<PAGE> 1
[NATIONS FUNDS LOGO]
Investments For A Lifetime(SM)
FIXED
INCOME
FUNDS
ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 1997
<PAGE> 2
<TABLE>
<S> <C>
NOT MAY LOSE VALUE
FDIC- NO BANK GUARANTEE
INSURED
</TABLE>
NATIONS FUNDS DISTRIBUTOR: STEPHENS INC. STEPHENS INC., WHICH IS NOT AFFILIATED
WITH NATIONSBANK, N.A., IS NOT A BANK AND SECURITIES OFFERED BY IT ARE NOT
GUARANTEED BY ANY BANK OR INSURED BY THE FDIC. STEPHENS INC., MEMBER NYSE-SIPC.
NATIONS FUNDS INVESTMENT ADVISER: NATIONSBANC ADVISORS, INC.
NATIONS FUNDS INVESTMENT SUB-ADVISERS: TRADESTREET INVESTMENT ASSOCIATES, INC.
AND GARTMORE GLOBAL PARTNERS.
<PAGE> 3
NATIONS FUNDS
DEAR SHAREHOLDER:
We are pleased to present the Nations Funds annual report for the fiscal year
ended March 31, 1997. Overall, domestic equity markets rewarded investors with
strong returns. In fact, during this period the U.S stock market reached record
levels. More recently, the markets have experienced increasing volatility as
concerns have surfaced about strong economic growth leading to inflation. When
markets experience fluctuations like this, it is often unsettling. Investors
should be cautioned, however, not to confuse short-term volatility with
long-term trends.
The last two years marked a period that most investors (particularly equity
investors) will look back upon with great satisfaction. Domestic equity returns
averaged better than 18% during 1996; and for the last two years, have exceeded
50%(1). Several factors contributed to 1996's favorable market results: 1) The
continued strength in the U.S. economy; 2) No real evidence of inflationary
pressures; 3) U.S. corporations experiencing continued profit growth; and 4)
Record cash inflow into equity mutual funds. Investors should note that returns
on stocks have been exceptional and well above the historical average of
10.7%.(2)
Looking out into 1997, the investment environment continues to read as if it
were being scripted to enhance financial assets -- moderate but persistent
economic growth, low inflation and strong earnings. Although the duration of
this economic expansion is six years and counting, there does not appear to be
anything on the horizon that would move the economy off its current track.
Importantly, after a long period of outperformance by stocks, investors should
pay particular attention to their current allocation relative to their
objectives and risk tolerance. We are expecting that future advances in the
markets will be accompanied by increased volatility and periodic corrections as
the market adjusts to factors such as recent changes in monetary policy. While
we believe that markets will reach significant new highs before the end of the
millennium, markets do not go straight up and there will be periods of decline
along the way.
Thank you for your continued confidence in the Nations Funds family of funds.
Sincerely,
/s/ A. Max Walker /s/ Mark H. Williamson
- ------------------------- -----------------------------
A. Max Walker Mark H. Williamson
President and Chairman of the Board President, NationsBanc Advisos, Inc.
March 31, 1997
(1) AS MEASURED BY THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX.
(2) IBBOTSON ASSOCIATES, STOCKS, BONDS, BILLS AND INFLATION 1997 YEARBOOK
1
<PAGE> 4
THE NATIONS FUNDS ADVANTAGE
A family of mutual funds provides investors with a number of advantages,
including the ability to shift investment assets among funds as their financial
objectives or market conditions change. The Nations Funds family of mutual
funds includes a broad array of professionally managed domestic and
international stock, bond and money market funds advised by NationsBanc
Advisors, Inc. The family was designed to accommodate a wide variety of
investment objectives across the risk/reward spectrum.
POTENTIAL RETURN
<TABLE>
<CAPTION>
LONGER TERM
MONEY SHORTER INTERMEDIATE DOMESTIC EQUITY
MARKET MATURITY MATURITY AND GLOBAL BALANCED INCOME
FUNDS BOND FUNDS BOND FUNDS BOND FUNDS FUNDS FUNDS
<S> <C> <C> <C> <C> <C>
- - Nations - Nations Short- - Nations - Nations Global - Nations - Nations
Prime Fund Intermediate Strategic Fixed Government Balanced Equity Income
Government Income Fund Income Fund Assets Fund Fund
- - Nations Fund
Government - Nations - Nations
Money Market - Nations Intermediate Diversified
Fund Short-Term Municipal Income Fund
Income Fund Bond Fund
- - Nations - Nations
Treasury Fund - Nations Short- - Nations Government
Term Municipal State-Specific Securities Fund
- - Nations Tax Income Fund Intermediate
Exempt Fund Municipal - Nations
Bond Funds Municipal
Income Fund
- Nations State-
Specific Long-
Term Municipal
Bond Funds
------ GROWTH & INCOME ------
- -------------------------------- CURRENT INCOME -----------------------------
- --------------------- STABILITY --------------------- RISK (VARIABILITY)
</TABLE>
For specific information on developing an investment portfolio that
will more closely target your investment objectives, contact your investment
representative or Nations Fund for fund brochures and prospectuses at (800)
982-2271.
The Nations Funds family also includes Nations Equity Index Fund, which
seeks to match the performance of the S&P 500 before fees and expenses.
2
<PAGE> 5
GROWTH LARGE SMALLER INTERNATIONAL REGION-SPECIFIC
AND INCOME CAPITALIZATION CAPITALIZATION EQUITY FUNDS INTERNATIONAL
FUNDS GROWTH FUNDS GROWTH FUNDS FUNDS
- ------------ ----------------- ---------------- --------------- ----------------
- -Nations -Nations -Nations -Nations -Nations
Value Fund Disciplined Emerging International Emerging
Equity Fund Growth Fund Equity Fund Markets Fund
-Nations Capital -Nations
Growth Fund Pacific Growth
Fund
- ----------GROWTH------------- -------------AGGRESSIVE GROWTH------------------
SPECIALTY FUNDS
MANAGED INDEX FUNDS
Nations Managed SmallCap Index Fund
Nations Managed Index Fund
3
<PAGE> 6
TIME AND DIVERSIFICATION
CAN SMOOTH OUT
MARKET VOLATILITY
During the past two years, many investors have enjoyed some of the most
rewarding stock market gains in history. So if you're relatively new to the
financial markets, the market fluctuations over recent months may be an
unsettling experience.
We can't say with certainty when this period of market volatility may end. But
we can say that it's an entirely normal occurrence. In fact, the history of the
market shows both periods of growth and periods of downturns. The good news is
that downturns are often short-lived, and have historically been followed by
renewed growth.
So instead of focusing on the market's daily ups and downs, keep focused on your
long-term goals. By staying invested, you won't miss out on the potential for
later gains from a market rebound. You may also want to take advantage of these
helpful strategies:
- - PUT DIVERSIFICATION ON YOUR SIDE. You may lessen the effect of market
fluctuations when you maintain a diversified portfolio of stocks, bonds, and
cash investments such as money market funds. In addition, mutual funds make it
easy to diversify within each asset class. For example, you can add an
international fund if your portfolio is largely domestic equities. Or you can
spread your fixed-income component across multiple bond funds that emphasize
different maturities and credit qualities.
- - REBALANCE YOUR ASSETS. Your original investment allocation among stocks, bonds
and money market funds may have shifted over time -- for example, with recent
gains, you may have a larger percentage of your investments in stocks than you
expect. If needed, you should rebalance your allocations in line with your
long-term strategy.
- - CONSIDER DOWNTURNS A BUYING OPPORTUNITY. By investing regular amounts in a
Nations Funds account on a set interval, regardless of the market's direction,
you wind up purchasing more shares when the price is low and fewer when the
price is high. This strategy, called dollar-cost averaging, may help lessen
the impact of market swings by averaging the cost of your shares over time.
And, with a systematic investment plan (SIP), you can have a set amount
automatically withdrawn from your bank checking or savings account and
invested directly into your Nations Funds account on a monthly or quarterly
basis.
Please note that dollar-cost averaging does not assure a profit or protect
against loss in declining markets. Since such a plan involves continuous
investment in securities, regardless of fluctuating price levels, you should
carefully consider your financial ability to continue your purchases through
periods of fluctuating price levels.
So remember, if you have a sound long-term investment program, and your
short-term needs are being met, your original decisions should still serve you
well. Simply by staying patient, you may increase your likelihood of reaching
your investment goals. For more information, please call Nations Funds at
1-800-321-7854.
4
<PAGE> 7
NATIONS SHORT-TERM INCOME FUND
PERFORMANCE AND COMMENTARY
PORTFOLIO MANAGER
Brad Pope is Portfolio Manager of Nations Short-Term Income Fund and
Product Manager, Fixed Income Management for TradeStreet Investment Associates,
Inc., investment sub-adviser to the Fund.
INVESTMENT OBJECTIVE
The Fund seeks high current income consistent with minimal fluctuation of
principal. The Fund invests in investment grade debt securities.
PERFORMANCE REVIEW*
For the one-year period ended March 31, 1997, Nations Short-Term Income
Fund Investor A Shares provided shareholders with a total return of 5.04%.
PORTFOLIO MANAGER COMMENTARY
In the following interview, Mr. Pope shares his views on financial market
conditions and Fund performance for the one-year period ended March 31, 1997.
HOW DID THE MARKET ENVIRONMENT AFFECT THE FUND?
Since Nations Short-Term Income Fund focuses on one- to three-year
securities, changes in interest rates affect the Fund less than they do longer
term bond portfolios. These securities generally provide more income over time
than money markets, but with lower price volatility than longer-term bonds. The
rise in rates seen during the first quarter of 1997, has enabled us to add yield
to the portfolio by purchasing securities at higher yield levels and lower
prices.
During the year, the Fund emphasized corporate bonds and asset-backed
securities. These positions contributed significantly to Fund performance. The
yield advantage these types of securities have over U.S. Treasuries helped to
mute the negative effects of a rising interest rate environment.
WHERE DO YOU SEE RATES GOING AS WE HEAD INTO THE NEW FISCAL YEAR?
There is little doubt that there will be continued market volatility. We
believe that, in the short run, rates are likely to rise as the economy
continues to show resilience and the market ponders the possibility of a series
of interest rate hikes by the Federal Reserve Board. However, we also believe
this will create a buying opportunity, as rates then should decline in response
to a slower growth, benign inflation environment.
HOW ARE YOU POSITIONING THE FUND GOING FORWARD?
We continue to emphasize income potential by focusing on investment grade
corporate bonds, asset-backed securities and mortgages. Over time, the
incremental income advantage of the portfolio should enhance return potential.
We are taking a somewhat more defensive approach to the corporate bond market
given the historically small yield advantage some of these securities have over
U.S. Treasuries.
WHAT'S THE BIGGEST HURDLE INVESTORS FACE TODAY?
Understanding that market reactions to information and perception are
quicker than they have been historically. This does not mean that the economic
cycle and the business cycle have changed. Rather, the market is reacting to the
cycles much more quickly and may, in fact, be tempering the severity of the
cycles. Losing sight of fundamental economic and valuation measures is a danger
many investors face today.
- ---------------
* The performance shown includes the effect of fee waivers by the investment
adviser. Such fee waivers have the effect of increasing total return.
5
<PAGE> 8
NATIONS FUNDS
Nations Short-Term Income Fund
- ---------------------------------------------
PORTFOLIO BREAKDOWN AS OF 3/31/97
[PIE CHART]
<TABLE>
<S> <C>
Foreign Bonds and Notes 6.5%
Corporate Bonds anad Notes 53.8%
Asset-Backed Securities 25.4%
U.S. Treasury Obligations 10.0%
Mortgage-Backed Security 3.3%
Repurchase Agreement and Other
Assets and Liabilities (Net) 1.0%
</TABLE>
-------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS A
% OF NET ASSETS AS OF 3/31/97
<TABLE>
<S> <C> <C>
1. U.S. Treasury Notes 10.0%
2. Federal National Mortgage Association
Certificates 3.3
3. Advanta Corporation, MTN, 6.600% 02/04/00 2.9
4. Time Warner Asset-Backed Trust, 7.290%
06/22/98 2.7
5. Comdisco, Inc., MTN, 6.470% 09/30/98 2.5
6. Chase Manhattan Auto Owner Trust, Series
1996-C, Class A4, 6.150% 03/15/02 2.5
7. Salomon Inc., MTN, 9.000% 02/15/99 2.4
8. Lockheed Martin Corporation, 6.625% 06/15/98 2.3
9. Associates Corporation N.A., Notes, 6.625%
01/15/98 2.3
10. IMC Home Equity Loan Trust, Series 1997-1,
Class A3, 6.820% 10/25/11 2.2
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 3/31/97
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
INVESTOR A SHARES
- ---------------------------------
<S> <C>
Year Ended 03/31/97 5.04%
Since Inception (10/02/92)
through 03/31/97 4.87%
</TABLE>
The chart to the right shows
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations Short-Term
Income Fund on October 2, 1992
(inception date). Figures for
the Merrill Lynch 1-3 Year
Treasury Index, an unmanaged
index comprised of U.S.
Treasury bonds with maturities
of 1-3 years, include
reinvestment of dividends.
[LINE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Merrill Lynch 1-3 Year Growth of Investment with
(Quarterly) Treasury Index Distributions Reinvested
<S> <C> <C>
Oct. 2, 1992 10000 10000
Nov. 30, 1992 10018 9914
10239 10226
10350 10398
10498 10585
Nov. 30, 1993 10560 10641
10508 10535
10516 10492
10620 10592
Nov. 30, 1994 10620 10590
10977 10925
11329 11304
11499 11475
Nov. 30, 1995 11789 11763
Mar. 31, 1996 11828 11790
11947 11901
12145 12088
12375 12314
Mar. 31, 1997 12457 12385
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
Portfolio characteristics and outlook were current as of March 31, 1997, are
subject to change and may not be representative of current characteristics and
outlook.
6
<PAGE> 9
NATIONS FUNDS
Nations Short-Term Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -INVESTOR C, INVESTOR N, PRIMARY A AND PRIMARY B SHARES
AS OF MARCH 31, 1997
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
INVESTOR C SHARES
- ----------------------------------------------
<S> <C>
Year Ended 03/31/97 4.39%*
Year Ended 03/31/97 4.89%
Since Inception (10/02/92) through
03/31/97 4.68%
*adjusted for maximum contingent
deferred sales charge of 0.50% when
Investor C Shares are redeemed
within one year of purchase.
INVESTOR N SHARES
- ----------------------------------------------
Year Ended 03/31/97 4.89%
Since Inception (06/07/93) through
03/31/97 4.81%
PRIMARY A SHARES
- ----------------------------------------------
Year Ended 03/31/97 5.25%
Since Inception (09/30/92) through
03/31/97 5.13%
AGGREGATE TOTAL RETURN
PRIMARY B SHARES**
- ----------------------------------------------
Since Inception (06/28/96) through
03/31/97 3.95%
</TABLE>
The charts to the right show the growth in value of a hypothetical $10,000
investment in Investor C, Investor N, Primary A and Primary B Shares of
Nations Short-Term Income Fund from the date each class of shares was
first offered. Figures for the Merrill Lynch 1-3 Year Treasury Index, an
unmanaged index comprised of U.S. Treasury bonds with maturities of 1-3
years, include reinvestment of dividends.
Each chart assumes the reinvestment of all distributions.
** Please note that the performance shown for Primary B Shares includes
the performance for Primary A Shares from their date of inception
(09/30/92) through 6/28/96, plus the performance for Primary B Shares
from their date of inception (6/28/96) through 3/31/97. The expense
structures for Primary A and Primary B Shares are similar, except that
Primary B Shares are subject to a shareholder servicing fee of up to 60
basis points. This difference in expenses will result in a slight
difference in the performance of Primary A and Primary B Shares.
PERFORMANCE COMPARISONS
[LINE GRAPH]
INVESTOR C SHARES AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
GROWTH OF
MERRILL LYNCH INVESTMENT
1-3 YEAR WITH
MEASUREMENT PERIOD TREASURY DISTRIBUTIONS
QUARTERLY INDEX REINVESTED
<S> <C> <C>
OCT. 2, 1992 10000 10000
NOV. 30, 1992 10018 9923
10239 10226
10350 10380
10498 10560
NOV. 30, 1993 10560 10609
10508 10497
10516 10450
10620 10546
NOV. 30, 1994 10620 10539
10977 10869
11329 11237
11499 11403
NOV. 30, 1995 11789 11685
MAR. 31, 1996 11828 11707
11947 11813
12145 11994
12375 12214
MAR. 31, 1997 12457 12280
</TABLE>
INVESTOR N SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF
MERRILL LYNCH INVESTMENT
1-3 YEAR WITH
MEASUREMENT PERIOD TREASURY DISTRIBUTIONS
QUARTERLY INDEX REINVESTED
<S> <C> <C>
JUNE 7, 1993 10000 10000
10218 10277
NOV. 30, 1993 10279 10328
10227 10223
10236 10177
10337 10271
NOV. 30, 1994 10337 10265
10684 10586
11027 10946
11192 11108
NOV. 30, 1995 11474 11382
MAR. 31, 1996 11512 11405
11628 11508
11821 11684
12045 11898
MAR. 31, 1997 12125 11962
</TABLE>
PRIMARY A AND PRIMARY B SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF GROWTH OF
MERRILL LYNCH INVESTMENT INVESTMENT
1-3 YEAR WITH WITH
MEASUREMENT PERIOD TREASURY DISTRIBUTIONS DISTRIBUTIONS
QUARTERLY INDEX REINVESTED - A REINVESTED - B
<S> <C> <C> <C>
SEPT. 30, 1992 10000 10000 10000
NOV. 30, 1992 10016 9941 9941
10239 10268 10268
10350 10435 10435
10498 10629 10629
NOV. 30, 1993 10560 10692 10692
10508 10592 10592
10518 10553 10553
10620 10660 10660
NOV. 30, 1994 10620 10663 10663
10977 11006 11006
11329 11391 11391
11499 11569 11569
NOV. 30, 1995 11789 11865 11865
MAR. 31, 1996 11828 11899 11899
JUNE 28, 1996 11947 12017 12017
12145 12212 12212
12375 12446 12446
MAR. 31, 1997 12457 12524 12491
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual and aggregate total returns are historical in nature and measure
net investment income and capital gain or loss from portfolio investments
assuming reinvestment of dividends.
7
<PAGE> 10
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
PERFORMANCE AND COMMENTARY
PORTFOLIO MANAGER
John Swaim is Senior Portfolio Manager of Nations Short-Intermediate
Government Fund and Senior Product Manager, Fixed Income Management for
TradeStreet Investment Associates, Inc., investment sub-adviser to the Fund.
INVESTMENT OBJECTIVE
The Fund seeks high current income consistent with modest fluctuation of
principal. The Fund invests primarily is securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
PERFORMANCE REVIEW*
For the one-year period ended March 31, 1997, Nations Short-Intermediate
Government Fund Investor A Shares provided shareholders with a total return of
3.51%.
PORTFOLIO MANAGER COMMENTARY
In the following interview, Mr. Swaim shares his views on financial market
conditions and Fund performance for the one-year period ended March 31, 1997.
WHAT THEME DOMINATED THE MARKET LAST YEAR?
The predominant theme in the market was a tug of war between economic
strength on one hand and positive inflation news on the other. These two
countervailing forces held the benchmark 30-year U.S. Treasury bond in an
80-basis-point range as the Federal Reserve Board (the "Fed") refrained from any
movement on interest rates. Toward the end of the fiscal year, the Fed raised
the Federal Funds rate as concern over wage inflation had increased.
The bond market witnessed a strong selloff early in the reporting year as
the economy rebounded after the severe winter and government shutdown. Rates on
the 30-year U.S. Treasury bond climbed from 6.60% at the beginning of April 1996
to 7.20% by early summer. The market then settled into a trading range that
lasted until the fall, when a rally dropped rates to 6.38% based on continued
good inflation news. The market sold off in December and January as economic
data showed persistent strength, bringing the long bond's yield back to 6.95%.
The yield at March 31, 1997 was 7.10%.
HOW DID MARKET CONDITIONS AFFECT THE FUND'S PERFORMANCE?
Since rates held in a fairly narrow range, the Fund benefited from callable
securities, including mortgages and agency issues. These securities benefit from
stability in interest rates as the Fund picks up incremental income with little
risk of the securities being called away.
The Fund was both helped and hurt by movement in interest rates during the
year. Being long in terms of duration early in the year hurt performance as
rates backed up, but being long later in the year helped as rates declined.
During the summer range bound period, the Fund was able to benefit from curve
trading. Five- and ten-year securities traded within a predictable range during
this period. We detected this pattern and were able to add return by tactically
overweighting one or the other maturity at various times.
WHAT ARE THE FUND'S CURRENT PORTFOLIO CHARACTERISTICS?**
As of the end of the fiscal year, we had reduced the Fund's position in
callable securities. Volatility, one of the key components of the valuation of
these securities, is at a very low level, and spreads are concurrently at
historically tight levels. In our view, the Fund is not sufficiently rewarded
for the risk of having these securities called. The yield curve has flattened
significantly of late, so we have overweighted the 5-year sector as a contrarian
strategy. As of March 31, 1997,
- ---------------
* The performance shown includes the effect of fee waivers by the investment
adviser. Such fee waivers have the effect of increasing total return.
** Portfolio characteristics and outlook were current as of March 31, 1997,
are subject to change and may not be representative of current
characteristics and outlook. Also, the outlook of this Fund's portfolio
manager may differ from that of other Nations Funds' portfolio managers.
8
<PAGE> 11
the Fund's average maturity was 4.32 years and the average duration was 3.13
years. Approximately 21% was invested in mortgages, with the balance in U.S.
government securities.
WHAT IS YOUR OUTLOOK GOING FORWARD AND HOW DO YOU ANTICIPATE POSITIONING THE
FUND IN RESPONSE?
Our near-term outlook is one of caution, in light of the Fed's recent
increase in interest rates due to wariness concerning economic strength and wage
pressure. Consequently, the Fund is short of its normal duration benchmark, but
we are looking for the appropriate level to lengthen duration and take advantage
of higher yield potential. We think the economy will eventually decelerate,
either by its own lack of forward momentum or with further increases in interest
rates by the Fed. We feel mortgages are somewhat vulnerable to a spread
widening, and the Fund is underweight the sector near term.
9
<PAGE> 12
NATIONS FUNDS
Nations Short-Intermediate Government Fund
- ---------------------------------------------
PORTFOLIO BREAKDOWN AS OF 3/31/97
[PIE CHART]
<TABLE>
<S> <C>
U.S. Treasury Obligations 78.6%
Collateralized Mortgage Obligations,
Government Guaranteed Bond, Mortgage-
Backed Securities, U.S. Government
Agency Securities, Repurchase
Agreement and Other Assets and
Liabilities (Net) 21.4%
</TABLE>
-------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS A
% OF NET ASSETS AS OF 3/31/97
<TABLE>
<C> <S> <C>
1. U.S. Treasury Notes 75.0%
2. Federal National Mortgage Association
Certificates 12.5
3. Federal Home Loan Mortgage Corporation
Certificates 5.8
4. Government National Mortgage Association
Certificates 3.6
5. U.S. Treasury Bill 3.6
6. Second Attransco Trailer Corporation, Series
A, 8.500% 06/15/02 0.4
7. Student Loan Marketing Association, 5.630%
08/02/99 0.2
8. Student Loan Marketing Association, 4.665%
06/01/98 0.1
9. Drexel Burnham Lambert, Series S, Class 2,
9.000% 08/01/18 0.1
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 3/31/97
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
INVESTOR A SHARES
- ---------------------------------
Year Ended 03/31/97 3.51%
Five Years Ended 03/31/97 5.34%
Since Inception (08/05/91)
through 03/31/97 6.08%
</TABLE>
The chart to the right shows
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations
Short-Intermediate Government
Fund on August 5, 1991
(inception date). Figures for
the Lehman 1-5 Year U.S.
Government Index, an unmanaged
index comprised of all U.S.
Government agency and U.S.
Treasury securities with
maturities between 1 and 5
years, include reinvestment of
dividends.
[LINE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Lehman 1-5 Year U.S. Growth of Investment with
(Quarterly) Government Index Distributions Reinvested
<S> <C> <C>
Aug. 5, 1991 10000 10000
10363 10427
Nov. 30, 1991 10562 10925
10748 10762
11185 11239
11854 11632
Nov. 30, 1992 11815 11546
12049 11982
12286 12166
12545 12435
Nov. 30, 1993 12564 12451
12331 12229
12263 12104
12357 12160
Nov. 30, 1994 12345 12128
12858 12586
13459 13053
13667 13235
Nov. 30, 1995 14124 13610
Mar. 31, 1996 14028 13485
14122 13497
14365 13723
14697 14015
Mar. 31, 1997 14694 13959
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
Portfolio characteristics and outlook were current as of March 31, 1997, are
subject to change and may not be representative of current characteristics and
outlook.
10
<PAGE> 13
NATIONS FUNDS
Nations Short-Intermediate Government Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -INVESTOR C, INVESTOR N, PRIMARY A AND PRIMARY B SHARES
AS OF MARCH 31, 1997
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
INVESTOR C SHARES
- ----------------------------------------------
<S> <C>
Year Ended 03/31/97 2.71%*
Year Ended 03/31/97 3.21%
Since Inception (06/17/92) through
03/31/97 4.33%
*adjusted for maximum contingent
deferred sales charge of 0.50% when
Investor C Shares are redeemed
within one year of purchase
INVESTOR N SHARES
- ----------------------------------------------
Year Ended 03/31/97 3.10%
Since Inception (06/07/93) through
03/31/97 3.50%
PRIMARY A SHARES
- ----------------------------------------------
Year Ended 03/31/97 3.72%
Five Years Ended 03/31/97 5.53%
Since Inception (08/01/91) through
03/31/97 6.24%
AGGREGATE TOTAL RETURN
PRIMARY B SHARES**
- ----------------------------------------------
Since Inception (06/28/96) through
03/31/97 3.31%
</TABLE>
The charts to the right show the growth in value of a hypothetical $10,000
investment in Investor C, Investor N, Primary A and Primary B Shares of
Nations Short-Intermediate Government Fund from the date each class of
shares was first offered. Figures for the Lehman 1-5 Year U.S. Government
Index, an unmanaged index comprised of all U.S. government agency and U.S.
Treasury securities with maturities between 1 and 5 years, include
reinvestment of dividends.
Each chart assumes the reinvestment of all distributions.
** Please note that the performance shown for Primary B Shares includes
the performance for Primary A Shares from their date of inception
(08/01/91) through 6/28/96, plus the performance for Primary B Shares
from their date of inception (6/28/96) through 3/31/97. The expense
structures for Primary A and Primary B Shares are similar, except that
Primary B Shares are subject to a shareholder servicing fee of up to 60
basis points. This difference in expenses will result in a slight
difference in the performance of Primary A and Primary B Shares.
INVESTOR C SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
LEHMAN GROWTH OF
1-5 INVESTMENT
YEAR U.S. WITH
MEASUREMENT PERIOD GOVERNMENT DISTRIBUTIONS
(QUARTERLY) INDEX REINVESTED
<S> <C> <C>
JUNE 17, 1992 10000 10000
10438 10394
NOV. 30, 1992 10403 10299
10792 10673
11004 10820
11236 11043
NOV. 30, 1993 11253 11041
11044 10828
10983 10710
11067 10751
NOV. 30, 1994 11056 10715
11516 11111
12054 11515
12241 11667
NOV. 30, 1995 12650 11989
MAR. 31, 1996 12564 11870
12648 11871
12866 12061
13163 12309
MAR. 31, 1997 13160 12250
</TABLE>
INVESTOR N SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF
LEHMAN 1-5 INVESTMENT
YEAR U.S. WITH
MEASUREMENT PERIOD GOVERNMENT DISTRIBUTIONS
(QUARTERLY) INDEX REINVESTED
<S> <C> <C>
JUNE 7, 1993 10000 10000
10145 10092
10359 10304
NOV. 30, 1993 10374 10307
10182 10113
10126 9999
10204 10035
NOV. 30, 1994 10193 9999
10617 10366
11113 10740
11256 10878
NOV. 30, 1995 11662 11175
MAR. 31, 1996 11533 11061
11661 11060
11862 11234
12136 11461
MAR. 31, 1997 12133 11404
</TABLE>
PRIMARY A AND PRIMARY B SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF GROWTH OF
INVESTMENT LEHMAN INVESTMENT
WITH 1-5 YEAR WITH
DISTRIBUTIONS U.S. DISTRIBUTIONS
MEASUREMENT PERIOD REINVESTED GOVERNMENT REINVESTED
(QUARTERLY) -B INDEX -A
<S> <C> <C> <C>
AUG. 1, 1991 10000 10000 10000
10427 10363 10427
NOV. 30, 1991 10925 10862 10925
10762 10746 10762
11242 11165 11242
11639 11654 11639
NOV. 30, 1992 11556 11615 11556
11997 12049 11997
12185 12288 12185
12461 12545 12461
NOV. 30, 1993 12483 12564 12483
12266 12331 12266
12147 12263 12147
12208 12357 12208
NOV. 30, 1994 12183 12345 12183
12648 12858 12648
13124 13459 13124
13314 13667 13314
NOV. 30, 1995 13699 14124 13699
MAR. 31, 1996 13580 14028 13580
JUN. 28, 1996 13599 14122 13599
13821 14365 13834
14110 14697 14135
MAR. 31, 1997 14049 14694 14086
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual and aggregate total returns are historical in nature and measure
net investment income and capital gain or loss from portfolio investments
assuming reinvestment of dividends.
11
<PAGE> 14
NATIONS STRATEGIC FIXED INCOME FUND
PERFORMANCE AND COMMENTARY
PORTFOLIO MANAGER
Greg Cobb is Senior Portfolio Manager of Nations Strategic Fixed Income
Fund and Senior Product Manager, Fixed Income Management for TradeStreet
Investment Associates, Inc., investment sub-adviser to the Fund.
INVESTMENT OBJECTIVE
The Fund seeks total return by investing in investment grade fixed income
securities.
PERFORMANCE REVIEW*
For the one-year period ended March 31, 1997, Nations Strategic Fixed
Income Fund Investor A Shares provided shareholders with a total return of
3.70%.
PORTFOLIO MANAGER COMMENTARY
In the following interview, Mr. Cobb shares his views on financial market
conditions and Fund performance for the one-year period ended March 31, 1997.
PLEASE DESCRIBE YOUR OVERALL INVESTMENT PHILOSOPHY AND THE FUND'S INVESTMENT
APPROACH.
Nations Strategic Fixed Income Fund invests in the investment grade sectors
of the broad bond market, buying mainly U.S. Government securities,
mortgage-backed securities, corporate bonds and asset-backed securities.
Our investment philosophy is biased toward total return, recognizing that
the combination of current income and price movement is ultimately more
important than current income alone. We use a combination of investment
strategies -- duration management (management of interest rate risk), sector
rotation, security selection and yield curve positioning -- to add value to the
Fund over time. By using multiple strategies, we avoid making "big bets" and
look for each strategy to add incremental income without any single strategy
dominating returns.
HOW DID BOND MARKET CONDITIONS AFFECT THE FUND'S PERFORMANCE?
Over the last twelve months, the bond market has been quite volatile. The
30-year U.S. Treasury bond, the benchmark for the market, began the reporting
period yielding 6.60%, and reached a high yield of 7.20% in July, before falling
to 6.35% in early December.
For most of the first quarter of 1997, the long bond traded above 6.80%,
ending the quarter at 7.10%. The rise in bond yields during the first quarter
can be attributed primarily to an economy that continues to exhibit a
frustrating resiliency, growing at a rate above the economy's long-run potential
of 2.25%.
Given our view that economic growth would moderate and interest rates trend
lower, the duration of the Fund (a measure of its sensitivity to interest rates)
was longer than that of its benchmark, the Lehman Aggregate Bond Index. Because
rising yields mean lower prices and longer durations magnify this effect, the
rise in yields over the majority of the reporting period resulted in the Fund
underperforming its benchmark.
WHAT ARE THE FUND'S CURRENT PORTFOLIO CHARACTERISTICS?
As of March 31, 1997, the Fund had a weighted average maturity of 8.5 years
and a duration of 4.5 years. The average quality of the portfolio was AA.
WHAT STRATEGIES HAS THE FUND BENEFITED FROM OVER THE LAST TWELVE MONTHS?**
The Fund's sector strategy of overweighting corporate bonds, mortgage
securities and asset-backed securities provided the strongest performance.
Corporates benefited from a moderate economic growth and low inflation, positive
- ---------------
* The performance shown includes the effect of fee waivers by the investment
adviser. Such fee waivers have the effect of increasing total return.
** Portfolio characteristics and outlook were current as of March 31, 1997, are
subject to change and may not be representative of current characteristics
and outlook. Also, the outlook of this Fund's portfolio manager may differ
from that of other Nations Funds' portfolio managers.
12
<PAGE> 15
credit trends (upgrades outnumbered downgrades) and positive technicals (heavy
demand and low supply). Mortgage securities also experienced strong demand as
investors poured money into the highest yielding investment grade sector.
Asset-backed securities also saw heavy demand, particularly in short maturities.
All three sectors outperformed comparable maturity U.S. Treasury bonds.
WHICH SECTOR PROVIDED THE WEAKEST PERFORMANCE?
Long-duration U.S. Treasury bonds, especially 30-year bonds, were the worst
performers. Historically, this has been the case in a rising interest rate
environment, as these securities are most sensitive to changes in interest
rates.
GOING FORWARD, WHERE DO YOU EXPECT TO FIND THE BEST VALUES?
The major spread sectors are expected to provide strong performance
potential going forward. "Spread" sectors refers to securities that trade at a
yield premium or spread over comparable maturity U.S. Treasury bonds. For
example, mortgages typically yield 1% to 1.25% more than Treasuries; they trade
at a spread over Treasuries.
We expect mortgages, in particular, to perform well as we think interest
rates will remain within a fairly narrow range. Demand from a broad array of
investors is expected to be strong, as mortgages provide more income relative to
corporate bonds and asset-backed securities.
13
<PAGE> 16
NATIONS FUNDS
Nations Strategic Fixed Income Fund
- ---------------------------------------------
PORTFOLIO BREAKDOWN AS OF 3/31/97
[PIE CHART]
<TABLE>
<S> <C>
Mortgage-Backed Securities 36.1%
U.S. Treasury Obligations 18.8%
Repurchase Agreement and Other Assets
and Liabilities (Net) 3.6%
Foreign Bonds 3.8%
Asset Backed Securities 13.2%
Corporate Bonds and Notes 24.5%
</TABLE>
-------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS A
% OF NET ASSETS AS OF 3/31/97
<TABLE>
<C> <S> <C>
1. Federal National Mortgage Association
Certificates 14.3%
2. Government National Mortgage Association
Certificates 12.8
3. U.S. Treasury Bonds 10.6
4. Federal Home Loan Mortgage Corporation
Certificates 9.0
5. U.S. Treasury Notes 8.2
6. Tennessee Valley Authority, Deb., 5.980%
04/01/36 1.7
7. AT&T Universal Card, Master Trust Series
95-2A, 5.950% 10/17/02 1.6
8. American Express Co., Master Trust, Series
94-3, Class A, 7.85% 08/15/05 1.6
9. Olympic Auto Receivables Trust Series 96-C,
Class A4, 6.80% 03/15/02 1.5
10. Aon Capital Trust A, 8.205% 01/01/27 1.5
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 3/31/97
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
INVESTOR A SHARES
- ---------------------------------
Year Ended 03/31/97 3.70%
Since Inception (11/19/92)
through 03/31/97 5.76%
</TABLE>
The chart to the right shows
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations Strategic
Fixed Income Fund on November
19, 1992 (inception date).
Figures for the Lehman
Aggregate Bond Index, an
unmanaged index comprised of
the Lehman Government/Corporate Index,
the Asset-Backed Securities
Index and the Mortgage-Backed
Securities Index which include
U.S. Treasury issues, agency
issues, corporate bond issues
and mortgage-backed
securities, include
reinvestment of dividends.
[LINE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Growth of Investment with
(Fiscal Year Covered) Lehman Aggregate Bond Index Distributions Reinvested
<S> <C> <C>
Nov. 19, 1992 10000 10000
Nov. 30, 1992 10157 10111
10577 10590
10858 10876
11141 11212
Nov. 30, 1993 11148 11183
10828 10865
10717 10733
10782 10787
Nov. 30, 1994 10823 10791
11369 11280
12061 11945
12298 12118
Nov. 30, 1995 12822 12631
12595 12313
Mar. 31, 1996 12666 12328
12901 12508
13288 12873
Mar. 31, 1997 13213 12769
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
Portfolio characteristics and outlook were current as of March 31, 1997, are
subject to change and may not be representative of current characteristics and
outlook.
14
<PAGE> 17
NATIONS FUNDS
Nations Strategic Fixed Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -INVESTOR C, INVESTOR N, PRIMARY A AND PRIMARY B SHARES
AS OF MARCH 31, 1997
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
INVESTOR C SHARES
- ----------------------------------------------
<S> <C>
Year Ended 03/31/97 2.88%*
Year Ended 03/31/97 3.38%
Since Inception (11/16/92) through
03/31/97 5.40%
*adjusted for maximum contingent
deferred sales charge of 0.50% when
Investor C Shares are redeemed
within one year of purchase
INVESTOR N SHARES
- ----------------------------------------------
Year Ended 03/31/97 3.23%
Since Inception (06/07/93) through
03/31/97 4.22%
PRIMARY A SHARES
- ----------------------------------------------
Year Ended 03/31/97 3.90%
Since Inception (10/30/92) through
03/31/97 5.97%
AGGREGATE TOTAL RETURN
PRIMARY B SHARES**
- ----------------------------------------------
Since Inception (06/28/96) through
03/31/97 3.35%
</TABLE>
The charts to the right show the growth in value of a hypothetical $10,000
investment in Investor C, Investor N, Primary A and Primary B Shares of
Nations Strategic Fixed Income Fund from the date each class of shares was
first offered. Figures for the Lehman Aggregate Bond Index, an unmanaged
index comprised of the Lehman Government/Corporate Index, the Asset-Backed
Securities Index and the Mortgage-Backed Securities Index which include
U.S. Treasury issues, agency issues, corporate bond issues and mortgage-
backed securities, include reinvestment of dividends.
Each chart assumes the reinvestment of all distributions.
**Please note that the performance shown for Primary B Shares includes the
performance for Primary A Shares from their date of inception (10/30/92)
through 6/28/96, plus the performance for Primary B Shares from their
date of inception (6/28/96) through 3/31/97. The expense structures for
Primary A and Primary B Shares are similar, except that Primary B Shares
are subject to a shareholder servicing fee of up to 60 basis points.
This difference in expenses will result in a slight difference in the
performance of Primary A and Primary B Shares.
INVESTOR C SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF
LEHMAN INVESTMENT
BROTHERS WITH
MEASUREMENT PERIOD AGGREGATE DISTRIBUTIONS
(QUARTERLY) BOND INDEX REINVESTED
<S> <C> <C>
NOV. 16, 1992 10000 10000
NOV. 30, 1992 10157 10133
10577 10598
10858 10867
11141 11185
NOV. 30, 1993 11148 11140
10828 10807
10717 10668
10782 10714
NOV. 30, 1994 10823 10710
11369 11187
12061 11837
12298 12000
NOV. 30, 1995 12822 12498
MAR. 31, 1996 12595 12174
12666 12178
12901 12347
13288 12698
MAR. 31, 1997 13213 12585
</TABLE>
INVESTOR N SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF
LEHMAN INVESTMENT
BROTHERS WITH
MEASUREMENT PERIOD AGGREGATE DISTRIBUTIONS
(QUARTERLY) BOND INDEX REINVESTED
<S> <C> <C>
JUNE 7, 1993 10000 10000
10161 10146
10447 10445
NOV. 30, 1993 10453 10406
10154 10097
10049 9963
10110 10003
NOV. 30, 1994 10148 9995
10660 10436
11310 11039
11532 11187
NOV. 30, 1995 12023 11647
MAR. 31, 1996 11810 11342
11877 11342
12097 11495
12460 11817
MAR. 31, 1997 12390 11708
</TABLE>
PRIMARY A AND PRIMARY B SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF GROWTH OF
INVESTMENT INVESTMENT
LEHMAN WITH WITH
MEASUREMENT PERIOD AGGREGATE DISTRIBUTIONS DISTRIBUTIONS
(QUARTERLY) BOND INDEX REINVESTED - A REINVESTED - B
<S> <C> <C> <C>
OCT. 30, 1992 10000 10000 10000
NOV. 30, 1992 10161 10151 10151
10581 10636 10636
10862 10928 10928
11145 11269 11269
NOV. 30, 1993 11152 11245 11245
10832 10928 10928
10721 10801 10801
10786 10861 10861
NOV. 30, 1994 10827 10871 10871
11373 11369 11369
12066 12045 12045
12303 12226 12226
NOV. 30, 1995 12827 12750 12750
12599 12436 12436
MAR. 31, 1996 12671 12456 12456
12906 12645 12645
13293 13021 13021
MAR. 31, 1997 13218 12921 12873
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual and aggregate total returns are historical in nature and measure
net investment income and capital gain or loss from portfolio investments
assuming reinvestment of dividends.
15
<PAGE> 18
NATIONS GOVERNMENT SECURITIES FUND
PERFORMANCE AND COMMENTARY
PORTFOLIO MANAGER
John Swaim is Senior Portfolio Manager of Nations Government Securities
Fund and Senior Portfolio Manager, Fixed Income Management for TradeStreet
Investment Associates, Inc., investment sub-adviser to the Fund.
INVESTMENT OBJECTIVE
The Fund seeks high current income consistent with moderate fluctuation of
principal. The Fund invests primarily in intermediate-term securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
PERFORMANCE REVIEW*
For the one-year period ended March 31, 1997, Nations Government Securities
Fund Investor A Shares provided shareholders with a total return of 2.92%.
PORTFOLIO MANAGER COMMENTARY
In the following interview, Mr. Swaim shares his views on financial market
conditions and Fund performance for the one-year period ended March 31, 1997.
WHAT HAPPENED IN THE FIXED INCOME MARKET OVER THE LAST TWELVE MONTHS?
The bond market witnessed a strong selloff early in the reporting year as
the economy rebounded after the severe winter and government shutdown. Rates on
the benchmark 30-year U.S. Treasury bond climbed from 6.60% at the beginning of
April 1996 to 7.20% by early summer. The market then settled into a trading
range that lasted until the fall, when a rally dropped rates to 6.38% based on
continued good inflation news. The market sold off in December and January as
economic data showed persistent strength, bringing the long bond yield back to
6.95%. The yield at March 31, 1997 was 7.10%.
The predominant theme in the market was a tug of war between economic
strength on one hand and positive inflation news on the other. These two
countervailing forces held bonds in an 80-basis-point range.
HOW DID YOU POSITION THE FUND IN RESPONSE TO MARKET CONDITIONS?
Since rates held in a fairly narrow range, the Fund benefited from callable
securities, including mortgages and agency issues. These securities benefit from
stability in interest rates as the Fund picks up incremental income with little
risk of the securities being called away. Interest rate movements during the
year generally helped the Fund's performance. The Fund was short duration early
in the year, which helped performance as rates backed up. The Fund became
progressively longer through the middle of the year, allowing it to benefit from
declining rates. During the range bound period, the Fund was able to benefit
from duration adjustments at the margin. As interest rates backed up to the
range highs, we added incrementally to duration. As interest rates approached
the lows of the range, we reduced duration. This strategy was successful for
most of the year, though the Fund's performance suffered from its duration being
short in January when interest rates declined.
WHAT IS YOUR OUTLOOK GOING FORWARD AND HOW DO YOU ANTICIPATE POSITIONING THE
FUND IN RESPONSE?**
Our near-term outlook is one of caution, with the Federal Reserve Board's
(the "Fed") stated wariness concerning economic strength and wage pressure.
Consequently, the Fund's duration is shorter than its benchmark, but we are
looking for the appropriate level to lengthen duration and take advantage of
higher yield potential. We think the economy will eventually decelerate, either
by its own lack of forward momentum or with additional increases in interest
rates by the
- ---------------
* The performance shown includes the effect of fee waivers by the investment
adviser. Such fee waivers have the effect of increasing total return.
** Portfolio characteristics and outlook were current as of March 31, 1997,
are subject to change and may not be representative of current
characteristics and outlook. Also, the outlook of this Fund's portfolio
manager may differ from that of other Nations Funds' portfolio managers.
16
<PAGE> 19
Fed. We feel mortgages are somewhat vulnerable to a spread widening, and,
therefore, are cautious about the sector in the near term. However, because the
yield offered by these securities is so attractive, the Fund will maintain a
representative position. While callable agency securities are vulnerable as
well, they are less so than mortgages. We have, therefore, added to the Fund's
holdings of callable securities.
As of March 31, 1997, the Fund's average maturity was 9.6 years and the
average effective duration was 4.8 years. Approximately 58% of the Fund was
invested in mortgages with the balance in other U.S. Government securities.
17
<PAGE> 20
NATIONS FUNDS
Nations Government Securities Fund
- ---------------------------------------------
PORTFOLIO BREAKDOWN AS OF 3/31/97
[PIE CHART]
<TABLE>
<S> <C>
Mortgage-Backed Securities 57.7%
U.S. Government Agency Securities 7.0%
U.S. Treasury Obligations 32.9%
Repurchase Agreement and Other
Assets and Liabilities (Net) 2.4%
</TABLE>
-------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS A
% OF NET ASSETS AS OF 3/31/97
<TABLE>
<C> <S> <C>
1. Federal National Mortgage Association
Certificates 35.1%
2. U.S. Treasury Bonds 20.9
3. Government National Mortgage Association
Certificates 17.2
4. U.S. Treasury Notes 12.0
5. Federal Home Loan Mortgage Corporation
Certificates 5.1
6. Federal Home Loan Mortgage Corporation,
6.280% 03/06/06 2.8
7. Federal Home Loan Bank,
7.700% 03/19/12 1.9
8. Federal Farm Credit Systems, 9.450% 11/21/03 1.5
9. Federal Home Loan Mortgage Corporation,
7.950% 07/28/04 0.7
10. Government National Mortgage Association II
Certificate, 11% 10/20/20 0.2
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 3/31/97
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
INVESTOR A SHARES
- ---------------------------------
<S> <C>
Year Ended 03/31/97 2.92%
Five Years Ended 03/31/97 4.79%
Since Inception (04/17/91)
through 03/31/97 5.61%
</TABLE>
The chart to the right shows
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations Government
Securities Fund on April 17,
1991 (inception date). Figures
for the Lehman Intermediate
Treasury Index track the
market value of U.S. Treasury
securities with maturities of
3 to 10 years. The Salomon
Brothers Mortgage Index is
comprised of 30-year and
15-year GNMA, FNMA and FHLMC
securities, and FNMA and FHLMC
balloon mortgages. Both
indices are unmanaged and
include reinvestment of
dividends.
[LINE GRAPH]
<TABLE>
<CAPTION>
Growth of Investment
Measurement Period Salomon Brothers Lehman Intermediate with Distributions
(Quarterly) Mortgage Index Treasury Index Reinvested
<S> <C> <C> <C>
Apr. 17, 1991 10000 10000 10000
May 31, 1991 10097 10061 10104
10657 10541 10626
11129 11055 11149
11070 10933 10949
May 31, 1992 11517 11359 11378
11857 11866 11744
11949 11823 11716
12299 12270 12063
May 31, 1993 12560 12512 12311
12674 12777 12600
12790 12796 12607
12521 12558 12223
May 31, 1994 12453 12489 12009
12552 12584 11940
12607 12570 11936
13272 13090 12522
May 31, 1995 13959 13705 13094
14242 13913 13312
14721 14383 13726
Mar. 31, 1996 14667 14281 13444
14766 14373 13422
15076 14620 13637
15512 14956 14039
Mar. 31, 1997 15531 14945 13837
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
Portfolio characteristics and outlook were current as of March 31, 1997, are
subject to change and may not be representative of current characteristics and
outlook.
18
<PAGE> 21
NATIONS FUNDS
Nations Government Securities Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C, INVESTOR N, PRIMARY A AND PRIMARY B
SHARES AS OF MARCH 31, 1997
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
INVESTOR C SHARES
- ----------------------------------------------
<S> <C>
Year Ended 03/31/97 2.17%*
Year Ended 03/31/97 2.67%
Since Inception (07/06/92) through
03/31/97 3.55%
*adjusted for maximum contingent
deferred sales charge of 0.50% when
Investor C Shares are redeemed within
one year of purchase
INVESTOR N SHARES
- ----------------------------------------------
Year Ended 03/31/97 2.51%
Since Inception (06/07/93) through
03/31/97 2.88%
PRIMARY A SHARES
- ----------------------------------------------
Year Ended 03/31/97 3.18%
Five Years Ended 03/31/97 5.02%
Since Inception (04/11/91) through
03/31/97 5.84%
AGGREGATE TOTAL RETURN
PRIMARY B SHARES**
- ----------------------------------------------
Since Inception (06/28/96) through
03/31/97 2.90%
</TABLE>
The charts to the right show the growth in value of a hypothetical $10,000
investment in Investor C, Investor N, Primary A and Primary B Shares of
Nations Fund from the date each class of shares was first offered. Figures
for the Lehman Intermediate Treasury Index track the market value of U.S.
Treasury securities with maturities of 3 to 10 years. The Salomon Brothers
Mortgage Index is comprised of 30-year and 15-year GNMA, FNMA and FHLMC
securities, and FNMA and FHLMC balloon mortgages. Both indices are
unmanaged and include reinvestment of dividends.
Each chart assumes the reinvestment of all distributions.
** Please note that the performance shown for Primary B Shares includes
the performance for Primary A Shares from their date of inception
(4/11/91) through 6/28/96, plus the performance for Primary B Shares
from their date of inception (6/28/96) through 3/31/97. The expense
structures for Primary A and Primary B Shares are similar, except that
Primary B Shares are subject to a shareholder servicing fee of up to 60
basis points. This difference in expenses will result in a slight
difference in the performance of Primary A and Primary B Shares.
PERFORMANCE COMPARISONS
INVESTOR C SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF
SALOMON LEHMAN INVESTMENT
BROTHERS INTERMEDIATE WITH
MEASUREMENT PERIOD MORTGAGE TREASURY DISTRIBUTIONS
QUARTERLY INDEX INDEX REINVESTED
<S> <C> <C> <C>
JULY 6, 1992 10000 10000 10000
10295 10447 10223
10375 10409 10181
10679 10802 10478
MAY 31, 1993 10905 11016 10667
11005 11249 10900
11105 11265 10890
10872 11056 10543
MAY 31, 1994 10813 10995 10345
10898 11079 10273
10946 11067 10257
11523 11924 10747
MAY 31, 1995 12120 12065 11224
12365 12249 11397
12782 12663 11736
MAR. 31, 1996 12734 12573 11488
12821 12654 11462
13090 12871 11638
13468 13167 11974
MAR. 31, 1997 13485 13157 11794
</TABLE>
INVESTOR N SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF
SALOMON LEHMAN INVESTMENT
BROTHERS INTERMEDIATE WITH
MEASUREMENT PERIOD MORTGAGE TREASURY DISTRIBUTIONS
QUARTERLY INDEX INDEX REINVESTED
<S> <C> <C> <C>
JUNE 7, 1993 10000 10000 10000
10190 10362 10296
10282 10379 10289
10066 10184 9963
MAY 31, 1994 10012 10129 9779
10091 10206 9713
10136 10195 9700
10670 10616 10166
MAY 31, 1995 11222 11115 10620
11450 11283 10786
11835 11665 11110
MAR. 31, 1996 11791 11582 10871
11871 11657 10842
12121 11857 11005
12471 12129 11318
MAR. 31, 1997 12486 12120 11144
</TABLE>
PRIMARY A AND PRIMARY B SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH GROWTH
OF OF
INVESTMENT INVESTMENT
WITH SALOMON LEHMAN WITH
MEASUREMENT DISTRIBUTIONS BROTHERS INTERMEDIATE DISTRIBUTIONS
PERIOD REINVESTED MORTGAGE TREASURY REINVESTED
QUARTERLY - B INDEX INDEX - A
<S> <C> <C> <C> <C>
APR. 11, 1991 10000 10000 10000 10000
10118 10203 10167 10118
10647 10768 10650 10647
11178 11245 11170 11178
10983 11185 11047 10983
MAY 31, 1992 11419 11637 11476 11419
11794 11980 11989 11794
11782 12074 11946 11782
12136 12427 12397 12136
MAY 31, 1993 12378 12691 12642 12378
12673 12807 12909 12673
12685 12923 12928 12685
12303 12652 12688 12303
MAY 31, 1994 12096 12583 12618 12096
12033 12663 12714 12033
12037 12739 12700 12037
12635 13410 13225 12635
MAY 31, 1995 13221 14105 13847 13221
13449 14395 14037 13449
13876 14875 14532 13876
13599 14820 14428 13599
JUN. 28, 1996 13585 14920 14522 13585
13795 15234 14771 13812
14192 15674 15110 14228
MAR. 31, 1997 13979 15693 15099 14032
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual and aggregate total returns are historical in nature and measure
net investment income and capital gain or loss from portfolio investments
assuming reinvestment of dividends.
19
<PAGE> 22
NATIONS DIVERSIFIED INCOME FUND
PERFORMANCE AND COMMENTARY
PORTFOLIO MANAGER
Mark S. Ahnrud, CFA, is Senior Portfolio Manager of Nations Diversified
Income Fund and a Director of Fixed Income Management for TradeStreet Investment
Associates, Inc., investment sub-adviser to the Fund.
INVESTMENT OBJECTIVE
The Fund seeks total return with an emphasis on current income by investing
in a diversified portfolio of fixed income securities.
PERFORMANCE REVIEW*
For the one-year period ended March 31, 1997, Nations Diversified Income
Fund Investor A Shares provided shareholders with a total return of 4.71%.
PORTFOLIO MANAGER COMMENTARY
In the following interview, Mr. Ahnrud shares his views on financial market
conditions and Fund performance for the one-year period ended March 31, 1997.
PLEASE DESCRIBE YOUR OVERALL INVESTMENT PHILOSOPHY AND THE FUND'S INVESTMENT
APPROACH.
Our investment philosophy is biased toward total return, recognizing that
the combination of current income and price movement is ultimately more
important than current income alone. We use a combination of investment
strategies -- duration management (management of interest rate risk), sector
rotation, security selection and yield curve positioning -- to add value to the
Fund over time. By using multiple strategies, we avoid making "big bets" and
look for each strategy to add incremental income without any single strategy
dominating returns.
Nations Diversified Income Fund invests in government securities and
corporate bonds, including high-yield corporates. High-yield corporate bonds and
government securities are not highly correlated to one another; they react
differently to changes in interest rates and the economy. This divergence in
performance is the key to the Fund's strategy, as the Fund balances credit risk
and interest rate risk by allocating assets to the different sectors as market
conditions warrant. When interest rates are falling, the Fund will overweight
long-term government securities whose prices rise with falling rates. In a
rising interest rate environment, often a sign of a strong economy, the Fund
will allocate a greater percentage of assets to high-yielding, lower-rated
corporate bonds, which tend to perform better in that environment than
higher-quality securities.
HOW DID MARKET CONDITIONS AFFECT THE FUND'S PERFORMANCE?
The Fund performed very well over the year relative to its peer group, as
the best performing sectors in the market during the last twelve months were
emerging market debt, high-yield, investment grade corporates, mortgages and
U.S. Treasuries, in that order. While we had reduced the Fund's exposure to
emerging market debt early in the year, the continued overweighting in both
investment grade and high-yield corporate bonds resulted in strong relative
performance. The rise in interest rates over the year was more dramatic in
shorter maturities, as the market began to anticipate an interest rate increase
by the Federal Reserve Board (the "Fed"), hurting U.S. Treasury returns. The
Fund's additions to mortgage exposure have been positive contributors to
performance over the last few months, as mortgages have been the best performing
sector during the first quarter of 1997.
WHAT ARE THE FUND'S CURRENT PORTFOLIO CHARACTERISTICS?**
As of March 31, 1997, the Fund had an average maturity of 9.57 years and an
effective duration of 4.85 years. The average credit quality of the portfolio's
holdings was 'AA3'. The Fund held 18.8% in high-yield (non-investment grade)
- ---------------
* The performance shown includes the effect of fee waivers by the investment
adviser. Such fee waivers have the effect of increasing total return.
** Portfolio characteristics and outlook were current as of March 31, 1997,
are subject to change and may not be representative of current
characteristics and outlook. Also, the outlook of this Fund's portfolio
manager may differ from that of other Nations Funds' portfolio managers.
20
<PAGE> 23
corporate bonds and 16.9% in investment grade corporate bonds. The Fund also
maintained a 29% position in mortgage pass-through securities.
WHERE DID YOU FIND THE STRONGEST PERFORMANCE OVER THE COURSE OF THE LAST TWELVE
MONTHS?
The best performance in the Fund during the last year came from its
holdings in high-yield securities. With interest rates moving up during the
course of the year and the economy remaining strong, high-yield bonds
outperformed investment-grade securities.
WHICH SECTOR PROVIDED THE WEAKEST PERFORMANCE?
The Fund's positions in 30-year U.S. Treasury bonds were the worst
performers during the last twelve months, as they proved more sensitive to
interest rate increases of almost one-half of one percent (50 basis points) over
that time.
WHERE DO YOU EXPECT TO FIND THE BEST VALUES?
While we continue to believe that the high-yield market can perform well in
1997, the strength in this market over the last 4-5 years has made us cautious
on how much outperformance is left in the sector. In the near term, the best
values will probably be found in the mortgage market, especially if the economy
remains strong and interest rates move higher. If the increase in rates occurs,
then we will look to add exposure to longer duration assets, as we would then
expect interest rates to stabilize or end the year lower than their peak.
WHAT IS YOUR OUTLOOK FOR THE FIXED INCOME MARKETS IN 1997?
We are concerned that the strength seen in the fourth quarter of 1996 has
carried over into the first quarter of 1997. We have moved the Fund's duration
down to 4.85 years, shorter than that of the benchmark. We believe that there is
a very good chance that the Fed will continue to raise interest rates this year
in order to slow economic growth. While this would lead to higher interest rates
near term, slowing growth coupled with little inflationary pressure should then
allow rates to move lower.
21
<PAGE> 24
NATIONS FUNDS
Nations Diversified Income Fund
- ---------------------------------------------
PORTFOLIO BREAKDOWN AS OF 3/31/97
[PIE CHART]
<TABLE>
<S> <C>
Corporate Bonds and Notes 37.5%
U.S. Treasury Obligations 32.1%
Mortgage-Backed Securities 29.0%
Repurchase Agreement and Other
Assets and Liabilities (Net) 1.4%
</TABLE>
-------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS A
% OF NET ASSETS AS OF 3/31/97
<TABLE>
<C> <S> <C>
1. U.S. Treasury Note 13.8%
2. U.S. Treasury Bond 12.4
3. Government National Mortgage Association
Certificates 10.5
4. Federal Home Loan Mortgage Corporation
Certificates 9.8
5. Federal National Mortgage Association
Certificates 8.7
6. U.S. Treasury Strips 5.9
7. Tennessee Valley Authority, Deb., 5.980%
04/01/36 2.6
8. Morgan Stanley Finance PLC., Gtd. Sub. Deb.,
8.030% 02/28/17 1.6
9. Conseco, Inc., Sr. Notes, 10.500% 12/15/04 1.4
10. Paine Webber Group, Inc., Sr. Notes, 7.625%
10/15/08 1.3
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 3/31/97
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
INVESTOR A SHARES
- ---------------------------------
Year Ended 03/31/97 4.71%
Since Inception (11/25/92)
through 03/31/97 7.93%
</TABLE>
The chart to the right shows
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations Diversified
Income Fund on November 25,
1992 (inception date). Figures
for the Lehman Government/Corporate
Bond Index, an unmanaged index
comprised of U.S. Government,
U.S. Treasury and agency
securities, corporate and
yankee bonds, include
reinvestment of dividends.
[LINE GRAPH]
<TABLE>
<CAPTION>
Measurement Period Lehman Government/Corporate Growth of Investment with
(Quarterly) Bond Index Distributions Reinvested
<S> <C> <C>
Nov. 25, 1992 10000 10000
Nov. 30, 1992 10171 10138
10644 10799
10964 11225
11326 11634
Nov. 30, 1993 11293 11722
10940 11404
10804 11231
10857 11322
Nov. 30, 1994 10897 11401
11440 11994
12182 12883
12415 13109
Nov. 30, 1995 12994 13751
Mar. 31, 1996 12690 13305
12749 13342
12974 13598
13371 14054
Mar. 31, 1997 13256 13932
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
Portfolio characteristics and outlook were current as of March 31, 1997, are
subject to change and may not be representative of current characteristics and
outlook.
22
<PAGE> 25
NATIONS FUNDS
Nations Diversified Income Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON -INVESTOR C, INVESTOR N, PRIMARY A AND PRIMARY B SHARES
AS OF MARCH 31, 1997
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
INVESTOR C SHARES
- ----------------------------------------------
<S> <C>
Year Ended 03/31/97 3.94%*
Year Ended 03/31/97 4.44%
Since Inception (11/09/92) through
03/31/97 7.62%
*adjusted for maximum contingent
deferred sales charge of 0.50% when
Investor C Shares are redeemed
within one year of purchase
INVESTOR N SHARES
- ----------------------------------------------
Year Ended 03/31/97 4.18%
Since Inception (06/07/93) through
03/31/97 5.78%
PRIMARY A SHARES
- ----------------------------------------------
Year Ended 03/31/97 4.97%
Since Inception (10/30/92) through
03/31/97 8.20%
AGGREGATE TOTAL RETURN
PRIMARY B SHARES**
- ----------------------------------------------
Since Inception (06/28/96) through
03/31/97 4.22%
</TABLE>
The charts to the right show the growth in value of a hypothetical $10,000
investment in Investor C, Investor N, Primary A and Primary B Shares of
Nations Fund from the date each class of shares was first offered. Figures
for the Lehman Government/Corporate Bond Index, an unmanaged index
comprised of U.S. Government, U.S. Treasury and agency securities,
corporate and yankee bonds, include reinvestment of dividends.
Each chart assumes the reinvestment of all distributions.
** Please note that the performance shown for Primary B Shares includes
the performance for Primary A Shares from their date of inception
(10/30/92) through 6/28/96, plus the performance for Primary B Shares
from their date of inception (6/28/96) through 3/31/97. The expense
structures for Primary A and Primary B Shares are similar, except that
Primary B Shares are subject to a shareholder servicing fee of up to 60
basis points. This difference in expenses will result in a slight
difference in the performance of Primary A and Primary B Shares.
PERFORMANCE COMPARISONS
INVESTOR C SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
LEHMAN GROWTH OF
BROTHERS INVESTMENT
GOVERNMENT/ WITH
MEASUREMENT PERIOD CORPORATE DISTRIBUTIONS
(QUARTERLY) BOND INDEX REINVESTED
<S> <C> <C>
NOV. 9, 1992 10000 10000
NOV. 30, 1992 10163 10242
10636 10893
10955 11307
11317 11701
NOV. 30, 1993 11284 11772
10931 11435
10795 11248
10848 11324
NOV. 30, 1994 10888 11389
11431 11967
12172 12838
12405 13047
NOV. 30, 1995 12983 13668
MAR. 31, 1996 12680 13217
12739 13246
12964 13491
13360 13935
MAR. 31, 1997 13245 13805
</TABLE>
INVESTOR N SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
LEHMAN GROWTH OF
BROTHERS INVESTMENT
GOVERNMENT/ WITH
MEASUREMENT PERIOD CORPORATE DISTRIBUTIONS
(FISCAL YEAR COVERED) BOND INDEX REINVESTED
<S> <C> <C>
JUNE 7, 1993 10000 10000
10227 10178
10565 10533
NOV. 30, 1993 10534 10597
10205 10295
10078 10125
10128 10194
NOV. 30, 1994 10165 10253
10671 10773
11364 11558
11581 11745
NOV. 30, 1995 12121 12305
MAR. 31, 1996 11837 11891
11893 11910
12103 12123
12473 12513
MAR. 31, 1997 12365 12389
</TABLE>
PRIMARY A AND PRIMARY B SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF LEHMAN GROWTH OF
INVESTMENT BROTHERS INVESTMENT
WITH GOVERNMENT/ WITH
MEASUREMENT PERIOD DISTRIBUTIONS CORPORATE DISTRIBUTIONS
(QUARTERLY) REINVESTED BOND INDEX REINVESTED
- B - A
<S> <C> <C> <C>
OCT. 30, 1992 10000 10000 10000
NOV. 30, 1992 10225 10163 10225
10894 10636 10894
11318 10955 11318
11735 11317 11735
NOV. 30, 1993 11828 11284 11828
11512 10931 11512
11344 10795 11344
11442 10848 11442
NOV. 30, 1994 11530 10888 11530
12136 11431 12136
13045 12172 13045
13281 12405 13281
NOV. 30, 1995 13940 12983 13940
MAR. 31, 1996 13497 12680 13497
JUN. 28, 1996 13543 12739 13543
13794 12964 13812
14248 13360 14284
MAR. 31, 1997 14115 13245 14168
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual and aggregate total returns are historical in nature and measure
net investment income and capital gain or loss from portfolio investments
assuming reinvestment of dividends.
23
<PAGE> 26
NATIONS FUNDS
Nations Short-Term Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
ASSET-BACKED SECURITIES -- 25.4%
$ 4,300,000 Banc One Credit Card Master Trust,
Series 1994-C, Class A,
7.800% 11/15/98................. $ 4,375,250
5,000,000 Chase Manhattan Auto Owner Trust,
Series 1996-C, Class A4,
6.150% 03/15/02................. 4,904,650
3,000,000 Discover Card Master Trust, Series
1995-2, Class A,
6.550% 02/15/03................. 2,971,860
4,000,000 EQCC Home Equity Loan Trust,
Series 1996-2, Class A2,
6.700% 09/15/08................. 3,987,520
3,000,000 Fingerhut Metris Master Trust,
Series 1996-1, Class A,
6.450% 02/20/02................. 2,987,790
2,500,000 Green Tree Financial Corporation,
Series 1996-9, Class A2,
6.250% 01/15/28................. 2,487,500
3,000,000 Household Affinity Credit Card
Master Trust I, Series 1993-1,
Class B, 5.300% 09/15/00........ 2,911,860
4,500,000 IMC Home Equity Loan Trust, Series
1997-1, Class A3,
6.820% 10/25/11................. 4,452,188
2,531,667 Keystone Auto Grantor Trust,
Series 1996-B, Class A,
6.150% 04/15/03**............... 2,514,274
Olympic Automobile Receivables
Trust:
2,792,085 Series 1995-B, Class A2,
7.350% 10/15/01................. 2,813,891
2,142,738 Series 1995-C, Class A2,
6.200% 01/15/02................. 2,135,367
2,300,000 Prime Credit Card Master Trust,
Series 1992-2, Class B2,
7.950% 11/15/02................. 2,354,984
2,000,000 Sears Credit Account Master Trust,
Series 1995-4, Class A,
6.250% 01/15/03................. 1,996,240
4,150,000 Spiegel Master Trust, Series
1995-A, Class A,
7.500% 09/15/04................. 4,219,388
12,000,000 Time Warner Asset-Backed Trust,
7.290% 06/22/98**+.............. 5,259,120
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $50,781,626).............. 50,371,882
===========
CORPORATE BONDS AND NOTES -- 53.8%
BANKING -- 5.9%
4,000,000 Capital One Bank, MTN,
6.875% 04/24/00................. 3,970,560
3,500,000 Chemical Bank (N.Y.) Corporation,
9.750% 06/15/99................. 3,710,980
4,000,000 Union Planters National Bank,
Notes, 6.470% 10/29/99.......... 3,958,840
------------
11,640,380
------------
BROKERAGE -- 11.3%
3,400,000 Goldman Sachs Group, L.P., Notes,
6.875% 09/15/99**............... 3,400,374
3,275,000 Lehman Brothers Holdings Inc.,
MTN, 6.850% 10/08/99............ 3,264,946
4,000,000 Merrill Lynch & Company, MTN,
6.520% 06/22/98................. 4,010,120
Paine Webber Group Inc., Sr.
Notes:
2,500,000 6.250% 06/15/98................. 2,491,200
2,500,000 7.700% 02/11/00................. 2,540,650
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
BROKERAGE -- (CONTINUED)
$ 4,500,000 Salomon Inc., MTN,
9.000% 02/15/99................. $ 4,662,180
2,000,000 Smith Barney Holdings, Inc.,
Notes, 5.625% 11/15/98.......... 1,968,440
------------
22,337,910
------------
CAPTIVE FINANCE -- 4.0%
4,000,000 AT&T Capital Corporation, MTN,
5.650% 01/15/99................. 3,922,080
4,000,000 General Motors Acceptance
Corporation, MTN,
7.375% 07/20/98................. 4,047,680
------------
7,969,760
------------
FINANCIAL -- 17.6%
6,000,000 Advanta Corporation, MTN, 6.600%
02/04/00........................ 5,820,420
3,000,000 Aristar, Inc., Notes,
5.750% 07/15/98................. 2,971,830
4,500,000 Associates Corporation N.A.,
Notes, 6.625% 05/15/98.......... 4,508,145
3,800,000 Banponce Financial Corporation,
MTN, 6.560% 04/22/99............ 3,772,792
4,000,000 Chrysler Financial Corporation,
Notes, 6.375% 01/28/00.......... 3,950,360
3,000,000 Finova Capital Corporation, Notes,
6.380% 04/15/99................. 2,974,590
2,500,000 GATX Capital Corporation, Notes,
6.110% 05/07/98................. 2,491,300
3,350,000 Heller Financial, Inc., MTN,
6.510% 09/20/99................. 3,327,153
2,000,000 Norwest Financial Inc., Sr. Notes,
8.375% 01/15/00................. 2,051,140
3,000,000 NYNEX, MTN,
6.720% 06/15/98**............... 3,010,530
------------
34,878,260
------------
INDEPENDENT FINANCE -- 1.2%
2,500,000 North American Mortgage Company,
MTN,
5.800% 11/02/98................. 2,469,825
------------
INDUSTRIAL -- 11.2%
5,000,000 Comdisco, Inc., MTN,
6.470% 09/30/98................. 4,989,900
3,000,000 Crane Company, Notes,
7.250% 06/15/99................. 3,037,800
4,500,000 Lockheed Martin Corporation,
6.625% 06/15/98................. 4,508,685
3,340,000 News America Holdings Inc., Sr.
Notes,
7.500% 03/01/00................. 3,377,041
2,250,000 PDV America Inc., Sr. Notes,
7.250% 08/01/98................. 2,252,880
4,000,000 Unocal Corporation, MTN,
8.810% 05/18/98................. 4,100,520
------------
22,266,826
------------
RETAIL -- 0.6%
1,130,000 Sears, Roebuck & Company, MTN,
9.230% 08/06/98................. 1,169,900
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE> 27
NATIONS FUNDS
Nations Short-Term Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
UTILITY -- ELECTRIC -- 2.0%
$ 4,000,000 Commonwealth Edison Company, 1st
Mortgage Bonds,
6.375% 07/15/00................. $ 3,909,960
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $107,484,565)............. 106,642,821
============
FOREIGN BONDS AND NOTES -- 6.5%
3,000,000 Bladex, Notes,
7.000% 09/24/99**............... 2,988,180
4,000,000 Corporacion Andina De Fomento,
Eurobonds,
6.625% 10/14/98**............... 3,998,000
1,950,000 Fletcher Challenge, Deb.,
9.800% 06/15/98................. 2,019,693
4,000,000 Skandia Capital AB, Guaranteed
Eurobonds,
6.000% 11/02/98................. 3,948,480
------------
TOTAL FOREIGN BONDS AND NOTES
(Cost $12,948,266).............. 12,954,353
============
MORTGAGE-BACKED SECURITY -- 3.3%
(Cost $6,660,087)
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA) CERTIFICATE
-- 3.3%
6,595,007 6.000% 11/01/03................... 6,449,719
============
U.S. TREASURY OBLIGATIONS -- 10.0%
U.S. TREASURY NOTES -- 10.0%
1,175,000 6.125% 08/31/98................... 1,172,427
18,750,000 5.875% 01/31/99................... 18,574,125
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $19,829,748).............. 19,746,552
============
TOTAL SECURITIES
(Cost $197,704,292)............. 196,165,327
============
REPURCHASE AGREEMENT -- 1.1%
(Cost $2,190,000)
2,190,000 Agreement with Smith Barney,
6.300% dated 03/31/97, to be
repurchased at $2,190,383 on
04/01/97, collateralized by:
$2,190,006 U.S. Government
Agency Securities,
5.125% - 8.740% due 03/04/98 -
12/15/43........................ 2,190,000
============
</TABLE>
<TABLE>
<CAPTION>
VALUE
(NOTE 1)
- ------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS
(Cost $199,894,292*)............. 100.1% $198,355,327
OTHER ASSETS AND
LIABILITIES (NET)................ (0.1) (179,736)
----- ------------
NET ASSETS......................... 100.0% $198,175,591
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes is $199,902,435.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Zero Coupon Security. The rate shown is the effective yield at date of
purchase.
ABBREVIATION:
<TABLE>
<S> <C>
MTN Medium Term Note
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 28
NATIONS FUNDS
Nations Short-Intermediate Government Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
COLLATERALIZED MORTGAGE OBLIGATION -- 0.1%
(Cost $489,451)
$ 462,232 Drexel Burnham Lambert,
Series S, Class 2,
9.000% 08/01/18.................. $ 463,388
============
GOVERNMENT GUARANTEED BOND -- 0.4%
(Cost $1,783,370)
1,766,000 Second Attransco Tanker
Corporation,
Series A,
8.500% 06/15/02.................. 1,811,368
============
MORTGAGE-BACKED SECURITIES -- 22.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) CERTIFICATES -- 5.8%
38,464 6.500% 09/01/03.................. 38,274
510,292 8.500% 04/01/08.................. 524,187
5,745,786 8.500% 08/01/09.................. 5,945,049
58,947 REMIC, Series 105, Class D,
6.000% 01/15/19.................. 58,597
20,206,291 30 Year Gold Pass Thru,
7.000% 12/01/25.................. 19,385,310
------------
25,951,417
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 12.6%
1,700,000 8.150% 05/11/98.................. 1,726,554
9,842,061 8.500% 11/01/09.................. 10,198,836
2,543,563 10.000% 04/01/14................. 2,773,247
4,876,634 9.000% 04/01/16.................. 5,132,657
3,940,457 6.500% 04/01/26.................. 3,668,289
21,565,763 7.500% 02/01/27.................. 21,161,405
12,000,000 7.000% 02/15/11, TBA+++.......... 11,786,280
------------
56,447,268
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) CERTIFICATES -- 3.6%
4,252,255 8.500% 02/15/05 - 08/15/08
(27 Pools)..................... 4,423,409
8,260,320 7.500% 02/15/24.................. 8,128,650
3,951,151 7.500% 04/15/26.................. 3,870,864
------------
16,422,923
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $99,586,894)............... 98,821,608
===========
U.S. GOVERNMENT AGENCY SECURITIES -- 0.3%
Student Loan Marketing Association:
500,000 4.665% 06/01/98+................. 494,800
1,000,000 5.630% 08/02/99+................. 996,530
------------
TOTAL U.S. GOVERNMENT AGENCY
SECURITIES
(Cost $1,499,269)................ 1,491,330
============
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
U.S. TREASURY OBLIGATIONS -- 78.6%
U.S. TREASURY BILL -- 3.6%
$16,000,000 5.030% 05/01/97++................ $ 15,931,200
------------
U.S. TREASURY NOTES -- 75.0%
14,000,000 5.875% 01/31/99.................. 13,868,680
120,000,000 6.375% 05/15/99.................. 119,737,200
14,000,000 8.500% 02/15/00.................. 14,684,740
16,000,000 6.250% 08/31/00.................. 15,797,440
155,000,000 6.625% 07/31/01.................. 154,225,000
3,000,000 7.500% 02/15/05.................. 3,103,590
5,000,000 6.500% 10/15/06.................. 4,844,550
12,000,000 6.250% 02/15/07.................. 11,435,640
------------
337,696,840
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $356,245,398).............. 353,628,040
============
TOTAL SECURITIES
(Cost $459,604,382).............. 456,215,734
============
REPURCHASE AGREEMENT -- 2.5%
(Cost $11,048,000)
11,048,000 Agreement with Smith Barney, 6.300%
dated 03/31/97, to be repurchased
at $11,049,933 on 04/01/97,
collateralized by: $11,048,028
U.S. Government Agency
Securities, 5.125% - 8.740% due
03/04/98 - 12/15/43.............. 11,048,000
============
TOTAL INVESTMENTS
(Cost $470,652,382*)................. 103.9% 467,263,734
OTHER ASSETS AND
LIABILITIES (NET).................... (3.9) (17,576,259)
----- ------------
NET ASSETS............................. 100.0% $449,687,475
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes is $470,777,944.
+ Variable rate security. The interest rate shown reflects the rate in effect
at March 31, 1997.
++ Rate represents annualized yield at date of purchase.
+++ Security purchased on a when-issued or delayed delivery basis (Note 1).
ABBREVIATIONS:
<TABLE>
<S> <C>
Gold Payments are on accelerated 45 day payment cycle
instead of regular 75 day cycle
REMIC Real Estate Mortgage Investment Conduit
TBA To Be Announced
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 29
NATIONS FUNDS
Nations Strategic Fixed Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
ASSET-BACKED SECURITIES -- 13.2%
$15,000,000 American Express Company, Master
Trust, Series 1994-3, Class A,
7.850% 08/15/05................. $ 15,548,400
16,500,000 AT&T Universal Card, Master Trust,
Series 95-2A,
5.950% 10/17/02................. 16,056,480
5,000,000 Chase Manhattan Credit Card Master
Trust, Series 1996-4, Class A,
6.730% 02/15/03................. 5,009,350
4,400,000 Discover Card Master Trust, Series
1996-3, Class B,
6.250% 08/18/08................. 4,034,228
10,000,000 EQCC Home Equity Loan Trust,
Series 1996-2, Class A2,
6.700% 09/15/08................. 9,968,800
Fingerhut Metris Master Trust:
10,000,000 Series 1996-1, Class A,
6.450% 02/20/02................. 9,959,300
7,500,000 Series 1996-1, Class B,
6.800% 02/20/02................. 7,455,450
10,750,000 IMC Home Equity Loan Trust, Series
1997-1, Class A3,
6.820% 10/25/11................. 10,635,781
Olympic Automobile Receivables
Trust:
15,275,000 Series 1996-C, Class A4,
6.800% 03/15/02................. 15,265,530
12,920,000 Series 1996-D, Class A4,
6.050% 08/15/02................. 12,657,595
7,250,000 Prime Credit Card Master Trust,
Series 1992-2, Class B2,
7.950% 11/15/02................. 7,423,320
6,100,000 Spiegel Master Trust, Series
1994-B, Class A,
8.150% 06/15/04................. 6,296,359
10,075,000 Standard Credit Card Master Trust,
Series 1995-9, Series B,
6.650% 10/07/07................. 9,527,121
------------
TOTAL ASSET-BACKED SECURITIES
(Cost $132,402,501)............. 129,837,714
============
CORPORATE BONDS AND NOTES -- 24.5%
BANKING AND FINANCE -- 16.0%
8,000,000 Advanta Corporation, MTN,
6.540% 02/10/00................. 7,747,680
Ahmanson (H.F.) & Company:
8,500,000 MTN,
6.530% 06/01/98................. 8,509,010
7,465,000 Notes,
8.250% 10/01/02................. 7,782,188
15,000,000 Aon Capital Trust A,
8.205% 01/01/27**............... 14,800,200
9,890,000 Banponce Financial Corporation,
MTN,
6.550% 10/10/00................. 9,698,727
7,600,000 Bear Stearns Companies, Inc., Sr.
Notes,
6.750% 05/01/01................. 7,493,220
9,125,000 Beneficial Corporation, MTN,
6.350% 12/05/02................. 8,713,371
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
BANKING AND FINANCE -- (CONTINUED)
Capital One Bank, Notes:
$ 5,750,000 6.610% 06/22/99................. $ 5,706,415
9,000,000 7.200% 07/19/99................. 9,037,620
8,075,000 First USA Bank, Notes,
5.850% 02/22/01................. 7,763,305
8,000,000 Ford Motor Credit Corporation,
MTN,
6.060% 12/27/00................. 7,746,560
7,750,000 General Motors Acceptance
Corporation, MTN,
6.250% 10/18/99................. 7,641,578
7,500,000 Goldman Sachs Group, L.P., Notes,
7.200% 11/01/06 **.............. 7,348,875
Lehman Brothers Holdings, MTN:
13,425,000 6.650% 11/08/00................. 13,195,835
4,300,000 9.000% 09/28/01................. 4,564,923
6,175,000 Merrill Lynch and Companies, MTN,
6.500% 02/15/01................. 6,080,955
6,700,000 Paine Webber Group Inc., MTN,
7.300% 10/15/03................. 6,607,875
Salomon Inc.:
8,525,000 MTN,
6.625% 11/30/00................. 8,341,457
4,175,000 Sr. Notes,
7.000% 06/15/03................. 4,058,852
5,375,000 Travelers,
6.450% 10/18/99**............... 5,306,899
------------
158,145,545
------------
ENTERTAINMENT -- 2.7%
Time Warner Inc., Notes:
14,550,000 7.450% 02/01/98................. 14,626,533
12,500,000 6.100% 12/30/01**............... 11,736,250
------------
26,362,783
------------
INDUSTRIAL -- 4.1%
7,250,000 Auburn Hills Trust Certificates,
Deb., 12.000% 05/01/20+......... 10,492,417
PDV America, Inc.:
3,865,000 Sr. Notes,
7.250% 08/01/98................. 3,869,947
Gtd. Sr. Notes:
4,475,000 7.750% 08/01/00................. 4,476,700
5,534,000 7.875% 08/01/03................. 5,467,703
16,580,000 Tennessee Valley Authority, Deb.,
5.980% 04/01/36................. 16,585,969
------------
40,892,736
------------
RETAIL -- 1.0%
9,500,000 Sears Roebuck Acceptance
Corporation, MTN,
6.690% 04/30/01................. 9,370,230
------------
TRANSPORTATION -- 0.7%
7,000,000 Erac USA Finance Company,
6.950% 03/01/04**............... 6,800,937
------------
TOTAL CORPORATE BONDS AND NOTES
(Cost $245,170,994)............. 241,572,231
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 30
NATIONS FUNDS
Nations Strategic Fixed Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
FOREIGN BONDS -- 3.8%
$10,750,000 Bladex,
7.000% 09/24/99**............... $ 10,707,645
5,675,000 Corporacion Andina De Fomento,
7.375% 07/21/00................. 5,717,052
12,500,000 Hydro-Quebec,
9.000% 03/07/01................. 13,206,125
8,500,000 Sun Canada Financial Company,
7.250% 12/15/15**............... 7,987,705
------------
TOTAL FOREIGN BONDS
(Cost $38,241,416).............. 37,618,527
============
MORTGAGE-BACKED SECURITIES -- 36.1%
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC)
CERTIFICATES -- 9.0%
8,969,877 7.500% 09/12/26................. 8,821,247
38,211,036 6.500% 01/01/27................. 35,584,027
Gold:
12,016,108 6.500% 08/01/10................. 11,646,493
33,266,574 7.000% 08/01/11................. 32,753,604
------------
88,805,371
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 14.3%
22,000,000 7.180% 10/01/03................. 21,733,800
5,275,209 7.000% 09/01/11................. 5,181,205
10,419,594 9.000% 08/01/24................. 10,930,780
15,468,994 7.500% 09/01/25................. 15,193,336
15,946,633 8.000% 09/15/25................. 16,120,930
2,882,977 6.500% 03/01/26................. 2,683,849
13,827,403 6.500% 04/01/26................. 12,872,344
22,992,662 7.000% 04/01/26................. 22,022,602
16,797,328 8.500% 06/01/26................. 17,196,264
16,390,118 8.500% 07/01/26................. 16,779,383
------------
140,714,493
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA)
CERTIFICATES -- 12.8%
56,267 9.000% 04/15/20................. 59,643
4,991,354 8.000% 03/15/23................. 5,035,028
4,844,583 8.500% 08/15/24................. 4,976,259
4,906,572 8.000% 10/15/24................. 4,938,759
709,566 9.500% 01/15/25................. 762,337
9,714,307 9.500% 02/15/25................. 10,436,760
4,674,432 8.000% 08/15/25................. 4,699,253
4,296,211 7.000% 01/15/26................. 4,097,511
2,891,754 8.500% 08/15/26................. 2,964,944
9,826,905 8.500% 09/15/26................. 10,075,624
2,850,543 9.000% 09/15/26................. 2,982,381
21,981,313 7.500% 11/15/26................. 21,534,653
5,250,707 8.500% 12/15/26................. 5,383,602
10,715,129 8.500% 12/15/26................. 10,986,329
3,673,511 8.500% 01/15/27................. 3,766,488
24,729,647 7.000% 02/15/27................. 23,647,725
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA)
CERTIFICATES -- (CONTINUED)
$10,039,166 8.500% 02/15/26................. $ 10,293,257
------------
126,640,553
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $359,222,265)............. 356,160,417
============
U.S. TREASURY OBLIGATIONS -- 18.8%
U.S. TREASURY BONDS -- 10.6%
53,320,000 8.125% 08/15/19................. 58,502,171
42,250,000 8.000% 11/15/21................. 45,907,160
------------
104,409,331
------------
U.S. TREASURY NOTES -- 8.2%
49,000,000 6.375% 05/15/99................. 48,892,690
12,500,000 7.250% 08/15/04................. 12,748,000
20,000,000 6.500% 10/15/06................. 19,378,200
------------
81,018,890
------------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $188,395,794)............. 185,428,221
============
TOTAL SECURITIES
(Cost $963,432,970)............. 950,617,110
============
REPURCHASE AGREEMENT -- 3.2%
(Cost $31,671,000)
31,671,000 Agreement with Smith Barney,
6.300% dated 03/31/97, to be
repurchased at $31,676,542 on
04/01/97, collateralized by:
$31,671,081 U.S. Government
Agency Securities,
5.125% - 8.740% due 03/04/98 -
12/15/43........................ 31,671,000
-----------
TOTAL INVESTMENTS
(Cost $995,103,970*)............... 99.6% 982,288,110
OTHER ASSETS AND
LIABILITIES (NET).................. 0.4 3,746,759
----- ------------
NET ASSETS............................. 100.0% $986,034,869
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes is $995,230,537.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Step coupon bond. Current rate remains in effect through maturity date.
Effective yield was 12.39% at acquisition date.
<TABLE>
<S> <C>
ABBREVIATIONS:
Gold Payments are on accelerated 45 day payment cycle
instead of regular 75 day cycle
MTN Medium Term Note
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 31
NATIONS FUNDS
Nations Government Securities Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
MORTGAGE-BACKED SECURITIES -- 57.7%
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC)
CERTIFICATES -- 5.1%
$ 297,006 7.500% 08/01/08 - 06/01/09
(2 Pools)..................... $ 297,233
2,854,995 8.000% 08/01/07 - 05/01/17
(5 Pools)..................... 2,908,021
662,312 8.500% 02/01/08 - 06/01/17
(5 Pools)..................... 682,968
566,719 9.000% 05/01/09 - 12/01/16
(2 Pools)..................... 596,693
718,644 9.500% 04/01/18 - 06/01/21
(4 Pools)..................... 773,880
85,172 10.000% 07/01/01.................. 89,324
------------
5,348,119
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 35.2%
11,884,386 7.000% 06/01/26 - 02/01/27
(4 Pools)..................... 11,360,641
7,395,179 7.070% 02/25/07................... 7,253,561
3,976,716 7.500% 06/01/25................... 3,909,589
4,836,756 8.000% 04/01/06 - 09/01/11
(2 Pools)..................... 4,929,746
193,107 8.250% 04/01/09 (2 Pools)......... 196,848
687,038 8.500% 12/01/11 - 07/01/21
(3 Pools)..................... 709,208
7,483,442 10.000% 11/01/18 - 07/01/20
(2 Pools)..................... 8,154,965
------------
36,514,558
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA) CERTIFICATES
-- 17.2%
3,863,675 7.000% 07/15/10 - 06/15/23
(4 Pools)..................... 3,780,781
814,173 7.500% 03/15/24................... 801,196
1,931,813 8.000% 09/15/06 - 07/15/22
(14 Pools).................... 1,963,208
4,693,544 8.500% 09/15/04 - 05/15/22
(40 Pools).................... 4,877,808
4,602,591 9.000% 11/15/08 - 12/15/26
(20 Pools).................... 4,840,929
388,512 9.500% 04/15/16 - 08/15/21
(5 Pools)..................... 419,254
792,817 10.000% 11/15/09 - 08/15/20
(13 Pools).................... 870,356
132,306 10.500% 12/15/20.................. 146,486
168,378 11.750% 09/15/00 - 12/15/00
(2 Pools)..................... 174,482
10,901 12.750% 12/15/97.................. 11,289
------------
17,885,789
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION II (GNMA II)
CERTIFICATE -- 0.2%
145,209 11.000% 10/20/20.................. 162,910
------------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $60,614,836).............. 59,911,376
============
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
U.S. GOVERNMENT AGENCY SECURITIES -- 7.0%
$ 1,500,000 Federal Farm Credit Systems,
9.450% 11/21/03............... $ 1,558,365
2,000,000 Federal Home Loan Bank,
7.700% 03/19/12............... 1,950,000
Federal Home Loan Mortgage
Corporation:
3,150,000 6.280% 03/06/06................. 2,950,164
750,000 7.950% 07/28/04................. 747,540
------------
U.S. GOVERNMENT AGENCY SECURITIES
(Cost $7,489,643)............... 7,206,069
============
U.S. TREASURY OBLIGATIONS -- 32.9%
U.S. TREASURY BONDS -- 20.9%
10,000,000 8.750% 08/15/20................. 11,714,063
10,000,000 7.250% 08/15/22................. 10,015,600
------------
21,729,663
------------
U.S. TREASURY NOTES -- 12.0%
2,000,000 5.125% 02/28/98................. 1,982,820
10,600,000 5.875% 02/28/99................. 10,497,286
------------
12,480,106
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $34,250,215).............. 34,209,769
============
TOTAL SECURITIES
(Cost $102,354,694)............. 101,327,214
============
REPURCHASE AGREEMENT -- 0.1%
(Cost $133,000)
133,000 Agreement with Smith Barney,
6.300% dated 03/31/97, to be
repurchased at $133,023 on
04/01/97, collateralized by:
$133,000 U.S. Government Agency
Securities, 5.125% - 8.740% due
03/04/98 - 12/15/43............. 133,000
============
TOTAL INVESTMENTS
(Cost $102,487,694*)................. 97.7% 101,460,214
OTHER ASSETS AND
LIABILITIES (NET).................... 2.3 2,394,982
----- ------------
NET ASSETS............................. 100.0% $103,855,196
===== ============
</TABLE>
- ---------------
* Aggregate cost for Federal tax purposes.
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 32
NATIONS FUNDS
Nations Diversified Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES -- 37.5%
BANKING AND FINANCE -- 9.2%
$ 3,000,000 Conseco, Inc., Sr. Notes,
10.500% 12/15/04............... $ 3,445,470
2,000,000 First Nationwide Escrow, Sr. Sub
Notes,
10.625% 10/01/03**............. 2,120,000
2,700,000 Leucadia National Corporation,
Sr. Sub. Notes,
8.250% 06/15/05................ 2,729,241
3,900,000 Morgan Stanley Finance PLC.,
Gtd. Sub. Deb.,
8.030% 02/28/17................ 3,786,510
3,200,000 Paine Webber Group, Inc., Sr.
Notes,
7.625% 10/15/08................ 3,143,168
2,200,000 Security Pacific Corporation,
Sub. Notes,
11.000% 03/01/01............... 2,480,918
2,075,000 TIG Holdings, Inc., Notes,
8.125% 04/15/05................ 2,107,038
2,150,000 Western Financial Savings Bank,
Sub. Deb.,
8.500% 07/01/03................ 2,122,351
------------
21,934,696
------------
COMPUTER -- 0.6%
1,500,000 Unisys Corporation, Sr. Notes,
10.625% 10/01/99............... 1,533,750
------------
ENERGY -- 1.0%
2,000,000 Occidental Petroleum Corporation,
Sr. Deb.,
10.125% 09/15/09............... 2,371,260
------------
ENTERTAINMENT -- 1.0%
2,200,000 Time Warner Inc., Deb.,
9.150% 02/01/23................ 2,318,690
------------
GAS -- 1.0%
2,200,000 Louis Dreyfus Natural Gas
Corporation, Sr. Sub. Notes,
9.250% 06/15/04................ 2,332,000
------------
HEALTH CARE -- 4.3%
2,100,000 Genesis Health Ventures Inc., Sr.
Sub. Notes,
9.250% 10/01/06................ 2,089,500
2,775,000 Healthsouth Corporation, Sr. Sub.
Notes,
9.500% 04/01/01................ 2,899,875
2,525,000 Tenet Healthcare Corporation, Sr.
Sub. Notes,
10.125% 03/01/05............... 2,701,750
2,400,000 Quorum Health Group, Inc.,
Sr. Sub. Notes,
8.750% 11/01/05................ 2,424,000
------------
10,115,125
------------
INDUSTRIAL -- 16.1%
2,000,000 Auburn Hills Trust Certificates,
Deb.,
12.000% 05/01/20+.............. 2,894,460
2,100,000 Barrett Resources Corporation,
Sr. Notes,
7.550% 02/01/07................ 2,040,780
Federated Department Stores Inc.,
Sr. Notes:
775,000 8.125% 10/15/02................ 788,508
2,250,000 8.500% 06/15/03................ 2,323,913
2,600,000 Fisher Scientific International,
Sr. Notes,
7.125% 12/15/05................ 2,480,556
1,655,000 Georgia-Pacific Corporation,
Deb.,
9.950% 06/15/02................ 1,832,151
2,000,000 Harris Corporation, Notes,
10.375% 12/01/18............... 2,182,580
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
CORPORATE BONDS AND NOTES -- (CONTINUED)
INDUSTRIAL -- (CONTINUED)
$ 2,450,000 Maxus Energy Corporation, Notes,
9.375% 11/01/03................ $ 2,499,000
2,500,000 PDV America, Inc., Gtd. Sr.
Notes,
7.875% 08/01/03................ 2,470,050
2,000,000 Stone Container Corporation, Sr.
Notes,
11.875% 12/01/98............... 2,020,000
2,150,000 Summit Communications Group Inc.,
Sr. Sub. Debs.,
10.500% 04/15/05............... 2,322,000
6,205,000 Tennessee Valley Authority, Deb.,
5.980% 04/01/36................ 6,207,233
2,775,000 Valassis Inserts Inc., Sr. Notes,
9.375% 03/15/99................ 2,851,202
2,585,000 Viacom Inc., Sr. Notes,
7.750% 06/01/05................ 2,496,490
2,860,000 Westpoint Stevens Inc., Sr.
Notes,
8.750% 12/15/01................ 2,860,000
------------
38,268,923
------------
PUBLISHING -- 1.2%
2,575,000 News America Holdings Inc.,
Gtd. Deb.,
10.125% 10/15/12............... 2,897,673
------------
TELECOMMUNICATIONS -- 2.0%
2,000,000 Jones Intercable, Inc., Sr.
Notes,
9.625% 03/15/02................ 2,050,000
2,700,000 Rogers Cablesystems Limited,
Deb.,
10.000% 12/01/07............... 2,781,000
------------
4,831,000
------------
TRANSPORTATION -- 1.1%
2,200,000 Federal Express Corporation,
Notes,
9.650% 06/15/12................ 2,550,834
------------
TOTAL CORPORATE BONDS
AND NOTES
(Cost $90,019,182)............. 89,153,951
============
MORTGAGE-BACKED SECURITIES -- 29.0%
FEDERAL HOME LOAN MORTGAGE
CORPORATION (FHLMC)
CERTIFICATES -- 9.8%
8,000,000 7.000% 07/01/11................ 7,876,640
Gold,
15,586,270 7.500% 06/01/26................ 15,328,005
------------
23,204,645
------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION (FNMA)
CERTIFICATES -- 8.7%
1,877,847 7.000% 05/11/11................ 1,848,308
5,761,354 6.500% 07/01/11................ 5,547,089
5,804,011 7.000% 09/01/11................ 5,700,583
4,158,115 7.000% 08/01/25................ 3,982,684
1,711,028 8.500% 12/01/25................ 1,751,665
1,944,568 6.500% 05/01/26................ 1,810,257
------------
20,640,586
------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA)
CERTIFICATES -- 10.5%
3,960,000 8.000% 07/15/24................ 3,985,978
1,693,800 8.500% 08/15/24................ 1,739,838
5,102,848 8.000% 09/15/24................ 5,136,322
3,389,519 8.500% 05/15/25................ 3,478,460
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 33
NATIONS FUNDS
Nations Diversified Income Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
<S> <C>
MORTGAGE-BACKED SECURITIES --
(CONTINUED)
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA)
CERTIFICATES -- (CONTINUED)
$ 5,157,911 9.000% 08/15/26.................. $ 5,396,465
5,202,408 8.500% 09/18/26.................. 5,334,081
------------
25,071,144
------------
TOTAL MORTGAGE-BACKED
SECURITIES
(Cost $69,509,985)............. 68,916,375
============
U.S. TREASURY OBLIGATIONS -- 32.1%
U.S. TREASURY BOND -- 12.4%
21,525,000 12.000% 08/15/13................. 29,593,431
------------
U.S. TREASURY NOTE -- 13.8%
30,905,000 8.750% 08/15/00.................. 32,817,092
------------
U.S. TREASURY STRIPS -- 5.9%
5,225,000 Principal Only 08/15/00.......... 4,184,912
24,475,000 Principal Only 11/15/14.......... 9,895,487
------------
14,080,399
------------
TOTAL U.S. TREASURY
OBLIGATIONS
(Cost $77,569,538)............. 76,490,922
============
TOTAL SECURITIES
(Cost $237,098,705)............ 234,561,248
============
PRINCIPAL VALUE
AMOUNT (NOTE 1)
------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.2%
(Cost $406,000)
$ 406,000 Agreement with Smith Barney,
6.300% dated 03/31/97, to be
repurchased at $406,071 on
04/01/97, collateralized by:
$406,001 U.S. Government Agency
Securities, 5.125% - 8.740% due
03/04/98 - 12/15/43............ $ 406,000
============
TOTAL INVESTMENTS
(Cost $237,504,705*)................. 98.8% 234,967,248
OTHER ASSETS AND LIABILITIES (NET)..... 1.2 2,779,156
----- -------------
NET ASSETS............................. 100.0% $237,746,404
===== =============
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Aggregate cost for Federal tax purposes is
$237,578,110.
** Security exempt from registration under Rule 144A of
the Securities Act of 1933. These securities may be
resold in transactions exempt from registration,
normally to qualified institutional buyers.
+ Step coupon bond. Current rate remains in effect
through maturity date. Effective yield was 12.39% at
acquisition date.
ABBREVIATION:
Gold Payments are on accelerated 45 day payment cycle
instead of regular 75 day cycle
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 34
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 1997
<TABLE>
<CAPTION>
NATIONS NATIONS
NATIONS SHORT- STRATEGIC NATIONS
SHORT-TERM INTERMEDIATE FIXED GOVERNMENT NATIONS
INCOME GOVERNMENT INCOME SECURITIES DIVERSIFIED
FUND FUND FUND FUND INCOME FUND
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (Note 1),
See accompanying schedules:
Securities...................................... $196,165,327 $456,215,734 $ 950,617,110 $101,327,214 $234,561,248
Repurchase agreements........................... 2,190,000 11,048,000 31,671,000 133,000 406,000
------------ ------------ -------------- ------------ ------------
Total investments............................. 198,355,327 467,263,734 982,288,110 101,460,214 234,967,248
Cash.............................................. 860 418 529 752 66,722
Interest receivable............................... 2,285,532 6,026,677 12,389,573 754,341 3,486,904
Receivable for Fund shares sold................... 368,627 1,326,030 3,830,639 104,018 143,415
Receivable for investment securities sold......... -- 22,579 213 24,974,212 --
Unamortized organization costs (Note 6)........... 2,016 -- 2,354 -- 2,354
Prepaid expenses and other assets................. 4,900 23,959 18,892 24,915 26,125
------------ ------------ -------------- ------------ ------------
Total Assets.................................. 201,017,262 474,663,397 998,530,310 127,318,452 238,692,768
------------ ------------ -------------- ------------ ------------
LIABILITIES:
Payable for Fund shares redeemed.................. 2,241,660 11,357,678 9,343,930 1,073,552 367,089
Payable for investment securities purchased
(Notes 1 and 4)................................. -- 11,931,417 -- 21,939,520 --
Investment advisory fee payable (Note 2).......... 51,295 157,138 422,705 45,259 98,500
Administration fee payable (Note 2)............... 17,098 39,285 84,541 9,052 19,699
Shareholder servicing and distribution fees
payable (Note 3)................................ 6,175 22,726 15,561 22,145 47,726
Transfer agent fees payable (Note 2).............. 1,695 5,035 33,967 -- 19,849
Custodian fees payable (Note 2)................... 7,442 15,820 28,074 -- 2,472
Dividends payable................................. 474,835 1,384,667 2,501,891 340,498 345,837
Accrued Trustees'/Directors' fees and expenses
(Note 2)........................................ 10,421 25,044 50,833 4,901 11,285
Accrued expenses and other payables............... 31,050 37,112 13,939 28,329 33,907
------------ ------------ -------------- ------------ ------------
Total Liabilities............................. 2,841,671 24,975,922 12,495,441 23,463,256 946,364
------------ ------------ -------------- ------------ ------------
NET ASSETS........................................ $198,175,591 $449,687,475 $ 986,034,869 $103,855,196 $237,746,404
============ ============ ============== ============ ============
Investments, at cost.............................. $199,894,292 $470,652,382 $ 995,103,970 $102,487,694 $237,504,705
============ ============ ============== ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 35
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MARCH 31, 1997
<TABLE>
<CAPTION>
NATIONS NATIONS
NATIONS SHORT- STRATEGIC NATIONS NATIONS
SHORT-TERM INTERMEDIATE FIXED GOVERNMENT DIVERSIFIED
INCOME GOVERNMENT INCOME SECURITIES INCOME
FUND FUND FUND FUND FUND
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS CONSIST OF:
Undistributed net investment
income/(distributions in excess of net
investment income)............................ $ 6,396 $ 33,130 $ -- $ (340,498) $ 38,073
Accumulated net realized loss on investments
sold.......................................... (6,938,012) (23,552,094) (18,927,381) (10,473,882) (3,762,641)
Net unrealized depreciation of investments...... (1,538,965) (3,388,648) (12,815,860) (1,027,480) (2,537,457)
Paid-in capital................................. 206,646,172 476,595,087 1,017,778,110 115,697,056 244,008,429
------------ ------------ -------------- ------------ ------------
$198,175,591 $449,687,475 $ 986,034,869 $103,855,196 $237,746,404
============ ============ ============== ============ ============
NET ASSETS:
Primary A Shares................................ $181,455,355 $371,118,304 $ 947,276,804 $ 52,606,163 $152,070,465
============ ============ ============== ============ ============
Primary B Shares................................ $ 952,672 $ 16,979,912 $ 29,235,081 $ 755,405 $ 40,503
============ ============ ============== ============ ============
Investor A Shares............................... $ 6,168,715 $ 42,467,858 $ 6,345,434 $ 9,852,268 $ 11,661,719
============ ============ ============== ============ ============
Investor C Shares............................... $ 4,062,822 $ 8,333,721 $ 1,068,073 $ 1,834,758 $ 3,342,629
============ ============ ============== ============ ============
Investor N Shares............................... $ 5,536,027 $ 10,787,680 $ 2,109,477 $ 38,806,602 $ 70,631,088
============ ============ ============== ============ ============
SHARES OUTSTANDING:
Primary A Shares................................ 18,751,524 92,903,285 98,462,171 5,604,487 15,036,149
============ ============ ============== ============ ============
Primary B Shares................................ 98,444 4,255,617 3,037,736 80,478 4,005
============ ============ ============== ============ ============
Investor A Shares............................... 637,487 10,632,906 659,595 1,049,631 1,153,074
============ ============ ============== ============ ============
Investor C Shares............................... 419,862 2,086,517 110,996 195,473 330,501
============ ============ ============== ============ ============
Investor N Shares............................... 572,103 2,700,906 219,282 4,134,349 6,983,691
============ ============ ============== ============ ============
PRIMARY A SHARES:
Net asset value, offering and redemption price
per share..................................... $9.68 $3.99 $9.62 $9.39 $10.11
===== ===== ===== ===== ======
PRIMARY B SHARES:
Net asset value, offering and redemption price
per share..................................... $9.68 $3.99 $9.62 $9.39 $10.11
===== ===== ===== ===== ======
INVESTOR A SHARES:
Net asset value, offering and redemption price
per share..................................... $9.68 $3.99 $9.62 $9.39 $10.11
===== ===== ===== ===== ======
INVESTOR C SHARES:
Net asset value and offering price per share*... $9.68 $3.99 $9.62 $9.39 $10.11
===== ===== ===== ===== ======
INVESTOR N SHARES:
Net asset value, offering and redemption price
per share..................................... $9.68 $3.99 $9.62 $9.39 $10.11
===== ===== ===== ===== ======
</TABLE>
- ---------------
* Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE> 36
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
NATIONS NATIONS
NATIONS SHORT- STRATEGIC NATIONS NATIONS
SHORT-TERM INTERMEDIATE FIXED GOVERNMENT DIVERSIFIED
INCOME GOVERNMENT INCOME SECURITIES INCOME
FUND FUND FUND FUND FUND
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest................................................... $13,053,057 $29,980,442 $ 63,691,031 $8,039,329 $14,983,294
----------- ----------- ----------- ----------- -----------
EXPENSES:
Investment advisory fee (Note 2)........................... 1,202,160 2,829,267 5,709,169 724,889 1,200,738
Administration fee (Note 2)................................ 200,278 471,543 951,528 113,616 200,123
Transfer agent fees (Note 2)............................... 142,204 344,153 680,098 78,032 162,955
Custodian fees (Note 2).................................... 35,750 65,708 122,008 24,562 31,937
Legal and audit fees....................................... 45,589 82,018 110,729 37,818 48,103
Trustees'/Directors' fees and expenses (Note 2)............ 8,901 20,452 44,012 3,313 10,256
Amortization of organization costs (Note 6)................ 4,033 2,331 4,033 -- 4,033
Other...................................................... 66,621 115,377 93,164 81,816 50,475
----------- ----------- ----------- ----------- -----------
Subtotal............................................... 1,705,536 3,930,849 7,714,741 1,064,046 1,708,620
Shareholder servicing and distribution fees (Note 3):
Primary B Shares......................................... 1,535 23,994 63,358 2,205 143
Investor A Shares........................................ 10,355 98,037 13,443 26,901 31,743
Investor C Shares........................................ 16,662 49,757 3,245 10,999 17,939
Investor N Shares........................................ 22,564 74,129 15,434 296,401 587,699
Fees waived by investment adviser (Note 2)................. (601,326) (943,089) (951,528) (156,808) (200,123)
----------- ----------- ----------- ----------- -----------
Total expenses......................................... 1,155,326 3,233,677 6,858,693 1,243,744 2,146,021
Fees reduced by credits allowed by the custodian
(Note 2)................................................ (4,191) (3,681) (9,238) -- --
----------- ----------- ----------- ----------- -----------
Net expenses........................................... 1,151,135 3,229,996 6,849,455 1,243,744 2,146,021
----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME...................................... 11,901,922 26,750,446 56,841,576 6,795,585 12,837,273
----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
(NOTES 1 AND 4):
Net realized gain/(loss) on investments sold during the
year..................................................... 14,435 (9,570,325) (17,609,800) (3,826,282) (3,799,025)
Net unrealized appreciation/(depreciation) of investments
during the year.......................................... (1,766,538) 826,615 479,199 478,228 106,386
----------- ----------- ----------- ----------- -----------
Net realized and unrealized loss on investments............ (1,752,103) (8,743,710) (17,130,601) (3,348,054) (3,692,639)
----------- ----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $10,149,819 $18,006,736 $ 39,710,975 $3,447,531 $ 9,144,634
=========== =========== ============ ========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE> 37
NATIONS FUNDS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED MARCH 31, 1997
NATIONS NATIONS
NATIONS SHORT- STRATEGIC NATIONS NATIONS
SHORT-TERM INTERMEDIATE FIXED GOVERNMENT DIVERSIFIED
INCOME GOVERNMENT INCOME SECURITIES INCOME
FUND FUND FUND FUND FUND
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income.......................... $ 11,901,922 $ 26,750,446 $ 56,841,576 $ 6,795,585 $ 12,837,273
Net realized gain/(loss) on investments........ 14,435 (9,570,325) (17,609,800) (3,826,282) (3,799,025)
Change in unrealized
appreciation/(depreciation) of investments... (1,766,538) 826,615 479,199 478,228 106,386
------------ ------------ ------------ ------------ ------------
Net increase in net assets resulting from
operations................................... 10,149,819 18,006,736 39,710,975 3,447,531 9,144,634
Distributions to shareholders from net
investment income:
Primary A Shares............................. (10,929,771) (22,214,271) (54,960,385) (3,299,326) (7,049,444)
Primary B Shares............................. (24,362) (363,390) (701,691) (23,959) (1,757)
Investor A Shares............................ (296,338) (2,674,564) (388,702) (629,297) (820,865)
Investor C Shares............................ (265,655) (513,751) (35,613) (122,250) (222,986)
Investor N Shares............................ (357,900) (623,578) (124,213) (2,442,823) (4,654,890)
Distributions to shareholders from net realized
gain on investments:
Primary A Shares............................. -- -- (10,984,337) -- (1,246,521)
Primary B Shares............................. -- -- (168,447) -- (481)
Investor A Shares............................ -- -- (77,228) -- (146,959)
Investor C Shares............................ -- -- (8,604) -- (42,737)
Investor N Shares............................ -- -- (26,485) -- (932,648)
Distributions to shareholders from capital:
Primary A Shares............................. -- -- (61,284) (26,548) --
Primary B Shares............................. -- -- (836) (214) --
Investor A Shares............................ -- -- (449) (5,279) --
Investor C Shares............................ -- -- (43) (1,067) --
Investor N Shares............................ -- -- (156) (22,014) --
Net increase/(decrease) in net assets from Fund
share transactions:
Primary A Shares............................. 3,091,273 (22,025,851) 150,300,620 (1,923,011) 90,247,006
Primary B Shares............................. 957,004 17,251,586 29,855,538 768,845 41,228
Investor A Shares............................ 3,387,681 (13,976,457) 104,418 (1,489,221) (1,295,769)
Investor C Shares............................ (2,014,986) (3,303,160) 790,529 (659,366) (16,833)
Investor N Shares............................ (1,747,931) (2,780,531) (313,787) (10,856,535) (11,813,564)
------------ ------------ ------------ ------------ ------------
Net increase/(decrease) in net assets.......... 1,948,834 (33,217,231) 152,909,820 (17,284,534) 71,187,414
NET ASSETS:
Beginning of year.............................. 196,226,757 482,904,706 833,125,049 121,139,730 166,558,990
------------ ------------ ------------ ------------ ------------
End of year.................................... $198,175,591 $449,687,475 $986,034,869 $103,855,196 $237,746,404
============ ============ ============ ============ ============
Undistributed net investment income/
(distributions in excess of net investment
income) at end of year....................... $ 6,396 $ 33,130 $ -- $ (340,498) $ 38,073
============ ============ ============ ============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE> 38
NATIONS FUNDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED MARCH 31, 1996
NATIONS NATIONS
NATIONS SHORT- STRATEGIC NATIONS NATIONS
SHORT-TERM INTERMEDIATE FIXED GOVERNMENT DIVERSIFIED
INCOME GOVERNMENT INCOME SECURITIES INCOME
FUND(a) FUND(a) FUND(a) FUND(b) FUND(a)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income.......................... $ 3,927,305 $ 8,813,266 $ 15,374,466 $ 5,824,459 $ 3,482,630
Net realized gain on investments............... 739,233 534,819 23,781,522 110,292 2,934,675
Change in unrealized depreciation of
investments.................................. (2,409,577) (9,128,807) (48,262,684) (2,382,181) (9,439,511)
------------- ------------ ------------ ------------ ------------
Net increase/(decrease) in net assets resulting
from operations.............................. 2,256,961 219,278 (9,106,696) 3,552,570 (3,022,206)
Distributions to shareholders from net
investment income:
Primary A Shares............................. (3,565,554) (7,220,634) (15,210,029) (2,364,638) (1,419,419)
Investor A Shares............................ (57,809) (1,030,983) (118,080) (531,600) (281,185)
Investor C Shares............................ (118,157) (199,970) (5,049) (125,779) (69,099)
Investor N Shares............................ (155,101) (224,691) (41,308) (2,513,856) (1,712,773)
Distributions to shareholders in excess of net
investment income:
Primary A Shares............................. -- (112,834) -- (116,271) --
Investor A Shares............................ -- (16,747) -- (27,280) --
Investor C Shares............................ -- (3,441) -- (6,931) --
Investor N Shares............................ -- (3,966) -- (138,103) --
Net increase/(decrease) in net assets from Fund
share transactions:
Primary A Shares............................. 12,171,837 (18,177,375) 24,995,290 17,057,546 2,798,971
Investor A Shares............................ (135,027) (6,438,309) (28,347) 992,151 700,759
Investor C Shares............................ 114,573 (1,176,183) 81,673 (340,453) 2,187
Investor N Shares............................ (1,474,499) (857,349) (6,901) (4,234,782) (2,857,371)
------------- ------------ ------------ ------------ ------------
Net increase/(decrease) in net assets.......... 9,037,224 (35,243,204) 560,553 11,202,574 (5,860,136)
NET ASSETS:
Beginning of period............................ 187,189,533 518,147,910 832,564,496 109,937,156 172,419,126
------------- ------------ ------------ ------------ ------------
End of period.................................. $196,226,757 $482,904,706 $833,125,049 $121,139,730 $166,558,990
============= ============ ============ ============ ============
Distributions in excess of net investment
income at end of period...................... $ (772,975) $(2,116,748) $ (1,545,477) $ (604,959) $ (147,511)
============= ============ ============ ============ ============
</TABLE>
- ---------------
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30. The numbers reflected are for the period December 1, 1995
through March 31, 1996.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
May 31. The numbers reflected are for the period June 1, 1995 through March
31, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE> 39
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
YEAR ENDED NATIONS SHORT-TERM INCOME FUND PERIOD ENDED
MARCH 31, 1997(b) MARCH 31, 1996(a)
-------------------------------- --------------------------------
SHARES DOLLARS SHARES DOLLARS
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold.............................................. 6,396,691 $ 62,280,237 3,296,223 $ 32,508,452
Issued as reinvestment of dividends............... 611,423 5,939,306 172,406 1,695,467
Redeemed.......................................... (6,692,510) (65,128,270) (2,236,024) (22,032,082)
----------- ------------ ----------- ------------
Net increase...................................... 315,604 $ 3,091,273 1,232,605 $ 12,171,837
=========== ============ ========== ============
PRIMARY B SHARES:
Sold.............................................. 100,331 $ 975,313
Issued as reinvestment of dividends............... 1,896 18,454
Redeemed.......................................... (3,783) (36,763)
----------- ------------
Net increase...................................... 98,444 $ 957,004
=========== ============
INVESTOR A SHARES:
Sold.............................................. 536,576 $ 5,205,410 42,961 $ 422,917
Issued as reinvestment of dividends............... 27,926 271,789 4,994 49,132
Redeemed.......................................... (214,856) (2,089,518) (61,870) (607,076)
----------- ------------ ----------- ------------
Net increase/(decrease)........................... 349,646 $ 3,387,681 (13,915) $ (135,027)
=========== ============ ========== ============
INVESTOR C SHARES:
Sold.............................................. 63,175 $ 614,207 109,316 $ 1,078,053
Issued as reinvestment of dividends............... 19,749 192,097 9,036 88,887
Redeemed.......................................... (290,139) (2,821,290) (106,715) (1,052,367)
----------- ------------ ----------- ------------
Net increase/(decrease)........................... (207,215) $ (2,014,986) 11,637 $ 114,573
=========== ============ ========== ============
INVESTOR N SHARES:
Sold.............................................. 62,794 $ 611,334 33,310 $ 328,462
Issued as reinvestment of dividends............... 31,742 308,758 13,560 133,432
Redeemed.......................................... (274,315) (2,668,023) (196,694) (1,936,393)
----------- ------------ ----------- ------------
Net decrease...................................... (179,779) $ (1,747,931) (149,824) $ (1,474,499)
=========== ============ ========== ============
</TABLE>
- ---------------
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) Nations Short-Term Income Fund's Primary B Shares commenced operations on
June 28, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE> 40
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
YEAR ENDED PERIOD ENDED
MARCH 31, 1997(b) MARCH 31, 1996(a)
---------------------------- ---------------------------
SHARES DOLLARS SHARES DOLLARS
-----------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold..................................................... 25,588,345 $ 103,176,037 8,023,715 $ 33,168,896
Issued in exchange for Primary A Shares of Peachtree Bond
Fund (Note 9).......................................... -- -- -- --
Issued as reinvestment of dividends...................... 1,947,196 7,858,690 504,483 2,082,733
Redeemed................................................. (32,906,576) (133,060,578) (12,928,325) (53,429,004)
----------- ------------- ----------- ------------
Net increase/(decrease).................................. (5,371,035) $ (22,025,851) (4,400,127) $(18,177,375)
=========== ============= =========== =============
PRIMARY B SHARES:
Sold..................................................... 4,641,662 $ 18,801,947
Issued as reinvestment of dividends...................... 73,779 298,014
Redeemed................................................. (459,824) (1,848,375)
----------- -------------
Net increase............................................. 4,255,617 $ 17,251,586
=========== =============
INVESTOR A SHARES:
Sold..................................................... 485,750 $ 1,962,420 192,318 $ 794,577
Issued as reinvestment of dividends...................... 457,633 1,847,025 180,559 745,524
Redeemed................................................. (4,410,571) (17,785,902) (1,931,727) (7,978,410)
----------- ------------- ----------- ------------
Net increase/(decrease).................................. (3,467,188) $ (13,976,457) (1,558,850) $ (6,438,309)
=========== ============= =========== =============
INVESTOR C SHARES:
Sold..................................................... 157,558 $ 632,641 4,936 $ 20,431
Issued as reinvestment of dividends...................... 86,331 348,458 34,127 140,922
Redeemed................................................. (1,061,848) (4,284,259) (323,540) (1,337,536)
----------- ------------- ----------- ------------
Net increase/(decrease).................................. (817,959) $ (3,303,160) (284,477) $ (1,176,183)
=========== ============= =========== =============
INVESTOR N SHARES:
Sold..................................................... 181,291 $ 727,752 91,903 $ 379,562
Issued as reinvestment of dividends...................... 90,867 366,792 33,414 137,966
Redeemed................................................. (959,850) (3,875,075) (333,038) (1,374,877)
----------- ------------- ----------- ------------
Net decrease............................................. (687,692) $ (2,780,531) (207,721) $ (857,349)
=========== ============= =========== =============
<CAPTION>
NATIONS STRATEGIC FIXED INCOME FUND
YEAR ENDED PERIOD ENDED
MARCH 31, 1997(b) MARCH 31, 1996(a)
---------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
-----------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold..................................................... 43,888,161 $ 428,802,189 10,281,111 $104,671,102
Issued in exchange for Primary A Shares of Peachtree Bond
Fund (Note 9).......................................... 6,826,942 67,043,140 -- --
Issued as reinvestment of dividends...................... 3,413,891 33,535,767 645,969 6,558,919
Redeemed................................................. (38,662,065) (379,080,476) (8,463,213) (86,234,731)
----------- ------------- ---------- ------------
Net increase/(decrease).................................. 15,466,929 $ 150,300,620 2,463,867 $ 24,995,290
=========== ============= ========== ============
PRIMARY B SHARES:
Sold..................................................... 3,696,662 $ 36,307,617
Issued as reinvestment of dividends...................... 62,778 616,546
Redeemed................................................. (721,704) (7,068,625)
----------- -------------
Net increase............................................. 3,037,736 $ 29,855,538
=========== =============
INVESTOR A SHARES:
Sold..................................................... 271,643 $ 2,666,104 55,747 $ 570,159
Issued as reinvestment of dividends...................... 38,529 378,759 8,723 88,613
Redeemed................................................. (299,293) (2,940,445) (67,518) (687,119)
----------- ------------- ---------- ------------
Net increase/(decrease).................................. 10,879 $ 104,418 (3,048) $ (28,347)
=========== ============= ========== ============
INVESTOR C SHARES:
Sold..................................................... 114,761 $ 1,123,112 7,802 $ 79,891
Issued as reinvestment of dividends...................... 4,392 43,199 404 4,103
Redeemed................................................. (38,322) (375,782) (228) (2,321)
----------- ------------- ---------- ------------
Net increase/(decrease).................................. 80,831 $ 790,529 7,978 $ 81,673
=========== ============= ========== ============
INVESTOR N SHARES:
Sold..................................................... 17,220 $ 170,471 16,308 $ 166,977
Issued as reinvestment of dividends...................... 12,584 123,689 3,066 31,132
Redeemed................................................. (61,936) (607,947) (20,158) (205,010)
----------- ------------- ---------- ------------
Net decrease............................................. (32,132) $ (313,787) (784) $ (6,901)
=========== ============= ========== ============
</TABLE>
- ---------------
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) Nations Short-Intermediate Government Fund and Nations Strategic Fixed
Income Fund's Primary B Shares commenced operations on June 28, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE> 41
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
NATIONS GOVERNMENT SECURITIES FUND
YEAR ENDED PERIOD ENDED
MARCH 31, 1997(c) MARCH 31, 1996(b)
-------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
---------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold..................................................... 1,744,975 $ 16,536,475 1,429,108 $ 14,525,565
Issued in exchange for Trust A Shares of Nations
Mortgage-Backed Securities Fund (Note 9)............... -- -- 1,913,042 18,401,388
Issued as reinvestment of dividends...................... 36,054 344,081 24,136 238,465
Redeemed................................................. (1,963,478) (18,803,567) (1,627,897) (16,107,872)
---------- ------------ ---------- ------------
Net increase/(decrease).................................. (182,449) $ (1,923,011) 1,738,389 $ 17,057,546
---------- ------------ ---------- ------------
PRIMARY B SHARES:
Sold..................................................... 84,339 $ 805,378
Issued as reinvestment of dividends...................... 577 5,502
Redeemed................................................. (4,438) (42,035)
---------- ------------
Net increase............................................. 80,478 $ 768,845
-------- ----------
INVESTOR A SHARES:
Sold..................................................... 35,068 $ 337,119 701,960 $ 7,015,566
Issued as reinvestment of dividends...................... 40,328 385,010 28,709 283,397
Redeemed................................................. (231,727) (2,211,350) (633,283) (6,306,812)
---------- ------------ ---------- ------------
Net increase/(decrease).................................. (156,331) $ (1,489,221) 97,386 $ 992,151
---------- ------------ ---------- ------------
INVESTOR C SHARES:
Sold..................................................... 3,497 $ 33,160 36,493 $ 360,644
Issued as reinvestment of dividends...................... 7,277 69,445 7,802 77,066
Redeemed................................................. (79,815) (761,971) (78,586) (778,163)
---------- ------------ ---------- ------------
Net increase/(decrease).................................. (69,041) $ (659,366) (34,291) $ (340,453)
---------- ------------ ---------- ------------
INVESTOR N SHARES:
Sold..................................................... 85,775 $ 815,971 528,231 $ 5,215,631
Issued as reinvestment of dividends...................... 152,150 1,452,183 161,380 1,594,350
Redeemed................................................. (1,373,092) (13,124,689) (1,116,861) (11,044,763)
---------- ------------ ---------- ------------
Net decrease............................................. (1,135,167) $(10,856,535) (427,250) $ (4,234,782)
---------- ------------ ---------- ------------
<CAPTION>
NAIONS DIVERSIFIED INCOME FUND
YEAR ENDED PERIOD ENDED
MARCH 31, 1997(c) MARCH 31, 1996(a)
------------------------- ------------------------
SHARES DOLLARS SHARES DOLLARS
-----------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold..................................................... 9,326,149 $ 95,819,147 246,328 $ 2,659,348
Issued in exchange for Trust A Shares of Nations
Mortgage-Backed Securities Fund (Note 9)............... -- -- -- --
Issued as reinvestment of dividends...................... 682,648 7,030,327 54,957 577,516
Redeemed................................................. (1,220,878) (12,602,468) (41,015) (437,893)
---------- ------------ -------- -----------
Net increase/(decrease).................................. 8,787,919 $ 90,247,006 260,270 $ 2,798,971
========== ============ ======== ===========
PRIMARY B SHARES:
Sold..................................................... 3,788 $ 38,990
Issued as reinvestment of dividends...................... 217 2,238
Redeemed................................................. -- --
---------- ------------
Net increase............................................. 4,005 $ 41,228
========== ============
INVESTOR A SHARES:
Sold..................................................... 340,595 $ 3,519,242 150,996 $ 1,631,309
Issued as reinvestment of dividends...................... 50,590 521,584 14,397 154,212
Redeemed................................................. (518,078) (5,336,595) (100,604) (1,084,762)
---------- ------------ -------- -----------
Net increase/(decrease).................................. (126,893) $ (1,295,769) 64,789 $ 700,759
========== ============ ======== ===========
INVESTOR C SHARES:
Sold..................................................... 103,490 $ 1,066,332 29,052 $ 309,150
Issued as reinvestment of dividends...................... 18,494 190,859 4,283 45,862
Redeemed................................................. (123,059) (1,274,024) (32,809) (352,825)
---------- ------------ -------- -----------
Net increase/(decrease).................................. (1,075) $ (16,833) 526 $ 2,187
========== ============ ======== ===========
INVESTOR N SHARES:
Sold..................................................... 419,468 $ 4,343,211 243,789 $ 2,636,764
Issued as reinvestment of dividends...................... 334,274 3,456,153 92,508 991,836
Redeemed................................................. (1,901,187) (19,612,928) (603,828) (6,485,971)
---------- ------------ -------- -----------
Net decrease............................................. (1,147,445) $(11,813,564) (267,531) $(2,857,371)
========== ============ ======== ===========
</TABLE>
- ---------------
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
May 31.
(c) Nations Government Securities Fund and Nations Diversified Income Fund's
Primary B Shares commenced operations on June 28, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE> 42
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
NET INCREASE/ DISTRIBUTIONS
NET ASSET NET REALIZED (DECREASE) DIVIDENDS IN EXCESS
VALUE NET AND UNREALIZED IN NET FROM NET OF NET
BEGINNING INVESTMENT GAIN/(LOSS) ASSET VALUE INVESTMENT INVESTMENT
OF YEAR INCOME ON INVESTMENTS FROM OPERATIONS INCOME INCOME
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NATIONS SHORT-TERM
INCOME FUND
PRIMARY A
Year ended 03/31/1997#............. $ 9.76 $0.58 $ (0.08) $ 0.50 $(0.58) --
Period ended 03/31/1996(a)#........ 9.84 0.20 (0.08) 0.12 (0.20) --
Year ended 11/30/1995#............. 9.48 0.61 0.36 0.97 (0.61) --
Year ended 11/30/1994#............. 10.01 0.50 (0.51) (0.01) (0.48) $(0.02)
Year ended 11/30/1993.............. 9.75 0.53 0.26 0.79 (0.53) --
Period ended 11/30/1992*........... 10.00 0.09 (0.25) (0.16) (0.09) --
PRIMARY B
Period ended 03/31/1997*#.......... $ 9.71 $0.41 $ (0.03) $ 0.38 $(0.41) --
INVESTOR A
Year ended 03/31/1997#............. $ 9.76 $0.56 $ (0.08) $ 0.48 $(0.56) --
Period ended 03/31/1996(a)#........ 9.84 0.19 (0.08) 0.11 (0.19) --
Year ended 11/30/1995#............. 9.48 0.59 0.36 0.95 (0.59) --
Year ended 11/30/1994#............. 10.01 0.48 (0.51) (0.03) (0.46) $(0.02)
Year ended 11/30/1993.............. 9.75 0.51 0.26 0.77 (0.51) --
Period ended 11/30/1992*........... 10.00 0.08 (0.26) (0.18) (0.07) --
INVESTOR C
Year ended 03/31/1997#............. $ 9.76 $0.55 $ (0.08) $ 0.47 $(0.55) --
Period ended 03/31/1996(a)#........ 9.84 0.19 (0.08) 0.11 (0.19) --
Year ended 11/30/1995#............. 9.48 0.57 0.36 0.93 (0.57) --
Year ended 11/30/1994#............. 10.01 0.46 (0.51) (0.05) (0.44) $(0.02)
Year ended 11/30/1993.............. 9.75 0.48 0.26 0.74 (0.48) --
Period ended 11/30/1992*........... 10.00 0.08 (0.26) (0.18) (0.07) --
INVESTOR N
Year ended 03/31/1997#............. $ 9.76 $0.55 $ (0.08) $ 0.47 $(0.55) --
Period ended 03/31/1996(a)#........ 9.84 0.19 (0.08) 0.11 (0.19) --
Year ended 11/30/1995#............. 9.48 0.57 0.36 0.93 (0.57) --
Year ended 11/30/1994#............. 10.01 0.47 (0.51) (0.04) (0.45) $(0.02)
Period ended 11/30/1993*........... 9.94 0.22 0.07 0.29 (0.22) --
</TABLE>
- ---------------
* Nations Short-Term Income Fund's Primary A, Primary B, Investor A, Investor
C and Investor N Shares commenced operations on September 30, 1992, June
28, 1996, October 2, 1992, October 2, 1992 and June 7, 1993, respectively.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the monthly average share
method, which more appropriately represents the per share data for the
period since use of the undistributed income method did not accord with the
results of operations.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) The effect of interest expense on the operating expense ratio was less than
0.01%.
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE> 43
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
TOTAL NET ASSET NET ASSETS
DISTRIBUTIONS DIVIDENDS VALUE END OF
FROM AND END OF TOTAL YEAR
CAPITAL DISTRIBUTIONS YEAR RETURN++ (IN 000'S)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATIONS SHORT-TERM
INCOME FUND
PRIMARY A
Year ended 03/31/1997#............. -- $ (0.58) $ 9.68 5.25% $ 181,455
Period ended 03/31/1996(a)#........ -- (0.20) 9.76 1.19 179,957
Year ended 11/30/1995#............. -- (0.61) 9.84 10.48 169,291
Year ended 11/30/1994#............. $ (0.02) (0.52) 9.48 (0.11) 176,712
Year ended 11/30/1993.............. -- (0.53) 10.01 8.26 201,738
Period ended 11/30/1992*........... -- (0.09) 9.75 (1.58)+++ 190,680
PRIMARY B
Period ended 03/31/1997*#.......... -- $ (0.41) $ 9.68 3.95% $ 953
INVESTOR A
Year ended 03/31/1997#............. -- $ (0.56) $ 9.68 5.04% $ 6,169
Period ended 03/31/1996(a)#........ -- (0.19) 9.76 1.13 2,810
Year ended 11/30/1995#............. -- (0.59) 9.84 10.29 2,969
Year ended 11/30/1994#............. $ (0.02) (0.50) 9.48 (0.33) 2,490
Year ended 11/30/1993.............. -- (0.51) 10.01 8.03 11,205
Period ended 11/30/1992*........... -- (0.07) 9.75 (1.81)+++ 254
INVESTOR C
Year ended 03/31/1997#............. -- $ (0.55) $ 9.68 4.89% $ 4,063
Period ended 03/31/1996(a)#........ -- (0.19) 9.76 1.07 6,121
Year ended 11/30/1995#............. -- (0.57) 9.84 10.08 6,056
Year ended 11/30/1994#............. $ (0.02) (0.48) 9.48 (0.51) 8,102
Year ended 11/30/1993.............. -- (0.48) 10.01 7.73 19,851
Period ended 11/30/1992*........... -- (0.07) 9.75 (1.82)+++ 6,747
INVESTOR N
Year ended 03/31/1997#............. -- $ (0.55) $ 9.68 4.89% $ 5,536
Period ended 03/31/1996(a)#........ -- (0.19) 9.76 1.08 7,339
Year ended 11/30/1995#............. -- (0.57) 9.84 10.10 8,873
Year ended 11/30/1994#............. $ (0.02) (0.49) 9.48 (0.46) 16,550
Period ended 11/30/1993*........... -- (0.22) 10.01 2.96 39,861
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
---------------------------
RATIO OF RATIO OF RATIO OF
OPERATING NET INVESTMENT OPERATING NET
EXPENSES INCOME PORTFOLIO EXPENSES TO INVESTMENT
TO AVERAGE TO AVERAGE TURNOVER AVERAGE INCOME PER
NET ASSETS NET ASSETS RATE NET ASSETS SHARE
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATIONS SHORT-TERM
INCOME FUND
PRIMARY A
Year ended 03/31/1997#............. 0.55%(b) 5.97% 172% 0.85% $ 0.55
Period ended 03/31/1996(a)#........ 0.55+ 6.07+ 73 0.88+ 0.19
Year ended 11/30/1995#............. 0.56 6.32 224 0.86 0.58
Year ended 11/30/1994#............. 0.50 5.23 293 0.82 0.47
Year ended 11/30/1993.............. 0.37 5.27 121 0.79 0.48
Period ended 11/30/1992*........... 0.30+ 5.54+ 45 0.90+ 0.08
PRIMARY B
Period ended 03/31/1997*#.......... 0.90%(b)+ 5.62%+ 172% 1.20%+ $ 0.39
INVESTOR A
Year ended 03/31/1997#............. 0.75%(b) 5.77% 172% 1.05% $ 0.53
Period ended 03/31/1996(a)#........ 0.75+ 5.87+ 73 1.08+ 0.18
Year ended 11/30/1995#............. 0.76 6.12 224 1.06 0.56
Year ended 11/30/1994#............. 0.71 5.02 293 1.03 0.45
Year ended 11/30/1993.............. 0.57 5.07 121 0.99 0.48
Period ended 11/30/1992*........... 0.45+ 5.39+ 45 1.05+ 0.07
INVESTOR C
Year ended 03/31/1997#............. 0.90%(b) 5.62% 172% 1.20% $ 0.52
Period ended 03/31/1996(a)#........ 0.90+ 5.72+ 73 1.23+ 0.18
Year ended 11/30/1995#............. 0.91 5.97 224 1.21 0.54
Year ended 11/30/1994#............. 0.89 4.84 293 1.21 0.43
Year ended 11/30/1993.............. 0.87 4.77 121 1.29 0.45
Period ended 11/30/1992*........... 0.80+ 5.04+ 45 1.40+ 0.07
INVESTOR N
Year ended 03/31/1997#............. 0.90%(b) 5.62% 172% 1.20% $ 0.52
Period ended 03/31/1996(a)#........ 0.90+ 5.72+ 73 1.23+ 0.18
Year ended 11/30/1995#............. 0.91 5.97 224 1.21 0.54
Year ended 11/30/1994#............. 0.85 4.88 293 1.17 0.44
Period ended 11/30/1993*........... 0.72+ 4.92+ 121 1.14+ 0.21
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE> 44
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
NET INCREASE/ DIVIDENDS DISTRIBUTIONS DISTRIBUTIONS
NET ASSET NET REALIZED (DECREASE) FROM IN EXCESS FROM NET
VALUE NET AND UNREALIZED IN NET NET OF NET REALIZED
BEGINNING INVESTMENT GAIN/(LOSS) ASSET VALUE INVESTMENT INVESTMENT CAPITAL
OF YEAR INCOME ON INVESTMENTS FROM OPERATIONS INCOME INCOME GAINS
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NATIONS
SHORT-INTERMEDIATE
GOVERNMENT FUND
PRIMARY A
Year ended
03/31/1997#........... $ 4.07 $ 0.23 $(0.08) $ 0.15 $(0.23) -- --
Period ended
03/31/1996(b)#........ 4.14 0.07 (0.07) 0.00 (0.07) $ (0.00)(a) --
Year ended
11/30/1995#........... 3.93 0.24 0.21 0.45 (0.24) (0.00)(a) --
Year ended 11/30/1994... 4.28 0.23 (0.33) (0.10) (0.23) (0.00)(a) $ (0.02)
Year ended 11/30/1993... 4.16 0.23 0.14 0.37 (0.23) -- (0.02)
Year ended 11/30/1992... 4.17 0.28 (0.01) 0.27 (0.28) -- --
Period ended
11/30/1991*........... 4.00## 0.10 0.17 0.27 (0.10) -- --
PRIMARY B
Period ended
03/31/1997*#.......... $ 4.02 $ 0.16 $(0.03) $ 0.13 $(0.16) -- --
INVESTOR A
Year ended
03/31/1997#........... $ 4.07 $ 0.22 $(0.08) $ 0.14 $(0.22) -- --
Period ended
03/31/1996(b)#........ 4.14 0.07 (0.07) 0.00 (0.07) $ (0.00)(a) --
Year ended
11/30/1995#........... 3.93 0.23 0.21 0.44 (0.23) (0.00)(a) --
Year ended 11/30/1994... 4.28 0.22 (0.33) (0.11) (0.22) (0.00)(a) $ (0.02)
Year ended 11/30/1993... 4.16 0.22 0.14 0.36 (0.22) -- (0.02)
Year ended 11/30/1992... 4.17 0.27 (0.01) 0.26 (0.27) -- --
Period ended
11/30/1991*........... 4.00## 0.10 0.17 0.27 (0.10) -- --
INVESTOR C
Year ended
03/31/1997#........... $ 4.07 $ 0.21 $(0.08) $ 0.13 $(0.21) -- --
Period ended
03/31/1996(b)#........ 4.14 0.07 (0.07) 0.00 (0.07) $ (0.00)(a) --
Year ended
11/30/1995#........... 3.93 0.22 0.21 0.43 (0.22) (0.00)(a) --
Year ended 11/30/1994... 4.28 0.20 (0.33) (0.13) (0.20) (0.00)(a) $ (0.02)
Year ended 11/30/1993... 4.16 0.20 0.14 0.34 (0.20) -- (0.02)
Period ended
11/30/1992*........... 4.19 0.10 (0.03) 0.07 (0.10) -- --
INVESTOR N
Year ended
03/31/1997#........... $ 4.07 $ 0.20 $(0.08) $ 0.12 $(0.20) -- --
Period ended
03/31/1996(b)#........ 4.14 0.07 (0.07) 0.00 (0.07) $ (0.00)(a) --
Year ended
11/30/1995#........... 3.93 0.21 0.21 0.42 (0.21) (0.00)(a) --
Year ended 11/30/1994... 4.28 0.20 (0.33) (0.13) (0.20) (0.00)(a) $ (0.02)
Period ended
11/30/1993*........... 4.26 0.09 0.02 0.11 (0.09) -- --
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Nations Short-Intermediate Government Fund's Primary A, Primary B, Investor A, Investor C and Investor N Shares commenced
operations on August 1, 1991, June 28, 1996, August 5, 1991, June 17, 1992 and June 7, 1993, respectively.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and does not reflect the deduction of any
applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the monthly average share method, which more appropriately represents the
per share data for the period since use of the undistributed income method did not accord with the results of operations.
## Nations Short-Intermediate Government Fund's net asset value upon commencement of operations was $2.00 per share.
Effective September 25, 1991, the net asset value doubled as a result of the reclassification of each outstanding share
into half as many shares (reverse split).
### Amount represents less than 0.01%.
(a) Amount represents less than $0.01.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was November 30.
(c) The effect of interest expense on the operating expense ratio was less than 0.01%.
(d) The effect of the fees reduced by credits allowed by the custodian on the operating expense ratio, with and without
waivers and/or expense reimbursements and net investment income per share was less than 0.01% and $0.01, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE> 45
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF
NET ASSETS OPERATING
TOTAL DIVIDENDS NET ASSET END OF EXPENSES
AND VALUE END TOTAL YEAR TO AVERAGE
DISTRIBUTIONS OF YEAR RETURN++ (IN 000'S) NET ASSETS
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATIONS
SHORT-INTERMEDIATE
GOVERNMENT FUND
PRIMARY A
Year ended
03/31/1997#........... $(0.23) $3.99 3.72% $ 371,118 0.63%(c)(d)
Period ended
03/31/1996(b)#........ (0.07) 4.07 0.07 399,915 0.63+
Year ended
11/30/1995#........... (0.24) 4.14 11.70 425,200 0.60
Year ended 11/30/1994... (0.25) 3.93 (2.23) 433,278 0.59
Year ended 11/30/1993... (0.25) 4.28 9.03 443,426 0.55
Year ended 11/30/1992... (0.28) 4.16 6.70+++ 360,497 0.37
Period ended
11/30/1991*........... (0.10) 4.17 6.81+++ 158,435 0.08+
PRIMARY B
Period ended
03/31/1997*#.......... $(0.16) $3.99 3.31% $ 16,980 0.98%(c)(d)+
INVESTOR A
Year ended
03/31/1997#........... $(0.22) $3.99 3.51% $ 42,468 0.83%(c)(d)
Period ended
03/31/1996(b)#........ (0.07) 4.07 0.00### 57,381 0.83+
Year ended
11/30/1995#........... (0.23) 4.14 11.48 64,848 0.80
Year ended 11/30/1994... (0.24) 3.93 (2.41) 77,128 0.77
Year ended 11/30/1993... (0.24) 4.28 8.85 173,449 0.70
Year ended 11/30/1992... (0.27) 4.16 6.61 188,624 0.48
Period ended
11/30/1991*........... (0.10) 4.17 6.81+++ 53,874 0.08+
INVESTOR C
Year ended
03/31/1997#........... $(0.21) $3.99 3.21% $ 8,334 1.13%(c)(d)
Period ended
03/31/1996(b)#........ (0.07) 4.07 (0.10) 11,820 1.13+
Year ended
11/30/1995#........... (0.22) 4.14 11.15 13,206 1.10
Year ended 11/30/1994... (0.22) 3.93 (2.80) 16,725 1.17
Year ended 11/30/1993... (0.22) 4.28 8.20 31,440 1.30
Period ended
11/30/1992*........... (0.10) 4.16 1.64+++ 24,352 1.18+
INVESTOR N
Year ended
03/31/1997#........... $(0.20) $3.99 3.10% $ 10,788 1.23%(c)(d)
Period ended
03/31/1996(b)#........ (0.07) 4.07 (0.13) 13,789 1.23+
Year ended
11/30/1995#........... (0.21) 4.14 11.02 14,893 1.20
Year ended 11/30/1994... (0.22) 3.93 (2.81) 10,974 1.19
Period ended
11/30/1993*........... (0.09) 4.28 2.65 8,847 1.15+
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
------------------------
RATIO OF RATIO OF
NET INVESTMENT OPERATING NET
INCOME PORTFOLIO EXPENSES TO INVESTMENT
TO AVERAGE TURNOVER AVERAGE INCOME PER
NET ASSETS RATE NET ASSETS SHARE
------------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS
SHORT-INTERMEDIATE
GOVERNMENT FUND
PRIMARY A
Year ended
03/31/1997#........... 5.73% 529% 0.83%(d) $ 0.22(d)
Period ended
03/31/1996(b)#........ 5.32+ 189 0.86+ 0.06
Year ended
11/30/1995#........... 5.88 328 0.80 0.23
Year ended 11/30/1994... 5.76 133 0.80 0.22
Year ended 11/30/1993... 5.40 92 0.79 0.22
Year ended 11/30/1992... 6.48 25 0.77 0.26
Period ended
11/30/1991*........... 7.21+ 11 0.82+ 0.00(a)
PRIMARY B
Period ended
03/31/1997*#.......... 5.38%+ 529% 1.18%(d)+ $ 0.15(d)
INVESTOR A
Year ended
03/31/1997#........... 5.53% 529% 1.03%(d) $ 0.21(d)
Period ended
03/31/1996(b)#........ 5.12+ 189 1.06+ 0.06
Year ended
11/30/1995#........... 5.68 328 1.00 0.22
Year ended 11/30/1994... 5.58 133 0.98 0.21
Year ended 11/30/1993... 5.25 92 0.94 0.21
Year ended 11/30/1992... 6.34 25 0.88 0.25
Period ended
11/30/1991*........... 7.21+ 11 0.82+ 0.00(a)
INVESTOR C
Year ended
03/31/1997#........... 5.23% 529% 1.33%(d) $ 0.20(d)
Period ended
03/31/1996(b)#........ 4.82+ 189 1.36+ 0.06
Year ended
11/30/1995#........... 5.38 328 1.30 0.21
Year ended 11/30/1994... 5.18 133 1.38 0.19
Year ended 11/30/1993... 4.65 92 1.54 0.19
Period ended
11/30/1992*........... 4.80+ 25 1.44+ 0.09
INVESTOR N
Year ended
03/31/1997#........... 5.13% 529% 1.43%(d) $ 0.19(d)
Period ended
03/31/1996(b)#........ 4.72+ 189 1.46+ 0.06
Year ended
11/30/1995#........... 5.28 328 1.40 0.20
Year ended 11/30/1994... 5.16 133 1.40 0.19
Period ended
11/30/1993*........... 4.80+ 92 1.39+ 0.09
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE> 46
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
NET INCREASE/ DIVIDENDS DISTRIBUTIONS DISTRIBUTIONS
NET ASSET NET REALIZED (DECREASE) FROM IN EXCESS FROM NET
VALUE NET AND UNREALIZED IN NET NET OF NET REALIZED
BEGINNING INVESTMENT GAIN/(LOSS) ASSET VALUE INVESTMENT INVESTMENT CAPITAL
OF YEAR INCOME ON INVESTMENTS FROM OPERATIONS INCOME INCOME GAINS
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NATIONS STRATEGIC FIXED
INCOME FUND
PRIMARY A
Year ended
03/31/1997#........... $ 9.93 $ 0.58 $(0.20) $ 0.38 $(0.58) -- $ (0.11)
Period ended
03/31/1996(a)......... 10.22 0.19 (0.29) (0.10) (0.19) -- --
Year ended 11/30/1995... 9.32 0.59 0.90 1.49 (0.59) -- --
Year ended 11/30/1994... 10.55 0.53 (0.89) (0.36) (0.51) $ (0.02) (0.34)
Year ended 11/30/1993... 9.94 0.56 0.62 1.18 (0.56) -- (0.01)
Period ended
11/30/1992*........... 10.00 0.05 (0.06) (0.01) (0.05) -- --
PRIMARY B
Period ended
03/31/1997*#.......... $ 9.81 $ 0.41 $(0.08) $ 0.33 $(0.41) -- $ (0.11)
INVESTOR A
Year ended
03/31/1997#........... $ 9.93 $ 0.56 $(0.20) $ 0.36 $(0.56) -- $ (0.11)
Period ended
03/31/1996(a)......... 10.22 0.18 (0.29) (0.11) (0.18) -- --
Year ended 11/30/1995... 9.32 0.57 0.90 1.47 (0.57) -- --
Year ended 11/30/1994... 10.55 0.51 (0.89) (0.38) (0.49) $ (0.02) (0.34)
Year ended 11/30/1993... 9.94 0.54 0.62 1.16 (0.54) -- (0.01)
Period ended
11/30/1992*........... 9.99 0.01 (0.06) (0.05) -- -- --
INVESTOR C
Year ended
03/31/1997#........... $ 9.93 $ 0.53 $(0.20) $ 0.33 $(0.53) -- $ (0.11)
Period ended
03/31/1996(a)......... 10.22 0.17 (0.29) (0.12) (0.17) -- --
Year ended 11/30/1995... 9.32 0.54 0.90 1.44 (0.54) -- --
Year ended 11/30/1994... 10.55 0.47 (0.89) (0.42) (0.45) $ (0.02) (0.34)
Year ended 11/30/1993... 9.94 0.48 0.62 1.10 (0.48) -- (0.01)
Period ended
11/30/1992*........... 9.97 0.02 (0.04) (0.02) (0.01) -- --
INVESTOR N
Year ended
03/31/1997#........... $ 9.93 $ 0.52 $(0.20) $ 0.32 $(0.52) -- $ (0.11)
Period ended
03/31/1996(a)......... 10.22 0.16 (0.29) (0.13) (0.16) -- --
Year ended 11/30/1995... 9.32 0.53 0.90 1.43 (0.53) -- --
Year ended 11/30/1994... 10.55 0.47 (0.89) (0.42) (0.45) $ (0.02) (0.34)
Period ended
11/30/1993*........... 10.39 0.21 0.17 0.38 (0.21) -- (0.01)
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Nations Strategic Fixed Income Fund's Primary A, Primary B, Investor A, Investor C and Investor N Shares commenced
operations on October 30, 1992, June 28, 1996, November 19, 1992, November 16, 1992 and June 7, 1993, respectively.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and does not reflect the deduction of any
applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the monthly average share method, which more appropriately represents the
per share data for the period since use of the undistributed income method did not accord with the results of operations.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was November 30.
(b) Amount represents less than $0.01.
(c) The effect of the fees reduced by credits allowed by the custodian on the operating expense ratio, with and without
waivers and/or expense reimbursements and net investment income per share was less than 0.01% and $0.01, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE> 47
NATIONS FUNDS
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF
NET ASSETS OPERATING
DISTRIBUTIONS TOTAL NET ASSET END OF EXPENSES
FROM DIVIDENDS AND VALUE END TOTAL YEAR TO AVERAGE
CAPITAL DISTRIBUTIONS OF YEAR RETURN++ (IN 000'S) NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NATIONS STRATEGIC FIXED
INCOME FUND
PRIMARY A
Year ended
03/31/1997#................ $ (0.00)(b) $ (0.69) $ 9.62 3.90% $ 947,277 0.71%(c)
Period ended
03/31/1996(a).............. -- (0.19) 9.93 (1.04) 823,890 0.72+
Year ended 11/30/1995........ -- (0.59) 10.22 16.45 823,098 0.71
Year ended 11/30/1994........ -- (0.87) 9.32 (3.58) 550,697 0.68
Year ended 11/30/1993........ -- (0.57) 10.55 12.05 545,538 0.61
Period ended
11/30/1992*................ -- (0.05) 9.94 (0.11)+++ 581,329 0.26+
PRIMARY B
Period ended
03/31/1997*#............... $ (0.00)(b) $ (0.52) $ 9.62 3.35% $ 29,235 1.21%(c)+
INVESTOR A
Year ended
03/31/1997#................ $ (0.00)(b) $ (0.67) $ 9.62 3.70% $ 6,345 0.91%(c)
Period ended
03/31/1996(a).............. -- (0.18) 9.93 (1.11) 6,440 0.92+
Year ended 11/30/1995........ -- (0.57) 10.22 16.22 6,662 0.91
Year ended 11/30/1994........ -- (0.85) 9.32 (3.76) 967 0.86
Year ended 11/30/1993........ -- (0.55) 10.55 11.88 1,138 0.76
Period ended
11/30/1992*................ -- -- 9.94 (0.49)+++ 113 0.40+
INVESTOR C
Year ended
03/31/1997#................ $ (0.00)(b) $ (0.64) $ 9.62 3.38% $ 1,068 1.21%(c)
Period ended
03/31/1996(a).............. -- (0.17) 9.93 (1.22) 299 1.22+
Year ended 11/30/1995........ -- (0.54) 10.22 15.87 227 1.21
Year ended 11/30/1994........ -- (0.81) 9.32 (4.14) 41 1.43
Year ended 11/30/1993........ -- (0.49) 10.55 11.20 65 1.36
Period ended
11/30/1992*................ -- (0.01) 9.94 (0.22)+++ 84 1.03+
INVESTOR N
Year ended
03/31/1997#................ $ (0.00)(b) $ (0.63) $ 9.62 3.23% $ 2,109 1.36%(c)
Period ended
03/31/1996(a).............. -- (0.16) 9.93 (1.26) 2,496 1.37+
Year ended 11/30/1995........ -- (0.53) 10.22 15.70 2,578 1.36
Year ended 11/30/1994........ -- (0.81) 9.32 (4.21) 2,145 1.33
Period ended
11/30/1993*................ -- (0.22) 10.55 3.64 1,620 1.26+
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
--------------------------
RATIO OF RATIO OF
NET INVESTMENT OPERATING NET
INCOME PORTFOLIO DISTRIBUTIONS EXPENSES TO INVESTMENT
TO AVERAGE TURNOVER FROM AVERAGE INCOME PER
NET ASSETS RATE CAPITAL NET ASSETS SHARE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NATIONS STRATEGIC FIXED
INCOME FUND
PRIMARY A
Year ended
03/31/1997#................ 5.98% 368% $ (0.00)(b 0.81%(c) $ 0.57(c)
Period ended
03/31/1996(a).............. 5.49+ 133 -- 0.83+ 0.19
Year ended 11/30/1995........ 6.05 228 -- 0.81 0.58
Year ended 11/30/1994........ 5.43 307 -- 0.76 0.52
Year ended 11/30/1993........ 5.40 161 -- 0.77 0.55
Period ended
11/30/1992*................ 6.15+ 12 -- 0.86+ 0.04
PRIMARY B
Period ended
03/31/1997*#............... 5.48%+ 368% $ (0.00)(b 1.31%(c)+ $ 0.43(c)
INVESTOR A
Year ended
03/31/1997#................ 5.78% 368% $ (0.00)(b 1.01%(c) $ 0.55(c)
Period ended
03/31/1996(a).............. 5.29+ 133 -- 1.03+ 0.18
Year ended 11/30/1995........ 5.85 228 -- 1.01 0.56
Year ended 11/30/1994........ 5.25 307 -- 0.94 0.50
Year ended 11/30/1993........ 5.25 161 -- 0.92 0.53
Period ended
11/30/1992*................ 6.00+ 12 -- 1.00+ 0.01
INVESTOR C
Year ended
03/31/1997#................ 5.48% 368% $ (0.00)(b 1.31%(c) $ 0.52(c)
Period ended
03/31/1996(a).............. 4.99+ 133 -- 1.33+ 0.17
Year ended 11/30/1995........ 5.55 228 -- 1.31 0.53
Year ended 11/30/1994........ 4.68 307 -- 1.51 0.46
Year ended 11/30/1993........ 4.65 161 -- 1.52 0.47
Period ended
11/30/1992*................ 5.40+ 12 -- 1.63+ 0.02
INVESTOR N
Year ended
03/31/1997#................ 5.33% 368% $ (0.00)(b 1.46%(c) $ 0.51(c)
Period ended
03/31/1996(a).............. 4.84+ 133 -- 1.48+ 0.16
Year ended 11/30/1995........ 5.40 228 -- 1.46 0.52
Year ended 11/30/1994........ 4.78 307 -- 1.41 0.46
Period ended
11/30/1993*................ 4.75+ 161 -- 1.42+ 0.21
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE> 48
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
NET INCREASE/ DIVIDENDS DISTRIBUTIONS DISTRIBUTIONS
NET ASSET NET REALIZED (DECREASE) FROM IN EXCESS IN EXCESS OF
VALUE NET AND UNREALIZED IN NET NET OF NET NET REALIZED
BEGINNING INVESTMENT GAIN/(LOSS) ASSET VALUE INVESTMENT INVESTMENT CAPITAL
OF YEAR INCOME ON INVESTMENTS FROM OPERATIONS INCOME INCOME GAINS
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NATIONS GOVERNMENT
SECURITIES FUND
PRIMARY A
Year ended 03/31/1997#.......... $ 9.67 $ 0.60 $(0.30) $ 0.30 $(0.58) -- --
Period ended 03/31/1996(a)#..... 9.86 0.52 (0.19) 0.33 (0.50) $ (0.02) --
Year ended 05/31/1995#.......... 9.80 0.64 0.06 0.70 (0.60) -- --
Year ended 05/31/1994........... 10.46 0.64 (0.61) 0.03 (0.58) (0.02) $ (0.05)
Year ended 05/31/1993#.......... 10.36 0.71 0.13 0.84 (0.70) -- (0.04)
Year ended 05/31/1992........... 10.05 0.74 0.37 1.11 (0.77) -- (0.03)
Period ended 05/31/1991*........ 10.00 0.10 0.02 0.12 (0.07) -- --
PRIMARY B
Period ended 03/31/1997*#....... $ 9.51 $ 0.40 $(0.12) $ 0.28 $(0.40) -- --
INVESTOR A
Year ended 03/31/1997#.......... $ 9.67 $ 0.58 $(0.30) $ 0.28 $(0.56) -- --
Period ended 03/31/1996(a)#..... 9.86 0.50 (0.19) 0.31 (0.48) $ (0.02) --
Year ended 05/31/1995#.......... 9.80 0.61 0.06 0.67 (0.57) -- --
Year ended 05/31/1994........... 10.46 0.62 (0.61) 0.01 (0.56) (0.02) $ (0.05)
Year ended 05/31/1993#.......... 10.36 0.66 0.16 0.82 (0.68) -- (0.04)
Year ended 05/31/1992........... 10.05 0.71 0.38 1.09 (0.75) -- (0.03)
Period ended 05/31/1991*........ 10.01 0.09 0.02 0.11 (0.07) -- --
INVESTOR C
Year ended 03/31/1997#.......... $ 9.67 $ 0.55 $(0.30) $ 0.25 $(0.53) -- --
Period ended 03/31/1996(a)#..... 9.86 0.47 (0.19) 0.28 (0.45) $ (0.02) --
Year ended 05/31/1995#.......... 9.80 0.57 0.06 0.63 (0.53) -- --
Year ended 05/31/1994........... 10.46 0.55 (0.61) (0.06) (0.50) (0.01) $ (0.05)
Period ended 05/31/1993*#....... 10.52 0.59 0.02 0.61 (0.63) -- (0.04)
INVESTOR N
Year ended 03/31/1997#.......... $ 9.67 $ 0.54 $(0.30) $ 0.24 $(0.52) -- --
Period ended 03/31/1996(a)#..... 9.86 0.47 (0.19) 0.28 (0.45) $ (0.02) --
Year ended 05/31/1995#.......... 9.80 0.58 0.06 0.64 (0.54) -- --
Period ended 05/31/1994*........ 10.49 0.54 (0.64) (0.10) (0.49) (0.01) $ (0.05)
</TABLE>
- ---------------
* Nations Government Securities Fund's Primary A, Primary B, Investor A,
Investor C and Investor N Shares commenced operations on April 11, 1991,
June 28, 1996, April 17, 1991, July 6, 1992 and June 7, 1993, respectively.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the monthly average share
method, which more appropriately represents the per share data for the
period since use of the undistributed income method did not accord with the
results of operations.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
May 31.
(b) Amount represents less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE> 49
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF
TOTAL NET ASSET NET ASSETS OPERATING
DISTRIBUTIONS DIVIDENDS VALUE END OF EXPENSES
FROM AND END OF TOTAL PERIOD TO AVERAGE
CAPITAL DISTRIBUTIONS PERIOD RETURN++ (IN 000'S) NET ASSETS
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NATIONS GOVERNMENT
SECURITIES FUND
PRIMARY A
Year ended 03/31/1997#..........$ (0.00)(b) $ (0.58) $ 9.39 3.18% $ 52,606 0.80%
Period ended 03/31/1996(a)#..... -- (0.52) 9.67 3.41 55,962 0.80+
Year ended 05/31/1995#.......... (0.04) (0.64) 9.86 7.55 39,909 0.76
Year ended 05/31/1994........... (0.04) (0.69) 9.80 0.06 44,536 0.73
Year ended 05/31/1993#.......... -- (0.74) 10.46 8.37 40,472 0.85
Year ended 05/31/1992........... -- (0.80) 10.36 11.43+++ 42,256 1.06
Period ended 05/31/1991*........ -- (0.07) 10.05 1.19+++ 10,047 1.10+
PRIMARY B
Period ended 03/31/1997*#....... (0.00)(b) $ (0.40) $ 9.39 2.90% $ 755 1.30%+
INVESTOR A
Year ended 03/31/1997#.......... (0.00)(b) $ (0.56) $ 9.39 2.92% $ 9,852 1.05%
Period ended 03/31/1996(a)#..... -- (0.50) 9.67 3.20 11,662 1.05+
Year ended 05/31/1995#.......... (0.04) (0.61) 9.86 7.29 10,928 1.01
Year ended 05/31/1994........... (0.04) (0.67) 9.80 (0.11) 14,044 0.90
Year ended 05/31/1993#.......... -- (0.72) 10.46 8.18 15,354 1.00
Year ended 05/31/1992........... -- (0.78) 10.36 11.18+++ 3,326 1.31
Period ended 05/31/1991*........ -- (0.07) 10.05 1.07+++ 661 1.35+
INVESTOR C
Year ended 03/31/1997#.......... (0.00)(b) $ (0.53) $ 9.39 2.67% $ 1,835 1.30%
Period ended 03/31/1996(a)#..... -- (0.47) 9.67 2.83 2,558 1.48+
Year ended 05/31/1995#.......... (0.04) (0.57) 9.86 6.76 2,945 1.51
Year ended 05/31/1994........... (0.04) (0.60) 9.80 (0.69) 5,265 1.48
Period ended 05/31/1993*#....... -- (0.67) 10.46 5.37 5,998 1.60+
INVESTOR N
Year ended 03/31/1997#.......... (0.00)(b) $ (0.52) $ 9.39 2.51% $ 38,807 1.45%
Period ended 03/31/1996(a)#..... -- (0.47) 9.67 2.85 50,958 1.45+
Year ended 05/31/1995#.......... (0.04) (0.58) 9.86 6.86 56,155 1.41
Period ended 05/31/1994*........ (0.04) (0.59) 9.80 (1.09) 56,313 1.38+
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
-----------------------
RATIO OF RATIO OF
NET INVESTMENT OPERATING NET
INCOME PORTFOLIO EXPENSES TO INVESTMENT
TO AVERAGE TURNOVER AVERAGE INCOME PER
NET ASSETS RATE NET ASSETS SHARE
-------------------------------------------------------------
<S> <C> <C> <C> <C>
NATIONS GOVERNMENT
SECURITIES FUND
PRIMARY A
Year ended 03/31/1997#.......... 6.28% 468% 0.94% $ 0.59
Period ended 03/31/1996(a)#..... 6.36+ 199 0.95+ 0.51
Year ended 05/31/1995#.......... 6.69 413 0.94 0.62
Year ended 05/31/1994........... 6.08 56 0.94 0.61
Year ended 05/31/1993#.......... 6.67 103 1.00 0.60
Year ended 05/31/1992........... 7.15 130 1.72 0.07
Period ended 05/31/1991*........ 7.18+ 5 1.69+++ 0.09+++
PRIMARY B
Period ended 03/31/1997*#....... 5.78%+ 468% 1.44%+ $ 0.39
INVESTOR A
Year ended 03/31/1997#.......... 6.03% 468% 1.19% $ 0.57
Period ended 03/31/1996(a)#..... 6.11+ 199 1.20+ 0.49
Year ended 05/31/1995#.......... 6.44 413 1.19 0.59
Year ended 05/31/1994........... 5.91 56 1.11 0.59
Year ended 05/31/1993#.......... 6.52 103 1.15 0.55
Year ended 05/31/1992........... 6.90 130 1.97 0.07
Period ended 05/31/1991*........ 7.22+ 5 1.94+++ 0.08+++
INVESTOR C
Year ended 03/31/1997#.......... 5.78% 468% 1.44% $ 0.54
Period ended 03/31/1996(a)#..... 5.68+ 199 1.63+ 0.46
Year ended 05/31/1995#.......... 5.94 413 1.69 0.55
Year ended 05/31/1994........... 5.33 56 1.69 0.53
Period ended 05/31/1993*#....... 5.92+ 103 1.75+ 0.42
INVESTOR N
Year ended 03/31/1997#.......... 5.63% 468% 1.59% $ 0.53
Period ended 03/31/1996(a)#..... 5.71+ 199 1.60+ 0.46
Year ended 05/31/1995#.......... 6.04 413 1.59 0.56
Period ended 05/31/1994*........ 5.43+ 56 1.59+ 0.52
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE> 50
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
<TABLE>
<CAPTION>
NET INCREASE/ DIVIDENDS DISTRIBUTIONS DISTRIBUTIONS
NET ASSET NET REALIZED (DECREASE) FROM IN EXCESS FROM NET
VALUE NET AND UNREALIZED IN NET NET OF NET REALIZED
BEGINNING INVESTMENT GAIN/(LOSS) ASSET VALUE INVESTMENT INVESTMENT CAPITAL
OF YEAR INCOME ON INVESTMENTS FROM OPERATIONS INCOME INCOME GAINS
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NATIONS DIVERSIFIED
INCOME FUND
PRIMARY A
Year ended 03/31/1997#... $ 10.42 $ 0.69 $(0.18) $ 0.51 $(0.69) -- $ (0.13)
Period ended
03/31/1996(b).......... 10.82 0.23 (0.40) (0.17) (0.23) -- --
Year ended 11/30/1995.... 9.67 0.73 1.15 1.88 (0.73) -- --
Year ended 11/30/1994#... 10.88 0.74 (1.06) (0.32) (0.74) $ (0.00)(a) (0.15)
Year ended 11/30/1993#... 9.97 0.78 0.91 1.69 (0.78) -- --
Period ended
11/30/1992*............ 10.00 0.06 (0.03) 0.03 (0.06) -- --
PRIMARY B
Period ended
03/31/1997*#........... $ 10.28 $ 0.47 $(0.04) $ 0.43 $(0.47) -- $ (0.13)
INVESTOR A
Year ended 03/31/1997#... $ 10.42 $ 0.66 $(0.18) $ 0.48 $(0.66) -- $ (0.13)
Period ended
03/31/1996(b).......... 10.82 0.22 (0.40) (0.18) (0.22) -- --
Year ended 11/30/1995.... 9.67 0.71 1.15 1.86 (0.71) -- --
Year ended 11/30/1994#... 10.88 0.72 (1.06) (0.34) (0.72) $ (0.00)(a) (0.15)
Year ended 11/30/1993#... 9.96 0.76 0.92 1.68 (0.76) -- --
Period ended
11/30/1992*............ 10.02 0.01 (0.06) (0.05) (0.01) -- --
INVESTOR C
Year ended 03/31/1997#... $ 10.42 $ 0.63 $(0.18) $ 0.45 $(0.63) -- $ (0.13)
Period ended
03/31/1996(b).......... 10.82 0.21 (0.40) (0.19) (0.21) -- --
Year ended 11/30/1995.... 9.67 0.66 1.15 1.81 (0.66) -- --
Year ended 11/30/1994#... 10.88 0.67 (1.06) (0.39) (0.67) $ (0.00)(a) (0.15)
Year ended 11/30/1993#... 9.96 0.70 0.92 1.62 (0.70) -- --
Period ended
11/30/1992*............ 9.93 0.03 0.02 0.05 (0.02) -- --
INVESTOR N
Year ended 03/31/1997#... $ 10.42 $ 0.61 $(0.18) $ 0.43 $(0.61) -- $ (0.13)
Period ended
03/31/1996(b).......... 10.82 0.21 (0.40) (0.19) (0.21) -- --
Year ended 11/30/1995.... 9.67 0.66 1.15 1.81 (0.66) -- --
Year ended 11/30/1994#... 10.88 0.67 (1.06) (0.39) (0.67) $ (0.00)(a) (0.15)
Period ended
11/30/1993*#........... 10.59 0.30 0.29 0.59 (0.30) -- --
</TABLE>
- ---------------
* Nations Diversified Income Fund's Primary A, Primary B, Investor A, Investor
C and Investor N Shares commenced operations on October 30, 1992, June 28,
1996, November 25, 1992, November 9, 1992 and June 7, 1993, respectively.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the monthly average share
method, which more appropriately represents the per share data for the
period since use of the undistributed income method did not accord with the
results of operations.
(a) Amount represents less than $0.01.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements and net investment income per share was less than 0.01% and
$0.01, respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE> 51
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF RATIO OF
TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT
DIVIDENDS VALUE END OF EXPENSES INCOME
AND END OF TOTAL PERIOD TO AVERAGE TO AVERAGE
DISTRIBUTIONS PERIOD RETURN++ (IN 000'S) NET ASSETS NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NATIONS DIVERSIFIED
INCOME FUND
PRIMARY A
Year ended 03/31/1997#........... $ (0.82) $ 10.11 4.97% $152,070 0.75%(c) 6.73%
Period ended
03/31/1996(b).................. (0.23) 10.42 (1.59) 65,081 0.77+ 6.49+
Year ended 11/30/1995............ (0.73) 10.82 20.11 64,800 0.80 7.03
Year ended 11/30/1994#........... (0.89) 9.67 (3.05) 22,298 0.74 7.31
Year ended 11/30/1993#........... (0.78) 10.88 17.40 28,553 0.55 7.02
Period ended
11/30/1992*.................... (0.06) 9.97 0.32+++ 23,962 0.25+ 7.76+
PRIMARY B
Period ended
03/31/1997*#................... $ (0.60) $ 10.11 4.22% $ 41 1.25%(c)+ 6.23%+
INVESTOR A
Year ended 03/31/1997#........... $ (0.79) $ 10.11 4.71% $ 11,662 1.00%(c) 6.48%
Period ended
03/31/1996(b).................. (0.22) 10.42 (1.67) 13,332 1.02+ 6.24+
Year ended 11/30/1995............ (0.71) 10.82 19.82 13,150 1.05 6.78
Year ended 11/30/1994#........... (0.87) 9.67 (3.26) 10,819 0.96 7.09
Year ended 11/30/1993#........... (0.76) 10.88 17.32 13,291 0.70 6.87
Period ended
11/30/1992*.................... (0.01) 9.96 (0.49)+++ 18 0.40+ 7.61+
INVESTOR C
Year ended 03/31/1997#........... $ (0.76) $ 10.11 4.44% $ 3,343 1.25%(c) 6.23%
Period ended
03/30/1996(b).................. (0.21) 10.42 (1.77) 3,454 1.33+ 5.93+
Year ended 11/30/1995............ (0.66) 10.82 19.22 3,582 1.55 6.28
Year ended 11/30/1994#........... (0.82) 9.67 (3.77) 2,636 1.49 6.56
Year ended 11/30/1993#........... (0.70) 10.88 16.65 3,633 1.30 6.27
Period ended
11/30/1992*.................... (0.02) 9.96 0.54+++ 149 1.00+ 7.01+
INVESTOR N
Year ended 03/31/1997#........... $ (0.74) $ 10.11 4.18% $ 70,631 1.50%(c) 5.98%
Period ended
03/31/1996(b).................. (0.21) 10.42 (1.83) 84,692 1.52+ 5.74+
Year ended 11/30/1995............ (0.66) 10.82 19.22 90,887 1.55 6.28
Year ended 11/30/1994#........... (0.82) 9.67 (3.77) 55,058 1.49 6.56
Period ended
11/30/1993*#................... (0.30) 10.88 5.58 24,630 1.30+ 6.27+
<CAPTION>
WITHOUT WAIVERS AND/OR
EXPENSE REIMBURSEMENTS
----------------------------------
RATIO OF
OPERATING NET
PORTFOLIO EXPENSES TO INVESTMENT
TURNOVER AVERAGE INCOME PER
RATE NET ASSETS SHARE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
NATIONS DIVERSIFIED
INCOME FUND
PRIMARY A
Year ended 03/31/1997#........... 278% 0.85%(c) $ 0.67(c)
Period ended
03/31/1996(b).................. 69 0.87+ 0.23
Year ended 11/30/1995............ 96 0.93 0.72
Year ended 11/30/1994#........... 144 0.95 0.72
Year ended 11/30/1993#........... 86 0.95 0.70
Period ended
11/30/1992*.................... 46 0.85+ 0.05
PRIMARY B
Period ended
03/31/1997*#................... 278% 1.35%(c)+ $ 0.47(c)
INVESTOR A
Year ended 03/31/1997#........... 278% 1.10%(c) $ 0.66(c)
Period ended
03/31/1996(b).................. 69 1.12+ 0.22
Year ended 11/30/1995............ 96 1.18 0.70
Year ended 11/30/1994#........... 144 1.17 0.70
Year ended 11/30/1993#........... 86 1.10 0.70
Period ended
11/30/1992*.................... 46 1.00+ 0.01
INVESTOR C
Year ended 03/31/1997#........... 278% 1.35%(c) $ 0.63(c)
Period ended
03/30/1996(b).................. 69 1.43+ 0.21
Year ended 11/30/1995............ 96 1.68 0.65
Year ended 11/30/1994#........... 144 1.70 0.65
Year ended 11/30/1993#........... 86 1.70 0.64
Period ended
11/30/1992*.................... 46 1.60+ 0.03
INVESTOR N
Year ended 03/31/1997#........... 278% 1.60%(c) $ 0.61(c)
Period ended
03/31/1996(b).................. 69 1.62+ 0.21
Year ended 11/30/1995............ 96 1.68 0.65
Year ended 11/30/1994#........... 144 1.70 0.65
Period ended
11/30/1993*#................... 86 1.70+ 0.27
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE> 52
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Nations Fund Trust (the "Trust") and Nations Fund, Inc. (the "Company") are
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as open-end investment companies. As of the date of this report, the
Trust offers thirty-three separate portfolios and the Company offers five
separate portfolios. Information presented in these financial statements
pertains only to: Nations Short-Term Income Fund, Nations Short-Intermediate
Government Fund, Nations Strategic Fixed Income Fund, Nations Government
Securities Fund and Nations Diversified Income Fund (each, a "Fund" and
collectively, the "Funds"). The financial statements for the remaining funds of
the Trust and the Company are presented under separate cover. The Funds
currently offer five classes of shares: Primary A Shares, Primary B Shares,
Investor A Shares, Investor C Shares and Investor N Shares. Shareholders of a
Fund have equal voting rights on matters affecting all shareholders of the Fund.
In addition, each class of shares of a Fund has exclusive voting rights on
matters that relate solely to its class and separate voting rights on matters in
which the interests of one class of shares differ from the interests of any
other class.
1. SIGNIFICANT ACCOUNTING POLICIES.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Funds in the preparation of
their financial statements.
Securities Valuation: The Funds' portfolio securities are valued using broker
quotations or prices provided by a pricing service. Certain securities are
valued using broker quotations that are based on a matrix pricing system which
considers such factors as security prices, yields and maturities. The value of
mortgage-backed securities can be significantly affected by changes in interest
rates. Certain securities may be valued by one or more principal market makers.
Restricted securities, securities for which market quotations are not readily
available and other assets are valued by the investment adviser under the
supervision of the Board of Trustees or the Board of Directors. Short-term
investments that mature in 60 days or less are valued at amortized cost.
Repurchase Agreements: Each Fund may engage in repurchase agreement
transactions, including joint repurchase agreement transactions in which the
Funds, along with other registered investment companies advised by NationsBanc
Advisers, Inc. ("NBAI"), invest their aggregate cash balances. Under the terms
of a typical repurchase agreement, the Fund takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement results
in a fixed rate of return that is not subject to market fluctuations during the
Fund's holding period. The value of the collateral securities must be at least
equal at all times to the total amount of the repurchase obligations, including
interest. Generally, in the event of counterparty default, the Fund has the
right to use the collateral to offset losses incurred. There would be a
potential loss to the Fund in the event the Fund is delayed or prevented from
exercising its right to dispose of the collateral securities, including the risk
of a possible decline in the value of the underlying securities during the
period while the Fund seeks to assert its right. Unless permitted by the
Securities and Exchange Commission, the Fund will not enter into repurchase
agreements with its investment adviser, distributor or any of their affiliates.
The Funds' investment adviser, acting under the supervision of the Board of
Trustees and the Board of Directors, monitors the value of the collateral
received as well as the creditworthiness of those banks and dealers with which
the Funds enter into repurchase agreements to evaluate potential risks.
Dollar Roll Transactions: Certain Funds may enter into dollar roll transactions
with financial institutions to take advantage of opportunities in the mortgage
market. Dollar roll transactions consist of the sale by the Fund of mortgage-
backed or other asset-backed securities, with a commitment to purchase similar,
but not identical, securities at a future date, at the same price. The Funds are
paid a fee as consideration for entering into a commitment to purchase the
securities. This fee accrues as income over the duration of the dollar roll
contract. If the broker/dealer to whom a Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Fund is required to repurchase may be worth
less than the security that the Fund originally held, and the return earned by
the Fund in addition to the proceeds of a dollar roll sale may not exceed
transaction costs.
Securities Transactions and Investment Income: Securities transactions are
accounted for on trade date. Realized gains and losses are computed based on the
specific identification of the securities sold. Interest income, adjusted for
accretion
50
<PAGE> 53
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
of discounts and amortization of premiums calculated ratably, is earned from
settlement date and is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. Each Fund's investment income and realized and
unrealized gains and losses are allocated among its classes based upon the
relative net assets of each class of shares.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income is not accrued
until settlement date. Each Fund instructs the custodian to segregate assets
with a current value at least equal to the amount of its when-issued purchase
commitments.
Stripped mortgage-backed securities are derivative multi-class mortgage
securities structured so that one class receives most, if not all, of the
principal from the mortgage assets, while the other class receives most, if not
all, of the interest and the remainder of the principal. If the underlying
mortgage assets experience greater than anticipated repayments of principal, a
Fund may fail to fully recoup its initial investment in an interest-only
security. The fair market value of these securities is unusually volatile in
response to changes in interest rates.
Dividends and Distributions to Shareholders: It is the policy of each Fund to
declare dividends daily from net investment income and to pay such dividends
monthly. Each Fund will distribute net realized capital gains (including net
short-term capital gains), annually after the fiscal year in which earned,
unless offset by any available capital loss carryforward. Additional
distributions of net investment income and capital gains may be made at the
discretion of the Board of Trustees or the Board of Directors in order to avoid
application of the 4% non-deductible Federal excise tax. Income distributions
and capital gain distributions on a Fund level are determined in accordance with
Federal income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to timing differences
and differing characterization of distributions made by the Fund as a whole.
Reclassifications are made to each Funds' capital accounts to reflect income and
gains available for distribution (or available capital loss carryforwards) under
Federal income tax regulations. Certain reclassification adjustments are made
among undistributed net investment income, realized gain and loss and paid-in
capital due to different book and tax accounting for paydowns.
Reclassifications for the period ended March 31, 1997 were as follows:
<TABLE>
<CAPTION>
INCREASE/(DECREASE) INCREASE
DECREASE UNDISTRIBUTED NET ACCUMULATED NET
PAID-IN CAPITAL INVESTMENT INCOME REALIZED GAIN/(LOSS)
---------------------------------------------------------
<S> <C> <C> <C>
Nations Short-Term Income Fund.............. $ (772,975) $ 751,475 $ 21,500
Nations Short-Intermediate Government
Fund...................................... (2,785,652) 1,788,986 996,666
Nations Strategic Fixed Income Fund......... (2,764,295) 914,505 1,849,790
Nations Government Securities Fund.......... (221,464) (13,469) 234,933
Nations Diversified Income Fund............. (147,511) 98,253 49,258
</TABLE>
Federal Income Tax: It is the policy of each Fund to qualify as a regulated
investment company by complying with the requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders. Therefore,
no Federal income or excise tax provision is applicable.
Expenses: General expenses of the Trust or the Company are allocated to the
relevant Funds based upon their relative net assets. Operating expenses directly
attributable to a Fund or class of shares are charged to such Fund's or class's
operations. Expenses of each Fund not directly attributable to the operations of
any class of shares are prorated among the classes based on the relative net
assets of each class of shares.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS.
Each of the Trust and the Company has, on behalf of its Funds, entered into an
investment advisory agreement (the "Investment Advisory Agreements") with
NationsBanc Advisors, Inc. ("NBAI"), a wholly-owned subsidiary of NationsBank,
N.A. ("NationsBank"), pursuant to which NBAI provides investment advisory
services to the Funds. Under the terms of these Investment Advisory Agreements,
NBAI is entitled to receive an advisory fee, calculated daily and payable
monthly based on the annual rates multiplied by 0.60% of the average daily net
assets of Nations Short-Term Income Fund, Nations Short-Intermediate Government
Fund, Nations Strategic Fixed Income Fund and Nations Diversified Income Fund;
and 0.65% of the average daily net assets up to $100 million, 0.55% of the
average daily net
51
<PAGE> 54
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
assets between $100 million and $250 million, and 0.50% of the average daily net
assets exceeding $250 million for Nations Government Securities Fund.
Each of the Trust and the Company has, on behalf of its Funds, entered into a
sub-advisory agreement (the "Sub-Advisory Agreements") with NBAI and TradeStreet
Investment Associates, Inc. ("TradeStreet"), a wholly-owned subsidiary of
NationsBank. Under the terms of these Sub-Advisory Agreements, TradeStreet is
entitled to receive a sub-advisory fee from NBAI for each Fund at the annual
rate of 0.15% of each Fund's average daily net assets.
Stephens Inc. ("Stephens") serves as the administrator of the Trust and the
Company pursuant to separate administration agreements (the "Administration
Agreements"). First Data Investor Services Group, Inc. ("First Data"), a wholly-
owned subsidiary of First Data Corporation, serves as the co-administrator of
the Trust and the Company pursuant to co-administration agreements (the
"Co-Administration Agreements"). Pursuant to the Administration and
Co-Administration Agreements, Stephens and First Data are entitled to receive a
combined fee, computed daily and paid monthly, at the annual rate of 0.10% of
the average daily net assets of the investment portfolios of the Trust and the
Company and the investment portfolios of Nations Fund Portfolios, Inc. (another
registered open-end investment company which is a part of the Nations Funds
Family) on a combined basis. NationsBank serves as the sub-administrator of the
Trust and the Company pursuant to a sub-administration agreement (the
"Sub-Administration Agreement") with Stephens. For the year ended March 31,
1997, Stephens earned $1,033,447 from the Funds for its administration services,
of which $193,709 was paid to NationsBank for its services as sub-administrator.
The investment adviser, sub-adviser, administrator and co-administrator may,
from time to time, voluntarily reduce their fees payable by each Fund. For the
year ended March 31, 1997, the investment adviser voluntarily waived fees as
follows:
<TABLE>
<CAPTION>
FEES WAIVED BY
ADVISER
-------------
<S> <C>
Nations Short-Term Income Fund....................................... $601,326
Nations Short-Intermediate Government Fund........................... 943,089
Nations Strategic Fixed Income Fund.................................. 951,528
Nations Government Securities Fund................................... 156,808
Nations Diversified Income Fund...................................... 200,123
</TABLE>
NationsBank of Texas, N.A. ("NationsBank of Texas"), acts as the custodian for
the Funds and, for the year ended March 31, 1997, earned $189,005 for providing
such services. On October 18, 1996, The Bank of New York ("BONY") was appointed
sub-custodian for the Funds. The Trust and Company accrue a credit on daily cash
balances held at BONY. The earnings credit is applied to the monthly custody
fee. For the year ended March 31, 1997, the earnings credit was $17,110.
First Data serves as the transfer agent for the Funds' shares. NationsBank of
Texas also acts as the sub-transfer agent for the Primary Shares of the Funds
and, for the year ended March 31, 1997, earned approximately $28,427 for
providing such services.
Stephens also serves as distributor of the Funds' shares. For the year ended
March 31, 1997, the Funds were informed that the distributor received $570,063
in contingent deferred sales charges from shares which were subject to such
charges. A substantial portion of these fees are paid to affiliates of
NationsBank and NBAI.
No officer, director or employee of NationsBank, NBAI, TradeStreet, Stephens,
First Data, or any affiliate thereof, receives any compensation from the Trust
or the Company for serving as a trustee, director or officer of the Trust or the
Company. The Trust and the Company pay each unaffiliated Trustee or Director an
annual fee of $1,000 ($3,000 for the Chairman of the Board), plus $500 per Fund
and an additional $1,000 for each in-person board meeting, and $500 for each
telephonic board meeting attended. The Trust and the Company also reimburse
expenses incurred by each unaffiliated Trustee or Director in attending such
meetings.
The Trust's and Company's eligible Trustees or Directors, respectively, may
participate in a non-qualified deferred compensation and retirement plan which
may be terminated at any time. All benefits provided under these plans are
unfunded and any payments to plan participants are paid solely out of the Funds'
assets. Income earned on each plan participant's deferral account is tied to the
rate of return of the eligible mutual funds selected by the participants or, if
no funds are selected, to the rate of return of Nations Treasury Fund, a fund of
the Company. The expense for the deferred compensation and retirement plan is
included in "Trustees/Directors fees and expenses" in the Statements of
Operations.
52
<PAGE> 55
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS.
The Trust and the Company each have adopted shareholder administration plans
(each an "Administration Plan") for Primary B Shares of each Fund; shareholder
servicing and distribution plans pursuant to Rule 12b-1 under the 1940 Act for
Investor A Shares of each Fund ("Investor A Plan"); a shareholder servicing plan
("Servicing Plan") for Investor C Shares and Investor N Shares of each Fund; and
a distribution plan ("Distribution Plan") pursuant to Rule 12b-1 for Investor C
Shares and Investor N Shares of each Fund (collectively, the "Plans"). The
Administration Plan permits the Funds to compensate institutions for shareholder
administration services provided to their customers that own Primary B Shares.
The Investor A Plan permits the Funds to compensate (i) servicing agents and
selling agents that have entered into a servicing agreement with the Funds 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. The Servicing Plan permits the Funds to compensate servicing agents
for services provided to their customers that own Investor A Shares of Nations
Short-Term Income Fund, Investor C Shares and Investor N Shares, respectively.
The Distribution Plan permits the Funds to compensate or reimburse Stephens for
any activities or expenses primarily intended to result in the sale of the
Funds' Investor C Shares or Investor N Shares, respectively. Payments under the
Plans are accrued daily and paid monthly at a rate set, from time to time, by
the distributor. Fees incurred pursuant to the Plans are charged as expenses of
each Fund directly to the Primary B Shares, Investor A Shares, Investor C Shares
and Investor N Shares, respectively.
For the year ended March 31, 1997, the effective rates incurred by the Funds, as
a percentage of average daily net assets, pursuant to the Plans were as follows:
<TABLE>
<CAPTION>
PRIMARY B INVESTOR C INVESTOR C INVESTOR N INVESTOR N
ADMINISTRATION INVESTOR DISTRIBUTION SERVICING DISTRIBUTION SERVICING
FUND PLAN A PLAN PLAN PLAN PLAN PLAN
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nations Short-Term Income Fund........ 0.35% 0.20% 0.10% 0.25% 0.10% 0.25%
Nations Short-Intermediate Government
Fund................................ 0.35% 0.20% 0.25% 0.25% 0.35% 0.25%
Nations Strategic Fixed Income Fund... 0.50% 0.20% 0.25% 0.25% 0.40% 0.25%
Nations Government Securities Fund.... 0.50% 0.25% 0.25% 0.25% 0.40% 0.25%
Nations Diversified Income Fund....... 0.50% 0.25% 0.25% 0.25% 0.50% 0.25%
</TABLE>
In addition, a shareholder servicing plan has been adopted for the Investor A
shares of the Nations Short-Term Income Fund. For the year ended March 31, 1997,
no fees were incurred by the Fund pursuant to the plan.
A substantial portion of the fees paid pursuant to the plans described above are
paid to affiliates of NationsBank and NBAI.
4. PURCHASES AND SALES OF SECURITIES.
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. government securities and short-term investments, for the period ended
March 31, 1997 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-----------------------------------
<S> <C> <C>
Nations Short-Term Income Fund............................. $ 219,279,374 $ 200,804,930
Nations Strategic Fixed Income Fund........................ 823,589,814 566,405,868
Nations Diversified Income Fund............................ 112,737,900 119,797,405
</TABLE>
The aggregate cost of purchases and proceeds from sales of long-term U.S.
government securities for the year ended March 31, 1997 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-----------------------------------
<S> <C> <C>
Nations Short-Term Income Fund............................. $ 122,243,052 $ 136,379,950
Nations Short-Intermediate Government Fund................. 2,348,422,483 2,564,591,970
Nations Strategic Fixed Income Fund........................ 2,722,566,225 2,830,874,631
Nations Government Securities Fund......................... 523,662,836 538,708,969
Nations Diversified Income Fund............................ 504,621,203 422,447,204
</TABLE>
53
<PAGE> 56
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At March 31, 1997, aggregate gross unrealized appreciation and unrealized
depreciation for tax purposes were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION
-----------------------------------
<S> <C> <C>
Nations Short-Term Income Fund............................. $ 138,089 $ 1,685,197
Nations Short-Intermediate Government Fund................. 364,757 3,878,967
Nations Strategic Fixed Income Fund........................ 723,034 13,665,461
Nations Government Securities Fund......................... 140,922 1,168,402
Nations Diversified Income Fund............................ 647,031 3,257,893
</TABLE>
5. SHARES OF BENEFICIAL INTEREST/CAPITAL STOCK.
As of March 31, 1997, an unlimited number of shares without par value were
authorized for the Trust and 420,000,000,000 shares of $.001 par value capital
stock were authorized for the Company. The Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any authorized, but
unissued shares into one or more additional classes or series of shares. See
Schedule of Capital Stock Activity.
6. ORGANIZATION COSTS.
The Funds bear all costs in connection with their organization, including the
fees and expenses of registering and qualifying their shares for distribution
under Federal and state securities regulations. All such costs are being
amortized on a straight-line basis over a period of five years from commencement
of operations. In the event that any of the shares issued by the Funds to their
sponsor prior to the commencement of the Funds' public offering ("initial
shares") are redeemed during such amortization period by any holder thereof, the
Funds will be reimbursed by the holder for any unamortized organization costs in
the same proportion as the number of initial shares redeemed bears to the number
of initial shares outstanding at the time of redemption. All such costs for
Nations Short-Intermediate Government Fund and Nations Government Securities
Fund have been fully amortized.
7. LINE OF CREDIT.
The Trust and Company participate in an uncommitted line of credit provided by
The Bank of New York ("BONY") under a line of credit agreement dated February
28, 1997 (the "Agreement"). Advances under the Agreement are taken primarily for
temporary or emergency purposes, including the meeting of redemption requests
that otherwise might require the untimely disposition of securities. Under the
Agreement each Fund may borrow up to the lesser of $25 million or 25% of its net
assets. Interest on borrowings is payable at the Federal Funds Rate plus 0.50%
on an annualized basis. The Agreement requires, among other things, that each
participating Fund maintain a ratio of no less than 4 to 1 net assets (not
including funds borrowed pursuant to the agreement) to aggregate amount of
indebtedness pursuant to the agreement. Prior to executing the Agreement with
BONY the Trust and Company participated in a line of credit agreement with
Mellon Bank N.A.
At March 31, 1997, there were no loans outstanding under this Agreement.
Borrowings for the year ended March 31, 1997 by the Funds under each agreement
are disclosed below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AVERAGE INTEREST
AMOUNT AMOUNT AVERAGE DEBT RATE INTEREST
FUND OUTSTANDING OUTSTANDING SHARES PER SHARE HIGH LOW EXPENSE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nations Short-Term Income Fund............. $ 300,000 $ 1,918 20,526,883 $0.00(a) 6.00% 5.60% $ 115
Nations Short-Intermediate Government
Fund..................................... 500,000 1,370 117,056,971 0.00(a) 5.55 5.55 77
</TABLE>
- ---------------
(a) Amount represents less than $0.01 per share.
The average amount outstanding was calculated by adding the borrowings at the
end of each day and dividing the sum by the number of days in the year ended
March 31, 1997.
54
<PAGE> 57
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL LOSS CARRYFORWARD.
At March 31, 1997, the following Funds had available for Federal income tax
purposes the following unused capital losses expiring March 31:
<TABLE>
<CAPTION>
FUND 2001 2002 2003 2004 2005
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nations Short-Term Income
Fund....................... -- 6,266,621 650,652 -- 12,596
Nations Short-Intermediate
Government Fund............ 742,400 14,325,900 -- -- 6,939,350
Nations Strategic Fixed
Income Fund................ 1,218,818 -- 1,054,686 1,368,677 18,774,009
Nations Government Securities
Fund....................... -- 2,565,227 6,633,456 -- 2,302,378
Nations Diversified Income
Fund....................... -- -- -- -- 3,351,263
</TABLE>
Under the current tax law, capital losses realized after October 31, may be
deferred and treated as occurring on the first day of the following fiscal year.
For the year ended March 31, 1997, the following Funds have elected to defer
losses occurring between November 1, 1996 and March 31, 1997 under these rules:
<TABLE>
<CAPTION>
POST-OCTOBER CAPITAL
------------------------------------
SHORT TERM LONG TERM
FUND LOSS DEFERRAL (GAIN)/LOSS DEFERRAL
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Nations Short-Intermediate Government Fund..................... $ 3,013,169 $ (177,210)
Nations Government Securities Fund............................. 1,327,435 203,060
Nations Diversified Income Fund................................ 361,140 (23,167)
</TABLE>
9. REORGANIZATION.
Nations Strategic Fixed Income Fund, (the "Acquiring Fund") as listed below,
acquired the assets and certain liabilities of Peachtree Bond Fund, (the
"Acquired Fund") also listed below, in a tax-free exchange for shares of the
Acquiring Fund, pursuant to a plan of reorganization approved by the Acquired
Fund's shareholders. Total shares issued by the Acquiring Fund, the value of the
shares issued by the Acquiring Fund, the total net assets of the Acquired Fund
and the Acquiring Fund and any unrealized appreciation included in the Acquired
Fund's total net assets at the acquisition date and the total net assets of the
Acquiring Fund after the acquisition are as follows:
<TABLE>
<CAPTION>
SHARES VALUE OF TOTAL NET TOTAL NET
ISSUED BY SHARES ISSUED ASSETS OF ASSETS OF
ACQUISITION ACQUIRING BY ACQUIRING ACQUIRED ACQUIRING
ACQUIRING FUND ACQUIRED FUND DATE FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nations
Strategic Fixed Peachtree Bond
Income Fund Fund 09/27/96 6,826,942 $67,043,140 $67,043,140 $941,860,947
<CAPTION>
TOTAL NET
ASSETS OF ACQUIRED
ACQUIRING FUND
FUND AFTER UNREALIZED
ACQUIRING FUND ACQUISITION APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nations
Strategic Fixed
Income Fund $1,008,904,087 $597,022
</TABLE>
10. SIGNIFICANT CONCENTRATIONS.
On February 26, 1997, NationsBank Corporation's (the "Corporation") Asset
Management Group announced plans to sell its Institutional Trust, Retirement
Services and Corporate Trust businesses (collectively, the "Businesses"). The
Businesses make significant use of the Nations Family of Funds (the "Funds") to
satisfy their clients' investment needs. It is uncertain at this point what
impact, if any, the sale of these Businesses will have on the Funds and its
shareholders. Currently, however, the Advisor does not believe that a
significant impact to the overall financial condition and operating performance
of the Funds will occur.
55
<PAGE> 58
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. SUBSEQUENT EVENT.
Each of the Trust and the Company, is a party to an Agreement and Plan of
Reorganization with The Pilot Funds (which are advised by Boatmen's Trust
Company, an affiliate of NationsBank Corporation since January 7, 1997) pursuant
to which certain Nations Funds portfolios will acquire the assets of The Pilot
Funds portfolios. The shareholders of The Pilot Funds voted to approve the
proposed reorganizations on or before May 14, 1997. As of March 31, 1997, net
assets of the fourteen funds comprising The Pilot Funds were approximately $6.5
billion. The reorganization involves the following Funds:
<TABLE>
<CAPTION>
NATIONS FUNDS PILOT FUNDS
------------- -----------
<S> <C>
Short-Intermediate Government Fund Intermediate U.S. Government Securities
Strategic Fixed Income Fund Diversified Bond
</TABLE>
56
<PAGE> 59
NATIONS FUNDS
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS, DIRECTORS AND TRUSTEES OF NATIONS FUND TRUST AND NATIONS
FUND, INC.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Nations Short-Term Income Fund,
Nations Short-Intermediate Government Fund, Nations Strategic Fixed Income Fund,
Nations Government Securities Fund and Nations Diversified Income Fund
(collectively referred to as the "Funds") at March 31, 1997, and the results of
each of their operations, the changes in each of their net assets and their
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
May 15, 1997
57
<PAGE> 60
NATIONS FUNDS
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
PERIOD ENDED MARCH 31, 1997
The amount of long-term capital gains paid for the period ended March 31, 1997
was as follows:
<TABLE>
<S> <C>
Nations Strategic Fixed Income Fund................................... $ 11,265,101
Nations Diversified Income Fund....................................... 2,373,662
</TABLE>
58
<PAGE> 61
THE NATIONS FUNDS FAMILY
EQUITY FUNDS
GROWTH
Nations Emerging Markets Fund
Nations Pacific Growth Fund
Nations International Equity Fund
Nations Managed Smallcap Index Fund
Nations Emerging Growth Fund
Nations Disciplined Equity Fund
Nations Capital Growth Fund
GROWTH AND INCOME
Nations Value Fund
Nations Managed Index Fund
Nations Equity Index Fund
Nations Equity Income Fund
Nations Balanced Assets Fund
LIFEGOAL PORTFOLIOS
LifeGoal Growth Portfolio
LifeGoal Balanced Growth Portfolio
LifeGoal Income and Growth Portfolio
BOND FUNDS
INCOME
Nations Global Government Income Fund
Nations Diversified Income Fund
Nations Strategic Fixed Income Fund
Nations Government Securities Fund
Nations Short-Intermediate Government Fund
Nations Short-Term Income Fund
TAX-EXEMPT INCOME
Nations Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Short-Term Municipal Income Fund
Nations Florida Municipal Bond Fund
Nations Florida Intermediate Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Georgia Intermediate Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations Maryland Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Tennessee Intermediate Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Texas Intermediate Municipal Bond Fund
Nations Virginia Municipal Bond Fund
Nations Virginia Intermediate Municipal Bond Fund
MONEY MARKET FUNDS
Nations Prime Fund
Nations Government Money Market Fund
Nations Treasury Fund
Nations Tax Exempt Fund
For more complete information on Nations Funds mutual funds, including charges
and expenses, please contact Nations Funds or your Investment Representative for
a current prospectus. Please read the prospectus carefully before you invest or
send money.
<PAGE> 62
This report is submitted for the general information of shareholders of Nations
Funds. This material must be preceded or accompanied by a current Nations Funds
prospectus.
<PAGE> 63
[NATIONS FUNDS LOGO] BULK RATE
U.S. POSTAGE
P.O. Box 34602 PAID
Charlotte, NC 28234-4602 N READING, MA
Toll Free 1-800-982-2271 PERMIT NO.
105
AR5 IN-96120-397
