of its net tax-exempt interest, if any. No such
regulations had been issued as of the date of this SAI. The loss disallowance
rules described in this paragraph do not apply to losses realized under a
periodic redemption plan.

FEDERAL INCOME TAX RATES

As of the printing of this SAI, the maximum individual tax rate applicable
to ordinary income is 39.6% (marginal tax rates may be higher for some
individuals to reduce or eliminate the benefit of exemptions and deductions);
the maximum individual marginal tax rate applicable to net capital gain is 28%
(however, see "Capital Gain Distributions" above); and the maximum corporate tax
rate applicable to ordinary income and net capital gain is 35% (marginal tax
rates may be higher for some corporations to reduce or eliminate the benefit of
lower marginal income tax rates). Naturally, the amount of tax payable by an
individual or corporation will be affected by a

26
<PAGE>

combination of tax laws covering, for example, deductions, credits, deferrals,
exemptions, sources of income and other matters.

CORPORATE SHAREHOLDERS

Corporate shareholders of the Funds may be eligible for the
dividends-received deduction on dividends distributed out of a Fund's net
investment income attributable to dividends received from domestic corporations,
which, if received directly by the corporate shareholder, would qualify for such
deduction. In order to qualify for the dividends-received deduction, a corporate
shareholder must generally hold the shares upon which the dividend is made for
at least 46 days during the 90 day period beginning 45 days prior to the date
upon which the shareholder becomes entitled to the Fund's distribution
qualifying for the deduction.

FOREIGN SHAREHOLDERS

Under the Code, distributions of net investment income by a Fund to a
nonresident alien individual, foreign trust (I.E., trust which a U.S. court is
able to exercise primary supervision over administration of that trust and one
or more U.S. persons have authority to control substantial decisions of that
trust), foreign estate (i.e., the income of which is not subject to U.S. tax
regardless of source), foreign corporation, or foreign partnership (a "foreign
shareholder") will be subject to U.S. withholding tax (at a rate of 30% or a
lower treaty rate). Withholding will not apply if a dividend paid by a Fund to a
foreign shareholder is "effectively connected" with a U.S. trade or business
(or, if an income tax treaty applies, is attributable to a U.S. permanent
establishment of the foreign shareholder), in which case the reporting and
withholding requirements applicable to U.S. persons will apply. Distributions of
net capital gains are generally not subject to tax withholding, and, beginning
in 1999, the Funds will be permitted to estimate the portion of their
distributions qualifying as capital gain distributions.

BACKUP WITHHOLDING

The Trust may be required to withhold, subject to certain exemptions, at a
rate of 31% ("backup withholding") on dividends, capital gain distributions, and
redemption proceeds (including proceeds from exchanges and redemptions in-kind)
paid or credited to an individual Fund shareholder, unless the shareholder
certifies that the Taxpayer Identification Number ("TIN") provided is correct
and that the shareholder is not subject to backup withholding, or the IRS
notifies the Trust that the shareholder's TIN is incorrect or that the
shareholder is subject to backup withholding. Such tax withheld does not
constitute any additional tax imposed on the shareholder, and may be claimed as
a tax payment on the shareholder's Federal income tax return. An investor must
provide a valid TIN upon opening or reopening an account. Failure to furnish a
valid TIN to the Trust could subject the investor to penalties imposed by the
IRS.

TAX-DEFERRED PLANS

The Funds are available for a variety of tax-deferred retirement and other
plans, including Individual Retirement Accounts ("IRA"), Simplified Employee
Pension Plans ("SEP-IRA"),

<PAGE>

Savings Incentive Match Plans for Employees ("SIMPLE plans"), Roth IRAs, and
Education IRAs, which permit investors to defer some of their income from taxes.

OTHER MATTERS

Investors should be aware that the investments to be made by the Fund may
involve sophisticated tax rules that may result in income or gain recognition by
the Fund without corresponding current cash receipts. Although the Fund will
seek to avoid significant noncash income, such noncash income could be
recognized by the Fund, in which case the Fund may distribute cash derived from
other sources in order to meet the minimum distribution requirements described
above.

The foregoing discussion and the discussions in the Prospectus applicable
to each shareholder address only some of the Federal tax considerations
generally affecting investments in the Fund. Each investor is urged to consult
his or her tax advisor regarding specific questions as to Federal, state, local
or foreign taxes.

TRUSTEES AND OFFICERS

The Trustees and executive officers of the Trust, their addresses, principal
occupations during the past five years, and other affiliations are as set forth
below. The address of each, unless otherwise indicated, is 111 Center Street,
Little Rock, Arkansas 72201. Those Trustees who are "interested persons" of the
Trust (as defined in the 1940 Act) are indicated by an asterisk (*).

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING PAST 5
POSITION WITH YEARS AND CURRENT
NAME ADDRESS AND AGE THE TRUST DIRECTORSHIPS

<S> <C> <C>
Edmund L. Benson, III, 60 Trustee Director, President and Treasurer,
Saunders & Benson, Inc. Saunders & Benson, Inc. (Insurance);
728 East Main Street Trustee, Nations Institutional
Suite 400 Reserves, and Nations Annuity Trust;
Richmond, VA 23219 Director, Nations Fund, Inc., Nations
LifeGoal Funds, Inc. and Nations Fund
Portfolios, Inc.

<PAGE>

Principal Occupations During Past
Position with 5 Years and Current
Name Address and Age the Trust Directorships
- ------------------------ --------- -------------

James Ermer, 55 Trustee Senior Vice President- Finance, CSX
13705 Hickory Nut Point Corporation (transportation and natural
Midlothian, VA 23112 resources); Director, National Mine
Service; Director, Lawyers Title
Corporation; Trustee, Nations
Institutional Reserves and Nations
Annuity Trust; Director, Nations Fund,
Inc., Nations LifeGoal Funds, Inc., and
Nations Fund Portfolios, Inc.

William H. Grigg, 65 Trustee Chairman Emeritus, Duke Power Co. since
Duke Power Co., July, 1997; April 1994 to July 1997,
422 South Church Street Chairman and Chief Executive Officer;
PB04G November 1991 to April 1994, Vice
Charlotte, NC 28242-0001 Chairman, from April 1988 to November 1991,
Executive Vice President-- Customer
Group, Director, Coltec Industries, Hatteras
Income Securities, Inc., Nations
Government Income Term Trust 2003, Inc.,
Nations Government Income Term Trust 2004,
Inc., Nations Balanced Target Maturity Fund,
Inc., Nations Fund, Inc., Nations LifeGoal
Funds, Inc. and Nations Fund Portfolios, Inc.;
Trustee, Nations Institutional Reserves
and Nations Annuity Trust.

<PAGE>

Principal Occupations During Past
Position with 5 Years and Current
Name Address and Age the Trust Directorships
- ------------------------ --------- -------------

Thomas F. Keller, 66 Trustee R.J. Reynolds Industries Professor of
Fuqua School of Business Business Administration and former
P.O. Box 90120 Dean, Fuqua School of Business, Duke
Duke University University; Director, LADD Furniture,
Durham, NC 27708 Inc.; Director, Wendy's International
Inc., American Business Products, Dimon Inc.,
Biogen, Inc., Hatteras Income Securities,
Inc., Nations Government Income Term
Trust 2003, Inc., Nations Government
Income Term Trust 2004, Inc., Nations
Balanced Target Maturity Fund, Inc.,
Nations Fund, Inc., Nations LifeGoal
Funds, Inc., and Nations Fund
Portfolios, Inc.; Trustee, Nations
Institutional Reserves, Nations Annuity
Trust, the Mentor Funds, Mentor
Institutional Trust and Cash Resource
Trust.

Carl E. Mundy, Jr., 62 Trustee Commandant, United States Marine Corps,
9308 Ludgate Drive from July 1991 to July 1995; Commanding
Alexandria, VA 22309 General, Marine Forces Atlantic, from
June 1990 to June 1991; Director,
Nations Fund, Inc., Nations LifeGoal
Funds, Inc., and Nations Fund Portfolios,
Inc.; Trustee, Nations Institutional
Reserves and Nations Annuity Trust.

1
<PAGE>

Principal Occupations During Past
Position with 5 Years and Current
Name Address and Age the Trust Directorships
- ------------------------ --------- -------------
James B. Sommers*, 58 Trustee President, NationsBank Trust, from
January 1992 to September 1996;
Executive Vice President, NationsBank
Corporation, from January 1992 to May
1997; Principal, Bainbridge &
Associates; Partner, Villa LLC;
Chairman, Central Piedmont Community
College Foundation; Trustee, Central
Piedmont Community College; Board of
Commissioners, Charlotte/Mecklenberg
Hospital Authority; Director, Nations
Fund, Inc., Nations Fund Portfolios,
Inc. and Nations LifeGoal Funds, Inc.;
Trustee, Nations Institutional Reserves
and Nations Annuity Trust.

A. Max Walker*, 75 President, Trustee and Financial consultant; Formerly,
4580 Windsor Gate Court Chairman of the Board President, A. Max Walker, Inc.;
Atlanta, GA 30342 Director, Cerulean Companies, Inc.
Director and Chairman of the Board,
Hatteras Income Securities, Inc.,
Nations Government Income Term Trust
2003, Inc., Nations Government Income
Term Trust 2004, Inc., Nations Balanced
Target Maturity Fund, Inc., Nations
Fund, Inc., Nations LifeGoal Funds,
Inc., and Nations Fund Portfolios.
Inc.; President and Chairman of the
Board of Trustees, Nations Institutional
Reserves and Nations Annuity Trust.

<PAGE>

Principal Occupations During Past
Position with 5 Years and Current
Name Address and Age the Trust Directorships
- ------------------------ --------- -------------
Charles B. Walker, 58 Trustee Since 1989, Director, Executive Vice
Ethyl Corporation President, Chief Financial Officer and
330 South Fourth Street Treasurer, Ethyl Corporation
Richmond, VA 23219 (chemicals, plastics, and aluminum
manufacturing); since 1994, Vice Chairman,
Ethyl Corporation and Vice Chairman, Chief
Financial Officer and Treasurer, Albemarle
Corporation, Director, Nations Fund, Inc.,
Nations LifeGoal Funds, Inc., and Nations
Fund Portfolios, Inc.; Trustee, Nations
Institutional Reserves and Nations Annuity
Trust.

Thomas S. Word, Jr.*, 59 Trustee Partner, McGuire Woods Battle & Boothe
McGuire, Woods, Battle & Boothe (law); Director, Vaughan Bassett
One James Center Furniture Company, Director VB Williams
Richmond, VA 23219 Furniture Company, Inc.; Director,
Nations Fund, Inc., Nations LifeGoal
Funds, Inc., and Nations Fund Portfolios,
Inc.; Trustee, Nations Institutional
Reserves and Nations Annuity Trust.

Richard H. Blank, Jr., 41 Secretary Since 1994, Vice President of Mutual
Stephens Inc. Fund Services, Stephens Inc. 1990 to
1994, Manager Mutual Fund Services,
Stephens Inc. 1983 to 1990, Associate
in Corporate Finance Department,
Stephens Inc.; Secretary, Nations
Institutional Reserves, Nations Annuity
Trust, Nations Fund, Inc., Nations
LifeGoal Funds, Inc. and Nations Fund
Portfolios, Inc.

Michael W. Nolte, 36 Assistant Secretary Associate, Financial Services Group of
Stephens Inc. Stephens Inc.

Louise P. Newcomb, 45 Assistant Secretary Corporate Syndicate Associate, Stephens
Stephens Inc. Inc.

<PAGE>
Principal Occupations During Past
Position with 5 Years and Current
Name Address and Age the Trust Directorships
- ------------------------ --------- -------------
James E. Banks, 41 Assistant Secretary Since 1993, Attorney, Stephens Inc.;
Stephens Inc. Associate Corporate Counsel, Federated
Investors; from 1991 to 1993, Staff
Attorney, Securities and Exchange
Commission from 1988 to 1991

Richard H. Rose, 42 Treasurer Since 1994, Vice President, Division
First Data Investor Services Manager, First Data Investor Services
Group, Inc. Group, Inc. since 1988, Senior Vice
One Exchange Place President, The Boston Company Advisors.
Boston, MA 02109 Inc.; Treasurer, Nations Institutional
Reserves, Nations Annuity Trust,
Nations Fund, Inc., Nations LifeGoal
Funds, Inc. and Nations Fund
Portfolios, Inc.

Joseph C. Viselli, 33 Assistant Treasurer Since 1994, Director, First Data
First Data Investor Services Investor Services Group, Inc., since
Group, Inc. 1992, Assistant Vice President, The
One Exchange Place Boston Company Advisors, Inc., since
Boston, MA 02109 1989, Senior Accountant, Price
Waterhouse LLP.

Steven Levy, 32 Assistant Treasurer Since 1997, Vice President of Fund
First Data Investor Services Accounting, First Data Investor
Group, Inc. Services Group, Inc.; Prior to 1997,
One Exchange Place Investment Operations Manager, Franklin
Boston, MA 02109 Templeton Group and Assistant Vice
President of Fund Accounting, Scudder
Stevens and Clark, Inc.
</TABLE>

<PAGE>

COMPENSATION TABLE

PENSION OR RETIREMENT ESTIMATED TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED AS ANNUAL FROM REGISTRANT AND
COMPENSATION PART OF FUND EXPENSES BENEFITS UPON FUND COMPLEX (3)(4)
NAME OF PERSON FROM REGISTRANT -------- RETIREMENT --------------
POSITION (1) (2) ----------
------------ ---
<S> <C> <C> <C> <C>
Edmund L. Benson, III, $11,581.89 $23,071.34 $11,535.67 $84,042.84
Trustee (50% Def'd)
James Ermer 21,460.49 23,071.34 11,535.67 46,716.94
Trustee
William H. Grigg 0.00 23,071.34 11,535.67 115,933.25
Trustee (100% Def'd)
Thomas F. Keller 178.90 23,071.34 11,535.67 124,575.75
Trustee (100% Def'd)
A. Max Walker 24,861.99 23,071.34 11,535.67 75,322.94
Chairman of the Board
Charles B. Walker 22,590.83 23,071.34 11,535.67 51,238.33
Trustee
Thomas S. Word 417.01 23,071.34 11,535.67 118,926.66
Trustee (100% Def'd)
James B. Sommers 0.00 0.00 0.00 0.00
Trustee
Carl E. Mundy, Jr. 23,054.25 23,071.34 11,535.67 52,092.00
--------- --------- --------- ---------
Trustee
$104,145.35 $184,570.68 $92,285.34 $668,848.71
=========== =========== ========== ===========
</TABLE>

(1)The Compensation Table provides data concerning the compensation
paid to Trustees of the Trust during the twelve-month period ended March 31,
1997. All trustees receive reimbursements for expenses related to their
attendance at meetings of the Board of Trustees. Officers of the Trust receive
no direct remuneration in such capacity from the Trust.

(2)Each Trustee receives (i) an annual retainer of $1,000 ($3,000 for
the Chairman of the Board) plus $500 for each Fund of the Trust, plus (ii) a fee
of $1,000 for attendance at each "in-person" meeting of the Board of Trustees
(or committee thereof) and $500 for attendance at each other meeting of the
Board of Trustees (or Committee thereof).

(3)Messrs. Grigg, Keller and A.M. Walker receive compensation from nine
investment companies, including the Trust, that are deemed to be part of the
Nations Funds "fund complex," as that term is defined under Rule 14a-101 of the
Securities Exchange Act of 1934, as amended. Messrs. Benson, Ermer, C. Walker,
Mundy and Word receive compensation from five investment companies, including
the Trust, deemed to be part of the Nations Funds complex.

(4)Total compensation amounts include deferred compensation (including
interest) payable to or accrued for the following Trustees: Edmund L. Benson,
III ($55,652.78); William H. Grigg ($102,683.25); Thomas F. Keller
($110,610.14); and Thomas S. Word ($114,008.63).

<PAGE>

Mr. Rose serves as Treasurer to certain other investment
companies for which The Shareholder Services Group, Inc. (the
"Co-Administrator") or its affiliates serve as sponsor, distributor,
administrator and/or investment adviser.

Each Trustee of the Trust is also a Director of Nations Fund,
Inc., Nations Fund Portfolios, Inc. and Nations LifeGoal Funds, Inc. and a
trustee of Nations Institutional Reserves, each, a registered investment company
that is part of the Nations Funds family of funds. Richard H. Blank, Jr.,
Richard H. Rose, Joseph C. Viselli, Steven Levy, Michael W. Nolte, Louise P.
Newcomb and James E. Banks, Jr. also are officers of Nations Fund, Inc., Nations
Fund Portfolios, Inc.; Nations LifeGoal Funds, Inc., Nations Institutional
Reserves and Nations Annuity Trust.

Each Trustee receives (i) an annual retainer of $1,000 ($3,000
for the Chairman of the Board) plus $500 for each Fund of the Trust, plus (ii) a
fee of $1,000 for attendance at each "in-person" meeting of the Board of
Trustees (or committee thereof) and $500 for attendance at each other meeting of
the Board of Trustees (or committee thereof). All Trustees receive
reimbursements for expenses related to their attendance at meetings of the Board
of Trustees. Mr. Sommers was not a Trustee of the Trust during the fiscal year
ended March 31, 1997 and therefore received no compensation. Officers receive no
direct remuneration in such capacity from the Trust. No person who is an
officer, director, or employee of NationsBank or its affiliates serves as an
officer, Trustee, or employee of the Trust. The Trustees and officers of Nations
Funds own less than 1% of the shares of the Trust.

The Trust has adopted a Code of Ethics which, among other
things, prohibits each access person of the Trust from purchasing or selling
securities when such person knows or should have known that, at the time of the
transaction, the security (i) was being considered for purchase or sale by a
Fund, or (ii) was being purchased or sold by a Fund. For purposes of the Code of
Ethics, an access person means (i) a Trustee or officer of the Trust, (ii) any
employee of the Trust (or any company in a control relationship with the Trust)
who, in the course of his/her regular duties, obtains information about, or
makes recommendations with respect to, the purchase or sale of securities by the
Trust, and (iii) any natural person in a control relationship with the Trust who
obtains information concerning recommendations made to the Trust regarding the
purchase or sale of securities. Portfolio managers and other persons who assist
in the investment process are subject to additional restrictions, including a
requirement that they disgorge to the Trust any profits realized on short-term
trading (i.e., the purchase/sale or sale/purchase of securities within any
60-day period). The above restrictions do not apply to purchases or sales of
certain types of securities, including money market instruments and certain U.S.
Government securities. To facilitate enforcement, the Code of Ethics generally
requires that the Trust's access persons, other than its "disinterested"
Trustees, submit reports to the Trust's designated compliance person regarding
transactions involving securities which are eligible for purchase by a Fund.

NATIONS FUNDS RETIREMENT PLAN

Under the terms of the Nations Funds Retirement Plan for Eligible Trustees
(the "Retirement Plan"), each trustee may be entitled to certain benefits upon
retirement from the Board of

<PAGE>

Trustees. Pursuant to the Retirement Plan, the normal retirement date is the
date on which the eligible trustee has attained age 65 and has completed at
least five years of continuous service with one or more of the open-end
investment companies ("Fund") advised by the Adviser. If a trustee retires
before reaching age 65, no benefits are payable. Each eligible trustee is
entitled to receive an annual benefit from the Funds commencing on the first day
of the calendar quarter coincident with or next following his date of retirement
equal to 5% of the aggregate trustee's fees payable by the Funds during the
calendar year in which the trustee's retirement occurs multiplied by the number
of years of service (not in excess of ten years of service) completed with
respect to any of the Funds. Such benefit is payable to each eligible trustee in
quarterly installments for a period of no more than five years. If an eligible
trustee dies after attaining age 65, the trustee's surviving spouse (if any)
will be entitled to receive 50% of the benefits that would have been paid (or
would have continued to have been paid) to the trustee if he had not died. The
Retirement Plan is unfunded. The benefits owed to each trustee are unsecured and
subject to the general creditors of the Funds.

NATIONS FUNDS DEFERRED COMPENSATION PLAN

Under the terms of the Nations Funds Deferred Compensation Plan for
Eligible Trustees (the "Deferred Compensation Plan"), each trustee may elect, on
an annual basis, to defer all or any portion of the annual board fees (including
the annual retainer and all attendance fees) payable to the trustee for that
calendar year. An application was submitted to and approved by the SEC to permit
deferring trustees to elect to tie the rate of return on fees deferred pursuant
to the Deferred Compensation Plan to one or more of certain investment
portfolios of certain Funds of Nations Fund Trust. Distributions from the
deferring trustees' deferral accounts will be paid in cash, in generally equal
quarterly installments over a period of five years beginning on the date the
deferring trustee's retirement benefits commence under the Retirement Plan. The
Board of Trustees, in its sole discretion, may accelerate or extend such
payments after a trustee's termination of service. If a deferring trustee dies
prior to the commencement of the distribution of amounts in his deferral
account, the balance of the deferral account will be distributed to his
designated beneficiary in a lump sum as soon as practicable after the trustee's
death. If a deferring trustee dies after the commencement of such distribution,
but prior to the complete distribution of his deferral account, the balance of
the amounts credited to his deferral account will be distributed to his
designated beneficiary over the remaining period during which such amounts were
distributable to the trustee. Amounts payable under the Deferred Compensation
Plan are not funded or secured in any way and deferring trustees have the status
of unsecured creditors of the Funds from which they are deferring compensation.

SHAREHOLDER AND TRUSTEE LIABILITY

Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. However, the Trust's Declaration of Trust provides that
shareholders shall not be subject to any personal liability for the acts or
obligations of the Trust, and that every note, bond, contract, order, or other
undertaking made by the Trust shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The Declaration of Trust
provides for indemnification out of the trust property

<PAGE>

of any shareholder held personally liable solely by reason of his being or
having been a shareholder and not because of his acts or omissions or some other
reason. The Declaration of Trust also provides that the Trust shall, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Trust and shall satisfy any judgment thereon. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations.

The Declaration of Trust states further that no Trustee, officer, or agent
of the Trust shall be personally liable for or on account of any contract, debt,
tort, claim, damage, judgment, or decree arising out of or connected with the
administration or preservation of the trust estate or the conduct of any
business of the Trust; nor shall any Trustee be personally liable to any person
for any action or failure to act except by reason of his own bad faith, willful
misfeasance, gross negligence, or reckless disregard of his duties as Trustee.
The Declaration of Trust also provides that all persons having any claim against
the Trustees or the Trust shall look solely to the trust property for payment.

With the exceptions stated, the Declaration of Trust provides that a
Trustee is entitled to be indemnified against all liabilities and expenses
reasonably incurred by him in connection with the defense or disposition of any
proceeding in which he may be involved or with which he may be threatened by
reason of his being or having been a Trustee, and that the Trustees have the
power, but not the duty, to indemnify officers and employees of the Trust unless
any such person would not be entitled to indemnification had he or she been a
Trustee.

INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY,
TRANSFER AGENCY, SHAREHOLDER
SERVICING AND DISTRIBUTION SERVICES AGREEMENTS

INVESTMENT ADVISER

NBAI serves as investment adviser to the Funds of the Trust, pursuant to
an Investment Advisory Agreement. Effective upon the inception of the Funds,
Marsico Capital Management, LLC began serving as investment sub-adviser to the
Funds, pursuant to a Sub-Advisory Agreement.

NBAI also serves as the investment adviser to Nations Fund, Inc., Nations
Institutional Reserves, Nations Annuity Trust and Nations Fund Portfolios, Inc.,
each a registered investment company that is part of the Nations Funds Family.
In addition, NBAI serves as the investment advisor to Hatteras Income
Securities, Inc., Nations Government Income Term Trust 2003, Inc., Nations
Government Income Term Trust 2004, Inc. and Nations Balanced Target Maturity
Fund, Inc., each a closed-end diversified management investment company traded
on the New York Stock Exchange.

<PAGE>

NBAI is a wholly owned banking subsidiaries of NationsBank, which in turn
is a wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation.

Since 1874, NationsBank and its predecessors have been managing money for
foundations, universities, corporations, institutions and individuals.
NationsBank and its affiliates manage over $50 billion, including over $9
billion in Nations Fund assets, $1.2 billion in tax-free assets, and $35 billion
in fixed income assets for individuals, institutions and corporations in both
the United States and abroad. It is a company dedicated to a goal of providing
responsible investment management and superior service. NationsBank is
recognized for its sound investment approaches, which place it among the
nation's foremost financial institutions. NationsBank and its affiliates
organization makes available a wide range of financial services to its over 6
million customers through over 1700 banking and investment centers.
Approximately 12 of NationsBank personnel are involved in stock and bond
research.

The Investment Advisory Agreement for NBAI and Sub-Advisory Agreement for
Marsico Capital each provides that in the absence of willful misfeasance, bad
faith, negligence or reckless disregard of obligations or duties thereunder on
the part of NBAI or Marsico Capital, respectively, or any of their respective
officers, directors, employees or agents, NBAI or Marsico Capital shall not be
subject to liability to the Trust or to any shareholder of the Trust for any act
or omission in the course of, or connected with, rendering services thereunder
or for any losses that may be sustained in the purchase, holding or sale of any
security.

The Investment Advisory Agreement shall become effective for a two-year
term with respect to a Fund if and when approved by the Trustees of the Trust,
and if so approved, shall thereafter continue from year to year, provided that
such continuation of the Agreement is specifically approved at least annually by
(a) (i) the Trust's Board of Trustees or (ii) the vote of "a majority of the
outstanding voting securities" of a Fund (as defined in Section 2(a)(42) of the
1940 Act), and (b) the affirmative vote of a majority of the Trust's Trustees
who are not parties to such Agreement or "interested persons" (as defined in the
1940 Act) of a party to such Agreement (other than as Trustees of the Trust), by
votes cast in person at a meeting specifically called for such purpose.

The Investment Advisory Agreement will terminate automatically in the
event of its assignment, and is terminable with respect to a Fund at any time
without penalty by the Trust (by vote of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund) or by NBAI on 60
days' written notice.

The Sub-Advisory Agreement shall become effective for a two-year term with
respect to each Fund as of its execution date and, unless sooner terminated,
shall continue in full force and effect for one year, and may be continued with
respect to each Fund thereafter, provided that the continuation of the Agreement
is specifically approved at least annually by (a) (i) the Trust's Board of
Trustees or (ii) the vote of "a majority of the outstanding voting securities"
of the Fund (as defined in Section 2(a)(42) of the 1940 Act), and (b) the
affirmative vote of a majority of the Trust's Trustees who are not parties to
such Agreement or "interested persons" (as defined in the

<PAGE>

1940 Act) of a party to such Agreement (other than as Trustees of the Trust), by
votes cast in person at a meeting specifically called for such purpose.

The Sub-Advisory Agreement will terminate automatically in the event of
its assignment, and is terminable with respect to a Fund at any time without
penalty by the Trust (by vote of the Board of Trustees or by vote of a majority
of the outstanding voting securities of the Fund), or by NBAI, or by Marsico
Capital on 60 days' written notice.

For the services provided and expenses assumed pursuant to the Advisory
Agreement, NBAI is entitled to receive an advisory fee, computed daily and paid
monthly, at the annual rate of 0.85% of the average daily net assets of each
Fund. For the services provided and the expenses assumed pursuant to the
Sub-Advisory Agreement, NBAI will pay Marsico Capital sub-advisory fees,
computed daily and paid monthly, at the annual rate of 0.45% of the average
daily net assets of each Fund. NBAI and/or Marsico Capital may waive (either
voluntarily or pursuant to applicable state limitations) advisory fees payable
by the Fund.

In addition, the Adviser may pay out of its own assets, amounts to
certain broker/dealers in connection with the provision of administrative and/or
distribution related services to shareholders.

The Investment Advisory and Sub-Advisory Agreements were approved by the
Board of Trustees of the Trust, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act), at the December 9, 1997
Meeting of the Board of Trustees.

ADMINISTRATOR AND CO-ADMINISTRATOR

Since the Fund's inception, Stephens Inc. (the "Administrator) has been
serving as administrator of the Trust and First Data Investor Services Group,
Inc. ("First Data"), formerly The Shareholder Services Group, Inc., has been
serving as the co-administrator of the Trust (the "Co-Administrator").

The Administrator and Co-Administrator serve under an administration
agreement ("Administration Agreement") and a co-administration agreement
("Co-Administration Agreement"). The Administrator receives, as compensation for
its services rendered under the Administration Agreement and as agent for the
Co-Administrator for the services it provides under the Co-Administration
Agreement, an administrative fee, computed daily and paid monthly, at the annual
rate of 0.10% of the average daily net assets of each Fund.

Pursuant to the Administration Agreement, the Administrator has agreed to,
among other things, (i) maintain office facilities for the Funds, (ii) furnish
statistical and research data, data processing, clerical, and internal executive
and administrative services to the Trust, (iii) furnish corporate secretarial
services to the Trust, including coordinating the preparation and distribution
of materials for Board of Trustees meetings, (iv) coordinate the provision of
legal advice to the Trust with respect to regulatory matters, (v) coordinate the
preparation of reports to the Trust's shareholders and the SEC, including annual
and semi-annual reports, (vi) coordinate the provision of services to the Trust
by the Co-Administrator, the Transfer Agents and the Custodian, and (vii)
generally assist in all aspects of the Trust's operations. Additionally, the
Administrator is authorized to receive, as agent for the Co-Administrator, the
fees payable to the Co-Administrator

<PAGE>

by the Trust for its services rendered under the Co-Administration Agreement.
The Administrator bears all expenses incurred in connection with the performance
of its services.

Pursuant to the Co-Administration Agreement, the Co-Administrator has
agreed to, among other things, (i) provide accounting and bookkeeping services
for the Funds, (ii) compute the Funds' net asset value and net income, (iii)
accumulate information required for the Trust's reports to shareholders and the
SEC, (iv) prepare and file the Trust's federal and state tax returns, (v)
perform monthly compliance testing for the Trust, and (vi) prepare and furnish
the Trust monthly broker security transaction summaries and transaction listings
and performance information. The Co-Administrator bears all expenses incurred in
connection with the performance of its services.

The Administration Agreement and the Co-Administration Agreement may be
terminated by a vote of a majority of the Board of Trustees, or by the
Administrator or Co-Administrator, respectively, on 60 days' written notice
without penalty. The Administration Agreement and Co-Administration Agreement
are not assignable without the written consent of the other party. Furthermore,
the Administration Agreement and the Co-Administration Agreement provide that
the Administrator and Co-Administrator, respectively, shall not be liable to a
Fund or to its shareholders except in the case of the Administrator's or
Co-Administrator's, respectively, willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.

As discussed under the caption "Expenses," the Administrator will be
required to reduce its fee from the Trust, in direct proportion to the fees
payable to the Adviser and the Administrator by the Trust, if the expenses of
the Trust exceed the applicable expense limitation of any state in which a
Fund's shares are registered or qualified for sale.

CUSTODIAN AND TRANSFER AGENT

NationsBank of Texas, N.A., ("NationsBank of Texas") serves as custodian
for the fund securities and cash of the Fund. As custodian, NationsBank of Texas
maintains custody of the Funds' securities, cash and other property, delivers
securities against payment upon sale and pays for securities against delivery
upon purchase, makes payments on behalf of the Funds for payments of dividends,
distributions and redemptions, endorses and collects on behalf of the Funds all
checks, and receives all dividends and other distributions made on securities
owned by the Funds. For such services, NationsBank of Texas, is entitled to
receive, in addition to out-of-pocket expenses, fees, payable monthly (i) at the
rate of 1.25% of 1% of the average daily net assets of each Fund, (ii) $10.00
per repurchase collateral transaction by such Fund, and (iii) $15.00 per
purchase, sale and maturity transaction involving such Fund. NationsBank of
Texas is a wholly owned subsidiary of NationsBank Corp.

The Bank of New York ("BONY") has entered into an agreement with each of
the Funds and NationsBank of Texas, whereby BONY will serve as sub-custodian for
the assets of the Funds. BONY is located at 90 Washington Street, New York, New
York 10286. In return for providing sub-custodial services, BONY shall receive,
in addition to out of pocket expenses, fees at the rate of (i) 3/4 of one basis
point per annum on the aggregate net assets of all Nations' Non-

<PAGE>

Money Market Funds up to $10 billion; and (ii) 1/2 of one basis point on the
excess, including all Nations' Money Market Funds.

First Data, which is located at One Exchange Place, Boston, Massachusetts
02109, acts as transfer agent for the Trust's shares. Under the transfer agency
agreements, the transfer agent maintains the shareholder account records for the
Trust, handles certain communications between shareholders and the Trust, and
distributes dividends and distributions payable by the Trust to shareholders,
and produces statements with respect to account activity for the Trust and its
shareholders for these services. The transfer agent receives a monthly fee
computed on the basis of the number of shareholder accounts that it maintains
for the Trust during the month and is reimbursed for out-of-pocket expenses.
NationsBank of Texas, 901 Main Street, Dallas, Texas 75201, serves as
sub-transfer agent for the Funds' Primary A Shares.

DISTRIBUTION PLANS AND SHAREHOLDER SERVICING ARRANGEMENTS FOR
INVESTOR SHARES

INVESTOR A SHARES. The Trust has adopted a revised Amended and Restated
Shareholder Servicing and Distribution Plan (the "Investor A Plan") pursuant to
Rule 12b-1 under the 1940 Act with respect to the Investor A Shares of the Funds
of Nations Fund Trust. The Investor A Plan provides that the Funds may pay the
Distributor or banks, broker/dealers or other financial institutions that offer
shares of the Funds and that have entered into a Sales Support Agreement with
the Distributor ("Selling Agents") or a Shareholder Servicing Agreement with
Nations Fund Trust ("Servicing Agents"), up to 0.25% (on an annualized basis) of
the average daily net asset value of the Funds.

Such payments may be made to (i) the Distributor for reimbursements of
distribution-related expenses actually incurred by the Distributor, including,
but not limited to, expenses of organizing and conducting sales seminars,
printing of prospectuses and statements of additional information (and
supplements thereto) and reports for other than existing shareholders,
preparation and distribution of advertising material and sales literature and
costs of administering the Investor A Plan, or (ii) Selling Agents that have
entered into a Sales Support Agreement with the Distributor for providing sales
support assistance in connection with the sale of Investor A Shares. The sales
support assistance provided by a Selling Agent under a Sales Support Agreement
may include forwarding sales literature and advertising provided by Nations Fund
Trust or the Distributor to their customers and providing such other sales
support assistance as may be requested by the Distributor from time to time.

Payments under the Investor A Plan by the Funds also may be made to
Servicing Agents that have entered into a Shareholder Servicing Agreement with
Nations Fund Trust for providing shareholder support services to their Customers
which hold of record or beneficially Investor A Shares of the Funds. Such
shareholder support services provided by Servicing Agents to holders of Investor
A Shares of the Funds may include (i) aggregating and processing purchase and
redemption requests for Investor A Shares from their Customers and transmitting
promptly net purchase and redemption orders to our distributor or transfer
agent; (ii) providing their Customers with a service that invests the assets of
their accounts in Investor A Shares pursuant to specific or

<PAGE>

pre-authorized instructions; (iii) processing dividend and distribution payments
from Nations Fund Trust on behalf of their Customers; (iv) providing information
periodically to their Customers showing their positions in Investor A Shares;
(v) arranging for bank wires; (vi) responding to their Customers' inquiries
concerning their investment in Investor A Shares; (vii) providing subaccounting
with respect to Investor A Shares beneficially owned by their Customers or the
information to us necessary for subaccounting; (viii) if required by law,
forwarding shareholder communications from Nations Fund Trust (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to their Customers; (ix) forwarding to their
Customers proxy statements and proxies containing any proposals regarding the
Shareholder Servicing Agreement; (x) providing general shareholder liaison
services; and (xi) providing such other similar services as Nations Fund Trust
may reasonably request to the extent the Selling Agent is permitted to do so
under applicable statutes, rules or regulations.

Expenses incurred by the Distributor pursuant to the Investor A Plan in
any given year may exceed the sum of the fees received under the Investor A
Plan. Any such excess may be recovered by the Distributor in future years so
long as the Investor A Plan is in effect. If the Investor A Plan were terminated
or not continued, the Funds would not be contractually obligated to pay the
Distributor for any expenses not previously reimbursed by the Funds. Fees
received by the Distributor pursuant to the Investor A Plan will not be used to
pay any interest expenses, carrying charges or other financing costs (except to
the extent permitted by the SEC) and will not be used to pay any general and
administrative expenses of the Distributor.

INVESTOR B SHARES. As stated in the Prospectuses for the Investor B
Shares of the Funds, the Trustees have approved a Distribution Plan (the
"Investor B Distribution Plan") with respect to Investor B Shares of the Funds.
Pursuant to the Investor B Distribution Plan, a Fund may compensate or reimburse
the Distributor for any activities or expenses primarily intended to result in
the sale of the Fund's Investor B Shares, including for sales related services
provided by banks, broker/dealers or other financial institutions that have
entered into a Sales Support Agreement relating to the Investor B Shares with
the Distributor ("Selling Agents"). Payments under a Fund's Investor B
Distribution Plan will be calculated daily and paid monthly at a rate or rates
set from time to time by the Board of Trustees provided that the annual rate may
not exceed 0.75% of the average daily net asset value of each Fund's Investor B
Shares.

The fees payable under the Investor B Distribution Plan are used
primarily to compensate or reimburse the Distributor for distribution services
provided by it, and related expenses incurred, including payments by the
Distributor to compensate or reimburse Selling Agents, for sales support
services provided, and related expenses incurred, by such Selling Agents.
Payments under the Investor B Distribution Plan may be made with respect to
preparation, printing and distribution of prospectuses, sales literature and
advertising materials by the Distributor or, as applicable, Selling Agents,
attributable to distribution or sales support activities, respectively,
commissions, incentive compensation or other compensation to, and expenses of,
account executives or other employees of the Distributor or Selling Agents,
attributable to distribution or sales support activities, respectively; overhead
and other office expenses of the Distributor relating to the foregoing (which
may be calculated as a carrying charge in the Distributor's or

<PAGE>

Selling Agents' unreimbursed expenses), incurred in connection with distribution
or sales support activities. The overhead and other office expenses referenced
above may include, without limitation, (i) the expenses of operating the
Distributor's or Selling Agents' offices in connection with the sale of Fund
shares, including lease costs, the salaries and employee benefit costs of
administrative, operations and support personnel, utility costs, communication
costs and the costs of stationery and supplies, (ii) the costs of client sales
seminars and travel related to distribution and sales support activities, and
(iii) other expenses relating to distribution and sales support activities.

In addition, the Trustees have approved a Shareholder Servicing Plan
with respect to Investor B Shares of the Non-Money Market Funds and Investor C
Shares of the Money Market Funds) the "Investor B/C Servicing Plan") (formerly
the Investor N/C Servicing Plan). Pursuant to its Investor B/C Servicing Plan, a
Fund may compensate or reimburse banks, broker/dealers or other financial
institutions that have entered into a Shareholder Servicing Agreement with the
Trust ("Servicing Agents") for certain activities or expenses of the Servicing
Agents in connection with shareholder services that are provided by the
Servicing Agents. Payments under a Fund's Investor B/C Servicing Plan will be
calculated daily and paid monthly at a rate or rates set from time to time by
the Board of Trustees, provided that the annual rate may not exceed 0.25% of the
average daily net asset value of the Fund's Investor B or C Shares, as
appropriate.

The fees payable under the Investor B/C Servicing Plan are used
primarily to compensate or reimburse Servicing Agents for shareholder services
provided, and related expenses incurred, by such Servicing Agents. The
shareholder services provided by Servicing Agents may include: (i) aggregating
and processing purchase and redemption requests for Investor B and C Shares from
Customers and transmitting promptly net purchase and redemption orders to the
Distributor or Transfer Agent; (ii) providing Customers with a service that
invests the assets of their accounts in Investor B or C Shares pursuant to
specific or pre-authorized instructions; (iii) processing dividend and
distribution payments from the Trust on behalf of Customers; (iv) providing
information periodically to Customers showing their positions in Investor B or C
Shares; (v) arranging for bank wires; (vi) responding to Customers' inquiries
concerning their investment in Investor B or C Shares; (vii) providing
sub-accounting with respect to Investor C Shares beneficially owned by Customers
or providing the information to us necessary for sub-accounting; (viii) if
required by law, forwarding shareholder communications from the Trust (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers; (ix) forwarding to
Customers proxy statements and proxies containing any proposals regarding the
Investor B or C Servicing Plan or related agreements; (x) providing general
shareholder liaison services; and (xi) providing such other similar services as
the Trust may reasonably request to the extent such Servicing Agent is permitted
to do so under applicable statutes, rules or regulations.

The fees payable under the Investor C Distribution Plan and Investor
B/C Servicing Plan (together, the "Investor B/C Plans") are treated by the Funds
as an expense in the year they are accrued. At any given time, a Selling Agent
and/or Servicing Agent may incur expenses in connection with services provided
pursuant to its agreements with the Distributor under the Investor B/C Plans
which exceed the total of (i) the payments made to the Selling Agents and
Servicing Agents by the Distributor or Nations Fund and reimbursed by the Fund
pursuant to the

<PAGE>

Investor B/C Plans, and (ii) the proceeds of contingent deferred sales charges
paid to the Distributor and reallowed to the Selling Agent, upon the redemption
of their Customers' Investor B Shares. Any such excess expenses may be recovered
in future years, so long as the Investor B/C Plans are in effect.

Because there is no requirement under the Investor B/C Plans that the
Distributor be paid or the Selling Agents and Servicing Agents be compensated or
reimbursed for all their expenses or any requirement that the Investor B/C Plans
be continued from year to year, such excess amount, if any, does not constitute
a liability to a Fund or the Distributor. Although there is no legal obligation
for the Fund to pay expenses incurred by the Distributor, a Selling Agent or a
Servicing Agent in excess of payments previously made to the Distributor under
the Investor B/C Plans or in connection with contingent deferred sales charges,
if for any reason the Investor B/C Plans are terminated, the Trustees will
consider at that time and manner in which to treat such expenses.

INVESTOR C SHARES. As stated in the relevant Prospectuses, the Trustees of the
Trust have approved an Amended and Restated Distribution Plan (the "Investor C
Plan") in accordance with Rule 12b-1 under the 1940 Act for the Investor C
Shares of the Funds. Pursuant to the Investor C Plan, the Funds may pay the
Distributor for certain expenses that are incurred in connection with sales
support services. Payments under the Investor C Plan will be calculated daily
and paid monthly at a rate set from time to time by the Board of Trustees
provided that the annual rate may not exceed 0.75% of the average daily net
asset value of Investor C Shares of the Funds. Payments to the Distributor
pursuant to the Investor C Plan will be used (i) to compensate banks, other
financial institutions or a securities broker/dealer that have entered into a
Sales Support Agreement with the Distributor ("Selling Agents") for providing
sales support assistance relating to Investor C Shares covered by the Plan, (ii)
for promotional activities intended to result in the sale of Investor C Shares
covered by the Plan such as to pay for the preparation, printing and
distribution of prospectuses to other than current shareholders, and (iii) to
compensate Selling Agents for providing sales support services with respect to
their Customers who are, from time to time, beneficial and record holders of
Investor C Shares covered by the Plan. Currently, substantially all fees paid
pursuant to the Investor C Plan are paid to compensate Selling Agents for
providing the services described in (i) and (iii) above, with any remaining
amounts being used by the Distributor to partially defray other expenses
incurred by the Distributor in distributing Investor C Shares of the Funds. Fees
received by the Distributor pursuant to the Investor C Plan will not be used to
pay any interest expenses, carrying charges or other financing costs (except to
the extent permitted by the SEC) and will not be used to pay any general and
administrative expenses of the Distributor.

Pursuant to the Investor C Plan, the Distributor may enter
into Sales Support Agreements with Selling Agents for providing sales support
services to their Customers who are the record or beneficial owners of Investor
C Shares of the Funds. Such Selling Agents will be compensated at the annual
rate of up to 0.75% of the average daily net asset value of the Investor C
Shares of the Funds held of record or beneficially by such Customers. The sales
support services provided by Selling Agents may include providing distribution
assistance and promotional activities intended to result in the sales of shares
such as paying for the preparation, printing and distribution of prospectuses to
other than current shareholders. Fees paid pursuant to the Investor C Plan are

<PAGE>

accrued daily and paid monthly, and are charged as expenses of shares of the
Funds as accrued. Expenses incurred by the Distributor pursuant to the Investor
C Plan in any given year may exceed the sum of the fees received under the
Investor C Plan and payments received pursuant to contingent deferred sales
charges. Any such excess may be recovered by the Distributor in future years so
long as the Investor C Plan is in effect. If the Investor C Plan were terminated
or not continued, the Funds would not be contractually obligated to pay the
Distributor for any expenses not previously reimbursed by the Funds or recovered
through contingent deferred sales charges.

In addition, the Trustees have approved an Amended and Restated
Shareholder Servicing Plan with respect to Investor C Shares of the Funds (the
"Investor C Servicing Plan"). Pursuant to its Investor C Servicing Plan, the
Funds may pay banks, broker/dealers or other financial institutions that have
entered into a Shareholder Servicing Agreement with the Trust ("Servicing
Agents") for certain expenses that are incurred by the Servicing Agents in
connection with shareholder support services that are provided by the Servicing
Agents. Payments under the Fund's Investor C Servicing Plan will be calculated
daily and paid monthly at a rate set from time to time by the Board of Trustees,
provided that the annual rate may not exceed 0.25% of the average daily net
asset value of the Funds' Investor C Shares. The shareholder services provided
by the Servicing Agents may include (i) aggregating and processing purchase and
redemption requests for Investor C Shares covered by the Plan from Customers and
transmitting promptly net purchase and redemption orders to our distributor or
transfer agent; (ii) providing Customers with a service that invests the assets
of their accounts in Investor C Shares covered by the Plan pursuant to specific
or pre-authorized instructions; (iii) processing dividend and distribution
payments from the Trust on behalf of Customers; (iv) providing information
periodically to Customers showing their positions in Investor C Shares covered
by the Plan; (v) arranging for bank wires; (vi) responding to Customers'
inquiries concerning their investment in Investor Shares covered by the Plan;
(vii) providing subaccounting with respect to Investor C Shares covered by the
Plan beneficially owned by Customers or providing the information to us
necessary for subaccounting; (viii) if required by law, forwarding shareholder
communications from the Trust (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
Customers; (ix) forwarding to Customers proxy statements and proxies containing
any proposals regarding the Shareholder Servicing Agreement; (x) providing
general shareholder liaison services; and (xi) providing such other similar
services as the Trust may reasonably request to the extent the Servicing Agent
is permitted to do so under applicable statutes, rules or regulations.

INFORMATION APPLICABLE TO INVESTOR SHARES. The Investor A Plan, the Investor A
Servicing Plan, the Investor C Plan and the Investor C Servicing Plan (each a
"Plan" and collectively the "Plans") may only be used for the purposes specified
above and as stated in each such Plan. Compensation payable to Selling Agents or
Servicing Agents for shareholder support services under the Investor A Plan, the
Investor A Servicing Plan and the Investor C Servicing Plan is subject to, among
other things, the National Association of Securities Dealers, Inc. ("NASD")
Rules of Fair Practice governing receipt by NASD members of servicing fees from
registered investment companies (the "NASD Service Fee Rule"), which became
effective on July 7, 1993. Such compensation shall only be paid for services
determined to be permissible under the NASD Service Fee Rule.

<PAGE>

Each Plan requires the officers of the Trust to provide the
Board of Trustees at least quarterly with a written report of the amounts
expended pursuant to the Plan and the purposes for which such expenditures were
made. The Board of Trustees reviews these reports in connection with their
decisions with respect to the Plans.

As required by Rule 12b-1 under the 1940 Act, the Investor A
Plan, Investor B Plan and Investor C Plan were approved by the Board of
Trustees, including a majority of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
the Plan ("Qualified Trustees") on December 9, 1997.

In approving the Plans in accordance with the requirements of
Rule 12b-1, the Trustees considered various factors and determined that there is
a reasonable likelihood that each Plan will benefit the respective Investor A
and Investor C Shares of the Funds and the holders of such shares.

All Plans shall continue in effect as long as such continuance
is specifically approved at least annually by the Board of Trustees, including a
majority of qualified Trustees.

The Investor A Plan and the Investor C Plan may be terminated
with respect to Investor A or Investor C Shares by vote of a majority of the
Qualified Trustees, or by vote of a majority of the holders of the Funds'
outstanding voting securities of the Investor A or Investor C Shares. Any change
in such a Plan that would increase materially the distribution expenses paid by
the Investor A or Investor C Shares, as appropriate, requires shareholder
approval; otherwise, each Plan may be amended by the trustees, including a
majority of the Qualified Trustees, by vote cast in person at a meeting called
for the purpose of voting upon such amendment. The Investor A Servicing Plan and
the Investor C Servicing Plan may be terminated by a vote of a majority of the
Qualified Trustees. As long as a Plan is in effect, the selection or nomination
of the Qualified Trustees is committed to the discretion of the Qualified
Trustees.

Conflict of interest restrictions may apply to the receipt by
Selling and/or Servicing Agents of compensation from Nations Funds in connection
with the investment of fiduciary assets in Investor Shares. Selling and/or
Servicing Agents, including banks regulated by the Comptroller of the Currency,
the Federal Reserve Board, or the Federal Deposit Insurance Corporation, and
investment advisers and other money managers subject to the jurisdiction of the
SEC, the Department of Labor, or state securities commissions, are urged to
consult their legal advisers before investing such assets in Investor Shares.

DISTRIBUTOR

Since the inception of the Funds, Stephens Inc. (the "Distributor"), began
serving as the principal underwriter and distributor of the shares of the Funds.
At a meeting held on August 4, 1993, the Board of Trustees selected Stephens
Inc. as Distributor and approved a distribution

<PAGE>

agreement ("Distribution Agreement") with the Distributor. Pursuant to the
Distribution Agreement, the Distributor, as agent, sells shares of the Funds on
a continuous basis and transmits purchase and redemption orders that its
receives to the Trust or the Transfer Agent. Additionally, the Distributor has
agreed to use appropriate efforts to solicit orders for the sale of shares and
to undertake such advertising and promotion as it believes appropriate in
connection with such solicitation. Pursuant to the Distribution Agreement, the
Distributor, at its own expense, finances those activities which are primarily
intended to result in the sale of shares of the Funds, including, but not
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing of prospectuses to other than existing shareholders, and
the printing and mailing of sales literature. The Distributor, however, may be
reimbursed for all or a portion of such expenses to the extent permitted by a
distribution plan adopted by the Trust pursuant to Rule 12b-1 under the 1940
Act.

The Distribution Agreement will continue year to year as long as such
continuance is approved at least annually by (i) the Board of Trustees or a vote
of the majority (as defined in the 1940 Act) of the outstanding voting
securities of the Funds and (ii) a majority of the trustees who are not parties
to the Distribution Agreement or "interested persons" of any such party by a
vote cast in person at a meeting called for such purpose. The Distribution
Agreement is not assignable and is terminable with respect to the Funds, without
penalty, on 60 days' notice by the Board of Trustees, the vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the Funds, or
by the Distributor.

INDEPENDENT ACCOUNTANT AND REPORTS

The Board of Trustees has selected Price Waterhouse LLP, with offices at
160 Federal Street, Boston, MA 02110, to serve as independent accountant to
Nations Fund Trust.

The Funds have not commenced operation as of the date of this SAI. As
such, the financial statements for the Funds are not yet available. The Annual
Report for the Funds, when available, will be sent free of charge to all
shareholders of record.

COUNSEL

Morrison & Foerster LLP, 2000 Pennsylvania Avenue, N.W., Suite 5500,
Washington, D.C. 20006-1888 is counsel to the Trust.

ADDITIONAL INFORMATION ON PERFORMANCE

From time to time, the yield and total return of the Funds' Investor
Shares and Primary Shares may be quoted in advertisements, shareholder reports,
and other communications to shareholders. Performance information is available
by calling 1-800-321-7854 with respect to Investor Shares and 1-800-621-2192
with respect to Primary Shares.

<PAGE>

YIELD CALCULATIONS

Yield is calculated separately for the Investor A and Primary A Shares of
the Funds by dividing the net investment income per share for a particular class
or series of shares (as described below) earned during a 30-day period by the
maximum offering price per share on the last day of the period (for Primary A
Shares, maximum offering price per share is the same as the net asset value per
share) and annualizing the result on a semi-annual basis by adding one to the
quotient, raising the sum to the power of six, subtracting one from the result
and then doubling the difference. For a class or series of shares in a Fund, net
investment income per share earned during the period is based on the average
daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements. This calculation can be
expressed as follows:

Yield = 2 [(a-b+ 1)6 - 1]
---
cd

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.

d = maximum offering price per share on the last day of
the period (again, for Primary A Shares, this is
equivalent to net asset value per share).

For the purpose of determining net investment income earned during the
period (variable "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the portfolio. Each Fund calculates
interest earned on any debt obligations held in its portfolio by computing the
yield to maturity of each obligation held by it based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and dividing
the result by 360 and multiplying the quotient by the market value of the
obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is in the portfolio. For purposes of this calculation, it is assumed
that each month contains 30 days. The maturity of an obligation with a call
provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market values of such debt
obligations.

<PAGE>

Expenses accrued for the period (variable "b" in the formula) include
recurring fees charged by Nations Funds to shareholder accounts in proportion to
the length of the base period. Undeclared earned income will be subtracted from
the maximum offering price per share (which for Primary A Shares is net asset
value per share) (variable "d" in the formula). Undeclared earned income is the
net investment income which, at the end of the base period, has not been
declared as a dividend, but is reasonably expected to be and is declared as a
dividend shortly thereafter. The Fund's maximum offering price per share for
purposes of the formula includes the maximum sales charge, if any, imposed by
the Fund, as reflected in the Fund's Prospectuses.

The Funds may provide additional yield calculations in communications
(other than advertisements) to the holders of Investor A Shares. These may be
calculated based on the Investor A Shares' net asset values per share (rather
than their maximum offering prices) on the last day of the period covered by the
yield computations. That is, some communications provided to the holders of
Investor A Shares may also include additional yield calculations prepared for
the holders of Primary A Shares. Such additional quotations, therefore, will not
reflect the effect of the sales charges mentioned above.

TOTAL RETURN CALCULATIONS

Each Fund computes its average annual total return for Investor A, Primary
A Shares separately by determining the average annual compounded rates of return
during specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by dividing the ending
redeemable value of a hypothetical $1,000 initial payment by $1,000 and raising
the quotient to a power equal to one divided by the number of years (or
fractional portion thereof) covered by the computation and subtracting one from
the result. This calculation can be expressed as follows:

T = [(ERV)1/n - 1]
---
P

Where: T = average annual total return.

ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 payment made at the beginning of the
period.

P = hypothetical initial payment of $1,000.

n = period covered by the computation, expressed in
terms of years.

Each Fund compute its aggregate total returns for Investor A, Investor C,
Primary A Shares separately by determining the aggregate rates of return during
specified periods that likewise equate the initial amount invested to the ending
redeemable value of such investment. The formula for calculating aggregate total
return is as follows:

<PAGE>

T = [(ERV) - 1]
---
P

The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. The Funds' average annual total
return and aggregate total return quotations for Primary A, Investor A, Investor
B and Investor C Shares reflect the deduction of the maximum sales charge
charged (if applicable) with respect to the applicable class of shares in
connection with the purchase of these shares. The Funds may also provide, in
conjunction with such quotations for Primary A and Investor A Shares, additional
quotations that do not reflect the maximum sales charge when the quotations are
being provided to investors who are subject to waiver of or reduction in the
sales charges described in the Investor Shares Prospectuses.

Since the Funds have not commenced operation, no information on average
annual total return or aggregate annual total return for any class of shares is
available.

From time to time, the Funds may compare the performance and yield of a
class or series of shares to those of other mutual funds with similar investment
objectives and to other relevant indices or to rankings prepared by independent
services or other financial or industry publications that monitor the
performance of mutual funds. For example, the performance and yield of a class
of shares in the Funds may be compared to data prepared by Lipper Analytical
Services, Inc. The performance and yield of a class of shares in the Fund may
also be compared to the Standard & Poor's 500 Stock Index, an unmanaged index of
a group of common stocks, the Consumer Price Index, or the Dow Jones Industrial
Average, a recognized unmanaged index of common stocks of 30 industrial
companies listed on the Exchange. Performance and yield data as reported in
national financial publications such as Money Magazine, Forbes, Barron's, The
Wall Street Journal, and The New York Times, or in publications of a local or
regional nature, also may be used in comparing the performance of a class of
shares in the Funds.

The Funds may quote information obtained from the Investment Company
Institute in their advertising materials and sales literature.

IBBOTSON DATA. Ibbotson Associates of Chicago, Illinois, ("Ibbotson")
provides historical returns of the capital markets in the United States. Each
Fund may compare the performance of its share classes or series to the long-term
performance of the U.S. capital markets in order to demonstrate general
long-term risk versus reward investment scenarios. Performance comparisons could
also include the value of a hypothetical investment in common stocks, long-term
bonds or treasuries.

The capital markets tracked by Ibbotson are common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury Bills, and the U.S. rate of
inflation. These capital markets are based on the returns of several different
indices. For common stocks, the S&P is used. For small capitalization stocks,

<PAGE>

return is based on the return achieved by Dimensional Fund Advisors (DFA) Small
Company Fund. This fund is a market-value-weighted index of the ninth and tenth
deciles of the Exchange, plus stocks listed on the American Stock Exchange
(AMEX) and over-the-counter (OTC) with the same or less capitalization as the
upperbound of the Exchange ninth docile. At year-end 1995, the DFA Small Company
Fund contained approximately 2,663 stocks, with a weighted average market
capitalization of $165.75 million. The unweighted average market capitalization
was $82.97 million, while the median was $56.0 million.

MISCELLANEOUS

CERTAIN RECORD HOLDERS

As of the date of this SAI, NationsBank Corporation and its affiliates
owned of record more than 25% of the outstanding shares of the Trust acting as
agent, fiduciary, or custodian for its customers and may be deemed a controlling
person of the Trust under the 1940 Act.

<PAGE>

SCHEDULE A

DESCRIPTION OF RATINGS

The following summarizes the highest six ratings used by Standard &
Poor's Corporation ("S&P") for corporate and municipal bonds. The first four
ratings denote investment grade securities.

AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay
principal.

AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a
small degree.

A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those
in higher-rated categories.

BB, B - Bonds rated BB and B are regarded, on balance as predominantly
speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. Debt rated BB
has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal.

To provide more detailed indications of credit quality, the AA, A and
BBB, BB and B ratings may be modified by the addition of a plus or minus sign to
show relative standing within these major rating categories.

The following summarizes the highest six ratings used by Moody's
Investors Service, Inc. ("Moody's") for corporate and municipal bonds. The first
four denote investment grade securities.

Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong
position of such issues.

Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.

A-1

<PAGE>

A - Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.

Baa - Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.

Ba - Bonds that are rated Ba are judged to have speculative elements;
their future cannot be as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not as
well safeguarded during both good times and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B - Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.

Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa through B. The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks
in the lower end of its generic rating category. With regard to municipal bonds,
those bonds in the Aa, A and Baa groups which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa1, A1 or Baa1,
respectively.

The following summarizes the highest four ratings used by Duff & Phelps
Credit Rating Co. ("D&P") for bonds, each of which denotes that the securities
are investment grade.

AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.

AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.

A - Bonds that are rated A have protection factors which are average
but adequate. However, risk factors are more variable and greater in
periods of economic stress.

BBB - Bonds that are rated BBB have below average protection factors
but still are considered sufficient for prudent investment.
Considerable variability in risk during economic cycles.

To provide more detailed indications of credit quality, the AA, A and
BBB ratings may modified by the addition of a plus or minus sign to show
relative standing within these major categories.

The following summarizes the highest four ratings used by Fitch
Investors Service, Inc. ("Fitch") for bonds, each of which denotes that the
securities are investment grade:

A-2

<PAGE>

AAA - Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated F-1+.

A - Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.

BBB - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.

To provide more detailed indications of credit quality, the AA, A and
BBB ratings may be modified by the addition of a plus or minus sign to show
relative standing within these major rating categories.

The following summarizes the two highest ratings used by S&P for
short-term municipal notes:

SP-1 -- Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
are given a "plus" (+) designation.

SP-2 -- Satisfactory capacity to pay principal and interest.

The following summarizes the two highest ratings used by Moody's for
short-term municipal notes and variable-rate demand obligations:

MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.

MIG-2/VMIG-2 -- Obligations bearing these designations are of high
quality, with ample margins of protection although not so large as in
the preceding group.

The three highest rating categories of D&P for short-term debt, each of
which denotes that the securities are investment grade, are D-1, D-2, and D-3.
D&P employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-1+ indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is judged to be "outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations." D-1 indicates very high
certainty of timely payment. Liquidity factors are excellent and supported by
good fundamental protection factors. Risk factors are considered to be minor.
D-1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. D-2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. D-3 indicates satisfactory liquidity and other

A-3
<PAGE>

protection factors which qualify the issue as investment grade. Risk factors are
larger and subject to more variation. Nevertheless, timely payment is expected.

The following summarizes the two highest rating categories used by
Fitch for short-term obligations each of which denotes that the securities are
investment grade:

F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.

F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.

F-2 securities possess good credit quality. Issues carrying this rating
have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned the F-1+ and
F-1 ratings.

For commercial paper, D&P uses the short-term ratings described above.

For commercial paper, Fitch uses the short-term ratings described
above.

Thomson BankWatch, Inc. ("BankWatch") ratings are based upon a
qualitative and quantitative analysis of all segments of the organization
including, where applicable, holding company and operating subsidiaries.
BankWatch ratings do not constitute a recommendation to buy or sell securities
of any of these companies. Further, BankWatch does not suggest specific
investment criteria for individual clients.

BankWatch long-term ratings apply to specific issues of long-term debt
and preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following is the four investment grade ratings used by BankWatch
for long-term debt:

AAA - The highest category; indicates ability to repay principal and
interest on a timely basis is extremely high.

AA - The second highest category; indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental
risk versus issues rated in the highest category.

A-4
<PAGE>

A - The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be more
vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.

BBB - The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are,
however, more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.

Long-term debt ratings may include a plus (+) or minus(-) sign to
indicate where within a category the issue is placed.

The BankWatch short-term ratings apply to commercial paper, other
senior short-term obligations and deposit obligations of the entities to which
the rating has been assigned.

The BankWatch short-term ratings specifically assess the likelihood of
an untimely payment of principal or interest.

TBW-1 -- The highest category; indicates a very high likelihood that
principal and interest will be paid on a timely basis. TBW-2 -- The
second highest category; while the degree of safety regarding timely
repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1".

TBW-3 -- The lowest investment grade category; indicates that while
more susceptible to adverse developments (both internal and external)
than obligations with higher ratings, capacity to service principal and
interest in a timely fashion is considered adequate.

TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.

The following summarizes the four highest long-term debt ratings used
by IBCA Limited and its affiliate, IBCA Inc. (collectively "IBCA"):

AAA -- Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and
interest is substantial such that adverse changes in business, economic
or financial conditions are unlikely to increase investment risk
significantly.

AA -- Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and
interest is substantial. Adverse changes in business, economic or
financial conditions may increase investment risk albeit not very
significantly.

A -- Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial
conditions may lead to increased investment risk.

BBB--Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment
risk than for obligations in other categories.

A-5
<PAGE>

A plus or minus sign may be appended to a rating below AAA to denote
relative status within major rating categories.

The following summarizes the two highest short-term debt ratings used
by IBCA:

A1+ - When issues posses a particularly strong credit feature, a rating
of A1+ is assigned.

A1 - Obligations supported by the highest capacity for timely
repayment.

A2 -- Obligations supported by a good capacity for timely repayment.

A-6
<PAGE>

SCHEDULE B

ADDITIONAL INFORMATION CONCERNING

OPTIONS & FUTURES

As stated in the Prospectus, each Non-Money Market Fund, may enter into
futures contracts and options for hedging purposes. Such transactions are
described in this Schedule. During the current fiscal year, each of the Funds
intends to limit its transactions in futures contracts and options so that not
more than 5% of the Fund's net assets are at risk. Furthermore, in no event
would any Fund purchase or sell futures contracts, or related options thereon,
for hedging purposes if, immediately thereafter, the aggregate initial margin
that is required to be posted by the Fund under the rules of the exchange on
which the futures contract (or futures option) is traded, plus any premiums paid
by the Fund on its open futures options positions, exceeds 5% of the Fund's
total assets, after taking into account any unrealized profits and unrealized
losses on the Fund's open contracts and excluding the amount that a futures
option is "in-the-money" at the time of purchase. (An option to buy a futures
contract is "in-the-money" if the value of the contract that is subject to the
option exceeds the exercise price; an option to sell a futures contract is
"in-the-money" if the exercise price exceeds the value of the contract that is
subject of the option.)

I. Interest Rate Futures Contracts.

Use of Interest Rate Futures Contracts. Bond prices are established in
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures market have tended to move generally in the aggregate
in concert with the cash market prices and have maintained fairly predictable
relationships. Accordingly, a Fund may use interest rate futures as a defense,
or hedge, against anticipated interest rate changes and not for speculation. As
described below, this would include the use of futures contract sales to protect
against expected increases in interest rates and futures contract purchases to
offset the impact of interest rate declines.

A Fund presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Fund, through using futures contracts.

Description of Interest Rates Futures Contracts. An interest rate
futures contract sale would create an obligation by a Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by the Fund, as purchaser, to take delivery of the specific
type of financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.

Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without the making or taking

B-1
<PAGE>

of delivery of securities. Closing out a futures contract sale is effected by
the Fund's entering into a futures contract purchase for the same aggregate
amount of the specific type of financial instrument and the same delivery date.
If the price in the sale exceeds the price in the offsetting purchase, the Fund
is paid the difference and thus realizes a gain. If the offsetting purchase
price exceeds the sale price, the Fund pays the difference and realizes a loss.
Similarly, the closing out of a futures contract purchase is effected by the
Fund's entering into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the Fund realizes a gain, and if the purchase price
exceeds the offsetting sale price, the Fund realizes a loss.

Interest rate futures contracts are traded in an auction environment on
the floors of several exchanges principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. A Fund would deal
only in standardized contracts on recognized changes. Each exchange guarantees
performance under contract provisions through a clearing corporation, a
nonprofit organization managed by the exchange membership.

A public market now exists in futures contracts covering various
financial instruments including long-term United States Treasury Bonds and
Notes; Government National Mortgage Association (GNMA) modified pass-through
mortgage-backed securities; three-month United States Treasury Bills; and
ninety-day commercial paper. The Funds may trade in any futures contract for
which there exists a public market, including, without limitation, the foregoing
instruments.

Examples of Futures Contract Sale. A Fund would engage in an interest
rate futures contract sale to maintain the income advantage from continued
holding of a long-term bond while endeavoring to avoid part or all of the loss
in market value that would otherwise accompany a decline in long-term securities
prices. Assume that the market value of a certain security in a Fund tends to
move in concert with the futures market prices of long-term United States
Treasury bonds ("Treasury Bonds"). The investment adviser ("Adviser") wishes to
fix the current market value of this portfolio security until some point in the
future. Assume the portfolio security has a market value of 100, and the Adviser
believes that, because of an anticipated rise in interest rates, the value will
decline to 95. The Fund might enter into futures contract sales of Treasury
bonds for an equivalent of 98. If the market value of the portfolio securities
does indeed decline from 100 to 95, the equivalent futures market price for the
Treasury bonds might also decline from 98 to 93.

In that case, the five-point loss in the market value of the portfolio
security would be offset by the five-point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.

The Adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.

If interest rate levels did not change, the Fund in the above example
might incur a loss of 2 points (which might be reduced by an offsetting
transaction prior to the settlement date). In each transaction, transaction
expenses would also be incurred.

Examples of Future Contract Purchase. A Fund would engage in an
interest rate futures contract purchase when it is not fully invested in
long-term bonds but wishes to defer for a time the purchase of long-term bonds
in light of the availability of advantageous interim investments, e.g.,
shorter-term

B-2
<PAGE>

securities whose yields are greater than those available on long-term bonds. The
Fund's basic motivation would be to maintain for a time the income advantage
from investing in the short-term securities; the Fund would be endeavoring at
the same time to eliminate the effect of all or part of an expected increase in
market price of the long-term bonds that the Fund may purchase.

For example, assume that the market price of a long-term bond that the
Fund may purchase, currently yielding 10%, tends to move in concert with futures
market prices of Treasury bonds. The Adviser wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example) when it may purchase the bond. Assume the long-term bond
has a market price of 100, and the Adviser believes that, because of an
anticipated fall in interest rates, the price will have risen to 105 (and the
yield will have dropped to about 9-1/2%) in four months. The Fund might enter
into futures contracts purchases of Treasury bonds for an equivalent price of
98. At the same time, the Fund would assign a pool of investments in short-term
securities that are either maturing in four months or earmarked for sale in four
months, for purchase of the long-term bond at an assumed market price of 100.
Assume these short-term securities are yielding 15%. If the market price of the
long-term bond does indeed rise from 100 to 105, the equivalent futures market
price for Treasury bonds might also rise from 98 to 103. In that case, the
5-point increase in the price that the Fund pays for the long-term bond would be
offset by the 5-point gain realized by closing out the futures contract
purchase.

The Adviser could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or below,
it is possible that the Fund would continue with its purchase program for
long-term bonds. The market price of available long-term bonds would have
decreased. The benefit of this price decrease, and thus yield increase, will be
reduced by the loss realized on closing out the futures contract purchase.

If, however, short-term rates remained above available long-term rates,
it is possible that the Fund would discontinue its purchase program for
long-term bonds. The yield on short-term securities in the portfolio, including
those originally in the pool assigned to the particular long-term bond, would
remain higher than yields on long-term bonds. The benefit of this continued
incremental income will be reduced by the loss realized on closing out the
futures contract purchase.

In each transaction, expenses also would be incurred.

II. Index Futures Contracts.

A stock or bond index assigns relative values to the stocks or bonds
included in the index, and the index fluctuates with changes in the market
values of the stocks or bonds included. Some stock index futures contracts are
based on broad market indices, such as the Standard & Poor's 500 or the Exchange
Composite Index. In contract, certain exchanges offer futures contracts on
narrower market indices, such as the Standard & Poor's 100, the Bond Buyer
Municipal Bond Index, an index composed of 40 term revenue and general
obligation bonds, or indices based on an industry or market segment, such as oil
and gas stocks. Futures contracts are traded on organized exchanges regulated by
the Commodity Futures Trading Commission. Transactions on such exchanges are
cleared through a clearing corporation, which guarantees the performance of the
parties to each contract.

A Fund will sell index futures contracts in order to offset a decrease
in market value of its portfolio securities that might otherwise result from a
market decline. The Fund may do so either to hedge the value of its portfolio as
a whole, or to protect against declines, occurring prior to sales of securities,
in the value

B-3
<PAGE>

of the securities to be sold. Conversely, a Fund will purchase index futures
contracts in anticipation of purchases of securities. In a substantial majority
of these transactions, the Fund will purchase such securities upon termination
of the long futures position, but a long futures position may be terminated
without a corresponding purchase of securities.

In addition, a Fund may utilize index futures contracts in anticipation
of changes in the composition of its portfolio holdings. For example, in the
event that a Fund expects to narrow the range of industry groups represented in
its holdings it may, prior to making purchases of the actual securities,
establish a long futures position based on a more restricted index, such as an
index comprised of securities of a particular industry group. A Fund also may
sell futures contracts in connection with this strategy, in order to protect
against the possibility that the value of the securities to be sold as part of
the restructuring of the portfolio will decline prior to the time of sale.

The following are examples of transactions in stock index futures (net
of commissions and premiums, if any).

ANTICIPATORY PURCHASE HEDGE: BUY THE FUTURE

HEDGE OBJECTION: PROTECT AGAINST INCREASING PRICE

Portfolio Futures
- -----------------
- -Day Hedge is Placed-

Anticipate Buying $62,500 Buying 1 Index Futures at 125

Equity Portfolio Value of Futures = $62,500/Contract

- -Day Hedge is Lifted-

Buy Equity Portfolio with Sell 1 Index Futures at 130

Actual Cost = $65,000 Value of Futures = $65,000/Contract

Increase in Purchase Price =$2,500 Gain on Futures = $2,500

HEDGING A STOCK PORTFOLIO: SELL THE FUTURE

HEDGE OBJECTIVE: PROTECT AGAINST DECLINING

VALUE OF THE PORTFOLIO

Factors:
- --------
Value of Stock Portfolio = $1,000,000

Value of Futures Contract = 125 x $500 = $62,500

Portfolio Beta Relative to the Index - 1.0

B-4
<PAGE>

Portfolio Futures
- -----------------

- -Day Hedge is Placed --

Anticipate Selling $1,000,000 Sell 16 Index Futures at 125

Equity Portfolio Value of Futures = $1,000,000

- -Day Hedge is Lifted --

Equity Portfolio-Own Buy 16 Index Futures at 120

Stock with Value = $960,000 Value of Futures = $960,000

Loss in Portfolio Value = $40,000 Gain on Futures = $40,000

If, however, the market moved in the opposite direction, that is,
market value decreased and the Fund had entered into an anticipatory purchase
hedge, or market value increased and the Fund had hedged its stock portfolio,
the results of the Fund's transactions in stock index futures would be as set
forth below.

ANTICIPATORY PURCHASE HEDGE: BUY THE FUTURE

HEDGE OBJECTIVE: PROTECT AGAINST INCREASING PRICE

Portfolio Futures
- -----------------
- -Day Hedge is Placed--

Anticipate Buying $62,500 Buying 1 Index Futures at 125

Equity Portfolio Value of Futures = $62,500/Contract

- -Day Hedge is Lifted--

Buy Equity Portfolio with Sell 1 Index Futures at 120

Actual Cost - $60,000 Value of Futures = $60,000/Contract

Decrease in Purchase Price = $2,500 Loss on Futures = $2,500/Contract

HEDGING A STOCK PORTFOLIO: SELL THE FUTURE

HEDGE OBJECTIVE: PROTECT AGAINST DECLINING

VALUE OF THE PORTFOLIO

Factors:
- --------
Value of Stock Portfolio = $1,000,000

Value of Futures Contract = 125 x $500 = $62,500

B-5
<PAGE>

Portfolio Beta Relative to the Index = 1.0

Portfolio Futures
- -----------------
-Day Hedge is Placed --

Anticipate Selling $1,000,000 Sell 16 Index Futures at 125

Equity Portfolio Value of Futures = $1,000,000

- -Day Hedge is Lifted --

Equity Portfolio-Own Buy 16 Index Futures at 130

Stock with Value = $1,040,000 Value of Futures = $1,040,000

Gain in Portfolio = $40,000 Loss of Futures = $40,000

III. Margin Payments.

Unlike when a Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the broker or in a segregated account
with the Fund's Custodian an amount of cash or cash equivalents, the value, of
which may vary but is generally equal to 10% or less of the value of the
contract. This amount is known as initial margin. The nature of initial margin
in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the customer to finance the transactions. Rather, the initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures contract assuming all
contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying security or index fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
marking to the market. For example, when a Fund has purchased a futures contract
and the price of the contract has risen in response to a rise in the underlying
instruments, that position will have increased in value and the Fund will be
entitled to receive from the broker a variation margin payment equal to that
increase in value. Conversely, where a Fund has purchased a futures contract and
the price of the futures contract has declined in response to a decrease in the
underlying instruments, the position would be less valuable, and the Fund would
be required to make a variation margin payment to the broker. At any time prior
to expiration of the futures contract, the Adviser may elect to close the
position by taking an opposite position, subject to the availability of a
secondary market, which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or gain.

IV. Risks of Transactions in Futures Contracts.

There are several risks in connection with the use of futures by a Fund
as a hedging device. One risk arises because of the imperfect correlation
between movements in the price of the future and movements in the price of the
securities which are the subject of the hedge. The price of the future may move
more than or less than the price of the securities being hedged. If the price of
the future moves less than the price of the securities which are the subject of
the hedge, the hedge will not be fully effective but, if the price of the
securities being hedged has moved in an unfavorable direction, the Fund would be
in a

B-6
<PAGE>

better position than if it had not hedged at all. If the price of the securities
being hedged has moved in a favorable direction, this advance will be partially
offset by the loss on the future. If the price of the future moves more than the
price of the hedged securities, the Fund involved will experience either a loss
or gain on the future which will not be completely offset by movements in the
price of the securities which are the subject of the hedge.

To compensate for the imperfect correlation of movements in the price
of securities being hedged and movements in the price of futures contracts, a
Fund may buy or sell futures contracts in a greater dollar amount than the
dollar amount of securities being hedged if the volatility over a particular
time period of the prices of such securities has been greater than the
volatility over such time period of the future, or if otherwise deemed to be
appropriate by the Adviser. Conversely, a Fund may buy or sell fewer futures
contracts if the volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such time period of the
futures contract being used, or if otherwise deemed to be appropriate by the
Adviser. It also is possible that, where a Fund has sold futures to hedge its
portfolio against a decline in the market, the market may advance, and the value
of securities held by the Fund may decline. If this occurred, the Fund would
lose money on the future and also experience a decline in value in its portfolio
securities.

Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead; if the Fund then concludes not to invest in
securities or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the futures
contract that is not offset by a reduction in the price of securities purchased.

In instances involving the purchase of futures contracts by a Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Fund's Custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.

In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and the
securities being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Adviser still may not
result in a successful hedging transaction over a short time frame.

Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any

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particular time. In such event, it may not be possible to close a futures
investment position, and in the event of adverse price movements, a Fund would
continue to be required to make daily cash payments of variation margin.
However, in the event futures contracts have been used to hedge portfolio
securities, such securities will not be sold until the futures contract can be
terminated. In such circumstances, an increase in the price of the securities,
if any, may partially or completely offset losses on the futures contract.
However, as described above, there is no guarantee that the price of the
securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.

Further, it should be noted that the liquidity of a secondary market in
a futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions.

Successful use of futures by a Fund also is subject to the Adviser's
ability to predict correctly movements in the direction of the market. For
example, if a Fund has hedged against the possibility of a decline in the market
adversely affecting securities held in its portfolio and securities prices
increase instead, the Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. A Fund may have to sell
securities at a time when it may be disadvantageous to do so.

V. Options on Futures Contracts.

The Funds may purchase options on the futures contracts described
above. A futures option gives the holder, in return for the premium paid, the
right to buy (call) from or sell (put) to the writer of the option a futures
contract at a specified price at any time during the period of the option. Upon
exercise, the writer of the option is obligated to pay the difference between
the cash value of the futures contract and the exercise price. Like the buyer or
seller of a futures contract, the holder, or writer, of an option has the right
to terminate its position prior to the scheduled expiration of the option by
selling, or purchasing, an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss.

Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the purchase
of an option also entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the option
purchased. Depending on the pricing of the option compared to either the futures
contract upon which it is based, or upon the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. In general, the market prices of options can be
expected to be more volatile than the market prices on the underlying futures
contract. Compared to the purchase or sale of futures contracts, however, the
purchase of call or put options on futures contracts may frequently involve less
potential risk to a Fund because the maximum amount at risk is the premium paid
for the options (plus transaction costs). Although permitted by their
fundamental investment policies, the Funds do not currently intend to write
future options, and will not do so in the future absent any necessary regulatory
approvals.

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VI. Accounting and Tax Treatment.

Accounting for futures contracts and options will be in accordance with
generally accepted accounting principles.

Generally, futures contracts and options on futures contracts held by a
Fund at the close of the Fund's taxable year will be treated for Federal income
tax purposes as sold for their fair market value on the last business day of
such year, a process known as "marking-to-market." Forty percent (40%) of any
gains or loss resulting from such constructive sale will be treated as
short-term capital gain or loss and sixty percent (60%) of such gain or loss
will be treated as long-term capital gain or loss without regard to the length
of time the Fund holds the futures contract or option (the "40%-60% rule"). The
amount of any capital gain or loss actually realized by a Fund in a subsequent
sale or other disposition of those futures contracts will be adjusted to reflect
any capital gain or loss taken into account by the Fund in a prior year as a
result of the constructive sale of the contracts and options. With respect to
futures contracts to sell or options which will be regarded as parts of a "mixed
straddle" because their values fluctuate inversely to the values of specific
securities held by the Fund, losses as to such contracts to sell or options will
be subject to certain loss deferral rules which limit the amount of loss
currently deductible on either part of the straddle to the amount thereof which
exceeds the unrecognized gain (if any) with respect to the other part of the
straddle, and to certain wash sales regulations. Under short sales rules, which
also will be applicable, the holding period of the securities forming part of
the straddle will (if they have not been held for the long-term holding period)
be deemed not to begin prior to termination of the straddle. With respect to
certain futures contracts and options, deductions for interest and carrying
charges will not be allowed. Notwithstanding the rules described above, with
respect to futures contracts to sell which are properly identified as such and
certain options, a Fund may make an election which will except (in whole or in
part) those identified futures contracts or options from being treated for
Federal income tax purposes as sold on the last business day of the Fund's
taxable year, but gains and losses will be subject to such short sales, wash
sales, loss deferral rules and the requirement to capitalize interest and
carrying charges. Under temporary regulations, a Fund would be allowed (in lieu
of the foregoing) to elect to either (1) offset gains or losses from portions
which are part of a mixed straddle by separately identifying each mixed straddle
to which such treatment applies, or (2) establish a mixed straddle account for
which gains and losses would be recognized and offset on a periodic basis during
the taxable year. Under either election, the 40%-60% rule will apply to the net
gain or loss attributable to the futures contracts, but in the case of a mixed
straddle account election, not more than 50% of any net gain may be treated as
long-term and not more than 40% of any net loss may be treated as short-term.

Certain foreign currency contracts entered into by a Fund may be
subject to the "marking-to-market" process and the 40%-60% rule in a manner
similar to that described in the preceding paragraph for futures contracts and
options on futures contracts. To receive such Federal income tax treatment, a
foreign currency contract must meet the following conditions: (1) the contract
must require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract depends;
(2) the contract must be entered into at arm's length at a price determined by
reference to the price in the interbank market; and (3) the contract must be
traded in the interbank market. The Treasury Department has broad authority to
issue regulations under the provisions respecting foreign currency contracts.
Other foreign currency contracts entered into by a Fund may result in the
creation of one or more straddles for Federal income tax purposes, in which case
certain loss deferral, short sales, and wash sales rules and the requirement to
capitalize interest and carrying charges may apply.

As described more full in the section of the SAI entitled "Additional
Information Concerning Taxes," in order to qualify as a regulated investment
company under the Code a Fund must derive less than

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30% of its gross income from investments held for less than three months. With
respect to futures contracts and other financial instruments subject to the
marking-to-market rules, the Internal Revenue Service has ruled in private
letter rulings that a gain realized from such a futures contract or financial
instrument will be treated as being derived from a security held for three
months or more (regardless of the actual period for which the contract or
instrument is held) if the gain arises as a result of a constructive sale under
the marking-to-market rules, and will be treated as being derived from a
security held for less than three months only if the contract or instrument is
terminated (or transferred) during the taxable year (other than by reason of
marking-to-market) and less than three months have elapsed between the date the
contract or instrument is acquired and the termination date. In determining
whether the 30% test is met for a taxable year, increases and decreases in the
value of each Fund's futures contracts and other investments that qualify as
part of a "designated hedge," as defined in the Code, may be netted.

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SCHEDULE C

ADDITIONAL INFORMATION CONCERNING

MORTGAGE-BACKED SECURITIES

Mortgage-backed securities represent an ownership interest in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his/her lending institution are "passed-through" to an investor.
Most issuers or poolers provide guarantees of payments, regardless of whether or
not the mortgagor actually makes the payment. The guarantees made by issuers or
poolers are supported by various forms of credit, collateral, guarantees or
insurance, including individual loan, title, pool and hazard insurance purchased
by the issuer. There can be no assurance that the private issuers or poolers can
meet their obligations under the policies. Mortgage-backed securities issued by
private issuers or poolers, whether or not such securities are subject to
guarantees, may entail greater risk than securities directly or indirectly
guaranteed by the U.S.
Government.

Interests in pools of mortgage-backed securities differ from other
forms of debt securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified call
dates. Instead, these securities provide a monthly payment which consists of
both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their
residential mortgage loans, net of any fees paid. Additional payments are caused
by repayments resulting from the sale of the underlying residential property,
refinancing or foreclosure net of fees or costs which may be incurred. Some
mortgage-backed securities are described as "modified pass-through." These
securities entitle the holders to receive all interest and principal payments
owed on the mortgages in the pool, net of certain fees, regardless of whether or
not the mortgagors actually make the payments.

Residential mortgage loans are pooled by the Federal Home Loan Mortgage
Corporation (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its stock is owned by
the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's"), which represent interests in mortgages from FHLMC's national
portfolio. FHLMC guarantees the timely payment of interest and ultimate
collection of principal.

The Federal National Mortgage Association (FNMA) is a Government
sponsored corporation owned entirely by private stockholders. It is subject to
general regulation by the Secretary of Housing and Urban Development. FNMA
purchases residential mortgages from a list of approved sellers/servicers which
include state and federally-chartered savings and loan associations, mutual
savings banks, commercial banks and credit unions and mortgage bankers.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA.

The principal Government guarantor of mortgage-backed securities is the
Government National Mortgage Association (GNMA). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and

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credit of the U.S. Government, the timely payment of principal and interest on
securities issued by approved institutions and backed by pools of FHA-insured or
VA-guaranteed mortgages.

Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than Government and Government-related pools because there are no
direct or indirect Government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance purchased by the issuer. The insurance and guarantees are
issued by Governmental entities, private insurers, and the mortgage poolers.
There can be no assurance that the private insurers or mortgage poolers can meet
their obligations under the policies.

The Fund expects that Governmental or private entities may create
mortgage loan pools offering pass-through investments in addition to those
described above. The mortgages underlying these securities may be alternative
mortgage instruments, that is, mortgage instruments whose principal or interest
payment may vary or whose terms to maturity may be shorter than previously
customary. As new types of mortgage-backed securities are developed and offered
to investors, certain Funds will, consistent with their investment objective and
policies, consider making investments in such new types of securities.

UNDERLYING MORTGAGES

Pools consist of whole mortgage loans or participations in loans. The
majority of these loans are made to purchasers of 1-4 family homes. The terms
and characteristics of the mortgage instruments are generally uniform within a
pool but may vary among pools. For example, in addition to fixed-rate,
fixed-term mortgages, a Fund may purchase pools of variable-rate mortgages
(VRM), growing equity mortgages (GEM), graduated payment mortgages (GPM) and
other types where the principal and interest payment procedures vary. VRM's are
mortgages which reset the mortgage's interest rate periodically with changes in
open market interest rates. To the extent that the Fund is actually invested in
VRM's, the Fund's interest income will vary with changes in the applicable
interest rate on pools of VRM's. GPM and GEM pools maintain constant interest
rates, with varying levels of principal repayment over the life of the mortgage.
These different interest and principal payment procedures should not impact the
Fund's net asset value since the prices at which these securities are valued
will reflect the payment procedures.

All poolers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Poolers also establish
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, some mortgages included in pools are insured through
private mortgage insurance companies.

AVERAGE LIFE

The average life of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's term may be shortened
by unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage, and other social and demographic conditions.

As prepayment rates of individual pools vary widely, it is not possible
to accurately predict the average life of a particular pool. For pools of
fixed-rated 30-year mortgages, common industry practice is

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to assume that prepayments will result in a 12-year average life. Pools of
mortgages with other maturities or different characteristics will have varying
assumptions for average life.

RETURNS ON MORTGAGE-BACKED SECURITIES

Yields on mortgage-backed pass-through securities are typically quoted
based on the maturity of the underlying instruments and the associated average
life assumption. Actual prepayment experience may cause the yield to differ from
the assumed average life yield.

Reinvestment of prepayments may occur at higher or lower interest rates
than the original investment, thus affecting the yields of the Fund. The
compounding effect from reinvestments of monthly payments received by the Fund
will increase its yield to shareholders, compared to bonds that pay interest
semi-annually.

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