Prospectus
PRIMARY A SHARES
AUGUST 1, 1997
AS SUPPLEMENTED ON
FEBRUARY 23, 1998
MONEY MARKET FUNDS
Nations Prime Fund
Nations Treasury Fund
Nations Government Money Market
Fund
Nations Tax Exempt Fund
EQUITY FUNDS
Nations Value Fund
Nations Equity Income Fund
Nations International Equity Fund
Nations International Growth Fund
Nations Emerging Markets Fund
Nations Pacific Growth Fund
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Small Company Growth Fund
Nations Disciplined Equity Fund
INDEX FUNDS
Nations Equity Index Fund
Nations Managed Index Fund
Nations Managed SmallCap Index Fund
Nations Managed Value Index Fund
Nations Managed SmallCap Value Index
Fund
BALANCED FUND
Nations Balanced Assets Fund
BOND FUNDS
Nations U.S. Government Bond Fund
Nations Short-Intermediate Government
Fund
Nations Government Securities Fund
Nations Short-Term Income Fund
Nations Diversified Income Fund
Nations Strategic Fixed Income Fund
Nations Global Government
Income Fund
Nations Municipal Income Fund
Nations Short-Term Municipal Income
Fund
Nations Intermediate Municipal
Bond Fund
Nations Florida Intermediate Municipal
Bond Fund
Nations Florida Municipal Bond Fund
Nations Georgia Intermediate Municipal
Bond Fund
Nations Georgia Municipal Bond Fund
Nations Maryland Intermediate
Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations North Carolina Intermediate
Municipal Bond Fund
Nations North Carolina Municipal Bond
Fund
Nations South Carolina Intermediate
Municipal Bond Fund
Nations South Carolina Municipal Bond
Fund
Nations Tennessee Intermediate
Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Texas Intermediate Municipal
Bond Fund
Nations Texas Municipal Bond Fund
Nations Virginia Intermediate Municipal
Bond Fund
Nations Virginia Municipal Bond Fund
(Nations Fund Logo appears here)
INVESTMENT ADVISER: NationsBanc Advisors, Inc.
INVESTMENT SUB-ADVISER: TradeStreet Investment Associates, Inc.
INVESTMENT SUB-ADVISER: Gartmore Global Partners
INVESTMENT SUB-ADVISER: Boatmen's Capital Management, Inc.
DISTRIBUTOR: Stephens Inc.
TR-96127-298
<PAGE>
Prospectus
PRIMARY A SHARES
AUGUST 1, 1997
This Prospectus describes the investment portfolios
listed in the column to the right (each a "Fund") of
Nations Fund Trust, Nations Fund, Inc. and Nations
Fund Portfolios, Inc. ("Nations Portfolios"), each
an open-end management investment company in the
Nations Funds Family ("Nations Funds" or "Nations
Funds Family"). This Prospectus describes one class
of shares of each Fund -- Primary A Shares.
NATIONS PRIME FUND, NATIONS TREASURY FUND, NATIONS
GOVERNMENT MONEY MARKET FUND AND NATIONS TAX EXEMPT
FUND (THE "MONEY MARKET FUNDS") SEEK TO MAINTAIN A
NET ASSET VALUE OF $1.00 PER SHARE.
INVESTMENTS IN THE MONEY MARKET FUNDS ARE NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND
THERE CAN BE NO ASSURANCE THAT THESE FUNDS WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
This Prospectus sets forth concisely the information
about each Fund that a prospective purchaser of
Primary A Shares should consider before investing.
Investors should read this Prospectus and retain it
for future reference. Additional information about
Nations Fund Trust, Nations Fund, Inc. and Nations
Portfolios is contained in separate Statements of
Additional Information (the "SAIs"), that have been
filed with the Securities and Exchange Commission
(the "SEC") and are available upon request without
charge by writing or calling Nations Fund at its
address or telephone number shown below. The SAIs
for Nations Fund Trust, Nations Fund, Inc. and
Nations Portfolios, each dated August 1, 1997, are
incorporated by reference in their entirety into
this Prospectus. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAIs,
material incorporated by reference in this
Prospectus and other information regarding
registrants that file electronically with the SEC.
NationsBanc Advisors, Inc. ("NBAI") is the
investment adviser to the Funds. TradeStreet
Investment Associates, Inc. ("TradeStreet") is
investment sub-adviser to certain of the Funds,
Gartmore Global Partners ("Gartmore") is investment
sub-adviser to certain other Funds, and Boatmen's
Capital Management, Inc. ("Boatmen's") is investment
sub-adviser to Nations U.S. Government Bond Fund. As
used herein the term "Adviser" shall mean NBAI,
TradeStreet, Gartmore and/or Boatmen's as the
context may require.
SHARES OF NATIONS FUNDS ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR ISSUED, ENDORSED OR GUARANTEED
BY, NATIONSBANK, N.A. ("NATIONSBANK") OR ANY OF ITS
AFFILIATES. SUCH SHARES ARE NOT INSURED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES CERTAIN RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
NATIONSBANK AND CERTAIN OF ITS AFFILIATES PROVIDE
SERVICES TO NATIONS FUNDS, FOR WHICH THEY ARE
COMPENSATED. STEPHENS INC., WHICH IS NOT AFFILIATED
WITH NATIONSBANK, IS THE SPONSOR AND ADMINISTRATOR
AND SERVES AS THE DISTRIBUTOR FOR NATIONS FUNDS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
MONEY MARKET FUNDS:
Nations Prime Fund
Nations Treasury Fund
Nations Government Money Market Fund
Nations Tax Exempt Fund
EQUITY FUNDS:
Nations Value Fund
Nations Equity Income Fund
Nations International Equity Fund
Nations International Growth Fund
Nations Emerging Markets Fund
Nations Pacific Growth Fund
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Small Company Growth Fund
Nations Disciplined Equity Fund
INDEX FUNDS:
Nations Equity Index Fund
Nations Managed Index Fund
Nations Managed SmallCap Index Fund
Nations Managed Value Index Fund
Nations Managed SmallCap Value Index Fund
BALANCED FUND:
Nations Balanced Assets Fund
BOND FUNDS:
Nations U.S. Government Bond Fund
Nations Short-Intermediate Government Fund
Nations Government Securities Fund
Nations Short-Term Income Fund
Nations Diversified Income Fund
Nations Strategic Fixed Income Fund
Nations Global Government Income Fund
Nations Municipal Income Fund
Nations Short-Term Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Florida Intermediate Municipal Bond Fund
Nations Florida Municipal Bond Fund
Nations Georgia Intermediate Municipal Bond Fund
Nations Georgia Municipal Bond Fund
Nations Maryland Intermediate Municipal Bond Fund
Nations Maryland Municipal Bond Fund
Nations North Carolina Intermediate Municipal Bond Fund
Nations North Carolina Municipal Bond Fund
Nations South Carolina Intermediate Municipal Bond Fund
Nations South Carolina Municipal Bond Fund
Nations Tennessee Intermediate
Municipal Bond Fund
Nations Tennessee Municipal Bond Fund
Nations Texas Intermediate Municipal Bond Fund
Nations Texas Municipal Bond Fund
Nations Virginia Intermediate Municipal Bond Fund
Nations Virginia Municipal Bond Fund
For Fund information call:
1-800-765-2668
Nations Funds
c/o Stephens Inc.
One NationsBank Plaza
33rd Floor
Charlotte, NC 28255
(Nations Fund Logo appears here)
TR-96127-897
<PAGE>
Table Of Contents
About The Prospectus Summary 3
Funds
Expenses Summary 7
Financial Highlights 13
Objectives 49
How Objectives Are Pursued 52
How Performance Is Shown 71
How The Funds Are Managed 75
Organization And History 83
About Your How To Buy Shares 85
Investment
How To Redeem Shares 86
How To Exchange Shares 86
How The Funds Value Their Shares 87
How Dividends And Distributions Are Made;
Tax Information 88
Appendix A -- Portfolio Securities 90
Appendix B -- Description Of Ratings 100
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT
CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAIS
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
NATIONS FUNDS OR ITS DISTRIBUTOR. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING BY NATIONS FUNDS OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
2
<PAGE>
About The Funds
Prospectus Summary
(Bullet) TYPE OF COMPANIES: Open-end management investment companies.
(Bullet) INVESTMENT OBJECTIVES AND POLICIES:
(Bullet) MONEY MARKET FUNDS:
(Bullet) Nations Prime Fund's investment objective is to seek the
maximization of current income to the extent consistent with
the preservation of capital and the maintenance of liquidity.
(Bullet) Nations Treasury Fund's investment objective is the
maximization of current income to the extent consistent with
the preservation of capital and the maintenance of liquidity.
(Bullet) Nations Government Money Market Fund's investment objective is
to seek as high a level of current income as is consistent
with liquidity and stability of principal.
(Bullet) Nations Tax Exempt Fund's investment objective is to seek as
high a level of current interest income exempt from Federal
income taxes as is consistent with liquidity and stability of
principal.
(Bullet) EQUITY FUNDS:
(Bullet) Nations Value Fund's investment objective is to seek growth of
capital by investing in companies that are believed to be
undervalued.
(Bullet) Nations Equity Income Fund's investment objective is to seek
current income and growth of capital by investing primarily in
companies with above average dividend yields.
(Bullet) Nations International Equity Fund's investment objective is to
seek long-term capital growth by investing primarily in equity
securities of non-United States companies in Europe,
Australia, the Far East and other regions, including
developing countries.
(Bullet) Nations International Growth Fund's investment objective is to
seek long-term capital growth by investing primarily in equity
securities of companies domiciled in countries outside the
United States and listed on major stock exchanges primarily in
Europe and the Pacific Basin.
(Bullet) Nations Emerging Markets Fund's investment objective is to
seek long-term capital growth by investing primarily in equity
securities of companies in emerging market countries, such as
those in Latin America, Eastern Europe, the Pacific Basin, the
Far East, Africa and India.
(Bullet) Nations Pacific Growth Fund's investment objective is to seek
long-term capital growth by investing primarily in equity
securities of companies in the Pacific Basin and the Far East
(excluding Japan).
(Bullet) Nations Capital Growth Fund's investment objective is to seek
growth of capital by investing in companies that are believed
to have superior earnings growth potential.
(Bullet) Nations Emerging Growth Fund's investment objective is to seek
capital appreciation by investing in emerging growth companies
that are believed to have superior long-term earnings growth
prospects.
(Bullet) Nations Small Company Growth Fund's investment objective is to
seek long-term capital growth by investing primarily in equity
securities.
(Bullet) Nations Disciplined Equity Fund's investment objective is to
seek growth of capital by investing in companies that are
expected to produce significant increases in earnings per
share.
3
<PAGE>
(Bullet) INDEX FUNDS:
(Bullet) Nations Equity Index Fund's investment objective is to seek
investment results that correspond, before fees and expenses,
to the total return of the Standard & Poor's 500 Composite
Stock Price Index.
(Bullet) Nations Managed Index Fund's investment objective is to seek,
over the long-term, to provide a total return which (gross of
fees and expenses) exceeds the total return of the Standard &
Poor's 500 Composite Stock Price Index.
(Bullet) Nations Managed SmallCap Index Fund's investment objective is
to seek, over the long-term, to provide a total return which
(gross of fees and expenses) exceeds the total return of the
Standard & Poor's SmallCap 600 Index.
(Bullet) Nations Managed Value Index Fund's investment objective is to
seek, over the long-term, to provide a total return that
(gross of fees and expenses) exceeds the total return of the
S&P 500/BARRA Value Index.
(Bullet) Nations Managed SmallCap Value Index Fund's investment
objective is to seek, over the long-term, to provide a total
return that (gross of fees and expenses) exceeds the total
return of the S&P SmallCap 600/BARRA Value Index.
(Bullet) BALANCED FUND:
(Bullet) Nations Balanced Assets Fund's investment objective is to seek
total return by investing in equity and fixed income
securities.
(Bullet) BOND FUNDS:
(Bullet) Nations U.S. Government Bond Fund's investment objective is to
seek total return and preservation of capital by investing in
U.S. Government securities and repurchase agreements.
(Bullet) Nations Short-Intermediate Government Fund's investment
objective is to seek high current income consistent with
modest fluctuation of principal. The Fund invests primarily in
securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
(Bullet) Nations Government Securities Fund's investment objective is
to seek high current income consistent with moderate
fluctuation of principal. The Fund invests primarily in
intermediate-term securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
(Bullet) Nations Short-Term Income Fund's investment objective is to
seek high current income consistent with minimal fluctuation
of principal. The Fund invests in investment grade debt
securities.
(Bullet) Nations Diversified Income Fund's investment objective is to
seek total return with an emphasis on current income by
investing in a diversified portfolio of fixed income
securities.
(Bullet) Nations Strategic Fixed Income Fund's investment objective is
to seek total return by investing in investment grade fixed
income securities.
(Bullet) Nations Global Government Income Fund's investment objective
is to seek total return by investing primarily in high quality
debt securities issued by governments, banks and supranational
entities located throughout the world.
(Bullet) Nations Municipal Income Fund's investment objective is to
seek high current income exempt from Federal income tax with
the potential for principal fluctuation associated with
investments in long-term municipal securities. The Fund
invests in investment grade, long-term municipal securities.
(Bullet) Nations Short-Term Municipal Income Fund's investment
objective is to seek high current income exempt from Federal
income tax consistent with minimal fluctuation of principal.
The Fund invests in investment grade, short- term municipal
securities.
(Bullet) Nations Intermediate Municipal Bond Fund's investment
objective is to seek high current income exempt from Federal
income tax consistent with moderate fluctuation of principal.
The Fund invests in investment grade, intermediate-term
municipal securities.
4
<PAGE>
(Bullet) Nations Florida Intermediate Municipal Bond Fund's investment
objective is to seek high current income exempt from Federal
income and the Florida state intangibles taxes consistent with
moderate fluctuation of principal. The Fund invests in
investment grade, intermediate-term municipal securities.
(Bullet) Nations Florida Municipal Bond Fund's investment objective is
to seek high current income exempt from Federal income and the
Florida state intangibles taxes with the potential for
principal fluctuation associated with investments in long-term
municipal securities. The Fund invests in investment grade,
long-term municipal securities.
(Bullet) Nations Georgia Intermediate Municipal Bond Fund's investment
objective is to seek high current income exempt from Federal
and Georgia state income taxes consistent with moderate
fluctuation of principal. The Fund invests in investment
grade, intermediate-term municipal securities.
(Bullet) Nations Georgia Municipal Bond Fund's investment objective is
to seek high current income exempt from Federal and Georgia
state income taxes with the potential for principal
fluctuation associated with investments in long- term
municipal securities. The Fund invests in investment grade,
long-term municipal securities.
(Bullet) Nations Maryland Intermediate Municipal Bond Fund's investment
objective is to seek high current income exempt from Federal
and Maryland state income taxes consistent with moderate
fluctuation of principal. The Fund invests in investment
grade, intermediate-term municipal securities.
(Bullet) Nations Maryland Municipal Bond Fund's investment objective is
to seek high current income exempt from Federal and Maryland
state income taxes with the potential for principal
fluctuation associated with investments in long-term municipal
securities. The Fund invests in investment grade, long-term
municipal securities.
(Bullet) Nations North Carolina Intermediate Municipal Bond Fund's
investment objective is to seek high current income exempt
from Federal and North Carolina state income taxes consistent
with moderate fluctuation of principal. The Fund invests in
investment grade, intermediate-term municipal securities.
(Bullet) Nations North Carolina Municipal Bond Fund's investment
objective is to seek high current income exempt from Federal
and North Carolina state income taxes with the potential for
principal fluctuation associated with investments in long-term
municipal securities. The Fund invests in investment grade,
long-term municipal securities.
(Bullet) Nations South Carolina Intermediate Municipal Bond Fund's
investment objective is to seek high current income exempt
from Federal and South Carolina state income taxes consistent
with moderate fluctuation of principal. The Fund invests in
investment grade, intermediate-term municipal securities.
(Bullet) Nations South Carolina Municipal Bond Fund's investment
objective is to seek high current income exempt from Federal
and South Carolina state income taxes with the potential for
principal fluctuation associated with investments in long-term
municipal securities. The Fund invests in investment grade,
long-term municipal securities.
(Bullet) Nations Tennessee Intermediate Municipal Bond Fund's
investment objective is to seek high current income exempt
from Federal income tax and the Tennessee Hall Income Tax on
unearned income consistent with moderate fluctuation of
principal. The Fund invests in investment grade,
intermediate-term municipal securities.
(Bullet) Nations Tennessee Municipal Bond Fund's investment objective
is to seek high current income exempt from Federal income tax
and the Tennessee Hall Income Tax on unearned income with the
potential for principal fluctuation associated with
investments in long-term municipal securities. The Fund
invests in investment grade, long- term municipal securities.
(Bullet) Nations Texas Intermediate Municipal Bond Fund's investment
objective is to seek high current income exempt from Federal
income tax consistent with moderate fluctuation of principal.
The Fund invests in investment grade, intermediate-term
municipal securities.
(Bullet) Nations Texas Municipal Bond Fund's investment objective is to
seek high current income exempt from Federal income tax with
the potential for principal fluctuation associated with
investments in long-term municipal securities. The Fund
invests in investment grade, long-term municipal securities.
(Bullet) Nations Virginia Intermediate Municipal Bond Fund's investment
objective is to seek high current income exempt from Federal
and Virginia state income taxes consistent with moderate
fluctuation of principal. The Fund invests in investment
grade, intermediate-term municipal securities.
5
<PAGE>
(Bullet) Nations Virginia Municipal Bond Fund's investment objective is
to seek high current income exempt from Federal and Virginia
state income taxes with the potential for principal
fluctuation associated with investments in long- term
municipal securities. The Fund invests in investment grade,
long-term municipal securities.
(Bullet) INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as the investment
adviser to the Funds. NBAI provides investment advice to more than 52
investment company portfolios in the Nations Funds Family. TradeStreet
Investment Associates, Inc. provides sub-advisory services to certain
of the Funds, Gartmore Global Partners provides sub-advisory services
to certain other Funds and Boatmen's Capital Management, Inc. provides
investment sub-advisory services to Nations U.S. Government Bond Fund.
See "How The Funds Are Managed."
(Bullet) DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income are
declared and paid monthly by Nations Capital Growth Fund, Nations
Disciplined Equity Fund, Nations Equity Income Fund, Nations Managed
Index Fund, Nations Value Fund and Nations Small Company Growth Fund.
Dividends from net investment income are declared and paid annually by
Nations International Growth Fund. All other Equity Funds, Index Funds
and the Balanced Fund declare and pay dividends from net investment
income each calendar quarter. The Money Market Funds and the Bond Funds
declare dividends daily and pay them monthly. Each Fund's net realized
capital gains, including net short-term capital gains, are distributed
at least annually.
(Bullet) RISK FACTORS: Although the Adviser seeks to achieve the investment
objective of each Fund, there is no assurance that it will be able to
do so. Investments in a Fund are not insured against loss of principal.
Investments by a Fund in common stocks and other equity securities are
subject to stock market risk, which is the risk that the value of the
stocks the Fund holds may decline over short or even extended periods.
The U.S. stock market tends to be cyclical, with periods when stock
prices generally rise and periods when prices generally decline. As of
the date of this Prospectus, the stock market, as measured by the S&P
500 Index (as defined below) and other commonly used indices, was
trading at or close to record levels. There can be no guarantee that
these levels will continue. Certain of the Funds may invest in
securities of smaller and newer issuers. Investments in such companies
may present greater opportunities for capital appreciation because of
high potential earnings growth, but also present greater risks than
investments in more established companies with longer operating
histories and greater financial capacity. Investments by a Fund in debt
securities are subject to interest rate risk, which is the risk that
increases in market interest rates will adversely affect a Fund's
investments in debt securities. The value of a Fund's investments in
debt securities, including U.S. Government Obligations (as defined
below), will tend to decrease when interest rates rise and increase
when interest rates fall. In general, longer-term debt instruments tend
to fluctuate in value more than shorter-term debt instruments in
response to interest rate movements. In addition, debt securities which
are not backed by the United States Government are subject to credit
risk, which is the risk that the issuer may not be able to pay
principal and/or interest when due. Certain of the Funds' investments
constitute derivative securities. Certain types of derivative
securities can, under certain circumstances, significantly increase an
investor's exposure to market or other risks. Since the State
Intermediate Municipal Bond Funds and State Municipal Bond Funds invest
primarily in securities issued by entities located in a single state,
such Funds are more susceptible to changes in value due to political or
economic changes affecting such states or their subdivisions. For a
discussion of these and other factors, see "How Objectives Are
Pursued -- Risk Considerations" and "Appendix A -- Portfolio
Securities."
Nations International Equity Fund, Nations International Growth Fund,
Nations Emerging Markets Fund, Nations Pacific Growth Fund and Nations
Global Government Income Fund are designed for long-term investors
seeking international diversification and who are willing to bear the
risks associated with international investing, such as foreign currency
fluctuations and economic and political risks. For a discussion of
these factors, see "How Objectives Are Pursued -- Special Risk
Considerations Relevant to an Investment in the Nations International
Equity Fund, Nations International Growth Fund, Nations Emerging
Markets Fund, Nations Pacific Growth Fund and Nations Global Government
Income Fund."
(Bullet) MINIMUM PURCHASE: $250,000 minimum initial investment per record
holder. See "How To Buy Shares."
6
<PAGE>
Expenses Summary
Expenses are one of several factors to consider when investing in the Funds. The
following tables summarize shareholder transaction and operating expenses for
Primary A Shares of the Funds. The Examples show the cumulative expenses
attributable to a hypothetical $1,000 investment in the Funds over specified
periods.
NATIONS FUND MONEY MARKET FUNDS PRIMARY A SHARES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Nations
Government
Nations Prime Nations Money Market
SHAREHOLDER TRANSACTION EXPENSES Fund Treasury Fund Fund
Sales Load Imposed on Purchases None None None
Deferred Sales Load None None None
<CAPTION>
Nations
Tax
Exempt
SHAREHOLDER TRANSACTION EXPENSES Fund
Sales Load Imposed on Purchases None
Deferred Sales Load None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Management Fees (After Fee Waivers)1 .16% .16% .14%
<S> <C> <C> <C>
All Other Expenses .14% .14% .16%
Total Operating Expenses (After Fee Waivers)1 .30% .30% .30%
<CAPTION>
Management Fees (After Fee Waivers)1 .16%
<S> <C>
All Other Expenses .14%
Total Operating Expenses (After Fee Waivers)1 .30%
</TABLE>
1 See page 12 for a discussion of the actual expenses absent such fee waivers.
NATIONS FUND EQUITY/BALANCED FUNDS PRIMARY A SHARES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Nations Nations Nations Nations
Value Equity International International
SHAREHOLDER TRANSACTION EXPENSES Fund Income Fund Equity Fund Growth Fund
Sales Load Imposed on Purchases None None None None
Deferred Sales Load None None None None
<CAPTION>
Nations Nations
Emerging Pacific Growth
SHAREHOLDER TRANSACTION EXPENSES Markets Fund Fund
Sales Load Imposed on Purchases None None
Deferred Sales Load None None
</TABLE>
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Management Fees .75% .67% .90% .90%
<S> <C> <C> <C> <C>
All Other Expenses .19% .22% .26% .22%
Total Operating Expenses .94% .89% 1.16% 1.12%
<CAPTION>
Management Fees 1.10% .90%
<S> <C> <C>
All Other Expenses .64% .52%
Total Operating Expenses 1.74% 1.42%
</TABLE>
7
<PAGE>
NATIONS FUND EQUITY/INDEX/BALANCED FUNDS PRIMARY A SHARES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Nations Nations Nations
Capital Emerging Nations Disciplined
Growth Growth Small Company Equity
SHAREHOLDER TRANSACTION EXPENSES Fund Fund Growth Fund Fund
Sales Load Imposed on Purchases None None None None
Deferred Sales Load None None None None
<CAPTION>
Nations
Equity
Index
SHAREHOLDER TRANSACTION EXPENSES Fund
Sales Load Imposed on Purchases None
Deferred Sales Load None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Management Fees (After Fee Waivers)(1) .75% .75% .75% .75%
<S> <C> <C> <C> <C>
All Other Expenses .21% .23% .20% .25%
Total Operating Expenses (After Fee Waivers)(1) .96% .98% .95% 1.00%
<CAPTION>
Management Fees (After Fee Waivers)(1) .20%
<S> <C>
All Other Expenses .15%
Total Operating Expenses (After Fee Waivers)(1) .35%
</TABLE>
(1) See page 12 for a discussion of the actual expenses absent such fee waivers
and/or expense reimbursements.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Nations
Nations Nations Managed
Nations Managed Managed SmallCap
Managed SmallCap Value Index Value Index
SHAREHOLDER TRANSACTION EXPENSES Index Fund Index Fund Fund Fund
Sales Load Imposed on Purchases None None None None
Deferred Sales Load None None None None
<CAPTION>
Nations
Balanced
Assets
SHAREHOLDER TRANSACTION EXPENSES Fund
Sales Load Imposed on Purchases None
Deferred Sales Load None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Management Fees (After Fee Waivers)(1) .30% .30% .30% .30%
<S> <C> <C> <C> <C>
All Other Expenses1 .20% .20% .20% .20%
Total Operating Expenses (After Fee Waivers)(1) .50% .50% .50% .50%
<CAPTION>
Management Fees (After Fee Waivers)(1) .75%
<S> <C>
All Other Expenses1 .25%
Total Operating Expenses (After Fee Waivers)(1) 1.00%
</TABLE>
(1) See page 12 for a discussion of the actual expenses absent such fee waivers
and/or expense reimbursements.
NATIONS FUND BOND FUNDS PRIMARY A SHARES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Nations Nations Short- Nations
U.S. Intermediate Government
Government Government Securities
SHAREHOLDER TRANSACTION EXPENSES Bond Fund Fund Fund
Sales Load Imposed on Purchases None None None
Deferred Sales Load None None None
<CAPTION>
Nations
Short-Term
Income
SHAREHOLDER TRANSACTION EXPENSES Fund
Sales Load Imposed on Purchases None
Deferred Sales Load None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C> <C> <C>
Management Fees (After Fee Waivers)(1) .40% .40% .50%
All Other Expenses .20% .22% .30%
Total Operating Expenses (After Fee Waivers)(1) .60% .62% .80%
<CAPTION>
<S> <C>
Management Fees (After Fee Waivers)(1) .30%
All Other Expenses .25%
Total Operating Expenses (After Fee Waivers)(1) .55%
</TABLE>
(1) See page 12 for a discussion of the actual expenses absent such fee waivers.
8
<PAGE>
NATIONS FUND BOND FUNDS PRIMARY A SHARES
<TABLE>
<CAPTION>
<S> <C> <C>
Nations
Nations Strategic
Diversified Fixed
SHAREHOLDER TRANSACTION EXPENSES Income Fund Income Fund
Sales Load Imposed on Purchases None None
Deferred Sales Load None None
<CAPTION>
Nations
Global
Government
Income
SHAREHOLDER TRANSACTION EXPENSES Fund
Sales Load Imposed on Purchases None
Deferred Sales Load None
</TABLE>
ANNUAL FUND
OPERATING EXPENSES
(as a percentage of average
net assets)
<TABLE>
<S> <C> <C>
Management Fees (After Fee Waivers)(1) .50% .50%
All Other Expenses .25% .20%
Total Operating Expenses (After Fee Waivers)(1) .75% .70%
<CAPTION>
Management Fees (After Fee Waivers)(1) .70%
<S> <C>
All Other Expenses .56%
Total Operating Expenses (After Fee Waivers)(1) 1.26%
</TABLE>
(1) See page 12 for a discussion of the actual expenses absent such fee waivers.
NATIONS FUND TAX-EXEMPT BOND FUNDS PRIMARY A SHARES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Nations Nations
Nations Short-Term Nations Florida
Municipal Municipal Intermediate Intermediate
Income Income Municipal Municipal
SHAREHOLDER TRANSACTION EXPENSES Fund Fund Bond Fund Bond Fund
Sales Load Imposed on Purchases None None None None
Deferred Sales Load None None None None
<CAPTION>
Nations
Florida
Municipal
SHAREHOLDER TRANSACTION EXPENSES Bond Fund
Sales Load Imposed on Purchases None
Deferred Sales Load None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Management Fees (After Fee Waivers)(1) .40% .30% .30% .30%
All Other Expenses .20% .10% .20% .20%
Total Operating Expenses (After Fee Waivers)(1) .60% .40% .50% .50%
<CAPTION>
Management Fees (After Fee Waivers)(1) .40%
<S> <C>
All Other Expenses .20%
Total Operating Expenses (After Fee Waivers)(1) .60%
</TABLE>
(1) See page 12 for a discussion of the actual expenses absent such fee waivers.
NATIONS FUND TAX-EXEMPT BOND FUNDS PRIMARY A SHARES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Nations Nations
Georgia Nations Maryland Nations
Intermediate Georgia Intermediate Maryland
Municipal Municipal Municipal Municipal
SHAREHOLDER TRANSACTION EXPENSES Bond Fund Bond Fund Bond Fund Bond Fund
Sales Load Imposed on Purchases None None None None
Deferred Sales Load None None None None
<CAPTION>
Nations
North
Carolina
Intermediate
Municipal
SHAREHOLDER TRANSACTION EXPENSES Bond Fund
Sales Load Imposed on Purchases None
Deferred Sales Load None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Management Fees (After Fee Waivers)(1) .30% .40% .30% .40%
All Other Expenses .20% .20% .20% .20%
Total Operating Expenses (After Fee Waivers)(1) .50% .60% .50% .60%
<CAPTION>
Management Fees (After Fee Waivers)(1) .30%
<S> <C>
All Other Expenses .20%
Total Operating Expenses (After Fee Waivers)(1) .50%
</TABLE>
(1) See page 12 for a discussion of the actual expenses absent such fee waivers.
9
<PAGE>
NATIONS FUND TAX-EXEMPT BOND FUNDS PRIMARY A SHARES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Nations
Nations South Nations Nations
North Carolina South Tennessee
Carolina Intermediate Carolina Intermediate
Municipal Municipal Municipal Municipal
SHAREHOLDER TRANSACTION EXPENSES Bond Fund Bond Fund Bond Fund Bond Fund
Sales Load Imposed on Purchases None None None None
Deferred Sales Load None None None None
<CAPTION>
Nations
Tennessee
Municipal
SHAREHOLDER TRANSACTION EXPENSES Bond Fund
Sales Load Imposed on Purchases None
Deferred Sales Load None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Management Fees (After Fee Waivers)(1) .40% .30% .40% .30%
All Other Expenses (After Expense Reimbursements)1 .20% .20% .20% .20%
Total Operating Expenses (After Fee Waivers and Expense
Reimbursements)1 .60% .50% .60% .50%
<CAPTION>
Management Fees (After Fee Waivers)(1) .40%
<S> <C>
All Other Expenses (After Expense Reimbursements)1 .20%
Total Operating Expenses (After Fee Waivers and Expense
Reimbursements)1 .60%
</TABLE>
(1) See page 12 for a discussion of the actual expenses absent such fee waivers
and/or expense reimbursements.
NATIONS FUND TAX-EXEMPT BOND FUNDS PRIMARY A SHARES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Nations Nations
Texas Nations Virginia
Intermediate Texas Intermediate
Municipal Municipal Municipal
SHAREHOLDER TRANSACTION EXPENSES Bond Fund Bond Fund Bond Fund
Sales Load Imposed on Purchases None None None
Deferred Sales Load None None None
<CAPTION>
Nations
Virginia
Municipal
SHAREHOLDER TRANSACTION EXPENSES Bond Fund
Sales Load Imposed on Purchases None
Deferred Sales Load None
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Management Fees (After Fee Waivers)(1) .30% .40% .30%
All Other Expenses .20% .20% .20%
Total Operating Expenses (After Fee Waivers)(1) .50% .60% .50%
<CAPTION>
Management Fees (After Fee Waivers)(1) .40%
<S> <C>
All Other Expenses .20%
Total Operating Expenses (After Fee Waivers)(1) .60%
</TABLE>
(1) See page 12 for a discussion of the actual expenses absent such fee waivers.
10
<PAGE>
EXAMPLES:
You would pay the following expenses on a $1,000 investment in Primary A Shares
of the indicated Fund, assuming (1) a 5% annual return and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nations
Government Nations Nations Nations Nations
Nations Nations Money Tax Nations Equity International International
Prime Treasury Market Exempt Value Income Equity Growth
Fund Fund Fund Fund Fund Fund Fund Fund
1 Year $ 3 $ 3 $ 3 $ 3 $ 10 $ 9 $ 12 $ 11
3 Years $10 $10 $10 $10 $ 30 $ 28 $ 37 $ 36
5 Years $17 $17 $17 $17 $ 52 $ 49 $ 64 $ 62
10 Years $38 $38 $38 $38 $115 $110 $141 $136
<CAPTION>
Nations Nations
Emerging Pacific
Markets Growth
Fund Fund
1 Year $ 18 $ 14
3 Years $ 55 $ 45
5 Years $ 94 $ 78
10 Years $205 $170
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Nations Nations Nations Nations
Nations Emerging Nations Disciplined Equity Nations Managed
Capital Growth Growth Small Company Equity Index Managed SmallCap
Fund Fund Growth Fund Fund Fund Index Fund Index Fund
1 Year $ 10 $ 10 $ 10 $ 10 $ 4 $ 5 $ 5
3 Years $ 31 $ 31 $ 30 $ 32 $11 $16 $16
5 Years $ 53 $ 54 $ 53 $ 55 $20 $28 $28
10 Years $118 $120 $117 $122 $44 $63 $63
<CAPTION>
Nations
Nations Managed
Managed SmallCap
Value Value Index
Index Fund Fund
1 Year $ 5 $ 5
3 Years $16 $16
5 Years N/A N/A
10 Years N/A N/A
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Nations Nations
Nations Nations Short- Nations Nations Nations Strategic
Balanced U.S. Intermediate Government Short-Term Diversified Fixed
Assets Government Government Securities Income Income Income
Fund Bond Fund Fund Fund Fund Fund Fund
1 Year $ 10 $ 6 $ 6 $ 8 $ 6 $ 8 $ 7
3 Years $ 32 $19 $20 $26 $18 $24 $22
5 Years $ 55 $33 $35 $44 $31 $42 $39
10 Years $122 $75 $77 $99 $69 $93 $87
<CAPTION>
Nations
Global Nations
Government Municipal
Income Income
Fund Fund
1 Year $ 13 $ 6
3 Years $ 40 $19
5 Years $ 69 $33
10 Years $152 $75
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Nations Nations
Nations Nations Florida Nations Nations Nations Maryland
Short-Term Intermediate Intermediate Florida Georgia Georgia Intermediate
Municipal Municipal Municipal Municipal Intermediate Municipal Municipal
Income Bond Bond Bond Municipal Bond Bond
Fund Fund Fund Fund Bond Fund Fund Fund
1 Year $ 4 $ 5 $ 5 $ 6 $ 5 $ 6 $ 5
3 Years $13 $16 $16 $19 $16 $19 $16
5 Years $22 $28 $28 $33 $28 $33 $28
10 Years $51 $63 $63 $75 $63 $75 $63
<CAPTION>
Nations
North
Carolina
Nations Intermediate
Maryland Municipal
Municipal Bond Bond
Fund Fund
1 Year $ 6 $ 5
3 Years $19 $16
5 Years $33 $28
10 Years $75 $63
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Nations
Nations South Nations Nations Nations
North Carolina South Tennessee Nations Texas Nations
Carolina Intermediate Carolina Intermediate Tennessee Intermediate Texas
Municipal Municipal Municipal Municipal Municipal Municipal Municipal
Bond Bond Bond Bond Bond Bond Bond
Fund Fund Fund Fund Fund Fund Fund
1 Year $ 6 $ 5 $ 6 $ 5 $ 6 $ 5 $ 6
3 Years $19 $16 $19 $16 $19 $16 $19
5 Years $33 $28 $33 $28 $33 $28 $33
10 Years $75 $63 $75 $63 $75 $63 $75
<CAPTION>
Nations
Virginia Nations
Intermediate Virginia
Municipal Municipal
Bond Bond
Fund Fund
1 Year $ 5 $ 6
3 Years $16 $19
5 Years $28 $33
10 Years $63 $75
</TABLE>
11
<PAGE>
The purpose of the foregoing tables is to assist an investor in understanding
the various shareholder transaction and operating expenses that an investor in
Primary A Shares will bear either directly or indirectly. Except for Nations
Managed Index Fund, Nations Managed SmallCap Index Fund, Nations Managed Value
Index Fund and Nations Managed SmallCap Value Index Fund, which expenses are
based on estimates, certain figures contained in the above tables are based on
amounts incurred during each Fund's most recent fiscal year and have been
adjusted as necessary to reflect current service provider fees. There is no
assurance that any fee waivers and/or reimbursements will continue. In
particular, to the extent other expenses are less than expected, waivers and/or
reimbursements of management fees, if any, may decrease. Shareholders will be
notified of any decrease that materially increases Total Operating Expenses. If
fee waivers and/or reimbursements are discontinued, the amounts contained in the
"Examples" above may increase. For more complete descriptions of the Funds'
operating expenses, see "How The Funds Are Managed."
Absent fee waivers and expense reimbursements, "Management Fees" and "Total
Operating Expenses" for Primary A Shares of the indicated Fund would have been
as follows: Nations Government Money Market Fund -- .40% and .56%,
respectively; Nations Tax Exempt Fund -- .40% and .54%, respectively; Nations
Prime Fund -- .20% and .34%, respectively; Nations Treasury Fund -- .20% and
.34%, respectively; Nations Small Company Growth Fund -- 1.00% and 1.20%,
respectively; Nations Equity Index Fund -- .50% and .65%, respectively; Nations
Managed Index Fund -- .50% and .70%, respectively; Nations Managed SmallCap
Index Fund -- .50% and .70%, respectively; Nations Managed Value Index Fund
-- .50% and .70%, respectively; Nations Managed SmallCap Value Index Fund --
.50% and .70%, respectively; Nations U.S. Government Bond Fund -- .60% and
.80%, respectively; Nations Short-Intermediate Government Fund -- .60% and
.82%, respectively; Nations Government Securities Fund -- .64% and .94%,
respectively; Nations Short-Term Income Fund -- .60% and .85%, respectively;
Nations Diversified Income Fund -- .60% and .85%, respectively; Nations
Strategic Fixed Income Fund -- .60% and .80%, respectively; Nations Municipal
Income Fund -- .60% and .80%, respectively; Nations Short-Term Municipal Income
Fund -- .50% and .60%, respectively; Nations Intermediate Municipal Bond Fund
-- .50% and .70%, respectively; Nations Florida Intermediate Municipal Bond
Fund -- .50% and .70%, respectively; Nations Florida Municipal Bond Fund --
.60% and .80%, respectively; Nations Georgia Intermediate Municipal Bond Fund
-- .50% and .70%, respectively; Nations Georgia Municipal Bond Fund -- .60%
and .80%, respectively; Nations Maryland Intermediate Municipal Bond Fund --
.50% and .70%, respectively; Nations Maryland Municipal Bond Fund -- .60% and
.80%, respectively; Nations North Carolina Intermediate Municipal Bond Fund --
.50% and .70%, respectively; Nations North Carolina Municipal Bond Fund -- .60%
and .80%, respectively; Nations South Carolina Intermediate Municipal Bond Fund
-- .50% and .70%, respectively; Nations South Carolina Municipal Bond Fund
-- .60% and .80%, respectively; Nations Tennessee Intermediate Municipal Bond
Fund -- .50% and .70%, respectively; Nations Tennessee Municipal Bond Fund --
.60% and .80%, respectively; Nations Texas Intermediate Bond Fund -- .50% and
.70%, respectively; Nations Texas Municipal Bond Fund -- .60% and .80%,
respectively; Nations Virginia Intermediate Bond Fund -- .50% and .70%,
respectively; and Nations Virginia Municipal Bond Fund -- .60% and .80%.
THE FOREGOING SHOULD NOT BE CONSIDERED TO BE AN ACTUAL REPRESENTATION OF PAST OR
FUTURE PERFORMANCE. ACTUAL EXPENSES AND RATES OF RETURN MAY BE GREATER OR LESS
THAN THOSE SHOWN.
12
<PAGE>
Financial Highlights
The financial information on the following pages has been derived from the
audited financial statements of Nations Fund Trust, Nations Fund, Inc. and
Nations Portfolios. Price Waterhouse LLP is the independent accountant to
Nations Fund Trust, Nations Fund, Inc. and Nations Portfolios. The reports of
Price Waterhouse LLP for the most recent fiscal years of Nations Fund Trust,
Nations Fund, Inc. and Nations Portfolios accompany the financial statements for
such periods and are incorporated by reference in the SAIs, which are available
upon request. For more information see "Organization And History." Shareholders
of a Fund will receive unaudited semi-annual reports describing the Funds'
investment operations and annual financial statements audited by the Funds'
independent accountant. Financial Highlights for Nations Managed Value Index
Fund and Nations Managed SmallCap Value Index Fund are not provided below
because neither Fund had yet commenced operations during the period indicated
below.
Information for Primary A Shares of Nations International Growth Fund, Nations
Small Company Growth Fund and Nations U.S. Government Bond Fund has been derived
from the audited financial statements dated May 16, 1997 for the Pilot Shares of
The Pilot Funds' Pilot International Equity Fund, Pilot Small Capitalization
Equity Fund and Pilot U.S. Government Securities Fund, the predecessor funds to
Nations International Growth Fund, Nations Small Company Growth Fund and Nations
U.S. Government Bond Fund, respectively. This information has been audited by
Arthur Andersen LLP and is provided to help you understand the historical
performance of the Funds and their predecessors. The reports of Arthur Andersen
LLP accompany the financial statements dated May 16, 1997 and are incorporated
by reference in the SAI, which is available upon request.
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS PRIME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 3/31/97 03/31/96(a) 05/31/95 5/31/94
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0520 0.0468 0.0519 0.0318
Dividends from net investment income (0.0520) (0.0468) (0.0519) (0.0318)
Total dividends and distributions (0.0520) (0.0468) (0.0519) (0.0318)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 5.34% 4.79% 5.32% 3.22%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,533,688 $ 2,472,469 $ 2,873,096 $ 2,883,762
Ratio of operating expenses to average net assets 0.30% 0.30%+ 0.30% 0.30%
Ratio of net investment income to average net assets 5.21% 5.62%+ 5.23% 3.20%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.35% 0.37%+ 0.38% 0.37%
Net investment income per share without waivers and/or
expense reimbursements $ 0.0516 $ 0.0463 $ 0.0511 $ 0.0311
<CAPTION>
YEAR
ENDED
PRIMARY A SHARES 5/31/93
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0328
Dividends from net investment income (0.0328)
Total dividends and distributions (0.0328)
Net asset value, end of period $ 1.00
Total return++ 3.33%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,156,266
Ratio of operating expenses to average net assets 0.30%
Ratio of net investment income to average net assets 3.25%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.36%
Net investment income per share without waivers and/or
expense reimbursements $ 0.0322
</TABLE>
NATIONS PRIME FUND (CONT.)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 5/31/92 5/31/91 5/31/90 5/31/89
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0506 0.0749 0.0855 0.0839
Dividends from net investment income (0.0506) (0.0749) (0.0855) (0.0839)
Total dividends and distributions (0.0506) (0.0749) (0.0855) (0.0839)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 5.19%+++ 7.75%+++ 8.88%+++ 8.71%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 500,476 $ 574,993 $ 433,298 $ 115,295
Ratio of operating expenses to average net
assets 0.30% 0.30% 0.32% 0.35%
Ratio of net investment income to average
net assets 5.03% 7.47% 8.43% 8.11%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.42% 0.44% 0.50%+++ 0.55%+++
Net investment income per share without
waivers and/or expense reimbursements $ 0.0494 $ 0.0735 $ 0.0731+++ $ 0.0819+/+++
<CAPTION>
YEAR PERIOD
ENDED ENDED
PRIMARY A SHARES 5/31/88 5/31/87*
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0675 0.0277
Dividends from net investment income (0.0675) (0.0277)
Total dividends and distributions (0.0675) (0.0277)
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 6.94%+++ 2.79%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 264,063 $ 252,562
Ratio of operating expenses to average net
assets 0.36% 0.35%+
Ratio of net investment income to average
net assets 6.73% 5.99%+
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.56%+++ 0.65%+/+++
Net investment income per share without
waivers and/or expense reimbursements $ 0.0655+++ $ 0.0247+++
</TABLE>
* The Nations Prime Fund Primary A Shares commenced operations on December 15,
1986.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
May 31.
13
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TREASURY FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 3/31/97 03/31/96(a) 5/31/95 5/31/94
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0509 0.0458 0.0494 0.0297
Dividends from net investment income (0.0509) (0.0458) (0.0494) (0.0297)
Distributions from net realized capital gains -- (0.0000)# (0.0000)# --
Total dividends and distributions (0.0509) (0.0458) (0.0494) (0.0297)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 5.22% 4.67% 5.05% 2.99%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 1,345,585 $ 821,030 $ 2,896,868 $ 2,679,992
Ratio of operating expenses to average net assets 0.30% 0.30%+ 0.30% 0.30%
Ratio of net investment income to average net assets 5.09% 5.52%+ 4.99% 2.97%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.35% 0.37%+ 0.35% 0.36%
Net investment income per share without waivers and/or
expense reimbursements $ 0.0504 $ 0.0453 $ 0.0489 $ 0.0292
<CAPTION>
YEAR
ENDED
PRIMARY A SHARES 5/31/93
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0307
Dividends from net investment income (0.0307)
Distributions from net realized capital gains --
Total dividends and distributions (0.0307)
Net asset value, end of period $ 1.00
Total return++ 3.12%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,956,796
Ratio of operating expenses to average net assets 0.30%
Ratio of net investment income to average net assets 3.02%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.36%
Net investment income per share without waivers and/or
expense reimbursements $ 0.0302
</TABLE>
NATIONS TREASURY FUND (CONT.)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 5/31/92 5/31/91 5/31/90 5/31/89 5/31/88
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0483 0.0721 0.0829 0.0802 0.0630
Dividends from net investment income (0.0483) (0.0721) (0.0829) (0.0802) (0.0630)
Distributions from net realized capital
gains -- -- -- -- --
Total dividends and distributions (0.0483) (0.0721) (0.0829) (0.0802) (0.0630)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 4.95%+++ 7.46%+++ 8.61%+++ 8.33%+++ 6.49%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $1,094,741 $ 955,186 $ 392,843 $ 90,946 $ 111,414
Ratio of operating expenses to average net
assets 0.29% 0.25% 0.25% 0.39% 0.38%
Ratio of net investment income to average
net assets 4.82% 7.04% 8.18% 7.93% 6.31%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.42% 0.43% 0.59%+++ 0.58%+++ 0.65%+++
Net investment income per share without
waivers and/or expense reimbursements $ 0.0470 $ 0.0703 $ 0.0693+++ $ 0.0783+++ $ 0.0603+++
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 5/31/87*
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0262
Dividends from net investment income (0.0262)
Distributions from net realized capital
gains --
Total dividends and distributions (0.0262)
Net asset value, end of period $ 1.00
Total return++ 2.64%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 66,221
Ratio of operating expenses to average net
assets 0.35%+
Ratio of net investment income to average
net assets 5.68%+
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.75%+/+++
Net investment income per share without
waivers and/or expense reimbursements $ 0.0222+++
</TABLE>
* Nations Treasury Fund Primary A Shares commenced operations on December 15,
1986.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.0001.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
May 31.
14
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(a) 11/30/95 11/30/94 11/30/93
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0503 0.0173 0.0558 0.0375 0.0294
Distributions:
Dividends from net investment income (0.0503) (0.0173) (0.0558) (0.0375) (0.0294)
Distributions from net realized capital
gains -- -- -- (0.0000)# --
Total dividends and distributions (0.0503) (0.0173) (0.0558) (0.0375) (0.0294)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 5.18% 1.74% 5.72% 3.84% 2.96%
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 299,394 $ 336,771 $ 332,895 $ 432,729 $ 475,180
Ratio of operating expenses to average net
assets 0.30% 0.30%+ 0.30% 0.30% 0.30%
Ratio of net investment income to average
net assets 5.03% 5.20%+ 5.58% 3.79% 2.91%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.57% 0.59%+ 0.57% 0.59% 0.56%
Net investment income per share without
waivers and/or expense reimbursements $ 0.0476 $ 0.0163 $ 0.0531 $ 0.0347 $ 0.0269
<CAPTION>
YEAR PERIOD
ENDED ENDED
PRIMARY A SHARES 11/30/92 11/30/91*
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0358 0.0571
Distributions:
Dividends from net investment income (0.0358) (0.0571)
Distributions from net realized capital
gains -- --
Total dividends and distributions (0.0358) (0.0571)
Net asset value, end of period $ 1.00 $ 1.00
Total return++ 3.63%+++ 5.87%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 414,412 $ 333,979
Ratio of operating expenses to average net
assets 0.42% 0.43%+
Ratio of net investment income to average
net assets 3.55% 5.49%+
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.58% 0.62%+
Net investment income per share without
waivers and/or expense reimbursements $ 0.0341 $ 0.0551
</TABLE>
* Nations Government Money Market Fund Primary A Shares commenced operations on
December 3, 1990.
+ Annualized.
++ Total return represents aggregate return for the periods indicated and does
not reflect the deduction of any applicable sales charge.
+++ Unaudited.
# Amount represents less than $0.0001 per share.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
15
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TAX EXEMPT FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(a) 11/30/95 11/30/94
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0324 0.0112 0.0361 0.0257
Dividends from net investment income (0.0324) (0.0112) (0.0361) (0.0257)
Total dividends and distributions (0.0324) (0.0112) (0.0361) (0.0257)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 3.29% 1.12% 3.68% 2.60%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 1,184,313 $ 1,078,764 $ 905,125 $ 820,677
Ratio of operating expenses to average net assets 0.30% 0.30%+ 0.30% 0.27%
Ratio of net investment income to average net assets 3.25% 3.35%+ 3.62% 2.59%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.55% 0.58%+ 0.57% 0.59%
Net investment income per share without waivers and/or
expense reimbursements $ 0.0298 $ 0.0103 $ 0.0335 $ 0.0226
<CAPTION>
YEAR
ENDED
PRIMARY A SHARES 11/30/93
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0223
Dividends from net investment income (0.0223)
Total dividends and distributions (0.0223)
Net asset value, end of period $ 1.00
Total return++ 2.27%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 701,403
Ratio of operating expenses to average net assets 0.23%
Ratio of net investment income to average net assets 2.23%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.59%
Net investment income per share without waivers and/or
expense reimbursements $ 0.0187
</TABLE>
NATIONS TAX EXEMPT FUND (CONT.)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 11/30/92 11/30/91 11/30/90 11/30/89
Operating performance:
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0267 0.0422 0.0550 0.0600
Dividends from net investment income (0.0267) (0.0422) (0.0550) (0.0600)
Total dividends and distributions (0.0267) (0.0422) (0.0550) (0.0600)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return++ 2.70%+++ 4.31%+++ 5.63%+++ 6.17%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 329,265 $ 168,829 $ 173,834 $ 145,109
Ratio of operating expenses to average net assets 0.40% 0.42% 0.40% 0.40%
Ratio of net investment income to average net assets 2.65% 4.23% 5.51% 6.00%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.57% 0.60% 0.75% 0.74%
Net investment income per share without waivers and/or
expense reimbursements $ 0.0250 $ 0.0404 $ 0.0515 $ 0.0566
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/88*
Operating performance:
Net asset value, beginning of period $ 1.00
Net investment income 0.0350
Dividends from net investment income (0.0350)
Total dividends and distributions (0.0350)
Net asset value, end of period $ 1.00
Total return++ 3.55%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 143,245
Ratio of operating expenses to average net assets 0.40%+
Ratio of net investment income to average net assets 4.97%+
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.75%+
Net investment income per share without waivers and/or
expense reimbursements $ 0.0325
</TABLE>
* Nations Tax Exempt Fund Primary A Shares commenced operations on March 14,
1988.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
16
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS VALUE FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(a) 11/30/95 11/30/94
Operating performance:
Net asset value, beginning of period $ 16.60 $ 16.21 $ 12.98 $ 13.74
Net investment income/(loss) 0.26 0.07 0.27 0.24
Net realized and unrealized gain/(loss) on investments 2.69 1.06 3.91 (0.23)
Net increase/(decrease) in net asset value from operations 2.95 1.13 4.18 0.01
Distributions:
Dividends from net investment income (0.26) (0.12) (0.28) (0.23)
Distributions from net realized capital gains (1.42) (0.62) (0.67) (0.54)
Total dividends and distributions (1.68) (0.74) (0.95) (0.77)
Net asset value, end of period $ 17.87 $ 16.60 $ 16.21 $ 12.98
Total return++ 18.07% 7.20% 34.53% (0.08)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,200,853 $ 998,957 $ 956,669 $ 799,743
Ratio of operating expenses to average net assets 0.97%(c) 0.96%+ 0.94% 0.93%
Ratio of net investment income/(loss) to average net assets 1.51% 1.30%+ 1.90% 1.85%
Portfolio turnover rate 47% 12% 63% 75%
Ratio of operating expenses to average net assets without waivers
and/or expense reimbursements 0.97%(c) 0.96%+ 0.94% 0.93%
Net investment income/(loss) per share without waivers and/or expense
reimbursements $ 0.26(c) $ 0.07% $ 0.27 $ 0.24
Average commission rate paid (b) $ 0.0649 $ 0.0648 N/A N/A
<CAPTION>
YEAR
ENDED
PRIMARY A SHARES 11/30/93
Operating performance:
Net asset value, beginning of period $ 12.45
Net investment income/(loss) 0.24
Net realized and unrealized gain/(loss) on investments 1.38
Net increase/(decrease) in net asset value from operations 1.62
Distributions:
Dividends from net investment income (0.24)
Distributions from net realized capital gains (0.09)
Total dividends and distributions (0.33)
Net asset value, end of period $ 13.74
Total return++ 13.19%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 707,185
Ratio of operating expenses to average net assets 0.96%
Ratio of net investment income/(loss) to average net assets 1.98%
Portfolio turnover rate 64%
Ratio of operating expenses to average net assets without waivers
and/or expense reimbursements 0.97%
Net investment income/(loss) per share without waivers and/or expense
reimbursements $ 0.24
Average commission rate paid (b) N/A
</TABLE>
NATIONS VALUE FUND (CONT.)
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR YEAR
ENDED ENDED
PRIMARY A SHARES 11/30/92 11/30/91
Operating performance:
Net asset value, beginning of period $ 11.16 $ 9.71
Net investment income/loss 0.28 0.34
Net realized and unrealized gain/(loss) on investments 1.57 1.47
Net increase/(decrease) in net asset value from operations 1.85 1.81
Distributions:
Dividends from net investment income (0.27) (0.36)
Distributions from net realized capital gains (0.29) --
Total dividends and distributions (0.56) (0.36)
Net asset value, end of period $ 12.45 $ 11.16
Total return++ 17.00%+++ 18.79%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 282,138 $ 82,360
Ratio of operating expenses to average net assets 0.90% 0.53%
Ratio of net investment income/(loss) to average net assets 2.31% 3.33%
Portfolio turnover rate 60% 51%
Ratio of operating expenses to average net assets without waivers and/or expense
reimbursements 0.97% 0.99%
Net investment income/(loss) per share without waivers and/or expense reimbursements $ 0.27 $ 0.30
Average commission rate paid (b) N/A N/A
<CAPTION>
YEAR PERIOD
ENDED ENDED
PRIMARY A SHARES 11/30/90 11/30/89*#
Operating performance:
Net asset value, beginning of period $ 10.04 $ 10.00
Net investment income/loss 0.35 0.08
Net realized and unrealized gain/(loss) on investments (0.36) (0.04)
Net increase/(decrease) in net asset value from operations (0.01) 0.04
Distributions:
Dividends from net investment income (0.32) --
Distributions from net realized capital gains -- --
Total dividends and distributions (0.32) --
Net asset value, end of period $ 9.71 $ 10.04
Total return++ (0.16)%+++ 0.40%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 19,769 $ 5,161
Ratio of operating expenses to average net assets 0.21% 0.49%+
Ratio of net investment income/(loss) to average net assets 4.19% 4.41%+
Portfolio turnover rate 24% --
Ratio of operating expenses to average net assets without waivers and/or expense
reimbursements 1.11% 1.41%+
Net investment income/(loss) per share without waivers and/or expense reimbursements $ 0.26 $ 0.06
Average commission rate paid (b) N/A N/A
</TABLE>
* Nations Value Fund Primary A Shares commenced operations on September 19,
1989.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the monthly average share
method, which more appropriately presents the per share data for the period
since the use of the undistributed method did not accord with the results of
operations.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) Average commission rate paid per share of securities purchased and sold by
the Fund.
(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.
17
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS EQUITY INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 05/31/95 5/31/94 5/31/93
Operating performance:
Net asset value, beginning
of period $ 13.14 $ 11.81 $ 11.43 $ 12.06 $ 11.41
Net investment income/(loss) 0.43 0.30 0.42 0.38 0.37
Net realized and unrealized
gain/(loss) on investments 1.55 1.77 1.11 0.22 1.08
Net increase/(decrease) in net
asset value from operations 1.98 2.07 1.53 0.60 1.45
Distributions:
Dividends from net
investment income (0.41) (0.37) (0.42) (0.42) (0.35)
Distributions from net
realized capital gains (2.41) (0.37) (0.73) (0.81) (0.45)
Total dividends and
distributions (2.82) (0.74) (1.15) (1.23) (0.80)
Net asset value, end of period $ 12.30 $ 13.14 $ 11.81 $ 11.43 $ 12.06
Total return++ 15.62% 17.98% 14.79% 5.00% 13.30%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's) $ 200,772 $ 283,142 $ 283,082 $ 225,740 $ 175,949
Ratio of operating expenses to
average net assets 0.91%(d) 0.90%+ 0.92% 0.94% 0.92%
Ratio of net investment
income/(loss) to average
net assets 3.09% 2.84%+ 3.75% 3.41% 3.37%
Portfolio turnover rate 102% 59% 158% 116% 55%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 0.91%(d) 0.90%+ 0.93% 0.95% 1.04%
Net investment income/(loss)
per share without waivers
and/or expense
reimbursements $ 0.43(d) $ 0.30 $ 0.42 $ 0.38 $ 0.36
Average commission rate
paid (c) $ 0.0609 $ 0.0287 N/A N/A N/A
<CAPTION>
YEAR PERIOD
ENDED ENDED
PRIMARY A SHARES 5/31/92 5/31/91*
Operating performance:
Net asset value, beginning
of period $ 10.19 $ 10.00
Net investment income/(loss) 0.34 0.05
Net realized and unrealized
gain/(loss) on investments 1.25 0.14
Net increase/(decrease) in net
asset value from operations 1.59 0.19
Distributions:
Dividends from net
investment income (0.30) --
Distributions from net
realized capital gains (0.07) --
Total dividends and
distributions (0.37) --
Net asset value, end of period $ 11.41 $ 10.19
Total return++ 15.91%+++ 1.90%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in
000's) $ 18,104 $ 10,194
Ratio of operating expenses to
average net assets 1.10% 1.12%+
Ratio of net investment
income/(loss) to average
net assets 3.15% 3.66%+
Portfolio turnover rate 84% 9%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 2.21% 1.80%+
Net investment income/(loss)
per share without waivers
and/or expense
reimbursements $ 0.22 $ (0.06)
Average commission rate
paid (c) N/A N/A
</TABLE>
* Nations Equity Income Fund Primary A Shares commenced operations on April
11, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
May 31.
(c) Average commission rate paid per share of securities purchased and sold by
the Fund.
(d) The effect of the fees reduced by credits allowed by the custodian on the
operating expenses ratio, with and without waivers and/or expense
reimbursements and net investment income per share was less than 0.01% and
$0.01, respectively.
18
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97# 03/31/96(a)# 05/31/95# 5/31/94# 5/31/93#
Operating performance:
Net asset value, beginning of period $ 13.50 $ 11.75 $ 12.06 $ 10.60 $ 10.40
Net investment income/(loss) 0.08 0.07 0.14 0.09 0.09
Net realized and unrealized gain/(loss) on
investments 0.11 1.80 (0.20) 1.44 0.21
Net increase/(decrease) in net asset value
from operations 0.19 1.87 (0.06) 1.53 0.30
Distributions:
Dividends from net investment income (0.11) (0.06) (0.03) (0.05) (0.08)
Distributions in excess of net investment
income (0.00)(c) (0.04) -- -- --
Distributions from net realized capital gains (0.42) (0.02) (0.12) (0.02) (0.02)
Distributions in excess of net realized
capital gains (0.03) -- (0.10) -- --
Total dividends and distributions (0.56) (0.12) (0.25) (0.07) (0.10)
Net asset value, end of period $ 13.13 $ 13.50 $ 11.75 $ 12.06 $ 10.60
Total return++ 1.32% 16.01% (0.46)% 14.37% 3.14%
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 976,855 $ 849,731 $ 572,940 $ 401,559 $ 118,873
Ratio of operating expenses to average net
assets 1.16% 1.17%+ 1.03% 1.17% 1.30%
Ratio of net investment income/(loss) to
average net assets 0.62% 0.65%+ 1.17% 0.75% 1.03%
Portfolio turnover rate 36% 26% 92% 39% 41%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements -- 1.18%+ 1.04% 1.18% 1.32%
Net investment income/(loss) per share
without waivers and/or expense
reimbursements -- $ 0.07 $ 0.14 $ 0.08 $ 0.10
Average commission rate paid (b) $ 0.0279 $ 0.0272 -- -- --
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 5/31/92*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) 0.08
Net realized and unrealized gain/(loss) on
investments 0.36
Net increase/(decrease) in net asset value
from operations 0.44
Distributions:
Dividends from net investment income (0.04)
Distributions in excess of net investment
income --
Distributions from net realized capital gains --
Distributions in excess of net realized
capital gains --
Total dividends and distributions (0.04)
Net asset value, end of period $ 10.40
Total return++ 4.43%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 83,970
Ratio of operating expenses to average net
assets 1.33%+
Ratio of net investment income/(loss) to
average net assets 1.81%+
Portfolio turnover rate 11%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.43%+
Net investment income/(loss) per share
without waivers and/or expense
reimbursements $ 0.03
Average commission rate paid (b) --
</TABLE>
* Nations International Equity Fund Primary A Shares commenced operations on
December 2, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the monthly average shares
method, which more appropriately presents the per share data for the period
since the use of the undistributed 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) Average commission rate paid per share of securities purchased and sold by
the Fund.
(c) Amount represents less than $0.01 per share.
19
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS INTERNATIONAL GROWTH FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES* 05/16/97 08/31/96 08/31/95 08/31/94
Operating performance:
Net asset value at the beginning of the period $ 17.05 $ 16.24 $ 16.34 $ 14.14
Net investment income (loss) 0.05 0.18 0.13(f) 0.11(f)
Net realized and unrealized gain/(loss) on
investments 2.76 1.61 (0.22)(f) 1.65(f)
Net realized and unrealized gain/(loss) on foreign
currency related transactions (0.92) (0.13) 0.39(f) 0.59(f)
Total income (loss) from investments activities 1.89 1.66 0.30 2.35
Distributions from net investment income (0.17) (0.46) (0.11) --
Distributions from net realized gain on investments
and foreign currency related transactions (0.34) (0.39) (0.29) (0.15)
Net asset value at the end of the period $ 18.43 $ 17.05 $ 16.24 $ 16.34
Total return (a) 11.28%(c) 10.64% 2.08% 16.75%
Portfolio turnover rate (g) 33.68% 22.31% 35.91% 35.40%
Ratio of expenses to average net assets 1.18%(d) 1.08% 1.18% 1.12%
Ratio of net investment income (loss) to average
net assets 0.47%(d) 0.69% 0.82% 0.75%
Net assets at end of period (in 000's) $ 701,033 $ 579,019 $ 363,212 $ 307,561
Average Commission Rate (h) $0.0107 $0.0160
<CAPTION>
EIGHT
MONTHS
ENDED
PRIMARY A SHARES* 08/31/93 (b)
Operating performance:
Net asset value at the beginning of the period $ 13.15
Net investment income (loss) (0.01)(f)
Net realized and unrealized gain/(loss) on
investments 1.10(f)
Net realized and unrealized gain/(loss) on foreign
currency related transactions (0.10)(f)
Total income (loss) from investments activities 0.99
Distributions from net investment income --
Distributions from net realized gain on investments
and foreign currency related transactions --
Net asset value at the end of the period $ 14.14
Total return (a) 7.53%(c)
Portfolio turnover rate (g) 26.65%(e)
Ratio of expenses to average net assets 1.31%(d)
Ratio of net investment income (loss) to average
net assets (0.56)%(d)
Net assets at end of period (in 000's) $ 195,548
Average Commission Rate (h)
</TABLE>
* Primary A Shares of Nations International Growth Fund were formerly Pilot
Shares of the Pilot International Equity Fund, a predecessor portfolio.
(a) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges.
(b) Pilot Shares were initially issued on July 26, 1993.
(c) Not annualized.
(d) Annualized.
(e) Excludes the transfer of assets effective on August 6, 1993 from a
collective trust for which Boatmen's Trust Company served as trustee.
(f) Calculated based on the average shares outstanding methodology.
(g) Portfolio turnover is calculated on the basis of the portfolio as a whole
without distinguishing between the classes of shares issued and is not
annualized.
(h) The average commission rate represents the total dollar amount of
commissions paid on portfolio transactions divided by the total number of
portfolio shares purchased and sold for which commissions were charged.
Disclosure is not required for prior periods.
20
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS EMERGING MARKETS FUND
<TABLE>
<CAPTION>
<S> <C>
YEAR
ENDED
PRIMARY A SHARES 03/31/97#
Operating performance:
Net asset value, beginning of period $ 10.34
Net investment income/(loss) 0.01
Net realized and unrealized gain on investments 1.21
Net increase in net asset value from operations 1.22
Distributions:
Dividends from net investment income (0.02)
Distributions in excess of net investment income (0.07)
Distributions from net realized capital gains (0.06)
Total dividends and distributions (0.15)
Net asset value, end of period $ 11.41
Total return++ 11.97%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 76,483
Ratio of operating expenses to average net assets 1.74%
Ratio of net investment income/(loss) to average net assets 0.13%
Portfolio turnover rate 31%
Average commission rate paid (a) $ 0.0003
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 03/31/96*#
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) (0.03)
Net realized and unrealized gain on investments 0.37
Net increase in net asset value from operations 0.34
Distributions:
Dividends from net investment income --
Distributions in excess of net investment income 0.00**
Distributions from net realized capital gains --
Total dividends and distributions 0.00**
Net asset value, end of period $ 10.34
Total return++ 3.42%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 47,560
Ratio of operating expenses to average net assets 2.13%+
Ratio of net investment income/(loss) to average net assets (0.38)%+
Portfolio turnover rate 17%
Average commission rate paid (a) $ 0.0004
</TABLE>
* Nations Emerging Markets Fund Primary A Shares commenced operations on June
30, 1995.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period, since the use
of the undistributed income method did not accord with the results of
operations.
(a) Average commission rate paid per share of securities purchased and sold by
the Fund.
NATIONS PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
<S> <C>
YEAR
ENDED
PRIMARY A SHARES 03/31/97
Operating performance:
Net asset value, beginning of period $ 10.24
Net investment income/(loss) 0.04
Net realized and unrealized gain/(loss) on investments 0.19
Net increase/(decrease) in net asset value from operations 0.23
Distributions:
Dividends from net investment income $ (0.03)
Distributions in excess of net investment income (0.03)
Total dividends and distributions (0.06)
Net asset value, end of period $ 10.41
Total return++ 2.18%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 122,887
Ratio of operating expenses to average net assets 1.42%
Ratio of net investment income/(loss) to average net assets 0.39%
Portfolio turnover rate 78%
Average commission rate paid (a) $ 0.0126
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 03/31/96*#
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) (0.02)
Net realized and unrealized gain/(loss) on investments 0.29
Net increase/(decrease) in net asset value from operations 0.27
Distributions:
Dividends from net investment income --
Distributions in excess of net investment income (0.03)
Total dividends and distributions (0.03)
Net asset value, end of period $ 10.24
Total return++ 2.66%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 95,210
Ratio of operating expenses to average net assets 1.76%+
Ratio of net investment income/(loss) to average net assets (0.27)%+
Portfolio turnover rate 23%
Average commission rate paid (a) $ 0.0178
</TABLE>
* Nations Pacific Growth Fund Primary A Shares commenced operations on June 30,
1995.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed income method did not accord with the results of
operations.
(a) Average commission rate paid per share of securities purchased and sold by
the Fund.
21
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97## 03/31/96(a) 11/30/95 11/30/94 11/30/93
Operating performance:
Net asset value, beginning of period $ 13.43 $ 14.24 $ 11.23 $ 11.08 $ 10.68
Net investment income/(loss) 0.05 0.02 0.09 0.09 0.09
Net realized and unrealized gain on
investments 1.66 0.38 3.28 0.14 0.42
Net increase in net asset value from
operations 1.71 0.40 3.37 0.23 0.51
Distributions:
Dividends from net investment income (0.05) (0.02) (0.10) (0.08) (0.10)
Distributions from net realized capital gains (3.39) (1.19) (0.26) (0.00)(b) (0.01)
Total dividends and distributions (3.44) (1.21) (0.36) (0.08) (0.11)
Net asset value, end of period $ 11.70 $ 13.43 $ 14.24 $ 11.23 $ 11.08
Total return++ 11.88% 3.14% 30.96% 2.14% 4.84%
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 533,168 $ 839,300 $ 867,361 $ 717,914 $ 646,661
Ratio of operating expenses to average net
assets 0.96%(d) 0.96%+ 0.98% 0.90% 0.80%
Ratio of net investment income/(loss) to
average net assets 0.39% 0.38%+ 0.71% 0.85% 0.84%
Portfolio turnover rate 75% 25% 80% 56% 81%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.96% 0.96%+ 0.98% 0.91% 0.89%
Net investment income/(loss) per share
without waivers and/or expense
reimbursements $ 0.05 $ 0.02 $ 0.09 $ 0.09 $ 0.08
Average commission rate paid (c) $ 0.0604 $ 0.0632 N/A N/A N/A
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/92*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) 0.02
Net realized and unrealized gain on
investments 0.66#
Net increase in net asset value from
operations 0.68
Distributions:
Dividends from net investment income --
Distributions from net realized capital gains --
Total dividends and distributions --
Net asset value, end of period $ 10.68
Total return++ 6.80%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 728,629
Ratio of operating expenses to average net
assets 0.30%+
Ratio of net investment income/(loss) to
average net assets 1.33%+
Portfolio turnover rate 7%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.05%+
Net investment income/(loss) per share
without waivers and/or expense
reimbursements $ 0.01
Average commission rate paid (c) N/A
</TABLE>
* Nations Capital Growth Fund Primary A Shares commenced operations on
September 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market values of the
portfolio.
## 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
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 per share.
(c) Average commission rate paid per share of securities purchased and sold by
the Fund.
(d) The effect of interest expense on the operating expense ratio was less than
0.01%.
22
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS EMERGING GROWTH FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97# 03/31/96#(a) 11/30/95 11/30/94#
Operating performance:
Net asset value, beginning of period $ 14.04 $ 14.28 $ 11.41 $ 10.87
Net investment income/(loss) (0.04) (0.00)(b) 0.01 (0.03)
Net realized and unrealized gain on investments 0.20 1.26 3.26 0.71
Net increase in net asset value from operations 0.16 1.26 3.27 0.68
Distributions:
Distributions from net realized capital gains (1.34) (1.50) (0.40) (0.14)
Total dividends and distributions (1.34) (1.50) (0.40) (0.14)
Net asset value, end of period $ 12.86 $ 14.04 $ 14.28 $ 11.41
Total return++ 0.48% 9.87% 29.95% 6.26%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 267,319 $ 295,764 $ 269,484 $ 182,459
Ratio of operating expenses to average net assets 0.98%(d) 0.99%+ 0.98% 1.01%
Ratio of net investment income/(loss) to average net assets (0.26)% (0.06)%+ 0.08% (0.29)%
Portfolio turnover rate 93% 39% 139% 129%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.98%(d) 0.99%+ 0.98% 1.01%
Net investment income/(loss) per share without waivers
and/or expense reimbursements $ (0.04)(d) (0.00)(b) $ 0.01 $ (0.03)
Average commission rate paid (c) $ 0.0562 $ 0.0599 N/A N/A
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/93*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) (0.01)
Net realized and unrealized gain on investments 0.89
Net increase in net asset value from operations 0.88
Distributions:
Distributions from net realized capital gains (0.01)
Total dividends and distributions (0.01)
Net asset value, end of period $ 10.87
Total return++ 8.81%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 121,281
Ratio of operating expenses to average net assets 0.80%+
Ratio of net investment income/(loss) to average net assets (0.15)%+
Portfolio turnover rate 159%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.01%+
Net investment income/(loss) per share without waivers
and/or expense reimbursements $ (0.03)
Average commission rate paid (c) N/A
</TABLE>
* Nations Emerging Growth Fund Primary A Shares commenced operations on
December 4, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Per share numbers have been calculated using the monthly average share
method, which more appropriately presents the per share data for the period
since the 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 per share.
(c) Average commission rate paid per share of securities purchased and sold by
the Fund.
(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.
23
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS SMALL COMPANY GROWTH FUND
<TABLE>
<CAPTION>
<S> <C>
PERIOD
ENDED
PRIMARY A SHARES* 5/16/97
Operating performance:
Net asset value at the beginning of the period $ 10.65
Net investment income 0.04
Net realized and unrealized gain on investments and futures 1.47
Total income from investment activities 1.51
Distributions from net investment income (0.04)
Distributions from net realized gains (0.05)
Net asset value at the end of the period $ 12.07
Total return (b) 14.21%
Ratio of expenses to average net assets (c) 0.98%
Ratio of net investment income to average net assets (c) 0.54%
Portfolio turnover rate (e) 48%
Net assets at end of period (in 000's) $ 109,450
Ratio of expenses to average net assets (assuming no waivers or expense reimbursements) 1.41%(c)
Ratio of net investment income to average net assets (assuming no waivers or expense
reimbursements) 0.11%(c)
Average Commission Rate (d) $.0323
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES* 08/31/96(a)
Operating performance:
Net asset value at the beginning of the period $ 10.00
Net investment income 0.09
Net realized and unrealized gain on investments and futures 0.64
Total income from investment activities 0.73
Distributions from net investment income (0.08)
Distributions from net realized gains --
Net asset value at the end of the period $ 10.65
Total return (b) 7.37%
Ratio of expenses to average net assets (c) 1.00%
Ratio of net investment income to average net assets (c) 1.06%
Portfolio turnover rate (e) 31%
Net assets at end of period (in 000's) $ 70,483
Ratio of expenses to average net assets (assuming no waivers or expense reimbursements) 1.54%(c)
Ratio of net investment income to average net assets (assuming no waivers or expense
reimbursements) 0.52%(c)
Average Commission Rate (d) $.0340
</TABLE>
* Primary A Shares of Nations Small Company Growth Fund were formerly Pilot
Shares of the Pilot Small Capitalization Equity Fund, a predecessor
portfoilo.
(a) Share activity commenced December 12, 1995.
(b) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return is not annualized.
(c) Annualized.
(d) The average commission rate represents the total dollar amount of
commissions paid on portfolio transactions divided by the total number of
portfolio shares purchased and sold for which commissions were charged.
Disclosure is not required for prior periods.
(e) Portfolio turnover is calculated on the basis of the portfolio as a whole
without distinguishing between the classes of shares issued.
24
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS DISCIPLINED EQUITY FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(a) 11/30/95 11/30/94* 04/29/94*
Operating performance:
Net asset value, beginning of period $ 17.19 $ 17.06 $ 13.08 $ 13.31 $ 13.65
Net investment income/(loss) 0.14 0.05 0.10 0.01 (0.05)
Net realized and unrealized gain/(loss) on
investments 2.79 0.35 3.96 (0.23)# 2.66
Net increase/(decrease) in net asset value
from operations 2.93 0.40 4.06 (0.22) 2.61
Distributions:
Dividends from net investment income (0.14) (0.04) (0.08) (0.01) --
Distributions from net realized
capital gains (1.51) (0.23) -- -- (2.95)
Return of capital -- -- -- (0.00)(b) --
Total dividends and distributions (1.65) (0.27) (0.08) (0.01) (2.95)
Net asset value, end of period $ 18.47 $ 17.19 $ 17.06 $ 13.08 $ 13.31
Total return++ 17.00% 2.44% 31.13% (1.62)% 18.79%
Ratios to average net assets/
supplemental data:
Net assets, end of period (in 000's) $ 100,260 $ 116,469 $ 109,939 $ 9,947 $ 8,079
Ratio of operating expenses to average net
assets 1.04%(d) 1.02%+ 1.30% 1.13%+ 1.20%+
Ratio of net investment income/(loss) to
average net assets 0.70% 0.82%+ 0.85% 0.12%+ (0.60)%+
Portfolio turnover rate 120% 47% 124% 177% 475%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.04% 1.02%+ 1.30% 1.56%+ 1.53%+
Net investment income/(loss) per share
without waivers and/or expense
reimbursements $ 0.14 $ 0.05 $ 0.10 $ (0.03) $ (0.08)
Average commission rate paid (c) $ 0.0377 0.0627 N/A N/A N/A
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 04/30/93*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income/(loss) (0.03)
Net realized and unrealized gain/(loss) on
investments 3.74
Net increase/(decrease) in net asset value
from operations 3.71
Distributions:
Dividends from net investment income --
Distributions from net realized
capital gains (0.06)
Return of capital --
Total dividends and distributions (0.06)
Net asset value, end of period $ 13.65
Total return++ 37.13%
Ratios to average net assets/
supplemental data:
Net assets, end of period (in 000's) $ 4,638
Ratio of operating expenses to average net
assets 1.20%+
Ratio of net investment income/(loss) to
average net assets (0.58)%+
Portfolio turnover rate 203%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.31%+
Net investment income/(loss) per share
without waivers and/or expense
reimbursements $ (0.03)
Average commission rate paid (c) N/A
</TABLE>
* The period for Nations Disciplined Equity Fund Primary A Shares reflects
operations from April 30, 1994 through November 30, 1994. The financial
information for the fiscal periods through April 29, 1994 is based on the
financial information for The Capitol Mutual Funds Special Equity Portfolio
Class A Shares, which were reorganized into Primary A Shares of Nations
Disciplined Equity Fund (then named Nations Special Equity Fund) as of the
close of business on April 29, 1994. The Capitol Mutual Funds Special Equity
Portfolio Class A Shares commenced operations on October 1, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market value of the
portfolio.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) Amount represents less than $0.01 per share.
(c) Average commission rate paid per share of securities purchased and sold by
the Fund.
(d) The effect of interest expense on the operating expense ratio was less than
0.01%.
25
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS EQUITY INDEX FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(a) 11/30/95
Operating performance:
Net asset value, beginning of period $ 13.58 $ 12.91 $ 9.84
Net investment income 0.26 0.08 0.28
Net realized and unrealized gain/(loss) on investments 2.36 0.86 3.20
Net increase in net asset value from operations 2.62 0.94 3.48
Distributions:
Dividends from net investment income (0.26) (0.13) (0.28)
Distributions from net realized capital gains (0.05) (0.14) (0.13)
Total dividends and distributions (0.31) (0.27) (0.41)
Net asset value, end of period $ 15.89 $ 13.58 $ 12.91
Total return++ 19.41% 7.33% 36.35%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 567,039 $ 192,388 $ 145,021
Ratio of operating expenses to average net assets 0.35%(c) 0.35%+ 0.37%
Ratio of operating expenses to average net assets including interest
expense N/A 0.35%+ 0.38%
Ratio of net investment income to average net assets 1.91% 1.99%+ 2.44%
Portfolio turnover rate 5% 2% 18%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 0.70%(c) 0.73%+ 0.78%
Net investment income per share without waivers and/or expense
reimbursements $ 0.21(c) $ 0.07 $ 0.23
Average commission rate paid (b) $ 0.0173 $ 0.0291 N/A
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/94*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.24
Net realized and unrealized gain/(loss) on investments (0.21)
Net increase in net asset value from operations 0.03
Distributions:
Dividends from net investment income (0.19)
Distributions from net realized capital gains --
Total dividends and distributions (0.19)
Net asset value, end of period $ 9.84
Total return++ 0.29%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 123,147
Ratio of operating expenses to average net assets 0.35%+
Ratio of operating expenses to average net assets including interest
expense --
Ratio of net investment income to average net assets 2.64%+
Portfolio turnover rate 14%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 0.79%+
Net investment income per share without waivers and/or expense
reimbursements $ 0.20
Average commission rate paid (b) N/A
</TABLE>
* Nations Equity Index Fund Primary A Shares commenced operations on December
15, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) Average commission rate paid per share of securities purchased and sold by
the Fund.
(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.
26
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS MANAGED INDEX FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
3/31/97*
<S> <C>
PRIMARY A SHARES
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income $ 0.15
Net realized and unrealized gain on investments $ 1.87
Net increase in net asset value from operations $ 2.02
Dividends from net investment income $ (0.13)
Total dividends and distributions $ (0.13)
Net asset value, end of period $ 11.89
Total return++ 20.22%
Ratio to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 42,226
Ratio of operating expenses to average net assets 0.50%+(b)
Ratio of net investment income to average net assets 1.92+
Portfolio turnover rate 17%
Ratio of operating expenses to average net assets without waivers and/or expense reimbursements 1.05%+(b)
Net investment income per share without waivers and/or expense reimbursements $ 0.12(b)
Average commission rate paid (a) $ 0.0259
</TABLE>
* Nations Managed Index Fund's Primary A Shares commenced operations on July
31, 1996.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) Average commission rate paid per share of securities purchased and sold by
the Fund.
(b) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements and net investment income per share was less than 0.01% and
$0.01, respectively.
27
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT THE PERIOD
NATIONS MANAGED SMALLCAP INDEX FUND
<TABLE>
<CAPTION>
PERIOD
ENDED
3/31/97*
<S> <C>
PRIMARY A SHARES
Operating performance:
Net asset value at the beginning of period $ 10.00
Net investment income $ 0.03
Net realized and unrealized gain/(loss) on investments $ (0.17)
Net increase in net asset value from operations $ (0.14)
Dividends from net investment income $ (0.03)
Distributions in excess of net investment income $ (0.00)(b)
Total dividends and distributions $ (0.03)
Net asset value, end of period $ 9.83
Total return++ (1.37)%
Ratio to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 40,851
Ratio of operating expenses to average net assets 0.50%+
Ratio of net investment income to average net assets 1.05%+
Portfolio turnover rate 18%
Ratio of operating expenses to average net assets without waivers and/or expense reimbursements 1.21%+
Net investment income per share without waivers and/or expense reimbursements $ 0.01
Average commission rate paid (a) $ 0.0279
</TABLE>
* Nations Managed SmallCap Index Fund's Primary A Shares commenced operations
on October 15, 1996.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) Average commission rate paid per share of securities purchased and sold by
the Fund.
(b) Amount represents less than $0.01 per share.
28
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS BALANCED ASSETS FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(a) 11/30/95 11/30/94 11/30/93
Operating performance:
Net asset value, beginning of period $ 11.65 $ 12.68 $ 10.44 $ 10.87 $ 10.24
Net investment income 0.39 0.11 0.38 0.25 0.29
Net realized and unrealized gain/(loss) on
investments 1.03 0.45 2.21 (0.43) 0.64
Net increase/(decrease) in net asset value
from operations 1.42 0.56 2.59 (0.18) 0.93
Distributions:
Dividends from net investment income (0.38) (0.18) (0.33) (0.25) (0.30)
Distributions from net realized capital
gains (1.54) (1.41) (0.02) -- --
Total dividends and distributions (1.92) (1.59) (0.35) (0.25) (0.30)
Net asset value, end of period $ 11.15 $ 11.65 $ 12.68 $ 10.44 $ 10.87
Total return++ 12.50% 4.90% 25.27% (1.73)% 9.22%
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 135,731 $ 164,215 $ 163,198 $ 162,215 $ 178,270
Ratio of operating expenses to average net
assets 1.00%(b) 1.00%+ 0.99 % 0.98 % 0.90%
Ratio of net investment income to average
net assets 3.31% 2.91%+ 3.25 % 2.31 % 2.82%
Portfolio turnover rate 264% 83% 174 % 156 % 50%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.00%(b) 1.00%+ 0.99 % 0.99 % 0.97%
Net investment income per share without
waivers and/or expense reimbursements $ 0.39 (b) $ 0.11 $ 0.38 $ 0.25 $ 0.29
Average commission rate paid (c) $ 0.0563 $ 0.0598 N/A N/A N/A
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/92*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.06
Net realized and unrealized gain/(loss) on
investments 0.18#
Net increase/(decrease) in net asset value
from operations 0.24
Distributions:
Dividends from net investment income --
Distributions from net realized capital
gains --
Total dividends and distributions --
Net asset value, end of period $ 10.24
Total return++ 2.40%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 111,953
Ratio of operating expenses to average net
assets 0.30%+
Ratio of net investment income to average
net assets 3.85%+
Portfolio turnover rate 79%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.05%+
Net investment income per share without
waivers and/or expense reimbursements $ 0.05
Average commission rate paid (c) N/A
</TABLE>
* Nations Balanced Assets Fund Primary A Shares commenced operations on
September 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# The amount shown at this caption for each share outstanding throughout the
period may not accord with the change in the aggregate gains and losses in
the portfolio securities for the period because of the timing of purchases
and withdrawals of shares in relation to the fluctuating market values of
the portfolio.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) The effect of the fees reduced by credits allowed by the custodian on the
operating expense ratio, with and without waivers and/or expense
reimbursements and net investment income per share was less than 0.01% and
$0.01, respectively.
(c) Average commission rate paid per share of securities purchased and sold by
the Fund.
29
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS U.S. GOVERNMENT BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C>
PERIOD PERIOD
ENDED ENDED
PRIMARY A SHARES* 5/16/97 08/31/96
Operating performance:
Net asset value at the beginning of the period $ 10.53 $ 11.20
Net investment income 0.41 0.61
Net realized and unrealized gain/(loss) on investments 0.17 (0.22)
Total income from investment activities 0.58 0.39
Distributions from net investment income (0.41) (0.61)
Distributions from net realized gains (0.51) (0.45)
Total distributions (0.92) (1.06)
Net asset value at the end of the period $ 10.19 $ 10.53
Total return (b) 5.62% 3.46%
Ratio of expenses to average net assets 0.62%(c) 0.65%
Ratio of net investment income to average net assets 5.60%(c) 5.61%
Portfolio turnover rate (d) 58% 87%
Net assets at end of period (in 000's) $ 148,082 $ 145,066
Ratio of expenses to average net assets (assuming no waiver or expense
reimbursements) 0.77%(c) 0.82%
Ratio of net investment income to average net assets (assuming no waiver or expense
reimbursements) 5.45%(c) 5.44%
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES* 08/31/95(a)
Operating performance:
Net asset value at the beginning of the period $ 10.00
Net investment income 0.56
Net realized and unrealized gain/(loss) on investments 1.20
Total income from investment activities 1.76
Distributions from net investment income (0.56)
Distributions from net realized gains --
Total distributions (0.56)
Net asset value at the end of the period $ 11.20
Total return (b) 18.03%
Ratio of expenses to average net assets 0.62%(c)
Ratio of net investment income to average net assets 6.45%(c)
Portfolio turnover rate (d) 132%
Net assets at end of period (in 000's) $ 137,261
Ratio of expenses to average net assets (assuming no waiver or expense
reimbursements) 0.87%(c)
Ratio of net investment income to average net assets (assuming no waiver or expense
reimbursements) 6.20%(c)
</TABLE>
* Primary A Shares of Nations U.S. Government Bond Fund were formerly Pilot
Shares of the Pilot U.S. Government Securities Fund, a predecessor portfolio.
(a) Pilot share activity commenced November 7, 1994.
(b) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no sales
charges. Total return is not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the portfolio as a whole
without distinguishing between the classes of shares issued.
30
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97# 03/31/96(b)# 11/30/95# 11/30/94 11/30/93 11/30/92
Operating performance:
Net asset value, beginning
of period $ 4.07 $ 4.14 $ 3.93 $ 4.28 $ 4.16 $ 4.17
Net investment income 0.23 0.07 0.24 0.23 0.23 0.28
Net realized and unrealized
gain/(loss) on
investments (0.08) (0.07) 0.21 (0.33) 0.14 (0.01)
Net increase/(decrease) in
net asset value from
operations 0.15 0.00 0.45 (0.10) 0.37 0.27
Distributions:
Dividends from net
investment income (0.23) (0.07) (0.24) (0.23) (0.23) (0.28)
Distributions in excess of
net investment income -- (0.00)(a) (0.00)(a) (0.00)(a) -- --
Distributions from net
realized capital gains -- -- -- (0.02) (0.02) --
Total dividends and
distributions (0.23) (0.07) (0.24) (0.25) (0.25) (0.28)
Net asset value, end of
period $ 3.99 $ 4.07 $ 4.14 $ 3.93 $ 4.28 $ 4.16
Total return++ 3.72% 0.07% 11.70% (2.23)% 9.03% 6.70%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period
(in 000's) $ 371,118 $ 399,915 $ 425,200 $ 433,278 $ 443,426 $ 360,497
Ratio of operating expenses
to average net assets 0.63%(c)(d) 0.63%+ 0.60% 0.59% 0.55% 0.37%
Ratio of net investment
income to average net
assets 5.73% 5.32%+ 5.88% 5.76% 5.40% 6.48%
Portfolio turnover rate 529% 189% 328% 133% 92% 25%
Ratio of operating expenses
to average net assets
without waivers and/or
expense reimbursements 0.83%(d) 0.86%+ 0.80% 0.80% 0.79% 0.77%
Net investment income per
share without waivers
and/or expense
reimbursements $ 0.22(d) $ 0.06 $ 0.23 $ 0.22 $ 0.22 $ 0.26
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/91*
Operating performance:
Net asset value, beginning
of period $ 4.00##
Net investment income 0.10
Net realized and unrealized
gain/(loss) on
investments 0.17
Net increase/(decrease) in
net asset value from
operations 0.27
Distributions:
Dividends from net
investment income (0.10)
Distributions in excess of
net investment income --
Distributions from net
realized capital gains --
Total dividends and
distributions (0.10)
Net asset value, end of
period $ 4.17
Total return++ 6.81%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period
(in 000's) $ 158,435
Ratio of operating expenses
to average net assets 0.08%+
Ratio of net investment
income to average net
assets 7.21%+
Portfolio turnover rate 11%
Ratio of operating expenses
to average net assets
without waivers and/or
expense reimbursements 0.82%+
Net investment income per
share without waivers
and/or expense
reimbursements $ 0.00(a)
</TABLE>
* Nations Short-Intermediate Government Fund Primary A Shares commenced
operations on August 1, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the monthly average share
method, which more appropriately presents the per share data for the period
since the 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).
(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.
31
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97# 03/31/96(b)# 05/31/95# 05/31/94 05/31/93
Operating performance:
Net asset value, beginning of period $ 9.67 $ 9.86 $ 9.80 $ 10.46 $ 10.36
Net investment income 0.60 0.52 0.64 0.64 0.71
Net realized and unrealized
gain/(loss) on investments (0.30) (0.19) 0.06 (0.61) 0.13
Net increase/(decrease) in net asset
value from operations 0.30 0.33 0.70 0.03 0.84
Distributions:
Dividends from net investment income (0.58) (0.50) (0.60) (0.58) (0.70)
Dividends in excess of net investment
income -- 0.02 -- (0.02) --
Distributions from net realized
capital gains -- -- -- -- --
Distributions in excess of net
realized capital gains -- -- -- (0.05) (0.04)
Distributions from capital (0.00)(a) -- (0.04) (0.04) --
Total dividends and distributions (0.58) (0.52) (0.64) (0.69) (0.74)
Net asset value, end of period $ 9.39 $ 9.67 $ 9.86 $ 9.80 $ 10.46
Total return++ 3.18% 3.41% 7.55% 0.06% 8.37%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 52,606 $ 55,962 $ 39,909 $ 44,536 $ 40,472
Ratio of operating expenses to average
net assets 0,80% 0.80%+ 0.76% 0.73% 0.85%
Ratio of net investment income to
average net assets 6.28% 6.36%+ 6.69% 6.08% 6.67%
Portfolio turnover rate 468% 199% 413% 56% 103%
Ratio of operating expenses to average
net assets without waivers and/or
expense reimbursements 0.94% 0.95%+ 0.94% 0.94% 1.00%
Net investment income per
share without waivers
and/or expense reimbursements $ 0.59 $ 0.51 $ 0.62 $ 0.61 $ 0.60
<CAPTION>
YEAR PERIOD
ENDED ENDED
PRIMARY A SHARES 05/31/92 05/31/91*
Operating performance:
Net asset value, beginning of period $ 10.05 $ 10.00
Net investment income 0.74 0.10
Net realized and unrealized
gain/(loss) on investments 0.37 0.02
Net increase/(decrease) in net asset
value from operations 1.11 0.12
Distributions:
Dividends from net investment income (0.77) (0.07)
Dividends in excess of net investment
income -- --
Distributions from net realized
capital gains -- --
Distributions in excess of net
realized capital gains (0.03) --
Distributions from capital -- --
Total dividends and distributions (0.80) (0.07)
Net asset value, end of period $ 10.36 $ 10.05
Total return++ 11.43%+++ 1.19%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 42,256 $ 10,047
Ratio of operating expenses to average
net assets 1.06% 1.10%+
Ratio of net investment income to
average net assets 7.15% 7.18%+
Portfolio turnover rate 130% 5%
Ratio of operating expenses to average
net assets without waivers and/or
expense reimbursements 1.72% 1.69%+++
Net investment income per
share without waivers
and/or expense reimbursements $ 0.07 $ 0.09+++
</TABLE>
* Nations Government Securities Fund Primary A Shares commenced operations on
April 11, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the average shares method, which
more appropriately presents the per share data for the period since the use
of the undistributed 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
May 31.
32
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-TERM INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97# 03/31/96(b)# 11/30/95# 11/30/94# 11/30/93
Operating performance:
Net asset value, beginning of period $ 9.76 $ 9.84 $ 9.48 $ 10.01 $ 9.75
Net investment income 0.58 0.20 0.61 0.50 0.53
Net realized and unrealized gain/(loss) on
investments (0.08) (0.08) 0.36 (0.51) 0.26
Net increase/(decrease) in net asset value
from operations 0.50 0.12 0.97 (0.01) 0.79
Distributions:
Dividends from net investment income (0.58) (0.20) (0.61) (0.48) (0.53)
Distributions in excess of net investment
income -- -- -- (0.02) --
Distributions from capital -- -- -- (0.02) --
Total dividends and distributions (0.58) (0.20) (0.61) (0.52) (0.53)
Net asset value, end of period $ 9.68 $ 9.76 $ 9.84 $ 9.48 $ 10.01
Total return++ 5.25% 1.19% 10.48% (0.11)% 8.26%
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 181,455 $ 179,957 $ 169,291 $ 176,712 $ 201,738
Ratio of operating expenses to average net
assets 0.55(a) 0.55%+ 0.56% 0.50% 0.37%
Ratio of net investment income to average
net assets 5.97% 6.07%+ 6.32% 5.23% 5.27%
Portfolio turnover rate 172% 73% 224% 293% 121%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.85% 0.88%+ 0.86% 0.82% 0.79%
Net investment income per share without
waivers and/or expense reimbursements $ 0.55 $ 0.19 $ 0.58 $ 0.47 $ 0.48
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/92*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.09
Net realized and unrealized gain/(loss) on
investments (0.25)
Net increase/(decrease) in net asset value
from operations (0.16)
Distributions:
Dividends from net investment income (0.09)
Distributions in excess of net investment
income --
Distributions from capital --
Total dividends and distributions (0.09)
Net asset value, end of period $ 9.75
Total return++ (1.58)%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 190,680
Ratio of operating expenses to average net
assets 0.30%+
Ratio of net investment income to average
net assets 5.54%+
Portfolio turnover rate 45%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.90%+
Net investment income per share without
waivers and/or expense reimbursements $ 0.08
</TABLE>
* Nations Short-Term Income Fund Primary A Shares commenced operations on
September 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the monthly average share
method, which more appropriately presents the per share data for the period
since the use of the undistributed method did not accord with the results of
operations.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
33
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED YEAR
PRIMARY A SHARES 03/31/97# 03/31/96(b) 11/30/95 11/30/94# ENDED 11/30/93#
Operating performance:
Net asset value, beginning of period $ 10.42 $ 10.82 $ 9.67 $ 10.88 $ 9.97
Net investment income 0.69 0.23 0.73 0.74 0.78
Net realized and unrealized gain/(loss) on
investments (0.18) (0.40) 1.15 (1.06) 0.91
Net increase/(decrease) in net asset value
from operations 0.51 (0.17) 1.88 (0.32) 1.69
Distributions:
Dividends from net investment income (0.69) (0.23) (0.73) (0.74) (0.78)
Distributions in excess of net investment
income -- -- -- (0.00)(a) --
Distributions from net realized capital
gains (0.13) -- -- (0.15) --
Total dividends and distributions (0.82) (0.23) (0.73) (0.89) (0.78)
Net asset value, end of period $ 10.11 $ 10.42 $ 10.82 $ 9.67 $ 10.88
Total return++ 4.97% (1.59)% 20.11% (3.05)% 17.40%
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 152,070 $ 65,081 $ 64,800 $ 22,298 $ 28,553
Ratio of operating expenses to average net
assets 0.75%(c) 0.77%+ 0.80% 0.74% 0.55%
Ratio of net investment income to average
net assets 6.73% 6.49%+ 7.03% 7.31% 7.02%
Portfolio turnover rate 278% 69% 96% 144% 86%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.85%(c) 0.87%+ 0.93% 0.95% 0.95%
Net investment income per share without
waivers and/or expense reimbursements $ 0.67(c) $ 0.23 $ 0.72 $ 0.72 $ 0.70
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/92*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.06
Net realized and unrealized gain/(loss) on
investments (0.03)
Net increase/(decrease) in net asset value
from operations 0.03
Distributions:
Dividends from net investment income (0.06)
Distributions in excess of net investment
income --
Distributions from net realized capital
gains --
Total dividends and distributions (0.06)
Net asset value, end of period $ 9.97
Total return++ 0.32%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 23,962
Ratio of operating expenses to average net
assets 0.25%+
Ratio of net investment income to average
net assets 7.76%+
Portfolio turnover rate 46%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.85%+
Net investment income per share without
waivers and/or expense reimbursements $ 0.05
</TABLE>
* Nations Diversified Income Fund Primary A Shares commenced operations on
October 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share numbers have been calculated using the monthly average share
method, which more appropriately presents the per share data for the period
since the 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.
34
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS STRATEGIC FIXED INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97# 03/31/96(a) 11/30/95 11/30/94 11/30/93
Operating performance:
Net asset value, beginning of period $ 9.93 $ 10.22 $ 9.32 $ 10.55 $ 9.94
Net investment income 0.58 0.19 0.59 0.53 0.56
Net realized and unrealized gain/(loss) on
investments (0.20) (0.29) 0.90 (0.89) 0.62
Net increase/(decrease) in net asset value
from operations 0.38 (0.10) 1.49 (0.36) 1.18
Distributions:
Dividends from net investment income (0.58) (0.19) (0.59) (0.51) (0.56)
Distributions in excess of net investment
income -- -- -- (0.02) --
Distributions from net realized capital gains (0.11) -- -- (0.34) (0.01)
Distributions from capital (0.00)(b) -- -- -- --
Total dividends and distributions (0.69) (0.19) (0.59) (0.87) (0.57)
Net asset value, end of period $ 9.62 $ 9.93 $ 10.22 $ 9.32 $ 10.55
Total return++ 3.90% (1.04)% 16.45% (3.58)% 12.05%
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 947,277 $ 823,890 $ 823,098 $ 550,697 $ 545,538
Ratio of operating expenses to average net
assets 0.71%(c) 0.72%+ 0.71% 0.68% 0.61%
Ratio of net investment income to average net
assets 5.98% 5.49%+ 6.05% 5.43% 5.40%
Portfolio turnover rate 368% 1.33% 228% 307% 161%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.81%(c) 0.83%+ 0.81% 0.76% 0.77%
Net investment income per share without
waivers and/or expense reimbursements $ 0.57(c) $ 0.19 $ 0.58 $ 0.52 $ 0.55
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/92*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.05
Net realized and unrealized gain/(loss) on
investments (0.06)
Net increase/(decrease) in net asset value
from operations (0.01)
Distributions:
Dividends from net investment income (0.05)
Distributions in excess of net investment
income --
Distributions from net realized capital gains --
Distributions from capital --
Total dividends and distributions (0.05)
Net asset value, end of period $ 9.94
Total return++ (0.11)%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 581,329
Ratio of operating expenses to average net
assets 0.26%+
Ratio of net investment income to average net
assets 6.15%+
Portfolio turnover rate 12%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.86%+
Net investment income per share without
waivers and/or expense reimbursements $ 0.04
</TABLE>
* Nations Strategic Fixed Income Fund Primary A Shares commenced operations on
October 30, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Per share 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
results of operations.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year 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.
35
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
03/31/97# 03/31/96*
<S> <C> <C>
PRIMARY A SHARES
Operating performance:
Net asset value, beginning of period $ 10.07 $ 10.00
Net investment income/(loss) 0.47 0.39
Net realized and unrealized gain/(loss) on investments (0.03) 0.11
Net increase in net asset value from operations 0.44 0.50
Distributions:
Dividends from net investment income (0.46) (0.37)
Distributions in excess of net investment income (0.10) (0.02)
Distributions from net realized capital gains (0.16) (0.04)
Total dividends and distributions (0.72) (0.43)
Net asset value, end of period $ 9.79 $ 10.07
Total return++ 4.25% 5.03%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 28,130 $ 24,753
Ratio of operating expenses to average net assets 1.26% 1.32%+
Ratio of net investment income/(loss) to average net assets 4.60% 5.17%+
Portfolio turnover rate 100% 213%
</TABLE>
* Nations Global Government Income Fund Primary A Shares commenced operations
on June 30, 1995.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Per share numbers have been calculated using the monthly average shares
method, which more appropriately represents the per share data for the
period, since the use of the undistributed income method did not accord with
the results of operations.
36
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94 11/30/93
Operating performance:
Net asset value, beginning of
period $ 10.84 $ 11.08 $ 9.64 $ 11.33 $ 10.65
Net investment income 0.59 0.20 0.59 0.57 0.59
Net realized and unrealized
gain/(loss) on investments 0.05 (0.24) 1.44 (1.44) 0.72
Net increase/(decrease) in net
asset value from operations 0.64 (0.04) 2.03 (0.87) 1.31
Distributions:
Dividends from net investment
income (0.59) (0.20) (0.59) (0.57) (0.59)
Distributions in excess of net
investment income -- -- -- (0.00)# --
Distributions from net
realized capital gains -- -- -- (0.25) (0.04)
Total dividends and
distributions (0.59) (0.20) (0.59) (0.82) (0.63)
Net asset value, end of period $ 10.89 $ 10.84 $ 11.08 $ 9.64 $ 11.33
Total return++ 6.03% (0.41)% 21.55% (8.17)% 12.54%
Ratios to average net
assets/supplemental data:
Net assets, end of period
(in 000's) $ 77,260 $ 68,022 $ 68,836 $ 59,279 $ 88,386
Ratio of operating expenses to
average net assets 0.60% 0.60%+ 0.60% 0.61% 0.52%
Ratio of operating expenses to
average net asset including
interest expense (a) (a) (a) 0.62% --
Ratio of net investment income
to average net assets 5.41% 5.35%+ 5.63% 5.42% 5.24%
Portfolio turnover rate 25% 4% 49% 63% 48%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 0.91% 0.91%+ 0.88% 0.90% 0.84%
Net investment income per
share without waivers and/or
expense reimbursements $ 0.56 $ 0.19 $ 0.56 $ 0.54 $ 0.55
<CAPTION>
YEAR PERIOD
ENDED ENDED
PRIMARY A SHARES 11/30/92 11/30/91*
Operating performance:
Net asset value, beginning of
period $ 10.25 $ 10.00
Net investment income 0.59 0.52
Net realized and unrealized
gain/(loss) on investments 0.41 0.25
Net increase/(decrease) in net
asset value from operations 1.00 0.77
Distributions:
Dividends from net investment
income (0.59) (0.52)
Distributions in excess of net
investment income -- --
Distributions from net
realized capital gains (0.01) --
Total dividends and
distributions (0.60) (0.52)
Net asset value, end of period $ 10.65 $ 10.25
Total return++ 9.97%+++ 7.87%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period
(in 000's) $ 62,387 $ 23,631
Ratio of operating expenses to
average net assets 0.43% 0.20%+
Ratio of operating expenses to
average net asset including
interest expense -- --
Ratio of net investment income
to average net assets 5.51% 6.07%+
Portfolio turnover rate 19% 54%
Ratio of operating expenses to
average net assets without
waivers and/or expense
reimbursements 0.90% 0.88%+
Net investment income per
share without waivers and/or
expense reimbursements $ 0.54 $ 0.45
</TABLE>
* Nations Municipal Income Fund Primary A Shares commenced operations on
February 1, 1991.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
37
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SHORT-TERM MUNICIPAL INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94
Operating performance:
Net asset value, beginning of period $ 9.98 $ 10.03 $ 9.69 $ 9.96
Net investment income 0.44 0.15 0.44 0.38
Net realized and unrealized gain/(loss) on investments (0.03) (0.05) 0.34 (0.27)
Net increase in net asset value from operations 0.41 0.10 0.78 0.11
Distributions:
Dividends from net investment income (0.44) (0.15) (0.44) (0.38)
Distributions from net realized capital gains -- -- -- (0.00)#
Total dividends and distributions (0.44) (0.15) (0.44) (0.38)
Net asset value, end of period $ 9.95 $ 9.98 $ 10.03 $ 9.69
Total return++ 4.15% 0.96% 8.16% 1.09%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 61,072 $ 48,511 $ 49,961 $ 33,488
Ratio of operating expenses to average net assets 0.40%(a) 0.40%+(a) 0.45%(a) 0.34%(a)
Ratio of net investment income to average net assets 4.36% 4.37%+ 4.38% 3.83%
Portfolio turnover rate 80% 16% 82% 57%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.84% 0.86%+ 0.93% 0.80%
Net investment income per share without waivers and/or
expense reimbursements $ 0.39 $ 0.13 $ 0.39 $ 0.33
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/93*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.05
Net realized and unrealized gain/(loss) on investments (0.04)
Net increase in net asset value from operations 0.01
Distributions:
Dividends from net investment income (0.05)
Distributions from net realized capital gains --
Total dividends and distributions (0.05)
Net asset value, end of period $ 9.96
Total return++ 0.06%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 5,999
Ratio of operating expenses to average net assets 0.09%+
Ratio of net investment income to average net assets 3.16%+
Portfolio turnover rate 45%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 1.04%+
Net investment income per share without waivers and/or
expense reimbursements $ 0.04
</TABLE>
* Nations Short-Term Municipal Income Fund Primary A Shares commenced
operations on October 7, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
NATIONS INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94
Operating performance:
Net asset value, beginning of period $ 10.03 $ 10.17 $ 9.24 $ 10.11
Net investment income 0.48 0.16 0.48 0.45
Net realized and unrealized gain/(loss) on investments (0.02) (0.14) 0.93 (0.86)
Net increase/(decrease) in net asset value from
operations 0.46 0.02 1.41 (0.41)
Distributions:
Dividends from net investment income (0.48) (0.16) (0.48) (0.45)
Distributions in excess of net investment income -- -- -- (0.00)#
Distributions from net realized capital gains -- -- -- (0.01)
Total dividends and distributions (0.48) (0.16) (0.48) (0.46)
Net asset value, end of period $ 10.01 $ 10.03 $ 10.17 $ 9.24
Total return++ 4.63% 0.20% 15.60% (4.25)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 108,204 $ 77,423 $ 73,897 $ 38,055
Ratio of operating expenses to average net assets 0.50%(a) 0.50%+(a) 0.45%(a) 0.35%(a)
Ratio of net investment income to average net assets 4.74% 4.75%+ 4.91% 4.59%
Portfolio turnover rate 21% 4% 31% 51%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.81% 0.83%+ 0.84% 0.88%
Net investment income per share without waivers and/or
expense reimbursements $ 0.44 $ 0.15 $ 0.45 $ 0.40
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/93*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.14
Net realized and unrealized gain/(loss) on investments 0.11
Net increase/(decrease) in net asset value from
operations 0.25
Distributions:
Dividends from net investment income (0.14)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total dividends and distributions (0.14)
Net asset value, end of period $ 10.11
Total return++ 2.46%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 28,335
Ratio of operating expenses to average net assets 0.24%+
Ratio of net investment income to average net assets 4.07%+
Portfolio turnover rate 23%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.96%+
Net investment income per share without waivers and/or
expense reimbursements $ 0.12
</TABLE>
* Nations Intermediate Municipal Bond Fund Primary A Shares commenced
operations on July 30, 1993.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
38
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94
Operating performance:
Net asset value, beginning of period $ 10.46 $ 10.63 $ 9.61 $ 10.50
Net investment income 0.49 0.17 0.48 0.45
Net realized and unrealized gain/(loss) on investments (0.06) (0.17) 1.02 (0.88)
Net increase/(decrease) in net asset value from operations 0.43 0.00 1.50 (0.43)
Distributions:
Dividends from net investment income (0.49) (0.17) (0.48) (0.45)
Distributions in excess of net investment income -- -- -- (0.00)#
Distributions from net realized capital gains -- -- -- (0.01)
Total dividends and distributions (0.49) (0.17) (0.48) (0.46)
Net asset value, end of period $ 10.40 $ 10.46 $ 10.63 $ 9.61
Total return++ 4.22% (0.06)% 15.92% (4.26)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 51,748 $ 44,988 $ 44,038 $ 42,717
Ratio of operating expenses to average net assets 0.50%(a) 0.50%+(a) 0.55%(a) 0.55%(a)
Ratio of net investment income to average net assets 4.72% 4.66%+ 4.70% 4.44%
Portfolio turnover rate 16% 18% 27% 34%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.81% 0.86%+ 0.81% 0.76%
Net investment income per share without waivers and/or
expense reimbursements $ 0.46 $ 0.15 $ 0.46 $ 0.43
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/93*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.44
Net realized and unrealized gain/(loss) on investments 0.50
Net increase/(decrease) in net asset value from operations 0.94
Distributions:
Dividends from net investment income (0.44)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total dividends and distributions (0.44)
Net asset value, end of period $ 10.50
Total return++ 9.50%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 41,489
Ratio of operating expenses to average net assets 0.44%+
Ratio of net investment income to average net assets 4.28%+
Portfolio turnover rate 15%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.80%+
Net investment income per share without waivers and/or
expense reimbursements $ 0.40
</TABLE>
* Nations Florida Intermediate Municipal Bond Fund Primary A Shares commenced
operations on December 11, 1992.
+ Annualized.
++ Total return represents aggregate total return for the periods indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
NATIONS FLORIDA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95
Operating performance:
Net asset value, beginning of period $ 9.47 $ 9.76 $ 8.40
Net investment income 0.48 0.16 0.51
Net realized and unrealized gain/(loss) on investments 0.01 (0.29) 1.36
Net increase/(decrease) in net asset value from operations 0.49 (0.13) 1.87
Dividends from net investment income (0.48) (0.16) (0.51)
Total dividends and distributions (0.48) (0.16) (0.51)
Net asset value, end of period $ 9.48 $ 9.47 $ 9.76
Total return++ 5.29% (1.33)% 22.69%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 16,702 $ 13,044 $ 11,219
Ratio of operating expenses to average net assets 0.60%(a) 0.60%+(a) 0.39%(a)
Ratio of net investment income to average net assets 5.07% 5.03%+ 5.44%
Portfolio turnover rate 23% 7% 13%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 0.93% 0.96%+ 0.95%
Net investment income per share without waivers and/or expense
reimbursements $ 0.45 $ 0.15 $ 0.46
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/94*
Operating performance:
Net asset value, beginning of period $ 9.93
Net investment income 0.49
Net realized and unrealized gain/(loss) on investments (1.53)
Net increase/(decrease) in net asset value from operations (1.04)
Dividends from net investment income (0.49)
Total dividends and distributions (0.49)
Net asset value, end of period $ 8.40
Total return++ (10.70)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4,258
Ratio of operating expenses to average net assets 0.21%+(a)
Ratio of net investment income to average net assets 5.55%+
Portfolio turnover rate 46%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 0.91%+
Net investment income per share without waivers and/or expense
reimbursements $ 0.43
</TABLE>
* Nations Florida Municipal Bond Fund Primary A Shares commenced operations on
December 13, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
39
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94 11/30/93
Operating performance:
Net asset value, beginning of period $ 10.63 $ 10.81 $ 9.82 $ 10.82 $ 10.29
Net investment income 0.50 0.17 0.50 0.49 0.50
Net realized and unrealized gain/(loss) on
investments (0.05) (0.18) 0.99 (0.98) 0.56
Net increase/(decrease) in net asset value
from operations 0.45 (0.01) 1.49 (0.49) 1.06
Distributions:
Dividends from net investment income (0.50) (0.17) (0.50) (0.49) (0.50)
Distributions in excess of net investment
income -- -- -- (0.00)# --
Distributions from net realized capital gains -- -- -- (0.02) (0.03)
Total dividends and distributions (0.50) (0.17) (0.50) (0.51) (0.53)
Net asset value, end of period $ 10.58 $ 10.63 $ 10.81 $ 9.82 $ 10.82
Total return++ 4.33% (0.13)% 15.42% (4.70)% 10.43%
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 43,470 $ 38,222 $ 40,383 $ 33,111 $ 30,738
Ratio of operating expenses to average net
assets 0.50% 0.50%+ 0.55% 0.54% 0.46%
Ratio of operating expenses to average net
assets including interest expense (a) (a) (a) 0.55% --
Ratio of net investment income to average net
assets 4.72% 4.67%+ 4.76% 4.74% 4.57%
Portfolio turnover rate 9% 3% 17% 22% 6%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.80% 0.83%+ 0.80% 0.75% 0.77%
Net investment income per share without
waivers and/or expense reimbursements $ 0.47 $ 0.16 $ 0.47 $ 0.47 $ 0.46
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/92*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.41
Net realized and unrealized gain/(loss) on
investments 0.29
Net increase/(decrease) in net asset value
from operations 0.70
Distributions:
Dividends from net investment income (0.41)
Distributions in excess of net investment
income --
Distributions from net realized capital gains --
Total dividends and distributions (0.41)
Net asset value, end of period $ 10.29
Total return++ 7.07%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 20,584
Ratio of operating expenses to average net
assets 0.20%+
Ratio of operating expenses to average net
assets including interest expense --
Ratio of net investment income to average net
assets 5.25%+
Portfolio turnover rate 12%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.77%+
Net investment income per share without
waivers and/or expense reimbursements $ 0.37
</TABLE>
* Nations Georgia Intermediate Municipal Bond Fund Primary A Shares commenced
operations on March 1, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
40
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS GEORGIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95
Operating performance:
Net asset value, beginning of period $ 9.48 $ 9.72 $ 8.38
Net investment income 0.47 0.16 0.51
Net realized and unrealized gain/(loss) on investments 0.02 (0.24) 1.34
Net increase/(decrease) in net asset value from operations 0.49 (0.08) 1.85
Dividends from net investment income (0.47) (0.16) (0.51)
Total dividends and distributions (0.47) (0.16) (0.51)
Net asset value, end of period $ 9.50 $ 9.48 $ 9.72
Total return++ 5.29% (0.84)% 22.48%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 5,550 $ 2,068 $ 2,628
Ratio of operating expenses to average net assets 0.60%(a) 0.60%+(a) 0.40%(a)
Ratio of net investment income to average net assets 4.96% 4.96%+ 5.42%
Portfolio turnover rate 19% 7% 26%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 1.05% 1.14%+ 1.09%
Net investment income per share without waivers and/or expense
reimbursements $ 0.43 $ 0.14 $ 0.44
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/94*
Operating performance:
Net asset value, beginning of period $ 10.02
Net investment income 0.46
Net realized and unrealized gain/(loss) on investments (1.64)
Net increase/(decrease) in net asset value from operations (1.18)
Dividends from net investment income (0.46)
Total dividends and distributions (0.46)
Net asset value, end of period $ 8.38
Total return++ (12.07)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 232
Ratio of operating expenses to average net assets 0.21%+(a)
Ratio of net investment income to average net assets 5.60%+
Portfolio turnover rate 35%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 1.04%+
Net investment income per share without waivers and/or expense
reimbursements $ 0.39
</TABLE>
* Nations Georgia Municipal Bond Fund Primary A Shares commenced operations on
January 13, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
41
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94 11/30/93
Operating performance:
Net asset value, beginning of period $ 10.80 $ 10.95 $ 10.00 $ 11.09 $ 10.72
Net investment income 0.51 0.17 0.51 0.50 0.52
Net realized and unrealized gain/(loss)
on investments (0.10) (0.15) 0.98 (0.99) 0.44
Net increase/(decrease) in net asset
value from operations 0.41 0.02 1.49 (0.49) 0.96
Distributions:
Dividends from net investment income (0.51) (0.17) (0.51) (0.50) (0.52)
Distributions from net realized capital
gains -- -- (0.03) (0.10) (0.07)
Distributions in excess of net realized
capital gains -- -- -- (0.00)# --
Total dividends and distributions (0.51) (0.17) (0.54) (0.60) (0.59)
Net asset value, end of period $ 10.70 $ 10.80 $ 10.95 $ 10.00 $ 11.09
Total return++ 3.83% 0.16% 15.16% (4.64)% 9.11%
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 63,549 $ 61,337+ $ 62,460 $ 61,349 $ 61,552
Ratio of operating expenses to average
net assets 0.50%(a) 0.50%+(a) 0.55%(a) 0.53%(a) 0.49%
Ratio of net investment income to
average net assets 4.70% 4.62%+ 4.76% 4.73% 4.73%
Portfolio turnover rate 10% 4% 11% 22% 26%
Ratio of operating expenses to average
net assets without waivers and/or
expense reimbursements 0.78% 0.81%+ 0.80% 0.73% 0.73%
Net investment income per share without
waivers and/or expense reimbursements $ 0.48 $ 0.16 $ 0.48 $ 0.48 $ 0.49
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
PRIMARY A SHARES 11/30/92 11/30/91 11/30/90*
Operating performance:
Net asset value, beginning of period $ 10.44 $ 10.21 $ 10.00
Net investment income 0.55 0.60 0.16
Net realized and unrealized gain/(loss)
on investments 0.31 0.24 0.21
Net increase/(decrease) in net asset
value from operations 0.86 0.84 0.37
Distributions:
Dividends from net investment income (0.55) (0.60) (0.16)
Distributions from net realized capital
gains (0.03) (0.01) --
Distributions in excess of net realized
capital gains -- -- --
Total dividends and distributions (0.58) (0.61) (0.16)
Net asset value, end of period $ 10.72 $ 10.44 $ 10.21
Total return++ 8.41%+++ 8.46%+++ 3.72%+++
Ratios to average net
assets/supplemental data:
Net assets, end of period (in 000's) $ 48,192 $ 31,088 $ 11,087
Ratio of operating expenses to average
net assets 0.39% 0.20% 0.21%+
Ratio of net investment income to
average net assets 5.12% 5.76% 6.12%+
Portfolio turnover rate 38% 26% 49%
Ratio of operating expenses to average
net assets without waivers and/or
expense reimbursements 0.78% 0.71% 0.84%+
Net investment income per share without
waivers and/or expense reimbursements $ 0.51 $ 0.55 $ 0.13
</TABLE>
* Nations Maryland Intermediate Municipal Bond Fund Primary A Shares commenced
operations on September 1, 1990.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
NATIONS MARYLAND MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95
Operating performance:
Net asset value, beginning of period $ 9.39 $ 9.63 $ 8.37
Net investment income 0.46 0.15 0.48
Net realized and unrealized gain/(loss) on investments 0.02 (0.24) 1.26
Net increase/(decrease) in net asset value from operations 0.48 (0.09) 1.74
Dividends from net investment income (0.46) (0.15) (0.48)
Total dividends and distributions (0.46) (0.15) (0.48)
Net asset value, end of period $ 9.41 $ 9.39 $ 9.63
Total return++ 5.20% (0.95)% 21.23%
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $ 4,596 $ 2,788 $ 2,595
Ratio of operating expenses to average net assets 0.60% 0.60%+ 0.40%
Ratio of net investment income to average net assets 4.88% 4.72%+ 5.14%
Portfolio turnover rate 18% 7% 11%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 1.12% 1.23%+ 1.26%
Net investment income per share without waivers and/or expense
reimbursements $ 0.41 $ 0.13 $ 0.40
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/94*
Operating performance:
Net asset value, beginning of period $ 8.90
Net investment income 0.11
Net realized and unrealized gain/(loss) on investments (0.53)
Net increase/(decrease) in net asset value from operations (0.42)
Dividends from net investment income (0.11)
Total dividends and distributions (0.11)
Net asset value, end of period $ 8.37
Total return++ (4.89)%
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's) $ 39
Ratio of operating expenses to average net assets 0.21%+(a)
Ratio of net investment income to average net assets 5.48%+
Portfolio turnover rate 39%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 1.30%+
Net investment income per share without waivers and/or expense
reimbursements $ 0.09
</TABLE>
* Nations Maryland Municipal Bond Fund Primary A Shares commenced operations
on September 20, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
42
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94
Operating performance:
Net asset value, beginning of period $ 10.36 $ 10.51 $ 9.53 $ 10.46
Net investment income 0.47 0.16 0.45 0.44
Net realized and unrealized gain/(loss) on investments (0.02) (0.15) 0.99 (0.88)
Net increase/(decrease) in net asset value from
operations 0.45 0.01 1.44 (0.44)
Distributions:
Dividends from net investment income (0.47) (0.16) (0.45) (0.44)
Distributions in excess of net investment income -- -- (0.00)# --
Distributions from net realized capital gains -- -- (0.01) (0.05)
Total dividends and distributions (0.47) (0.16) (0.46) (0.49)
Net asset value, end of period $ 10.34 $ 10.36 $ 10.51 $ 9.53
Total return++ 4.45% 0.05% 15.41% (4.34)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 25,855 $ 21,161 $ 20,916 $ 14,148
Ratio of operating expenses to average net assets 0.50%(a) 0.50%+ 0.57%(a) 0.55%(a)
Ratio of net investment income to average net assets 4.57% 4.47%+ 4.47% 4.38%
Portfolio turnover rate 26% 3% 57% 37%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.82% 0.87%+ 0.84% 0.82%
Net investment income per share without waivers and/or
expense reimbursements $ 0.44 $ 0.15 $ 0.43 $ 0.42
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/93*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.43
Net realized and unrealized gain/(loss) on investments 0.46
Net increase/(decrease) in net asset value from
operations 0.89
Distributions:
Dividends from net investment income (0.43)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total dividends and distributions (0.43)
Net asset value, end of period $ 10.46
Total return++ 9.03%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 11,814
Ratio of operating expenses to average net assets 0.42%+
Ratio of net investment income to average net assets 4.23%+
Portfolio turnover rate 29%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.85%+
Net investment income per share without waivers and/or
expense reimbursements $ 0.39
</TABLE>
* Nations North Carolina Intermediate Municipal Bond Fund Primary A Shares
commenced operations on December 11, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95
Operating performance:
Net asset value, beginning of period $ 9.49 $ 9.73 $ 8.36
Net investment income 0.47 0.16 0.50
Net realized and unrealized gain/(loss) on investments (0.02) (0.24) 1.37
Net increase/(decrease) in net asset value from operations 0.45 (0.08) 1.87
Dividends from net investment income (0.47) (0.16) (0.50)
Total dividends and distributions (0.47) (0.16) (0.50)
Net asset value, end of period $ 9.47 $ 9.49 $ 9.73
Total return++ 4.84% (0.87)% 22.87%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3,095 $ 1,593 $ 1,293
Ratio of operating expenses to average net assets 0.60%(a) 0.60%+ 0.38%(a)
Ratio of net investment income to average net assets 4.95% 4.86%+ 5.43%
Portfolio turnover rate 28% 22% 40%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 0.94% 0.99%+ 0.96%
Net investment income per share without waivers and/or expense
reimbursements $ 0.44 $ 0.15 $ 0.45
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/94*
Operating performance:
Net asset value, beginning of period $ 10.06
Net investment income 0.45
Net realized and unrealized gain/(loss) on investments (1.70)
Net increase/(decrease) in net asset value from operations (1.25)
Dividends from net investment income (0.45)
Total dividends and distributions (0.45)
Net asset value, end of period $ 8.36
Total return++ (12.65)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 531
Ratio of operating expenses to average net assets 0.21%+(a)
Ratio of net investment income to average net assets 5.53%+
Portfolio turnover rate 29%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 0.92%+
Net investment income per share without waivers and/or expense
reimbursements $ 0.40
</TABLE>
* Nations North Carolina Municipal Bond Fund Primary A Shares commenced
operations on January 11, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
43
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94 11/30/93
Operating performance:
Net asset value, beginning of period $ 10.52 $ 10.69 $ 9.76 $ 10.61 $ 10.18
Net investment income 0.51 0.17 0.51 0.50 0.50
Net realized and unrealized gain/(loss) on
investments (0.02) (0.17) 0.93 (0.84) 0.43
Net increase/(decrease) in net asset value
from operations 0.49 0.00 1.44 (0.34) 0.93
Distributions:
Dividends from net investment income (0.51) (0.17) (0.51) (0.50) (0.50)
Distributions in excess of net investment
income -- -- -- (0.00)# --
Distributions from net realized capital
gains -- -- -- (0.01) --
Total dividends and distributions (0.51) (0.17) (0.51) (0.51) (0.50)
Net asset value, end of period $ 10.50 $ 10.52 $ 10.69 $ 9.76 $ 10.61
Total return++ 4.71% 0.00%## 15.02% (3.37)% 9.32%
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 48,918 $ 41,817 $ 45,255 $ 49,030 $ 56,995
Ratio of operating expenses to average net
assets 0.50%(a) 0.50%+(a) 0.55%(a) 0.54%(a) 0.45%
Ratio of net investment income to average
net assets 4.80% 4.81%+ 4.92% 4.82% 4.68%
Portfolio turnover rate 13% 6% 11% 30% 11%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.79% 0.82%+ 0.75% 0.75% 0.75%
Net investment income per share without
waivers and/or expense reimbursements $ 0.48 $ 0.16 $ 0.49 $ 0.48 $ 0.47
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/92*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.47
Net realized and unrealized gain/(loss) on
investments 0.18
Net increase/(decrease) in net asset value
from operations 0.65
Distributions:
Dividends from net investment income (0.47)
Distributions in excess of net investment
income --
Distributions from net realized capital
gains --
Total dividends and distributions (0.47)
Net asset value, end of period $ 10.18
Total return++ 6.62%+++
Ratios to average net assets/supplemental
data:
Net assets, end of period (in 000's) $ 39,535
Ratio of operating expenses to average net
assets 0.20%+
Ratio of net investment income to average
net assets 4.11%+
Portfolio turnover rate 7%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.74%+
Net investment income per share without
waivers and/or expense reimbursements $ 0.42
</TABLE>
* Nations South Carolina Intermediate Municipal Bond Fund Primary A Shares
commenced operations on January 6, 1992.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
## Amount represents less than 0.01%.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
44
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95
Operating performance:
Net asset value, beginning of period $ 9.77 $ 9.99 $ 8.65
Net investment income 0.49 0.17 0.52
Net realized and unrealized gain/(loss) on investments 0.02 (0.22) 1.34
Net increase/(decrease) in net asset value from operations 0.51 (0.05) 1.86
Dividends from net investment income (0.49) (0.17) (0.52)
Total dividends and distributions (0.49) (0.17) (0.52)
Net asset value, end of period $ 9.79 $ 9.77 $ 9.99
Total return++ 5.32% (0.57)% 21.99%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 5,113 $ 2,058 $ 1,782
Ratio of operating expenses to average net assets 0.60%(a) 0.60%+(a) 0.40%(a)
Ratio of net investment income to average net assets 4.99% 4.96%+ 5.44%
Portfolio turnover rate 30% 20% 13%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 1.00% 1.13%+ 1.08%
Net investment income per share without waivers and/or expense
reimbursements $ 0.45 $ 0.15 $ 0.46
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/94*
Operating performance:
Net asset value, beginning of period $ 10.02
Net investment income 0.48
Net realized and unrealized gain/(loss) on investments (1.37)
Net increase/(decrease) in net asset value from operations (0.89)
Dividends from net investment income (0.48)
Total dividends and distributions (0.48)
Net asset value, end of period $ 8.65
Total return++ (9.12)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 400
Ratio of operating expenses to average net assets 0.21%+(a)
Ratio of net investment income to average net assets 5.48%+
Portfolio turnover rate 14%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 1.12%+
Net investment income per share without waivers and/or expense
reimbursements $ 0.41
</TABLE>
* Nations South Carolina Municipal Bond Fund Primary A Shares commenced
operations on December 27, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
45
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95
Operating performance:
Net asset value, beginning of period $ 10.09 $ 10.23 $ 9.30
Net investment income 0.46 0.15 0.46
Net realized and unrealized gain/(loss) on investments (0.01) (0.14) 0.93
Net increase/(decrease) in net asset value from
operations 0.45 0.01 1.39
Distributions:
Dividends from net investment income (0.46) (0.15) (0.46)
Distributions in excess of net investment income -- -- --
Distributions from net realized capital gains -- -- --
Total dividends and distributions (0.46) (0.15) (0.46)
Net asset value, end of period $ 10.08 $ 10.09 $ 10.23
Total return++ 4.54% 0.12% 15.22%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 8,869 $ 8,408 $ 7,160
Ratio of operating expenses to average net assets 0.50% 0.50%+ 0.57%
Ratio of operating expenses to average net assets
including interest expense (a) -- (a)
Ratio of net investment income to average net assets 4.55% 4.51%+ 4.65%
Portfolio turnover rate 28% 3% 34%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.93% 1.02%+ 0.92%
Net investment income per share without waivers and/or
expense reimbursements $ 0.42 $ 0.13 $ 0.43
<CAPTION>
YEAR PERIOD
ENDED ENDED
PRIMARY A SHARES 11/30/94 11/30/93*
Operating performance:
Net asset value, beginning of period $ 10.18 $ 10.06
Net investment income 0.45 0.29
Net realized and unrealized gain/(loss) on investments (0.87) 0.12
Net increase/(decrease) in net asset value from
operations (0.42) 0.41
Distributions:
Dividends from net investment income (0.45) (0.29)
Distributions in excess of net investment income (0.00)# --
Distributions from net realized capital gains (0.01) --
Total dividends and distributions (0.46) (0.29)
Net asset value, end of period $ 9.30 $ 10.18
Total return++ (4.24)% 4.09%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 4,116 $ 2,123
Ratio of operating expenses to average net assets 0.52% 0.27%+
Ratio of operating expenses to average net assets
including interest expense 0.53% --
Ratio of net investment income to average net assets 4.56% 4.31%+
Portfolio turnover rate 41% 16%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.89% 0.94%+
Net investment income per share without waivers and/or
expense reimbursements $ 0.41 $ 0.24
</TABLE>
* Nations Tennessee Intermediate Municipal Bond Fund Primary A Shares commenced
operations on April 13, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
NATIONS TENNESSEE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95
Operating performance:
Net asset value, beginning of period $ 9.68 $ 9.87 $ 8.58
Net investment income 0.48 0.16 0.52
Net realized and unrealized gain/(loss) on investments 0.02 (0.19) 1.29
Net increase/(decrease) in net asset value from operations 0.50 (0.03) 1.81
Dividends from net investment income (0.48) (0.16) (0.52)
Total dividends and distributions (0.48) (0.16) (0.52)
Net asset value, end of period $ 9.70 $ 9.68 $ 9.87
Total return++ 5.23% (0.30)% 21.52%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,594 $ 975 $ 768
Ratio of operating expenses to average net assets 0.60% 0.60%+ 0.40%
Ratio of operating expenses to average net assets including interest
expense -- (a) 0.61%+ -- (a)
Ratio of net investment income to average net assets 4.91% 4.92%+ 5.49%
Portfolio turnover rate 31% 2% 45%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 1.24% 1.47%+ 1.27%
Net investment income per share without waivers and/or expense
reimbursements $ 0.42 $ 0.13 $ 0.44
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/94*
Operating performance:
Net asset value, beginning of period $ 9.59
Net investment income 0.39
Net realized and unrealized gain/(loss) on investments (1.01)
Net increase/(decrease) in net asset value from operations (0.62)
Dividends from net investment income (0.39)
Total dividends and distributions (0.39)
Net asset value, end of period $ 8.58
Total return++ (6.66)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 311
Ratio of operating expenses to average net assets 0.21%+
Ratio of operating expenses to average net assets including interest
expense -- (a)
Ratio of net investment income to average net assets 5.56%+
Portfolio turnover rate 38%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 1.20%+
Net investment income per share without waivers and/or expense
reimbursements $ 0.32
</TABLE>
* Nations Tennessee Municipal Bond Fund Primary A Shares commenced operations
on March 2, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
46
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94
Operating performance:
Net asset value, beginning of period $ 10.21 $ 10.36 $ 9.53 $ 10.35
Net investment income 0.47 0.16 0.46 0.44
Net realized and unrealized gain/(loss) on investments (0.03) (0.15) 0.83 (0.79)
Net increase/(decrease) in net asset value from
operations 0.44 0.01 1.29 (0.35)
Distributions:
Dividends from net investment income (0.47) (0.16) (0.46) (0.44)
Distributions in excess of net investment income -- -- -- (0.00)#
Distributions from net realized capital gains -- -- -- (0.03)
Total dividends and distributions (0.47) (0.16) (0.46) (0.47)
Net asset value, end of period $ 10.18 $ 10.21 $ 10.36 $ 9.53
Total return++ 4.37% 0.05% 13.83% (3.48)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 24,764 $ 27,176 $ 26,382 $ 24,066
Ratio of operating expenses to average net assets 0.50% 0.50%+ 0.57% 0.55%
Ratio of operating expenses to average net assets
including interest expense -- -- (a) (a)
Ratio of net investment income to average net assets 4.59% 4.52%+ 4.62% 4.40%
Portfolio turnover rate 34% 11% 64% 61%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.84% 0.89% 0.83% 0.78%
Net investment income per share without waivers and/or
expense reimbursements $ 0.43 $ 0.15 $ 0.44 $ 0.42
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/93*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.41
Net realized and unrealized gain/(loss) on investments 0.35
Net increase/(decrease) in net asset value from
operations 0.76
Distributions:
Dividends from net investment income (0.41)
Distributions in excess of net investment income --
Distributions from net realized capital gains --
Total dividends and distributions (0.41)
Net asset value, end of period $ 10.35
Total return++ 7.72%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 31,875
Ratio of operating expenses to average net assets 0.44%+
Ratio of operating expenses to average net assets
including interest expense --
Ratio of net investment income to average net assets 4.43%+
Portfolio turnover rate 63%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.82%+
Net investment income per share without waivers and/or
expense reimbursements $ 0.38
</TABLE>
* Nations Texas Intermediate Municipal Bond Fund Primary A Shares commenced
operations on January 12, 1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
NATIONS TEXAS MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95
Operating performance:
Net asset value, beginning of period $ 9.49 $ 9.70 $ 8.39
Net investment income 0.48 0.16 0.50
Net realized and unrealized gain/(loss) on investments (0.01) (0.21) 1.31
Net increase/(decrease) in net asset value from operations 0.47 (0.05) 1.81
Dividends from net investment income (0.48) (0.16) (0.50)
Total dividends and distributions (0.48) (0.16) (0.50)
Net asset value, end of period $ 9.48 $ 9.49 $ 9.70
Total return++ 5.00% (0.55)% 22.09%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 5,675 $ 5,138 $ 4,613
Ratio of operating expenses to average net assets 0.60%(a) 0.60%+ 0.39%(a)
Ratio of net investment income to average net assets 4.99% 4.92%+ 5.45%
Portfolio turnover rate 52% 6% 50%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 1.03% 1.11%+ 1.05%
Net investment income per share without waivers and/or expense
reimbursements $ 0.44 $ 0.14 $ 0.44
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/94*
Operating performance:
Net asset value, beginning of period $ 10.01
Net investment income 0.42
Net realized and unrealized gain/(loss) on investments (1.62)
Net increase/(decrease) in net asset value from operations (1.20)
Dividends from net investment income (0.42)
Total dividends and distributions (0.42)
Net asset value, end of period $ 8.39
Total return++ (12.21 )%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 2,285
Ratio of operating expenses to average net assets 0.22%+(a)
Ratio of net investment income to average net assets 5.52%+
Portfolio turnover rate 107%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 1.06%+
Net investment income per share without waivers and/or expense
reimbursements $ 0.35
</TABLE>
* Nations Texas Municipal Bond Fund Primary A Shares commenced operations on
February 3, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
47
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR YEAR
ENDED ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94
Operating performance:
Net asset value, beginning of period $ 10.69 $ 10.83 $ 9.94 $ 10.99
Net investment income 0.51 0.17 0.51 0.50
Net realized and unrealized gain/(loss) on investments (0.10) (0.14) 0.89 (0.96)
Net increase/(decrease) in net asset value from operations 0.41 0.03 1.40 (0.46)
Distributions:
Dividends from net investment income (0.51) (0.17) (0.51) (0.50)
Distributions from net realized capital gains -- -- (0.00)# (0.09)
Distributions in excess of net realized capital gains -- -- -- (0.00)#
Total dividends and distributions (0.51) (0.17) (0.51) (0.59)
Net asset value, end of period $ 10.59 $ 10.69 10.83 $ 9.94
Total return++ 3.92% 0.27% 14.39% (4.35)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 148,701 $ 155,464 $ 157,252 $ 167,405
Ratio of operating expenses to average net assets 0.50%(a) 0.50%+(a) 0.56%(a) 0.61%(a)
Ratio of net investment income to average net assets 4.79% 4.72%+ 4.87% 4.76%
Portfolio turnover rate 20% 2% 22% 14%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.74% 0.76%+ 0.74% 0.73%
Net investment income per share without waivers and/or
expense reimbursements $ 0.49 $ 0.16 $ 0.49 $ 0.49
<CAPTION>
YEAR
ENDED
PRIMARY A SHARES 11/30/93
Operating performance:
Net asset value, beginning of period $ 10.59
Net investment income 0.48
Net realized and unrealized gain/(loss) on investments 0.42
Net increase/(decrease) in net asset value from operations 0.90
Distributions:
Dividends from net investment income (0.48)
Distributions from net realized capital gains (0.02)
Distributions in excess of net realized capital gains --
Total dividends and distributions (0.50)
Net asset value, end of period $ 10.99
Total return++ 9.08%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 193,084
Ratio of operating expenses to average net assets 0.57%
Ratio of net investment income to average net assets 4.80%
Portfolio turnover rate 26%
Ratio of operating expenses to average net assets without
waivers and/or expense reimbursements 0.69%
Net investment income per share without waivers and/or
expense reimbursements $ 0.47
</TABLE>
NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND (CONT.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR YEAR YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 11/30/92 11/30/91 11/30/90
Operating performance:
Net asset value, beginning of period $ 10.34 $ 10.14 $ 10.08
Net investment income 0.54 0.58 0.61
Net realized and unrealized gain/(loss) on investments 0.29 0.21 0.11
Net increase/(decrease) in net asset value from operations 0.83 0.79 0.72
Distributions:
Dividends from net investment income (0.54) (0.58) (0.66)
Distributions from net realized capital gains (0.04) (0.01) --
Distributions in excess of net realized capital gains -- -- --
Total dividends and distributions (0.58) (0.59) (0.66)
Net asset value, end of period $ 10.59 10.34 $ 10.14
Total return++ 8.28%+++ 8.04%+++ 7.41%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 157,773 $ 119,757 $ 75,962
Ratio of operating expenses to average net assets 0.56% 0.45% 0.26%
Ratio of net investment income to average net assets 5.17% 5.67% 6.09%
Portfolio turnover rate 13% 24% 19%
Ratio of operating expenses to average net assets without waivers and/or expense
reimbursements 0.68% 0.73% 0.80%
Net investment income per share without waivers and/or expense reimbursements $ 0.53 $ 0.55 $ 0.55
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/89*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.12
Net realized and unrealized gain/(loss) on investments 0.03
Net increase/(decrease) in net asset value from operations 0.15
Distributions:
Dividends from net investment income (0.07)
Distributions from net realized capital gains --
Distributions in excess of net realized capital gains --
Total dividends and distributions (0.07)
Net asset value, end of period $ 10.08
Total return++ 1.46%+++
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 46,560
Ratio of operating expenses to average net assets 0.16%+
Ratio of net investment income to average net assets 6.09%+
Portfolio turnover rate 12%
Ratio of operating expenses to average net assets without waivers and/or expense
reimbursements 0.81%+
Net investment income per share without waivers and/or expense reimbursements $ 0.08
</TABLE>
* Nations Virginia Intermediate Municipal Bond Fund Primary A Shares commenced
operations on September 20, 1989.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
+++ Unaudited.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
48
<PAGE>
FOR A PRIMARY A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
NATIONS VIRGINIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95
Operating performance:
Net asset value, beginning of period $ 9.38 $ 9.62 $ 8.29
Net investment income 0.48 0.16 0.51
Net realized and unrealized gain/(loss) on investments 0.02 (0.24) 1.33
Net increase/(decrease) in net asset value from operations 0.50 (0.08) 1.84
Dividends from net investment income (0.48) (0.16) (0.51)
Total dividends and distributions (0.48) (0.16) (0.51)
Net asset value, end of period $ 9.40 $ 9.38 $ 9.62
Total return++ 5.44% (0.84)% 22.63%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 5,726 $ 3,296 $ 3,527
Ratio of operating expenses to average net assets 0.60% 0.60%+ 0.39%
Ratio of operating expenses to average net assets including interest
expense (a) 0.61%+ (a)
Ratio of net investment income to average net assets 5.10% 5.06%+ 5.51%
Portfolio turnover rate 37% 8% 16%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 0.98% 1.07%+ 1.04%
Net investment income per share without waivers and/or expense
reimbursements $ 0.44 $ 0.14 $ 0.46
<CAPTION>
PERIOD
ENDED
PRIMARY A SHARES 11/30/94*
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.45
Net realized and unrealized gain/(loss) on investments (1.71)
Net increase/(decrease) in net asset value from operations (1.26)
Dividends from net investment income (0.45)
Total dividends and distributions (0.45)
Net asset value, end of period $ 8.29
Total return++ (12.86)%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 432
Ratio of operating expenses to average net assets 0.21%+
Ratio of operating expenses to average net assets including interest
expense (a)
Ratio of net investment income to average net assets 5.52%+
Portfolio turnover rate 61%
Ratio of operating expenses to average net assets without waivers and/or
expense reimbursements 0.99%+
Net investment income per share without waivers and/or expense
reimbursements $ 0.38
</TABLE>
* Nations Virginia Municipal Bond Fund Primary A Shares commenced operations on
January 11, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and
does not reflect the deduction of any applicable sales charges.
(a) The effect of interest expense on the operating expense ratio was less than
0.01%.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
Objectives
MONEY MARKET FUNDS:
Each Money Market Fund endeavors to achieve its investment objective by
investing in a diversified portfolio of high quality money market instruments
with maturities of 397 days or less from the date of purchase. Securities
subject to repurchase agreements may bear longer maturities.
NATIONS PRIME FUND: Nations Prime Fund's investment objective is to seek the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS TREASURY FUND: Nations Treasury Fund's investment objective is the
maximization of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity.
NATIONS GOVERNMENT MONEY MARKET FUND: Nations Government Money Market Fund's
investment objective is to seek as high a level of current income as is
consistent with liquidity and stability of principal.
NATIONS TAX EXEMPT FUND: Nations Tax Exempt Fund's investment objective is to
seek as high a level of current interest income exempt from Federal income taxes
as is consistent with liquidity and stability of principal.
EQUITY FUNDS:
NATIONS VALUE FUND: Nations Value Fund's investment objective is to seek growth
of capital by investing in companies that are believed to be undervalued.
NATIONS EQUITY INCOME FUND: Nations Equity Income Fund's investment objective is
to seek current income and growth of capital by investing primarily in companies
with above-average dividend yields.
NATIONS INTERNATIONAL EQUITY FUND: Nations International Equity Fund's
investment objective is to seek long-term capital growth by investing primarily
in equity securities of non-United States companies in Europe, Australia, the
Far East and other regions, including developing countries.
NATIONS INTERNATIONAL GROWTH FUND: Nations International Growth Fund's
investment objective is to seek long-term capital growth by investing primarily
in equity securities of companies domiciled in countries outside the United
States and listed on major stock exchanges primarily in Europe and the Pacific
Basin.
NATIONS EMERGING MARKETS FUND: Nations Emerging Markets Fund's investment
objective is to seek long-term capital growth by investing primarily in equity
securities of companies in emerging market countries,
49
<PAGE>
such as those in Latin America, Eastern Europe, the Pacific Basin, the Far East,
Africa and India.
NATIONS PACIFIC GROWTH FUND: Nations Pacific Growth Fund's investment objective
is to seek long-term capital growth by investing primarily in equity securities
of companies in the Pacific Basin and the Far East (excluding Japan).
NATIONS CAPITAL GROWTH FUND: Nations Capital Growth Fund's investment objective
is to seek growth of capital by investing in companies that are believed to have
superior earnings growth potential.
NATIONS EMERGING GROWTH FUND: Nations Emerging Growth Fund's investment
objective is to seek capital appreciation by investing in emerging growth
companies that are believed to have superior long-term earnings growth
prospects.
NATIONS SMALL COMPANY GROWTH FUND: Nations Small Company Growth Fund's
investment objective is to seek long-term capital growth by investing primarily
in equity securities.
NATIONS DISCIPLINED EQUITY FUND: Nations Disciplined Equity Fund's investment
objective is to seek growth of capital by investing in companies that are
expected to produce significant increases in earnings per share.
INDEX FUNDS:
NATIONS EQUITY INDEX FUND: Nations Equity Index Fund's investment objective is
to seek investment results that correspond, before fees and expenses, to the
total return of the Standard & Poor's 500 Composite Stock Price Index.
NATIONS MANAGED INDEX FUND: Nations Managed Index Fund's investment objective is
to seek, over the long-term, to provide a total return which (gross of fees and
expenses) exceeds the total return of the Standard & Poor's 500 Composite Stock
Price Index.
NATIONS MANAGED SMALLCAP INDEX FUND: Nations Managed SmallCap Index Fund's
investment objective is to seek, over the long-term, to provide a total return
which (gross of fees and expenses) exceeds the total return of the Standard &
Poor's SmallCap 600 Index.
NATIONS MANAGED VALUE INDEX FUND: Nations Managed Value Index Fund's investment
objective is to seek, over the long-term, to provide a total return that (gross
of fees and expenses) exceeds the total return of the S&P 500/BARRA Value Index.
NATIONS MANAGED SMALLCAP VALUE INDEX FUND: Nations Managed SmallCap Value Index
Fund's investment objective is to seek, over the long-term, to provide a total
return that (gross of fees and expenses) exceeds the total return of the S&P
SmallCap 600/BARRA Value Index.
BALANCED FUND:
NATIONS BALANCED ASSETS FUND: Nations Balanced Assets Fund's investment
objective is to seek total return by investing in equity and fixed income
securities.
BOND FUNDS:
NATIONS U.S. GOVERNMENT BOND FUND: Nations U.S. Government Bond Fund's
investment objective is to seek total return and preservation of capital by
investing in U.S. Government securities and repurchase agreements.
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND: Nations Short-Intermediate
Government Fund's investment objective is to seek high current income consistent
with modest fluctuation of principal. The Fund invests primarily in securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
NATIONS GOVERNMENT SECURITIES FUND: Nations Government Securities Fund's
investment objective is to seek high current income consistent with moderate
fluctuation of principal. The Fund invests primarily in intermediate-term
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
NATIONS SHORT-TERM INCOME FUND: Nations Short-Term Income Fund's investment
objective is to seek high current income consistent with minimal fluctuation of
principal. The Fund invests in investment grade debt securities.
NATIONS DIVERSIFIED INCOME FUND: Nations Diversified Income Fund's investment
objective is to seek total return with an emphasis on current income by
investing in a diversified portfolio of fixed income securities.
NATIONS STRATEGIC FIXED INCOME FUND: Nations Strategic Fixed Income Fund's
investment objective is to seek total return by investing in investment grade
fixed income securities.
NATIONS GLOBAL GOVERNMENT INCOME FUND: Nations Global Government Income Fund's
investment objective is to seek total return by investing primarily in high
quality debt securities issued by governments, banks and supranational entities
located throughout the world.
NATIONS MUNICIPAL INCOME FUND: The investment objective of Nations Municipal
Income Fund is to seek high current income exempt from Federal income tax with
the potential for principal fluctuation associated with investments in long-term
municipal securities. The Fund invests in investment grade, long-term municipal
securities.
50
<PAGE>
NATIONS SHORT-TERM MUNICIPAL INCOME FUND: The investment objective of Nations
Short-Term Municipal Income Fund is to seek high current income exempt from
Federal income tax consistent with minimal fluctuation of principal. The Fund
invests in investment grade, short-term municipal securities.
NATIONS INTERMEDIATE MUNICIPAL BOND FUND: Nations Intermediate Municipal Bond
Fund's investment objective is to seek high current income exempt from Federal
income tax consistent with moderate fluctuation of principal. The Fund invests
in investment grade, intermediate-term municipal securities.
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND: Nations Florida Intermediate
Municipal Bond Fund's investment objective is to seek high current income exempt
from Federal income and the Florida state intangibles taxes consistent with
moderate fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
NATIONS FLORIDA MUNICIPAL BOND FUND: Nations Florida Municipal Bond Fund's
investment objective is to seek high current income exempt from Federal income
and the Florida state intangibles taxes with the potential for principal
fluctuation associated with investments in long-term municipal securities. The
Fund invests in investment grade, long-term municipal securities.
NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND: Nations Georgia Intermediate
Municipal Bond
Fund's investment objective is to seek high current income exempt from Federal
and Georgia state income taxes consistent with moderate fluctuation of
principal. The Fund invests in investment grade, intermediate-term municipal
securities.
NATIONS GEORGIA MUNICIPAL BOND FUND: Nations Georgia Municipal Bond Fund's
investment objective is to seek high current income exempt from Federal and
Georgia state income taxes with the potential for principal fluctuation
associated with investments in long-term municipal securities. The Fund invests
in investment grade, long-term municipal securities.
NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND: Nations Maryland Intermediate
Municipal Bond Fund's investment objective is to seek high current income exempt
from Federal and Maryland state income taxes consistent with moderate
fluctuation of principal. The Fund invests in investment grade, intermediate-
term municipal securities.
NATIONS MARYLAND MUNICIPAL BOND FUND: Nations Maryland Municipal Bond Fund's
investment objective is to seek high current income exempt from Federal and
Maryland state income taxes with the potential for principal fluctuation
associated with investments in long-term municipal securities. The Fund invests
in investment grade, long-term municipal securities.
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND: Nations North Carolina
Intermediate Municipal Bond Fund's investment objective is to seek high current
income exempt from Federal and North Carolina state income taxes consistent with
moderate fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND: Nations North Carolina Municipal
Bond Fund's investment objective is to seek high current income exempt from
Federal and North Carolina state income taxes with the potential for principal
fluctuation associated with investments in long-term municipal securities. The
Fund invests in investment grade, long-term municipal securities.
NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND: Nations South Carolina
Intermediate Municipal Bond Fund's investment objective is to seek high current
income exempt from Federal and South Carolina state income taxes consistent with
moderate fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND: Nations South Carolina Municipal
Bond Fund's investment objective is to seek high current income exempt from
Federal and South Carolina state income taxes with the potential for principal
fluctuation associated with investments in long-term municipal securities. The
Fund invests in investment grade, long-term municipal securities.
NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND: Nations Tennessee
Intermediate Municipal Bond Fund's investment objective is to seek high current
income exempt from Federal income tax and the Tennessee Hall Income Tax on
unearned income consistent with moderate fluctuation of principal. The Fund
invests in investment grade, intermediate-term municipal securities.
NATIONS TENNESSEE MUNICIPAL BOND FUND: Nations Tennessee Municipal Bond Fund's
investment objective is to seek high current income exempt from Federal income
tax and the Tennessee Hall Income Tax on unearned income with the potential for
principal fluctuation associated with investments in long-term municipal
securities. The Fund invests in investment grade, long-term municipal
securities.
NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND: Nations Texas Intermediate
Municipal Bond Fund's investment objective is to seek high current income exempt
from Federal income tax consistent with moder-
51
<PAGE>
ate fluctuation of principal. The Fund invests in investment grade,
intermediate-term municipal securities.
NATIONS TEXAS MUNICIPAL BOND FUND: Nations Texas Municipal Bond Fund's
investment objective is to seek high current income exempt from Federal income
tax with the potential for principal fluctuation associated with investments in
long-term municipal securities. The Fund invests in investment grade, long-term
municipal securities.
NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND: Nations Virginia Intermediate
Municipal Bond Fund's investment objective is to seek high current income exempt
from Federal and Virginia state income taxes consistent with moderate
fluctuation of principal. The Fund invests in investment grade, intermediate-
term municipal securities.
NATIONS VIRGINIA MUNICIPAL BOND FUND: Nations Virginia Municipal Bond Fund's
investment objective is to seek high current income exempt from Federal and
Virginia state income taxes with the potential for principal fluctuation
associated with investments in long-term municipal securities. The Fund invests
in investment grade, long-term municipal securities.
Nations Florida Intermediate Municipal Bond Fund, Nations Georgia Intermediate
Municipal Bond Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations
North Carolina Intermediate Municipal Bond Fund, Nations South Carolina
Intermediate Municipal Bond Fund, Nations Tennessee Intermediate Municipal Bond
Fund, Nations Texas Intermediate Municipal Bond Fund and Nations Virginia
Intermediate Municipal Bond Fund are sometimes collectively referred to as the
"State Intermediate Municipal Bond Funds," and Nations Florida Municipal Bond
Fund, Nations Georgia Municipal Bond Fund, Nations Maryland Municipal Bond Fund,
Nations North Carolina Municipal Bond Fund, Nations South Carolina Municipal
Bond Fund, Nations Tennessee Municipal Bond Fund, Nations Texas Municipal Bond
Fund and Nations Virginia Municipal Bond Fund are sometimes collectively
referred to as the "State Municipal Bond Funds".
Although the Adviser will seek to achieve the investment objective of each Fund,
there is no assurance that it will be able to do so. No single Fund should be
considered, by itself, to provide a complete investment program for any
investor. Investments in a Fund are not insured against loss of principal.
How Objectives Are Pursued
MONEY MARKET FUNDS:
NATIONS PRIME FUND: In pursuing its investment objective, the Fund may invest in
U.S. Treasury bills, notes and bonds and other instruments issued directly by
the U.S. Government ("U.S. Treasury Obligations") and other obligations issued
or guaranteed as to payment of principal and interest by the U.S. Government,
its agencies or instrumentalities (together, with U.S. Treasury Obligations,
"U.S. Government Obligations"), bank and commercial instruments that may be
available in the money markets, high quality short-term taxable obligations
issued by state and local governments, their agencies and instrumentalities and
repurchase agreements relating to U.S. Government Obligations and qualified
first tier money market collateral. The Fund also may purchase securities issued
by other investment companies, consistent with the Fund's investment objective
and policies, and may engage in reverse repurchase agreements. The Fund also may
invest in guaranteed investment contracts and in instruments issued by certain
trusts, partnerships or other special purpose issuers, including pass-through
certificates representing participations in, or debt instruments backed by, the
securities and other assets owned by such issuers. In addition, the Fund may
lend its portfolio securities to qualified institutional investors. Although the
Fund is permitted to invest a portion of its assets in second tier securities
(as defined below) in accordance with
Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"), the Fund
invests only in first tier securities (as defined below). For more information
concerning these instruments, see "Appendix A."
NATIONS TREASURY FUND: In pursuing its investment objective, the Fund invests in
U.S. Treasury Obligations and repurchase agreements secured by such obligations.
The Fund also may purchase securities issued by other investment companies,
consistent with the Fund's investment objective and policies, and may engage in
reverse repurchase agreements. The Fund also may invest in obligations the
principal and interest of which are backed by the full faith and credit of the
United States Government, provided that such Fund shall, under normal market
conditions, invest at least 65% of its total assets in U.S. Treasury bills,
notes and bonds and other instruments issued directly by the U.S. Government and
repurchase agreements secured by such obligations. The Fund may lend its
portfolio securities to qualified institutional investors. Although the Fund is
permitted to invest a portion of its assets in second tier securities (as
defined below) in accordance with Rule 2a-7 under the 1940 Act, the Fund invests
only in first tier securities (as defined below). For more information
concerning these instruments, see "Appendix A."
NATIONS GOVERNMENT MONEY MARKET FUND: In pursuing its investment objective, the
Fund invests in U.S. Government Obligations. Although the Fund may invest
52
<PAGE>
in repurchase agreements it does not currently intend to do so. The Fund also
may purchase securities issued by other investment companies, consistent with
the Fund's investment objective and policies, and may engage in reverse
repurchase agreements. The Fund may lend its portfolio securities to qualified
institutional investors. Although the Fund is permitted to invest a portion of
its assets in second tier securities (as defined below) in accordance with Rule
2a-7 under the 1940 Act, the Fund invests only in first tier securities (as
defined below). For more information concerning these instruments, see "Appendix
A."
NATIONS TAX EXEMPT FUND: In pursuing its investment objective, the Fund invests
in a diversified portfolio of obligations issued by or on behalf of states,
territories, and possessions of the United States, the District of Columbia, and
their political subdivisions, agencies, instrumentalities and authorities, the
interest on which, in the opinion of counsel to the issuer or bond counsel, is
exempt from regular Federal income tax ("Municipal Securities"). The Fund will
not knowingly purchase securities the interest on which is subject to such tax.
A portion of the Fund's assets, however, may be invested in private activity
bonds, the interest on which may be treated as a specific tax preference item
under the Federal alternative minimum tax. See "How Dividends And Distributions
Are Made; Tax Information."
The Fund invests in Municipal Securities which are determined to present minimal
credit risks and which at the time of purchase are considered to be of "high
quality" -- E.G., rated "AA" or higher by Duff & Phelps Credit Rating Co.
("D&P"), Fitch Investors Service, Inc. ("Fitch"), Standard & Poor's Corporation
("S&P"), IBCA Limited or its affiliate IBCA Inc. (collectively "IBCA"), or
Thomson BankWatch, Inc. ("BankWatch"), or "Aa" or higher by Moody's Investors
Service, Inc. ("Moody's"), in the case of bonds; having a long-term rating of
"A" or higher from D&P, Fitch, S&P, IBCA, BankWatch or Moody's in the case of
certain bonds which are lacking a short-term rating from the requisite number of
nationally recognized statistical rating organizations); rated "D-1" or higher
by D&P, "F-1" or higher by Fitch, "SP-1" by S&P, or "MIG-1" by Moody's in the
case of notes; rated "D-1" or higher by D&P, "F-1" or higher by Fitch, or
"VMIG-1" by Moody's in the case of variable-rate demand notes; or rated "D-1" or
higher by D&P, "F-1" or higher by Fitch, "A-1" or higher by S&P or "Prime-1" by
Moody's in the case of tax-exempt commercial paper. D&P, Fitch, S&P, Moody's,
IBCA and BankWatch are the six nationally recognized statistical rating
organizations (collectively, "NRSROs"). Securities that are unrated at the time
of purchase will be determined to be of comparable quality by the Adviser
pursuant to guidelines approved by Nations Fund Trust's Board of Trustees. The
applicable Municipal Securities ratings are described in "Appendix B."
The payment of principal and interest on most securities purchased by the Fund
will depend upon the ability of the issuers to meet their obligations. The
District of Columbia, each state, each of their political subdivisions,
agencies, instrumentalities and authorities and each multi-state agency of which
a state is a member is a separate "issuer" as that term is used in this
Prospectus and the related SAI. The non-governmental user of facilities financed
by private activity bonds also is considered to be an "issuer."
The Fund may hold uninvested cash reserves pending investment, during temporary
defensive periods, or if, in the opinion of the Adviser, desirable tax-exempt
obligations are unavailable. Uninvested cash reserves will not earn income. As a
matter of fundamental policy, under normal market conditions, at least 80% of
the Fund's net assets will be invested in Municipal Securities. Investments in
private activity bonds, the interest on which may be treated as a specific tax
preference item under the Federal alternative minimum tax, will not be treated
as Municipal Securities in determining whether the Fund is in compliance with
this 80% requirement. The Fund also may invest in securities issued by other
investment companies, consistent with the Fund's investment objective and
policies. The Fund also may invest in instruments issued by certain trusts,
partnerships or other special purpose issuers, including pass-through
certificates representing participations in, or debt instruments backed by, the
securities and other assets owned by such issuers. Although the Fund is
permitted to invest a portion of its assets in second tier securities (as
defined below) in accordance with Rule 2a-7 under the 1940 Act, the Fund invests
only in first tier securities (as defined below). For more information
concerning the Fund's investments, see "Appendix A."
RESTRAINTS ON INVESTMENTS BY MONEY MARKET FUNDS: In order for the Money Market
Funds to value their investments on the basis of amortized cost, (see "How The
Funds Value Their Shares") investments must be in accordance with the
requirements of Rule 2a-7 under the 1940 Act, some of which are described below.
A Money Market Fund is limited to acquiring obligations with a remaining
maturity of 397 days or less, or obligations with greater maturities, provided
such obligations are subject to demand features or resets which are less than
397 days, and to maintaining a dollar-weighted average portfolio maturity of 90
days or less. Quality requirements generally limit investments to U.S. dollar-
denominated instruments determined to present minimal credit risks and that at
the time of acquisition are rated in the first or second rating categories
(known as "first tier" and "second tier" securities, respectively) by the
required number of NRSROs (at least two or, if only one NRSRO has rated the
security, that one NRSRO) or, if unrated by any NRSRO, are (i) comparable in
priority and security to a class of short-term securities of the
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<PAGE>
same issuer that has the required rating, or (ii) determined to be comparable in
quality to securities having the required rating. The diversification
requirements provide generally that a Money Market Fund may not at the time of
acquisition invest more than 5% of its assets in securities of any one issuer
except that up to 25% of total assets may be invested in the first tier
securities of a single issuer for three business days. Additionally, (except for
Nations Tax Exempt Fund) no more than 5% of total assets may be invested, at the
time of the acquisition, in second tier securities in the aggregate, and any
investment in second tier securities of one issuer is limited to the greater of
1% of total assets or one million dollars. Securities issued by the U.S.
Government, its agencies, authorities or instrumentalities, are exempt from the
quality requirements, other than minimal credit risk. In the event that a Money
Market Fund's investment restrictions or permissible investments are more
restrictive than the requirements of Rule 2a-7, the Money Market Fund's own
restrictions will govern.
EQUITY FUNDS:
NATIONS VALUE FUND: The Fund invests in stocks drawn from a broad universe of
companies monitored by the Adviser. The Adviser closely monitors these
companies, rating them for quality and projecting their future earnings and
dividends as well as other factors. To qualify for purchase, an issuer would
normally have a market capitalization of $500 million or more and have an
average daily trading volume of at least $3 million. These requirements are
generally considered by the Adviser to be adequate to support normal purchase
and sale activity without materially affecting prevailing market prices of the
issuer's shares. The Adviser also analyzes key financial ratios that measure the
growth, profitability, and leverage of such issuers that it believes will help
maintain a portfolio of above-average quality.
Stocks are selected from this universe based on the Adviser's judgment of their
total return potential. The Adviser buys stocks that it believes are undervalued
relative to the overall stock market. The principal factor considered by the
Adviser in making these determinations is the ratio of a stock's price to
earnings relative to corresponding ratios of other stocks in the same industry
or economic sector. The Adviser believes that companies with lower
price-to-earnings ratios are more likely to provide better opportunities for
capital appreciation. This "value" approach generally produces a dividend yield
greater than the market average. The Adviser will attempt to temper risk by
broad diversification among economic sectors and industries. Through this
strategy, the Fund pursues above-average returns while seeking to avoid
above-average risks.
The Fund invests under normal market conditions at least 65% of its total assets
in common stocks. In addition to common stocks, the Fund also may invest in
preferred stocks, securities convertible into common stock and other types of
securities having common stock characteristics (such as rights and warrants to
purchase equity securities). Although the Fund invests primarily in
publicly-traded common stocks of companies incorporated in the United States,
the Fund may invest up to 20% of its assets in foreign securities. The Fund also
may hold up to 20% of its total assets in U.S. Government Obligations, and
investment grade securities of domestic companies. Obligations with the lowest
investment grade rating (E.G. rated "BBB" by S&P or "Baa" by Moody's) have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations may
be acquired by the Fund if they are determined by the Adviser to be of
comparable quality at the time of purchase to rated obligations that may be
acquired.
The Fund may invest in various money market instruments and repurchase
agreements. The Fund may invest without limitation in such instruments pending
investment, to meet anticipated redemption requests, or as a temporary defensive
measure if market conditions warrant.
NATIONS EQUITY INCOME FUND: The investment program of the Fund is based on
several premises. First, dividends are normally a more stable and predictable
source of return than capital appreciation. While the price of a company's stock
generally increases or decreases in response to short-term earnings and market
fluctuations, its dividends are generally less volatile. Second, diversifying
equity holdings in a manner that includes every major economic sector
contributes to reduced volatility, without a commensurate reduction in expected
investment return. Finally, investing in dividend paying stocks in all the
economic sectors can provide greater income than provided by the stocks in the
Standard & Poor's 500 Composite Stock Price Index1 ("S&P 500 Index") with less
volatility. Collectively, these traits may be combined in such a fashion as to
produce returns in excess of the market (S&P 500 Index) on a comparable risk
basis.
New purchases for the Fund will generally be made in equity securities that:
(1) "Standard & Poor's 500" is a registered service mark of Standard & Poor's
Corporation ("S&P").
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(Bullet) are income producing;
(Bullet) appear undervalued relative to the S&P 500 Index on a risk adjusted
basis; and
(Bullet) have favorable trends in personal stock ownership by the underlying
company's officers and/or directors.
To achieve its objective, the Fund, under normal circumstances, will invest at
least 65% of its assets in income-producing common stocks, including securities
convertible into or ultimately exchangeable for common stock (I.E., convertible
bonds or convertible preferred stock), whose prospects for dividend growth and
capital appreciation are considered favorable by the Adviser. The securities
held by the Fund generally will be listed on a national exchange or, if not so
listed, will usually have an established over-the-counter market.
In order to further enhance its income, the Fund also may invest its assets in
fixed-income securities (corporate and government bonds of various maturities),
preferred stocks and warrants. The Fund may invest in debt securities that are
considered investment grade (E.G. securities rated in one of the top four
investment categories by S&P or Moody's, or if not rated, are of equivalent
investment quality as determined by the Adviser). Obligations rated in the
lowest of the top four investment grade rating categories (E.G., rated "BBB" by
S&P) have speculative characteristics and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade debt
obligations. The Fund also may invest up to 5% of its assets in debt securities
that are rated below investment grade (E.G. rated "BB" by S&P) or if not rated,
are of equivalent investment quality as determined by the Adviser.
Non-investment-grade debt securities are sometimes referred to as "high yield
bonds" or "junk bonds," tend to have speculative characteristics, generally
involve more risk of principal and income than higher rated securities, and have
yields and market values that tend to fluctuate more than higher quality
securities. The Fund will invest in such high-yield debt securities only when
the Adviser believes that the issue presents minimal credit risk. For a
description of corporate debt ratings, see "Appendix B." Although the Fund
invests primarily in securities of U.S. issuers, the Fund may invest up to 20%
of its total assets in foreign securities. The Fund will treat foreign
securities as illiquid unless there is an active and substantial secondary
market for such securities.
The Fund also may invest in various money market instruments and repurchase
agreements. The Fund may invest without limitation in such instruments pending
investment, to meet anticipated redemption requests, or as a temporary defensive
measure if market conditions warrant.
NATIONS INTERNATIONAL EQUITY FUND: The Fund intends to diversify investments
broadly among countries and normally to invest in securities representing at
least three different countries. The Fund may invest in companies in the Far
East and Western Europe as well as Australia, Canada, and other areas (including
developing countries). Under unusual circumstances, however, the Fund may invest
substantially all of its assets in companies in one or two countries.
In seeking to achieve its objective, the Fund will invest at least 65% of its
assets in common stocks of established non-United States companies that the
Adviser believes have potential for growth of capital. The Fund may invest up to
35% of its assets in any other type of security including: convertible
securities; preferred stocks; bonds, notes and other debt securities (including
Eurodollar securities); and obligations of domestic or foreign governments and
their political subdivisions.
The Fund also may invest in American Depository Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), European Depository Receipts ("EDRs"), American
Depository Shares ("ADSs"), bonds, notes, other debt securities of foreign
issuers and securities of foreign investment funds or trusts and real estate
investment trust securities.
NATIONS INTERNATIONAL GROWTH FUND: In pursuing its investment objective, under
normal market conditions, the Fund will invest at least 65% of its total assets
in foreign equity securities listed on major exchanges, consisting of common
stocks, preferred stocks and convertible securities, such as warrants, rights
and convertible debt. The Fund may purchase the stock of small-, mid- and
large-capitalization companies.
The Fund may invest up to 35% of its total assets in securities of issuers
domiciled in developing countries. These countries are generally located in
Eastern Europe, the Asia-Pacific region, Latin and South America, Africa and,
subject to approval by the Board of Directors, the former Soviet Union and the
Middle East. Debt securities, if any, purchased by the Fund will be rated in the
top two categories by a nationally recognized statistical rating organization
("NRSRO"), or, if unrated, determined by the Adviser to be of comparable
quality. For temporary defensive purposes, the Fund may invest up to 100% of its
assets in debt and equity securities of U.S. issuers. Debt securities in which
the Fund may invest include short-term and intermediate-term obligations of
corporations, foreign governments and international organizations (such as the
International Bank for Reconstruction and Development (the "World Bank")),
including money market instruments.
The Fund may invest in common stocks (including securities convertible into
common stocks) of foreign issuers and rights to purchase common stock, options
and futures contracts on securities, securities indexes and foreign currencies,
securities lending, forward foreign exchange contracts and repurchase
agreements.
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The Fund also may invest in ADRs, GDRs, EDRs and ADSs.
NATIONS EMERGING MARKETS FUND: In seeking to achieve its objective, the Fund
will invest under normal market conditions at least 65% of its total assets in
equity securities of companies in emerging markets.
The Fund considers countries with emerging markets to include the following: (i)
countries with an emerging stock market as defined by the International Finance
Corporation; (ii) countries with low- to middle-income economies according to
the International Bank For Reconstruction and Development (more commonly
referred to as the World Bank); and (iii) countries listed in World Bank
publications as developing. The Adviser seeks to identify and invest in those
emerging markets that have a relatively low gross national product per capita,
compared to the world's major economies, and which exhibit potential for rapid
economic growth. The Adviser believes that investment in equity securities of
emerging market issuers offers significant potential for long-term capital
appreciation.
Emerging market countries include, but are not limited to: Argentina, Brazil,
Chile, China, the Czech Republic, Colombia, Ecuador, Greece, Hong Kong,
Indonesia, India, Malaysia, Mexico, the Philippines, Poland, Portugal, Peru,
Russia, Singapore, South Africa, Thailand, Taiwan and Turkey.
A company will be considered in a country, market or region if it conducts its
principal business activities in the country, market or region. A company will
be considered to conduct its principal business activities in a country, market
or region if it derives a significant portion (at least 50%) of its revenues or
profits from goods produced or sold, investments made, or services performed in
such country, market or region or has at least 50% of its assets situated in
such country, market or region.
Equity securities of emerging market issuers may include common stocks,
preferred stocks (including convertible preferred stocks) and warrants; bonds,
notes and debentures convertible into common or preferred stock; equity
interests in foreign investment funds or trusts and real estate investment trust
securities. The Fund may invest in ADRs, GDRs, EDRs, and ADSs of such issuers.
The Fund also may invest in other types of instruments, including debt
obligations. Debt obligations acquired by the Fund will be rated investment
grade at the time of purchase by Moody's or S&P or, if unrated, determined by
the Adviser to be comparable in quality to instruments so rated. Obligations
with the lowest investment grade rating (E.G., rated "Baa" by Moody's or "BBB"
by S&P) have speculative characteristics, and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade debt
obligations. See "Appendix B" for a description of these ratings designations.
The Fund is a diversified fund that intends, under normal market conditions, to
invest in at least three different countries, although it may, from time to
time, invest all of its assets in a single country. If the Fund invests all or a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's investments. For
additional information concerning risk, see "Special Risk Considerations
Relevant to an Investment in Nations International Equity Fund, Nations
International Growth Fund, Nations Emerging Markets Fund, Nations Pacific Growth
Fund and Nations Global Government Income Fund," below. When allocating
investments among individual countries, the Adviser will consider various
criteria, such as the relative economic growth potential of the various
economies and securities markets, expected levels of inflation, government
policies influencing business conditions and the outlook for currency
relationships.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments.
NATIONS PACIFIC GROWTH FUND: The Fund seeks to achieve its objective by
investing primarily in securities of issuers in the regions known as the Pacific
Basin and the Far East. An issuer will be considered in a region if it conducts
its principal business activities in the region. An issuer will be considered to
conduct its principal business activities in a region if it derives a
significant portion (at least 50%) of its revenues or profits from goods
produced or sold, investments made, or services performed in such region or has
at least 50% of its assets situated in such region. The Pacific Basin and Far
East include Australia, Hong Kong, India, Indonesia, South Korea, Malaysia, New
Zealand, Pakistan, the People's Republic of China, the Philippines, Singapore,
Sri Lanka, Taiwan and Thailand and may include other markets that develop in the
region. The Fund will not invest in securities of issuers in Japan.
The Fund will focus on equity securities, but may also invest in debt
obligations. Such equity securities may include common stocks, preferred stocks
(including convertible preferred stocks) and warrants; bonds, notes and
debentures convertible into common or preferred stock; equity interests in
foreign investment funds or trusts and real estate investment trust securities.
Debt obligations acquired by the Fund will be rated investment grade at the time
of purchase by Moody's or S&P or, if unrated, determined by the Adviser to be
comparable in quality to instruments so rated. Obligations with the lowest
investment grade rating (E.G., rated "Baa" by Moody's or "BBB" by S&P) have
speculative characteris-
56
<PAGE>
tics, and changes in economic conditions or other circumstances are more likely
to lead to a weakened capacity to make principal and interest payments than is
the case with higher grade debt obligations. See "Appendix B" for a description
of these ratings designations.
In seeking to achieve its objective, the Fund will invest under normal market
conditions at least 65% of its total assets in securities of issuers that
conduct their principal business activities in countries of the Pacific Basin
and Far East, except for Japan. Although the Fund may not invest in securities
issued by companies that conduct their principal business activities in Japan,
the Fund may invest in securities that are listed on a Japanese exchange.
The Fund is a diversified fund that intends, under normal market conditions, to
invest in at least three different countries, although it may, from time to
time, invest all of its assets in a single country. If the Fund invests all or a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's investments. For
additional information concerning risk, see "Special Risk Considerations
Relevant to an Investment in Nations International Equity Fund, Nations
International Growth Fund, Nations Emerging Markets Fund, Nations Pacific Growth
Fund and Nations Global Government Income Fund," below. When allocating
investments among individual countries, the Adviser will consider various
criteria, such as the relative economic growth potential of the various
economies and securities markets, expected levels of inflation, government
policies influencing business conditions and the outlook for currency
relationships.
The Fund may invest in ADRs, EDRs, GDRs and ADSs. For defensive purposes, the
Fund may temporarily invest substantially all of its assets in U.S. financial
markets or in U.S. dollar-denominated instruments.
NATIONS CAPITAL GROWTH FUND: The investment philosophy of the Fund is based on
the belief that companies with superior growth characteristics selling at
reasonable prices will, over time, outperform the market. Therefore, the Fund
will generally seek to invest in larger capitalization, high-quality companies
which possess above average earnings growth potential.
The Fund's equity investments will generally be made in companies which share
some of the following characteristics:
(Bullet) above-average earnings growth relative to the S&P 500 Index;
(Bullet) established operating histories, strong balance sheets and favorable
financial characteristics; and
(Bullet) above-average return on equity relative to the S&P 500 Index.
In addition, the Fund's investment program enables it to invest in the following
types of companies:
(Bullet) companies that generate or apply new technologies, new and improved
distribution techniques, or new services, such as those in the business
equipment, electronics, specialty merchandising and health service
industries;
(Bullet) companies that own or develop natural resources, such as energy
exploration companies;
(Bullet) companies that may benefit from changing consumer demands and
lifestyles, such as financial service organizations and
telecommunication companies;
(Bullet) foreign companies, including those in countries with more rapid
economic growth than the U.S.;
(Bullet) companies whose earnings growth is projected at a pace in excess of the
average company (I.E., growth companies); and
(Bullet) companies whose earnings are temporarily depressed and are currently
out of favor with most investors.
Through intensive research, visits to many companies each year and efficient
response to changing market conditions, the Adviser seeks to make the most of
the Fund's flexible charter.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks. In addition to common stocks, the Fund also may invest
in preferred stocks, securities convertible into common stocks and other types
of securities having common stock characteristics (such as rights and warrants
to purchase equity securities). Although the Fund invests primarily in publicly
traded common stocks of companies incorporated in the United States, the Fund
may invest up to 20% of its total assets in foreign securities.
The Fund also may invest in various money market instruments and repurchase
agreements. The Fund may invest without limitation in such instruments pending
investment, to meet anticipated redemption requests, or as a temporary defensive
measure if market conditions warrant.
NATIONS EMERGING GROWTH FUND: The Fund will invest in equity securities,
consisting of common stocks, preferred stocks and convertible securities, such
as warrants, rights and securities convertible into common stocks, selected from
a universe of emerging growth companies monitored by the Adviser. Most of the
companies will have revenues between $50 million and $1.5 billion and a debt
ratio of less than 50% of capitalization. The universe focuses on companies with
above average earnings growth rates and profit margins, yet the portfolio may
include positions of special situation companies whose growth is expected to
accelerate. These companies are believed to offer significant opportunities for
capital appreciation and the Adviser will attempt to identify these
opportunities before their potential is recognized by investors in general.
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In selecting industries and companies for investment, the Adviser will consider
overall growth prospects, financial condition, competitive position, technology,
research and development, innovative products, marketing expertise,
productivity, labor costs, raw material costs and sources, profit margins,
return on investment, structural changes in local economies, capital resources,
the degree of governmental regulation or deregulation, management and other
factors.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks. The Fund also may invest in various money market
instruments and repurchase agreements. The Fund may invest without limitation in
such instruments pending investment, to meet anticipated redemption requests, or
as a temporary defensive measure if market conditions warrant.
The volatility of emerging growth stocks is greater than that of larger
companies. Many of these stocks trade over-the-counter and may not have
widespread interest among institutional investors. These securities may have
larger potential for gains but also carry more risk if unexpected company
developments adversely affect the stock prices. To help reduce risk, the Fund is
diversified and typically invests in 75 to 100 companies which represent a broad
range of industries and sectors, both in the United States and abroad. Although
the Fund invests primarily in securities of U.S. issuers, it may invest up to
20% of its total assets in foreign securities.
NATIONS SMALL COMPANY GROWTH FUND: In pursuing its investment objective, under
normal market conditions, the Fund will invest at least 65% of its total assets
in equity securities, consisting of common stocks, preferred stocks and
convertible securities, such as warrants, rights and convertible debt. In
addition, the Fund will invest at least 65% of its total assets in companies
with a market capitalization of $1 billion or less.
In making investment decisions for the Fund, the Adviser, on a quarterly basis,
classifies approximately 6,000 companies by market value and eliminates the
largest 20%. The remaining companies constitute the Fund's small-capitalization
universe and generally represent only one-tenth of the aggregate U.S. equity
market capitalization. Due to the large number of small stocks to choose from,
the Adviser's selection process uses advanced quantitative techniques to
identify, buy and sell candidates in a timely and objective manner. The strategy
is to own those investments offering both attractive fundamental valuation and
relatively good prospects for earnings improvement. Typically, two types of
companies are candidates for purchase: (i) mature companies which may have
fallen from a larger market due to business difficulties, but which now exhibit
improving prospects; and (ii) smaller or younger companies which are
experiencing strong trends in earnings growth, but remain reasonably valued and
therefore offer premium growth at a discount in comparison to other companies.
The Adviser's internally designed investment approach uses a sophisticated
valuation process which measures changes in current earnings estimates and
longer-term growth trends, compares recent earnings results with market
expectations, and evaluates a company's earnings power relative to its stock
price. Companies become purchase candidates based upon a composite ranking of
these factors, and the top 20% are further evaluated on additional criteria.
Candidates for investment must also possess a sound financial structure and
demonstrate consistent factor rankings before being added to the Fund's
portfolio.
The Fund's weighted median capitalization generally is not expected to exceed
125% of the weighted median capitalization of the Russell 2000 Small Stock Index
(the "Russell 2000") as measured on a quarterly basis, although this may vary
from time to time. Furthermore, a stock may be sold if the composite rank falls
into the bottom 20% of the universe, financial quality weakens significantly, or
if individual factors demonstrate patterns of deterioration.
The Fund may invest up to 35% of its total assets in securities of issuers with
a market capitalization greater than $1 billion and in debt securities. However,
the Fund will not invest more than 10% of its total assets in debt securities,
unless the Fund assumes a temporary defensive position as discussed below. Debt
securities, if any, purchased by the Fund will be rated AA or above by S&P or Aa
or above by Moody's or, if unrated, determined by the Adviser to be of
comparable quality. For temporary defensive purposes, the Fund may invest up to
100% of its assets in debt securities. Debt securities in which the Fund may
invest include short-term and intermediate-term obligations of corporations, the
U.S. and foreign governments and international organizations (such as the World
Bank), and money market instruments.
The Fund may invest in common stocks (including securities convertible into
common stocks) of foreign issuers and rights to purchase common stock, options
and futures contracts on securities, securities indexes and foreign currencies,
securities lending, forward foreign exchange contracts and repurchase
agreements. The Fund currently intends to limit any investment in foreign
securities to 5% of total assets.
NATIONS DISCIPLINED EQUITY FUND: The investment philosophy of the Fund is based
on the premise that companies with positive earnings trends also should
experience positive trends in their share price. Based on this philosophy, the
Fund invests primarily in the common stocks of companies that the Adviser
believes are likely to experience significant increases in earnings. By pursuing
this investment philosophy, the Fund seeks to pro-
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vide investors with long-term capital appreciation which exceeds that of the S&P
500 Index.
In selecting stocks for the Fund, the Adviser utilizes quantitative analysis and
optimization tools. This approach seeks to identify companies with improving
profit potential through analysis of earnings forecasts issued by investment
banks, broker/dealers and other investment professionals. The Adviser believes
that companies experiencing such earnings trends have the potential to generate
significant increases in per share earnings. The Adviser also believes that
companies with increasing earnings should experience positive trends in their
stock price. The quantitative analysis also includes ranking the attractiveness
of equity securities according to a multi-factor valuation model. Both value and
growth factors are considered in the ranking process. Value factors such as book
value, earnings yield and cash flow measure a stock's intrinsic worth versus its
market price, while growth characteristics such as price momentum, earnings
growth and earnings acceleration measure a stock relative to others in the same
industry. The objective is to maintain a broadly diversified portfolio which
ranks in the top quartile on earnings momentum and in the top third on
valuation. This approach generally produces a dividend yield less than the
market average. Although this Fund seeks to invest in attractively priced
securities with increasing earnings, its investment objective focuses on
long-term capital appreciation; income is not an objective of this Fund.
Under normal market conditions, the Fund invests at least 65% of its total
assets in common stocks of domestic issuers. With respect to the remainder of
the Fund's assets, the Fund may invest in a broad range of equity and debt
instruments, including preferred stocks, securities (debt and preferred stock)
convertible into common stock, warrants and rights to purchase common stocks,
options, U.S. government and corporate debt securities and various money market
instruments. The Fund will invest primarily in medium- and large-sized companies
(I.E. companies with market capitalizations of $500 million or greater) that are
determined to have favorable price/earnings ratios. The Fund also may invest in
securities issued by companies with market capitalizations of less than $500
million. The volatility of small-capitalization stocks is typically greater than
that of larger companies. To help reduce risk, the Fund will invest in the
securities of companies representing a broad range of industries and economic
sectors.
The Fund's investments in debt securities, including convertible securities,
will be limited to securities rated investment grade (E.G. securities rated in
one of the top four investment categories by an NRSRO or, if not rated, are of
equivalent quality as determined by the Adviser). Obligations rated in the
lowest of the top four investment grade rating categories have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt obligations.
The Fund may invest up to 20% of its total assets in foreign securities. For
temporary defensive purposes if market conditions warrant, the Fund may invest
without limitation in preferred stocks, investment grade debt instruments, money
market instruments and repurchase agreements.
GENERAL: Each Equity Fund also may invest in certain specified derivative
securities including: exchange-traded options; over-the-counter options executed
with primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. and foreign exchange-traded financial futures approved by the
Commodity Futures Trading Commission ("CFTC") and options thereon for market
exposure risk management. Each Equity Fund may lend its portfolio securities to
qualified institutional investors and may invest in repurchase agreements,
restricted, private placement and other illiquid securities. Each Equity Fund
also may invest in real estate investment trust securities. In addition, each
Equity Fund may invest in securities issued by other investment companies,
consistent with the Fund's investment objective and policies and repurchase
agreements. Nations International Equity Fund, Nations International Growth
Fund, Nations Pacific Growth Fund and Nations Emerging Markets Fund may invest
in forward foreign exchange contracts. For more information concerning these and
other investments in which the Funds may invest and their investment practices,
see "Appendix A."
INDEX FUNDS:
NATIONS EQUITY INDEX FUND: Under normal conditions, the Fund will invest at
least 80% of its assets in equity securities of companies which compose the S&P
500 Index. The S&P 500 Index consists of 500 selected common stocks, most of
which are listed on the New York Stock Exchange. Different stocks have different
weightings in the Index, depending on the amount of stock outstanding and its
current price. In seeking to duplicate the performance of the S&P 500 Index, the
Adviser will attempt to allocate the Fund's portfolio among common stocks in
approximately the same weightings as the S&P 500 Index, beginning with the
heaviest weighted stocks that make up a larger portion of the Index's value.
Subject to applicable law, the Fund will purchase stock of NationsBank
Corporation to the extent of its proportional make-up of the S&P 500 Index.
The Adviser generally will seek to match the composition of the S&P 500 Index as
closely as possible, but may not always invest the Fund's portfolio to mirror
the Index exactly. Because of the difficulty and expense of executing relatively
small stock transactions, the Fund
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<PAGE>
may not always be invested in the less heavily weighted S&P 500 Index stocks and
may at times have its portfolio weighted differently from the S&P 500 Index. The
Fund may omit or remove an S&P 500 Index stock from its portfolio if, following
objective criteria, the Adviser judges the stock to be insufficiently liquid or
believes the merit of the investment has been substantially impaired by
extraordinary events or financial conditions. The Adviser may purchase stocks
that are not included in the S&P 500 Index to compensate for these differences
if it believes that their prices will move together with the prices of S&P 500
Index stocks omitted from the portfolio.
The Fund is not managed according to traditional methods of "active" investment
management, which involve the buying and selling of securities based upon
economic, financial, and market analyses and investment judgment. Instead, the
Fund, utilizing a "passive" or "indexing" investment approach, attempts to
duplicate the performance of the S&P 500 Index.
The correlation between the performance of Nations Equity Index Fund (before
fees and expenses) and the S&P 500 Index is expected to be over 0.95 on an
annual basis. A correlation of 1.00 would indicate perfect correlation, which
would be achieved when the net asset value of the Fund, including the value of
its dividend and capital gains distributions, increases or decreases in exact
proportion to changes in the S&P 500 Index. The Fund's ability to track the S&P
500 Index, however, may be affected by, among other things, transaction costs,
changes in either the composition of the S&P 500 Index or the number of shares
outstanding for the components of the S&P 500 Index, and the timing and amount
of shareholder purchase and redemptions. The Fund may utilize stock index
futures contracts to minimize tracking error. In connection with engaging in
futures transactions, the Fund may hold cash, cash equivalents, and/or U.S.
Government securities.
Under normal conditions, the Adviser will attempt to invest as much of the
Fund's assets as is practical in common stocks. However, the Fund will maintain
a reasonable position in high-quality short-term debt securities and money
market instruments to meet redemption requests. If the Adviser believes that
market conditions warrant a temporary defensive posture, the Fund may invest
without limitation in high-quality short-term debt securities and money market
instruments. These securities and money market instruments may include domestic
and foreign commercial paper, certificates of deposit, bankers' acceptances and
time deposits, U.S. government securities and repurchase agreements.
The Fund may also invest a portion of its portfolio in instruments whose return
depends on stock market prices. These may include debt securities whose prices
or interest rates are indexed to the return of the S&P 500 Index, or swap
agreements linked to the S&P 500 Index, and options and futures contracts. The
Fund would invest in these types of instruments in order to seek to match the
total return of the Index in accordance with its investment objective. However,
instruments linked to stock market returns may not track the return of the Index
in all cases, and may involve additional credit risks. The Fund may also invest
in warrants.
NATIONS MANAGED INDEX FUND: In seeking to achieve its investment objective, the
Fund will invest in selected equity securities that are included in the S&P 500
Index. The S&P 500 Index is a market capitalization weighted index consisting of
500 common stocks chosen for market size, liquidity and industry group
representation.
Unlike traditional index funds, the Fund has a "managed" overlay. The Adviser
believes that a managed equity index portfolio can provide investors with
positive incremental performance relative to the S&P 500 Index while minimizing
the downside risk of underperforming the S&P 500 Index over time.
The initial stock universe considered by the Adviser is the S&P 500 Index. The
Adviser ranks the attractiveness of each security according to a multi-factor
valuation model. Both value and momentum factors are considered in the ranking
process. Value factors such as book value, earnings yield and cash flow measure
a stock's intrinsic worth versus its market price, while momentum
characteristics such as price momentum, earnings growth and earnings
acceleration measure a stock relative to others in the same industry. A second
quantitative model which measures the earnings momentum of each security is
added to the screening process to serve as a validity check in the portfolio
construction process. Each stock is assigned a ranking from 1 to 10 (best to
worst). The Adviser then either underweights or eliminates the less attractive
securities and modestly emphasizes the most attractive stocks resulting in a
portfolio of 300 to 400 holdings that capture the overall investment
characteristics of the S&P 500 Index.
Under normal conditions, the Adviser will attempt to invest as much of the
Fund's assets as is practical and, in any event the Fund will invest at least
80% of its total assets, in common stocks which are included in the S&P 500
Index. The Fund is expected, however, to maintain a position in high-quality
short-term debt securities and money market instruments to meet redemption
requests. If the Adviser believes that market conditions warrant a temporary
defensive posture, the Fund may invest without limitation in high-quality
short-term debt securities and money market instruments. These securities and
money market instruments may include domestic and foreign commercial paper,
certificates of deposit, bankers' acceptances and time deposits, U.S. Government
Obligations and repurchase agreements.
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NATIONS MANAGED SMALLCAP INDEX FUND: In seeking to achieve its investment
objective, the Fund will invest in selected equity securities that are included
in the Standard & Poor's SmallCap 600 Index2 ("S&P 600 Index"). The S&P 600
Index is a market capitalization weighted index consisting of 600 domestic
stocks which capture the economic and industry characteristics of small stock
performance.
Unlike traditional index funds, the Fund has a "managed" overlay. The Adviser
believes that a managed equity index portfolio can provide investors with
positive incremental performance relative to the S&P 600 Index while minimizing
the downside risk of underperforming the S&P 600 Index over time.
From the initial S&P 600 Index stock universe the Adviser ranks the
attractiveness of each security according to a multi-factor valuation model.
Both value and momentum factors are considered in the ranking process. Value
factors such as book value, earnings yield and cash flow measure a stock's
intrinsic worth versus its market price, while momentum characteristics such as
price momentum, earnings growth and earnings acceleration measure a stock
relative to others in the same industry. A second quantitative model which
measures the earnings momentum of each security is added to the screening
process to serve as a validity check in the portfolio construction process. Each
stock is assigned a ranking from 1 to 10 (best to worst). The Adviser then
either underweights or eliminates the less attractive securities and modestly
emphasizes the most attractive stocks resulting in a portfolio of approximately
400-500 holdings that capture the investment characteristics of the S&P 600
Index.
Under normal conditions, substantially all of the Fund's assets, and, in any
event at least 80% of its total assets, will be invested in common stocks which
are included in the S&P 600 Index. The Fund is expected, however, to maintain a
position in high-quality short-term debt securities and money market instruments
to meet redemption requests. If the Adviser believes that market conditions
warrant a temporary defensive posture, the Fund may invest without limitation in
high-quality short-term debt securities and money market instruments. These
securities and money market instruments may include domestic and foreign
commercial paper, certificates of deposit, bankers' acceptances and time
deposits, U.S. Government Obligations and repurchase agreements.
NATIONS MANAGED VALUE INDEX FUND: In seeking to achieve its investment
objective, the Fund will invest in selected equity securities that are included
in the S&P 500/BARRA Value Index ("S&P/BARRA Value Index"). The S&P/BARRA Value
Index is a subset of the S&P 500 Index. The S&P 500 Index is a market
capitalization weighted index consisting of 500 common stocks chosen for market
size, liquidity and industry group representation. The S&P/BARRA Value Index is
a market capitalization weighted index consisting of approximately 340 common
stocks selected from the S&P 500 Index on the basis of a lower than average
price-to-book ratio. Because of their lower than average price-to-book ratios,
stocks in the S&P/BARRA Value Index, on average, typically exhibit higher yields
than stocks in the S&P 500 Index. Historically, stocks in the S&P/BARRA Value
Index, on average, have exhibited less short-term volatility than stocks in the
S&P 500 Index.
S&P constructs the S&P/BARRA Value Index semi-annually by ranking all common
stocks included in the S&P 500 Index by their price-to-book ratios. The
resulting list is then divided in half by market capitalization. Stocks in the
half of the list that have lower price-to-book ratios are included in the
S&P/BARRA Value Index.
Unlike traditional index funds, the Fund has a "managed" overlay. The Adviser
believes that a managed equity value index portfolio can provide investors with
positive incremental performance relative to the S&P/BARRA Value Index while
reducing the downside risk of underperforming the S&P/BARRA Value Index over
time.
The initial stock universe considered by the Adviser is the S&P/BARRA Value
Index. The Adviser ranks the attractiveness of each security according to a
multi-factor valuation model. Although the universe consists exclusively of
value stocks, both value and momentum factors are considered in the ranking
process. Value factors such as book value, earnings yield and cash flow measure
a stock's intrinsic worth versus its market price, while momentum
characteristics such as price momentum, earnings growth and earnings
acceleration are useful in determining a stock's value in relation to others in
the same industry. A second quantitative model which measures the earnings
momentum of each security is added to the screening process to serve as a
validity check in the portfolio construction process. Each stock is assigned a
ranking from 1 to 10 (best to worst). The Adviser then either underweights or
eliminates the less attractive securities and modestly emphasizes the most
attractive stocks resulting in a portfolio of 100 to 200 holdings that capture
the overall investment characteristics of the S&P/BARRA Value Index.
Under normal conditions, the Adviser will invest at least 80% of its total
assets, in common stocks which are included in the S&P/BARRA Value Index. The
Fund is expected, however, to maintain a position in high-quality short-term
debt securities and money market instruments to meet redemption requests. If the
Adviser believes that market conditions warrant a temporary
(2) "Standard & Poor's SmallCap 600" is a registered service mark of S&P.
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defensive posture, the Fund may invest without limitation in high-quality
short-term debt securities and money market instruments. These securities and
money market instruments may include domestic and foreign commercial paper,
certificates of deposit, bankers' acceptances and time deposits, U.S. Government
Obligations and repurchase agreements.
NATIONS MANAGED SMALLCAP VALUE INDEX FUND: In seeking to achieve its investment
objective, the Fund will invest in selected equity securities that are included
in the S&P SmallCap 600/BARRA Value Index ("S&P/BARRA SmallCap Value Index").
The S&P/BARRA SmallCap Value Index is a subset of the S&P 600 Index. The S&P 600
Index is a market capitalization weighted index consisting of 600 domestic
stocks which capture the economic and industry characteristics of small stock
performance. The S&P/BARRA SmallCap Value Index is a market capitalization
weighted index consisting of approximately 375 companies selected from the S&P
600 Index on the basis of price-to-book ratios. Those companies with lower
price-to-book ratios make up the S&P/BARRA SmallCap Value Index. The S&P/BARRA
SmallCap Value Index is also rebalanced semi-annually to reflect changes in the
S&P 600 Index. Most of these stocks are listed on either the New York, American
or NASDAQ stock exchanges.
Unlike traditional index funds, the Fund has a "managed" overlay. The Adviser
believes that a managed equity index portfolio can provide investors with
positive incremental performance relative to the S&P/BARRA SmallCap Value Index
while reducing the downside risk of underperforming the S&P/BARRA SmallCap Value
Index over time.
The initial stock universe considered by the Adviser is the S&P/BARRA SmallCap
Value Index. The Adviser ranks the attractiveness of each security according to
a multi-factor valuation model. Although the universe consists exclusively of
value stocks, both value and momentum factors are considered in the ranking
process. Value factors such as book value, earnings yield and cash flow measure
a stock's intrinsic worth versus its market price, while momentum
characteristics such as price momentum, earnings growth and earnings
acceleration are useful in determining a stock's value in relation to others in
the same industry. A second quantitative model which measures the earnings
momentum of each security is added to the screening process to serve as a
validity check in the portfolio construction process. Each stock is assigned a
ranking from 1 to 10 (best to worst). The Adviser then either underweights or
eliminates the less attractive securities and modestly emphasizes the most
attractive stocks resulting in a portfolio of 200 to 300 holdings that capture
the overall investment characteristics of the S&P/BARRA SmallCap Value Index.
Under normal conditions, the Adviser will invest at least 80% of its total
assets in common stocks which are included in the S&P/BARRA SmallCap Value
Index. The Fund is expected, however, to maintain a position in high-quality
short-term debt securities and money market instruments to meet redemption
requests. If the Adviser believes that market conditions warrant a temporary
defensive posture, the Fund may invest without limitation in high-quality
short-term debt securities and money market instruments. These securities and
money market instruments may include domestic and foreign commercial paper,
certificates of deposit, bankers' acceptances and time deposits, U.S. Government
Obligations and repurchase agreements.
ABOUT THE INDEXES: The S&P 500 Index is composed of 500 common stocks, which are
chosen by S&P on a statistical basis to be included in the Index. The S&P
SmallCap 600 Index is composed of 600 domestic stocks, which are chosen by S&P
based on, among other things, market size, liquidity and industry group
representation. The S&P SmallCap 600 Index is designed to be a benchmark of
small capitalization stock performance. Most of these Funds' stocks are listed
on either the New York, American or NASDAQ stock exchanges.
The S&P/BARRA Value Index and the S&P/BARRA SmallCap Value Index (collectively,
the "BARRA Value Indexes") are constructed by dividing the stocks in the S&P 500
Index and the S&P 600 Index, respectively, according to a single attribute:
price-to-book ratios. The BARRA Value Indexes are capitalization-weighted,
meaning that each stock is weighted in the approximate index in proportion to
its market value. Additionally, price-to-book ratios tend to be more stable over
time than alternative measures such as price-to-earnings ratios, historical
earnings growth rates, or return on equity. This results in indexes with
relatively low turnover. Generally, the companies in the BARRA Value Indexes
also exhibit characteristics associated with "value" stocks: lower
price-to-earnings ratios, higher dividend yields, and lower historical and
predicted earnings growth than the S&P 500 Index or the S&P 600 Index,
respectively.
The S&P/BARRA Value Index and the S&P/BARRA SmallCap Value Index are relatively
concentrated. The S&P/BARRA Value Index tends to be more heavily concentrated in
the Energy, Utility, and Financial sectors than the S&P 500 Index. Additionally,
the S&P/BARRA SmallCap Value Index tends to be more heavily concentrated in the
Utility and Financial Sectors than the S&P 600 Index.
The inclusion of a stock in the S&P 500 Index, the S&P 600 Index, the S&P/BARRA
Value Index or the S&P/BARRA SmallCap Value Index in no way implies that S&P or
BARRA believes the stock to be an attractive investment. The Indexes are
determined, composed and calculated by S&P and BARRA without regard to the
Funds. Neither S&P or BARRA is a sponsor of, or in any way affiliated with, the
Funds, and neither S&P or
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BARRA makes any representation or warranty, expressed or implied, on the
advisability of investing in the Funds or as to the ability of the Indexes to
track general stock market performance. S&P and BARRA disclaim all warranties of
merchantability or fitness for a particular purpose or use with respect to the
Indexes or any data included therein.
GENERAL: Each Index Fund also may invest in certain specified derivative
securities including: exchange-traded options; over-the-counter options executed
with primary dealers, including long calls and puts and covered calls to enhance
return; and U.S. exchange-traded financial futures approved by the Commodity
Futures Trading Commission ("CFTC") and options thereon for market exposure risk
management. Each Fund may lend its portfolio securities to qualified
institutional investors and may invest in repurchase agreements, restricted,
private placement and other illiquid securities. In addition, the Funds may
invest in securities issued by other investment companies, consistent with the
Fund's investment objective and policies.
In addition, when consistent with the Fund's respective investment objective,
each of the Funds will employ various techniques to manage capital gain
distributions. These techniques include utilizing a share identification
methodology whereby the Fund will specifically identify each lot of shares of
portfolio securities that it holds, which will allow the Fund to sell first
those specific shares with the highest tax basis in order to reduce the amount
of recognized capital gains as compared with a sale of identical portfolio
securities, if any, with a lower tax basis. The Fund will sell first those
shares with the highest tax basis only when it is in the best interest of the
Fund to do so, and reserves the right to sell other shares when appropriate. In
addition, the Fund may, at times, sell portfolio securities in order to realize
capital losses. Such capital losses would be used to offset realized capital
gains thereby reducing capital gain distributions. Additionally, the Adviser
will, consistent with the portfolio construction process discussed above, employ
a low portfolio turnover strategy designed to defer the realization of capital
gains.
Equity mutual funds, like other investors in equity securities, incur
transaction (brokerage) costs in connection with the purchase and sale of
portfolio securities. For some funds, these costs can have a material negative
impact on performance. With respect to the Index Funds, the Adviser will attempt
to minimize these transaction costs by utilizing program trades and computerized
exchanges called "crossing networks" which allow institutions to execute trades
at the mid-point of the bid/ask spread and at a reduced commission rate.
For more information concerning these and other investments in which the Funds
may invest and their investment practices, see "Appendix A."
BALANCED FUND:
NATIONS BALANCED ASSETS FUND: In pursuing the Fund's objective, the Adviser will
allocate the Fund's assets based upon its judgment of the relative valuation and
the expected returns of the three major asset classes in which the Fund invests:
common stocks, fixed income securities, and cash equivalents. In assessing
relative value and expected returns, the Adviser will evaluate current economic
and financial market conditions (both domestically and internationally), current
interest rate trends, earnings and dividend prospects for common stocks, and
overall financial market stability. These asset classes are actively managed in
an effort to maximize total return. In general, the Adviser believes that common
stocks offer the best opportunity for long-term capital appreciation.
The Fund invests in common and preferred stocks of U.S. corporations and of
foreign issuers, as well as securities convertible into common stocks, and other
types of securities having common stock characteristics (such as rights and
warrants to purchase equity securities) that meet the Adviser's stringent
criteria. Fundamental research and valuation analysis are emphasized in the
stock selection process. Stock holdings are typically those of seasoned,
financially strong companies with favorable industry positioning.
Under normal circumstances, at least 25% of the total value of the Fund's assets
will be invested in fixed income securities. The Fund may invest in government,
corporate and municipal debt securities, as well as mortgage-backed and
asset-backed securities. Most obligations acquired by the Fund will be issued by
companies or governmental entities located within the United States. Debt
obligations acquired by the Fund will be rated investment grade at the time of
purchase by D&P, Fitch, S&P, Moody's, IBCA or BankWatch, or, if unrated,
determined by the Adviser to be comparable in quality to instruments so rated.
Obligations with the lowest investment grade rating (E.G. rated "BBB" by S&P or
"Baa" by Moody's) have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
obligations. See "Appendix B" for a description of these ratings designations.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations may
be acquired by the Fund if they are determined by the Adviser to be of
comparable quality at the time of purchase to rated obligations that may be
acquired.
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Although the Fund invests primarily in securities of U.S. issuers, the Fund may
invest up to 25% of its total assets in foreign securities.
The Fund also may invest in various money market instruments and repurchase
agreements. The Fund may invest without limitation in such instruments pending
investment, to meet anticipated redemption requests, or as a temporary defense
measure if market conditions warrant.
BOND FUNDS:
NATIONS U.S. GOVERNMENT BOND FUND: Under normal market conditions, the Fund will
invest at least 65% of its total assets in U.S. Government securities and
repurchase agreements collateralized by such securities. While the maturity of
individual securities will not be restricted, except during temporary defensive
periods or unusual market conditions, the average weighted maturity of the Fund
will be between five and thirty years. The Fund may invest in a variety of U.S.
Government Obligations. The Fund may also invest in interests in the foregoing
securities, including collateralized mortgage obligations issued or guaranteed
by a U.S. Government agency or instrumentality. U.S. Government Obligations have
historically had a very low risk of loss of principal if held to maturity. The
Fund, however, can give no assurance that the U.S. Government would provide
financial support to its agencies or instrumentalities if it were not legally
required to do so.
The Fund may also invest up to 35% of its total assets in debt securities of
U.S. and foreign corporate and foreign government issuers, ADRs and EDRs, zero
coupon bonds and cash equivalents. The Fund will purchase only those
non-government investments which are rated investment grade or better by at
least one NRSRO or, if unrated, are determined by the Adviser to be of
comparable quality. If a portfolio security held by the Fund ceases to be rated
investment grade by at least one NRSRO or if the Adviser determines that an
unrated portfolio security held by the Fund is no longer of comparable quality
to an investment grade security, the security will be sold in an orderly manner
as quickly as possible. Additionally, the Fund may also invest in futures
contracts, interest rate swaps and options.
The value of the Fund's portfolio (and consequently its shares) is expected to
fluctuate inversely in relation to changes in the direction of interest rates.
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND: In pursuing its investment
objective, Nations Short-Intermediate Government Fund invests substantially all
of its assets in U.S. Government Obligations and repurchase agreements relating
to such obligations. Under normal market conditions, it is expected that the
average dollar-weighted maturity of the Fund's portfolio will be between three
and five years and the duration will not exceed five years. U.S. Government
Obligations have historically involved little risk of loss of principal if held
to maturity. However, due to fluctuations in interest rates, the market value of
such securities may vary during the period a shareholder owns shares of the
Fund. The value of the Fund's portfolio generally will vary inversely with
changes in prevailing interest rates.
The Fund also may invest in corporate convertible and non-convertible debt
obligations, including bonds, notes and debentures rated investment grade at the
time of purchase by one of the six NRSROs, or if not so rated, determined by the
Adviser to be of comparable quality to instruments so rated; dollar-denominated
debt obligations of foreign issuers, including foreign corporations and foreign
governments; mortgage-related securities of governmental issuers or of private
issuers, including mortgage pass-through certificates, collateralized mortgage
obligations or "CMOs", real estate investment trust securities or
mortgage-backed bonds; other asset-backed and municipal securities rated by one
of the six NRSROs, or if not so rated, determined by the Adviser to be of
comparable quality.
The Fund also may invest in "high quality" money market instruments, repurchase
agreements and cash. Such obligations may include those issued by foreign banks
and foreign branches of U.S. banks. These investments may be in such proportion
as, in the Adviser's opinion, prevailing market or economic circumstances
warrant.
NATIONS GOVERNMENT SECURITIES FUND: In pursuing its investment objective,
Nations Government Securities Fund invests at least 65% of its assets in U.S.
Government Obligations. Under normal market conditions, it is expected that the
average dollar-weighted maturity of the Fund's portfolio will be between three
and 10 years and the Fund's duration is expected to be in a range of 3.5 to six
years.
The Fund also may invest in corporate convertible and non-convertible debt
obligations, including bonds, notes and debentures rated investment grade at the
time of purchase by one of the six NRSROs, or if not so rated, determined by the
Adviser to be of comparable quality to instruments so rated; dollar-denominated
debt obligations of foreign issuers, including foreign corporations and foreign
governments; mortgage-related securities of governmental issuers or of private
issuers, including mortgage pass-through certificates, CMOs, real estate
investment trust securities or mortgage-backed bonds; other asset-backed and
municipal securities rated by one of the six NRSROs, or if not so rated,
determined by the Adviser to be of comparable quality.
The Fund also may invest in "high quality" money market instruments, repurchase
agreements and cash. Such obligations may include those issued by foreign banks
and foreign branches of U.S. banks. These investments
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may be in such proportion as, in the Adviser's opinion, prevailing market or
economic circumstances warrant.
NATIONS SHORT-TERM INCOME FUND: In pursuing its investment objective, the Fund
will, under normal market conditions, invest at least 65% of the total value of
its assets in investment grade debt obligations. It is expected that the average
dollar-weighted maturity of the Fund will not exceed five years and the duration
of the Fund's portfolio will not exceed three years.
The Fund may invest in corporate convertible and non-convertible debt
obligations, including bonds, notes and debentures rated investment grade by one
of the six NRSROs, or, if not so rated, determined by the Adviser to be of
comparable quality to instruments so rated; dollar-denominated debt obligations
of foreign issuers, including foreign corporations and foreign governments; and
mortgage-related securities of governmental issuers or of private issuers,
including mortgage pass-through certificates, CMOs, real estate investment trust
securities or mortgage-backed bonds; other asset-backed and municipal securities
rated by one of the six NRSROs, or, if not so rated, determined by the Adviser
to be of comparable quality to instruments so rated. The Fund also may invest in
U.S. Government Obligations.
Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. The Fund may invest up
to 25% of its assets in foreign securities.
As noted above, the Fund will invest in investment grade debt obligations.
Obligations rated in the lowest of the top four investment grade rating
categories (E.G. rated "BBB" by S&P or "Baa" by Moody's) have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt obligations. Subsequent to its
purchase by the Fund, an issue of securities may cease to be rated or its rating
may be reduced below the minimum rating required for purchase by the Fund. The
Adviser will consider such an event in determining whether the Fund should
continue to hold the obligation. See "Appendix B" below for a description of
these rating designations.
The Fund also may invest in "high quality" money market instruments, repurchase
agreements and cash. Such obligations may include those issued by foreign banks
and foreign branches of U.S. banks. These investments may be in such proportions
as, in the Adviser's opinion, prevailing market or economic circumstances
warrant.
NATIONS DIVERSIFIED INCOME FUND: In pursuing its investment objective, the Fund
will, under normal market conditions, invest at least 65% of the total value of
its assets in investment grade debt obligations. It is expected that the average
dollar-weighted maturity of the Fund's portfolio will be greater than five
years.
The Fund may invest in corporate convertible and non-convertible debt
obligations; U.S. Government Obligations; dollar-denominated and
non-dollar-denominated debt obligations of foreign issuers, including foreign
corporations and foreign governments; mortgage-related securities of
governmental issuers or of private issuers, including mortgage pass-through
certificates, CMOs, real estate investment trust securities or mortgage-backed
bonds; other asset-backed and municipal securities rated by one of the six
NRSROs, or if not so rated, determined by the Adviser to be of comparable
quality.
Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. The Fund may invest up
to 25% of its assets in foreign securities.
Obligations rated in the lowest of the top four investment grade rating
categories (E.G. rated "BBB" by S&P or "Baa" by Moody's) have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade debt obligations.
Up to 35% of the total value of the Fund's assets may be invested in
lower-quality fixed income securities rated "B" or better by Moody's or S&P, or
if not so rated, determined by the Adviser to be of comparable quality.
Securities which are rated "B" generally lack characteristics of the desirable
investment, and assurance of interest and principal payment over any long period
of time may be limited. Non-investment-grade debt securities are sometimes
referred to as "high yield bonds" or "junk bonds," and tend to have speculative
characteristics, generally involve more risk of principal and income than higher
rated securities, and have yields and market values that tend to fluctuate more
than higher quality securities.
Subsequent to its purchase by the Fund, an issue of securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. See "Appendix B" below
for a description of these rating designations.
The Fund may hold or invest in "high quality" money market instruments,
repurchase agreements and cash. Such obligations may include those issued by
foreign banks and foreign branches of U.S. banks. These investments may be in
such proportions as, in the Adviser's opinion, prevailing market or economic
circumstances warrant.
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NATIONS STRATEGIC FIXED INCOME FUND: In pursuing its investment objective, the
Fund will, under normal market conditions, invest at least 65% of the total
value of its assets in investment grade fixed income securities. It is expected
that the average dollar-weighted maturity of the Fund's portfolio will be 10
years or less and under no circumstances will it exceed 15 years.
The Fund may invest in corporate convertible and non-convertible debt
obligations, including bonds, notes and debentures rated investment grade at the
time of purchase by one of the six NRSROs, or if not so rated, determined by the
Adviser to be of comparable quality to instruments so rated; U.S. Government
Obligations; dollar-denominated debt obligations of foreign issuers, including
foreign corporations and foreign governments; mortgage-related securities of
governmental issuers or of private issuers, including mortgage pass-through
certificates, CMOs, real estate investment trust securities or mortgage-backed
bonds; other asset-backed and municipal securities rated by one of the six
NRSROs, or if not so rated, determined by the Adviser to be of comparable
quality. The Fund also may invest in dividend paying preferred and common stock.
Most obligations acquired by the Fund will be issued by companies or
governmental entities located within the United States. The Fund may invest up
to 25% of its assets in foreign securities.
The Fund will invest in investment grade debt obligations. Obligations rated in
the lowest of the top four investment grade rating categories (E.G., rated "BBB"
by S&P or "Baa" by Moody's) have speculative characteristics and changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade debt obligations. Subsequent to its purchase by the Fund, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Fund. The Adviser will consider such an
event in determining whether the Fund should continue to hold the obligation.
See "Appendix B" below for a description of these rating designations.
The Fund also may invest in "high quality" money market instruments, repurchase
agreements and cash. Such obligations may include those issued by foreign banks
and foreign branches of U.S. banks. These investments may be in such proportions
as, in the Adviser's opinion, prevailing market or economic circumstances
warrant.
NATIONS GLOBAL GOVERNMENT INCOME FUND: In seeking to achieve its investment
objective, the Fund will invest under normal market conditions at least 65% of
its total assets in debt securities issued or guaranteed by U.S. or foreign
governments (including states, provinces and municipalities) or their agencies,
instrumentalities or subdivisions ("Government Securities"). Except for
temporary defensive purposes, the Fund will concentrate its investments in
foreign Government Securities. Concentration in this context means the
investment of more than 25% of the Fund's total assets in such securities. The
Fund may invest in the debt securities of any type of issuer, including
corporations, banks and supranational entities.
The Fund, under normal market conditions, will invest in at least three
different countries. These countries may include the U.S., the countries of
Western Europe, Japan, Australia, New Zealand and Canada. If the Fund invests a
significant portion of its assets at any time in a single country, events
occurring in such country are more likely to affect the Fund's investments. For
additional information concerning risk, see "Special Risk Considerations
Relevant to an Investment in Nations International Equity Fund, Nations
International Growth Fund, Nations Emerging Markets Fund, Nations Pacific Growth
Fund and Nations Global Government Income Fund," below. Because the Fund intends
to invest a large portion of its assets in foreign Government Securities, the
Fund is a "non-diversified" investment company for purposes of the Investment
Company Act of 1940 (the "1940 Act"). The Fund may invest in securities of
issuers located in any region or country and that are denominated in any
currency.
The Fund is managed in accordance with an overall global investment strategy
which means that Fund investments are allocated among securities denominated in
U.S. dollars and the currencies of a number of foreign countries. The Fund's
exposure to various count-
ries and currencies will vary in accordance with the Adviser's assessment of the
relative yield and appreciation of such securities. Fundamental economic
strength, credit quality and interest rate trends are the principal factors
considered by the Adviser in determining whether to increase or decrease the
emphasis placed upon a particular country or particular type of security within
the Fund's investment portfolio.
Under normal market conditions, the Fund intends to invest primarily in
securities rated "A" or better at the time of purchase by Moody's or S&P and
unrated securities that, at the time of purchase will be determined to be of
comparable quality by the Adviser. The Fund also may invest in securities rated
"Baa" by Moody's or "BBB" by S&P, but does not, as a general matter, intend to
invest more than 10% of its total assets in such securities. Subsequent to its
purchase by the Fund, an issue of securities may cease to be rated or its rating
may be reduced below the minimum rating required for purchase by the Fund. The
Adviser will consider such event in determining whether the Fund should continue
to hold the obligation. In no event will the Fund hold more than 5% of its total
net assets in securities rated below investment grade. See "Appendix B" below
for a description of these rating designations. The Adviser expects
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<PAGE>
that the Fund's dollar-weighted average maturity will not be greater than 15
years under normal market conditions.
Supranational entities are international organizations jointly operated by
multiple sovereign governments including, for example, the World Bank, the
European Coal and Steel Community, the Asian Development Bank, the European
Investment Bank and the Inter-American Development Bank. Supranational entities
generally have no taxing authority and are dependent upon their members for the
funds necessary to pay principal and interest on their debt obligations.
For defensive purposes, the Fund may temporarily invest substantially all of its
assets in U.S. financial markets or in U.S. dollar-denominated instruments. The
Fund also may invest in money market instruments.
NATIONS MUNICIPAL INCOME FUND, NATIONS SHORT-TERM MUNICIPAL INCOME FUND AND
NATIONS INTERMEDIATE MUNICIPAL BOND FUND: In pursuing their objectives, the
Funds will invest at least 80% of their total net assets in investment grade
obligations issued by or on behalf of states, territories, and possessions of
the United States, the District of Columbia, and their political subdivisions,
agencies, instrumentalities, and authorities, the interest on which, in the
opinion of counsel to the issuer or bond counsel, is exempt from Federal income
tax. To the extent consistent with the Funds' investment approach described in
this Prospectus, the Funds are managed to seek capital appreciation and minimize
capital losses due to interest rate movements.
Under normal market conditions, the average weighted maturity and duration of
each of the Funds' portfolios are expected to be as follows: Nations Municipal
Income Fund -- average dollar-weighted maturity greater than 10 years and
duration between 7.5 and 9.5 years; Nations Intermediate Municipal Bond
Fund -- average dollar-weighted maturity between three and 10 years and duration
between five and six years; Nations Short-Term Municipal Income Fund -- average
dollar-weighted maturity less than three years and duration between 1.25 and
2.75 years.
Municipal Securities will be rated investment grade at the time of purchase by
at least one of the six NRSROs or, if unrated, determined by the Adviser to be
of comparable quality at the time of purchase to rated obligations that may be
acquired by a Fund. Obligations rated in the lowest of the top four investment
grade rating categories (E.G. rated "BBB" by S&P or "Baa" by Moody's) have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Subsequent to its purchase by a Fund, an issue of Municipal Securities may cease
to be rated, or its rating may be reduced below the minimum rating required for
purchase by a Fund. The Adviser will consider such an event in determining
whether a Fund should continue to hold the obligation. See "Appendix B" for a
description of these rating designations.
During temporary defensive periods, the Funds may invest in short-term taxable
and non-taxable obligations in such proportions as, in the opinion of the
Adviser, prevailing market or economic conditions warrant. Taxable obligations
that may be acquired by a Fund include repurchase agreements and short-term debt
securities. Under normal market conditions, each Fund's investments in taxable
obligations and private activity bonds, the interest on which may be treated as
a specific tax preference item under the Federal alternative minimum tax, will
not exceed 20% of its total net assets at the time of purchase. The Funds may
hold uninvested cash reserves pending investment or during defensive periods.
STATE INTERMEDIATE MUNICIPAL BOND FUNDS AND STATE MUNICIPAL BOND FUNDS: Under
normal market conditions, at least 80% of the total net assets of the State
Intermediate Municipal Bond Funds and the State Municipal Bond Funds will be
invested in Municipal Securities. In addition, at least 80% of each Fund's total
net assets will be invested in debt instruments, issued by or on behalf of the
pertinent state and its political subdivisions, agencies, instrumentalities and
authorities.
Under normal market conditions, the average dollar-weighted maturity and
duration of each of the State Intermediate Municipal Bond Funds and State
Municipal Bond Funds are expected to be as follows: State Intermediate Municipal
Bond Funds -- average dollar-weighted maturity between three and 10 years and
duration between five and six years; State Municipal Bond Funds -- average
dollar-weighted maturity greater than 10 years and duration between 7.5 and 9.5
years.
Each of the State Intermediate Municipal Bond Funds and the State Municipal Bond
Funds operates as a non-diversified fund (except to the extent diversification
is required for Federal income tax purposes).
Dividends paid by each of these Funds which are derived from interest
attributable to tax-exempt obligations of the pertinent state and that state's
political subdivisions, agencies, instrumentalities and authorities, as well as
certain other governmental issuers such as Puerto Rico, will be exempt from
regular Federal income tax and (with the exception of Texas and Florida) the
income tax of the pertinent state. Texas and Florida do not impose a state
income tax; however, Florida imposes a state intangibles tax. Dividends derived
from interest on obligations of other governmental issuers will be exempt from
regular Federal income tax, but generally will be subject to state income tax
(with the exception of Texas and Florida). (See "How Dividends And Distributions
are Made; Tax Information.") During normal mar-
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<PAGE>
ket conditions and as a matter of fundamental investment policy, each of these
Funds will invest at least 80% of its total net assets in obligations the
interest on which will be exempt from regular Federal income tax and (with the
exception of Texas and Florida) the income tax of the pertinent state.
Municipal Securities acquired by the Funds will be rated investment grade at the
time of purchase by at least one NRSRO or, if unrated, determined by the Adviser
to be of comparable quality at the time of purchase to rated obligations that
may be acquired by the Funds. Obligations rated in the lowest of the top four
investment grade rating categories (E.G. rated "BBB" by S&P or "Baa" by Moody's)
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade debt obligations.
Subsequent to its purchase by a Fund, an issue of Municipal Securities may cease
to be rated or its rating may be reduced below the minimum rating required for
purchase by a Fund. The Adviser will consider such an event in determining
whether a Fund should continue to hold the obligation. See "Appendix B" below
for a description of these rating designations.
During temporary defensive periods, the Funds may invest in short-term taxable
and non-taxable obligations in such proportions as, in the opinion of the
Adviser, prevailing market or economic conditions warrant. Taxable obligations
that may be acquired by the Funds include repurchase agreements and short-term
debt securities. Under normal market conditions, each Fund's investments in
taxable obligations and private activity bonds, the interest on which may be
treated as a specific tax preference item under the Federal alternative minimum
tax, will not exceed 20% of its total net assets at the time of purchase.
GENERAL: Each of the Balanced and Bond Funds may invest in certain specified
derivative securities, including: interest rate swaps, caps and floors for
hedging purposes; exchange-traded options; over-the-counter options executed
with primary dealers, including long calls and puts and covered calls to enhance
return; and CFTC-approved U.S. and foreign exchange-traded financial futures and
options thereon for market exposure risk-management. Each of the Funds also may
lend its portfolio securities to qualified institutional investors and may
invest in repurchase agreements, restricted, private placement and other
illiquid securities. Nations Balanced Assets Fund, Nations U.S. Government Bond
Fund, Nations Short-Intermediate Government Fund, Nations Government Securities
Fund, Nations Short-Term Income Fund, Nations Diversified Income Fund and
Nations Strategic Fixed Income Fund may engage in reverse repurchase agreements
and dollar roll transactions. Nations Global Government Income Fund may invest
in forward foreign exchange contracts. Additionally, each Fund may purchase
securities issued by other investment companies, consistent with the Fund's
investment objective and policies.
The Funds also may invest in instruments issued by trusts or certain
partnerships including pass-through certificates representing participations in,
or debt instruments backed by, the securities and other assets owned by such
trusts and partnerships.
Certain securities that have variable or floating interest rates or demand, put
or prepayment features may be deemed to have remaining maturities shorter than
their nominal maturities for purposes of determining the average weighted
maturity and duration of the Funds.
For more information concerning these and other investments in which the Funds
may invest and their investment practices, see "Appendix A."
Although changes in the value of securities subsequent to their acquisition are
reflected in the net asset value of the Funds' shares, such changes will not
affect the income received by the Funds from such securities. However, since
available yields vary over time, no specific level of income can ever be
assured. The dividends paid by the Funds will increase or decrease in relation
to the income received by the Funds from their investments, which will in any
case be reduced by the Funds' expenses before being distributed to the Funds'
shareholders.
PORTFOLIO TURNOVER (NON-MONEY MARKET FUNDS): Generally, the Equity Funds, the
Index Funds, the Balanced Fund and the Bond Funds (the "Non-Money Market Funds")
will purchase portfolio securities for capital appreciation or investment
income, or both, and not for short-term trading profits. If a Fund's annual
portfolio turnover rate exceeds 100%, it may result in higher brokerage costs
and possible tax consequences for the Fund and its shareholders. For the Funds'
portfolio turnover rates, except for Nations Managed Value Index Fund and
Nations Managed SmallCap Value Index Fund, see "Financial Highlights." While it
is not possible to predict exactly annual portfolio turnover rates, it is
expected that under normal market conditions, the annual portfolio turnover rate
for each of Nations Managed Value Index Fund and Nations Managed SmallCap Value
Index Fund will not exceed 25%. With respect to Nations International Growth
Fund, it is expected that under normal market conditions, the annual portfolio
turnover rate will not exceed 100%.
RISK CONSIDERATIONS: Investments by a Fund in common stocks and other equity
securities are subject to stock market risks. The value of the stocks that the
Fund holds, like the broader stock market, may decline over short or even
extended periods. The U.S. stock market tends to be cyclical, with periods when
stock prices generally rise and periods when prices generally decline.
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<PAGE>
As of the date of this Prospectus, the stock market, as measured by the S&P 500
Index and other commonly used indices, was trading at or close to record levels.
There can be no guarantee that these levels will continue.
The value of a Fund's investments in debt securities, including U.S. Government
Obligations, will tend to decrease when interest rates rise and increase when
interest rates fall. In general, longer-term debt instruments tend to fluctuate
in value more than shorter-term debt instruments in response to interest rate
movements. In addition, debt securities that are not backed by the United States
Government are subject to credit risk, which is the risk that the issuer may not
be able to pay principal and/or interest when due.
Certain of the Funds may invest in securities of smaller and newer issuers.
Investments in such companies may present greater opportunities for capital
appreciation because of high potential earnings growth, but also present greater
risks than investments in more established companies with longer operating
histories and greater financial capacity.
Since each of the State Intermediate Municipal Bond Funds and State Municipal
Bond Funds invests primarily in securities issued by entities located in a
single state, such Funds are more susceptible to changes in value due to
political or economic changes affecting that state or its subdivisions.
Certain of the Funds' investments constitute derivative securities, which are
securities whose value is derived, at least in part, from an underlying index or
reference rate. There are certain types of derivative securities that can, under
certain circumstances, significantly increase a purchaser's exposure to market
or other risks. The Adviser, however, only purchases derivative securities in
circumstances where it believes such purchases are consistent with such Funds'
investment objectives and do not unduly increase the Funds' exposure to market
or other risks. For additional risk information regarding the Funds' investments
in particular instruments, see "Appendix A -- Portfolio Securities."
SPECIAL RISK CONSIDERATIONS RELEVANT TO AN INVESTMENT IN NATIONS INTERNATIONAL
EQUITY FUND, NATIONS INTERNATIONAL GROWTH FUND, NATIONS EMERGING MARKETS FUND,
NATIONS PACIFIC GROWTH FUND AND NATIONS GLOBAL GOVERNMENT INCOME FUND: Investors
should understand and consider carefully the special risks involved in foreign
investing. In addition, each Fund presents unique risks of which investors
should be aware.
Investors in Nations International Equity Fund should be aware that the Fund
may, from time to time, invest up to 5% of its total assets in securities of
companies located in Eastern Europe. Economic and political reforms in this
region are still in their infancy. As a result, investment in such countries
would be highly speculative and could result in losses to the Fund and, thus, to
its shareholders.
Investors in Nations Pacific Growth Fund should understand and consider
carefully the special risks involved in investing in the Pacific Basin and Far
East. Countries in the Pacific Basin and Far East are in various stages of
economic development, ranging from emerging markets to mature economies, but
each has unique risks. Most countries in this region are heavily dependent on
international trade, and some are especially vulnerable to recessions in other
countries. Many of these countries are also sensitive to world commodity prices.
Some countries that have experienced rapid growth may still have obsolete
financial systems, economic problems or archaic legal systems. In addition, many
of these nations are experiencing political and social uncertainties.
The same is true, but even more so, for the emerging market countries in which
Nations Emerging Markets Fund will invest. Although the Fund believes that its
investments present the possibility for significant growth over the long term,
they also entail significant risks. Many investments in emerging markets can be
considered speculative, and their prices can be much more volatile than in the
more developed nations of the world. This difference reflects the greater
uncertainties of investing in less established markets and economies. The
financial markets of emerging markets countries are generally less well
capitalized and thus securities of issuers based in such countries may be less
liquid.
The above risk considerations are also relevant to an investment in Nations
International Growth Fund.
Nations Global Government Income Fund's yield and share price will change based
on changes in domestic or foreign interest rates and in an issuer's
creditworthiness. In general, bond prices rise when interest rates fall, and
vice versa.
Moreover, for each of the Funds, investing in securities denominated in foreign
currencies and utilization of forward foreign currency exchange contracts and
other currency hedging techniques involve certain considerations comprising both
opportunities and risks not typically associated with investing in U.S.
dollar-denominated securities. Additionally, changes in the value of foreign
currencies can significantly affect a Fund's share price. General economic and
political factors in the various world markets also can impact a Fund's share
price.
The expenses to individual investors of investing directly in foreign securities
are very high relative to similar costs for investing in U.S. securities. While
the Funds offer a more efficient way for individual investors to participate in
foreign markets, their expenses, including
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<PAGE>
custodial fees, are also higher than the typical domestic equity mutual fund.
Risks unique to international investing include: (1) restrictions on foreign
investment and repatriation of capital; (2) fluctuations in currency exchange
rates; (3) costs of converting foreign currency into U.S. dollars and U.S.
dollars into foreign currencies; (4) greater price volatility and less
liquidity; (5) settlement practices, including delays, which may differ from
those customary in United States markets; (6) exposure to political and economic
risks, including the risk of nationalization, expropriation of assets and war;
(7) possible imposition of foreign taxes and exchange control and currency
restrictions; (8) lack of uniform accounting, auditing and financial reporting
standards; (9) less governmental supervision of securities markets, brokers and
issuers of securities; (10) less financial information available to investors;
and (11) difficulty in enforcing legal rights outside the United States. These
risks often are heightened for investments in emerging or developing countries.
See "Appendix A" for additional discussion of the risks associated with an
investment in the Nations International Equity Fund, Nations International
Growth Fund, Nations Emerging Markets Fund, Nations Pacific Growth Fund and
Nations Global Government Income Fund.
SPECIAL RISK CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE INDEX FUNDS: The
techniques employed by the Adviser to seek to manage capital gain distributions
will generally only have the effect of deferring the realization of capital
gains. For example, to the extent that the capital gains recognized on a sale of
portfolio securities arise from the sale of specifically-identified securities
with higher tax bases, subsequent sales of the same portfolio securities will be
calculated by reference to the lower tax basis securities that remain in the
portfolio. Under this scenario, an investor who purchases shares of a Fund after
the first sale could receive capital gain distributions that are higher than the
distributions that would have been received if this methodology had not been
used. Therefore, certain investors actually could be disadvantaged by the
techniques employed by the Fund to seek to manage capital gain distributions,
depending on the timing of their purchase of Fund shares. Even if there are no
subsequent sales, upon a redemption or exchange of Fund shares an investor will
have to recognize gain to the extent that the net asset value of Fund shares at
such time exceeds such investor's tax basis in his or her Fund shares.
The various techniques employed by the Funds to manage capital gain
distributions may result in the accumulation of substantial unrealized gains in
the Funds' portfolios. Moreover, the realization of capital gains is not
entirely within a Fund's control because it is at least partly dependent on
shareholder purchase and redemption activity. Capital gain distributions may
vary considerably from year to year.
Furthermore, the U.S. Treasury has proposed legislation which would require
holders of substantially identical securities to determine their tax basis using
the average cost of all of their holdings in such securities. If enacted, the
legislation would prevent the Funds from specifically identifying each lot of
shares that they hold and from selling first those specific shares with the
highest tax basis. Thus, the legislation would restrict the Funds' ability to
manage capital gains.
INVESTMENT LIMITATIONS: Each Fund is subject to a number of investment
limitations. The following investment limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding shares. Other investment limitations that
cannot be changed without such a vote of shareholders are described in the SAIs.
Each Fund may not:
1. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal activities in the
same industry, provided that this limitation does not apply (a) with respect to
the Nations Global Government Income Fund, to investments in foreign Government
Securities; and (b) to investments in obligations issued or guaranteed by the
U.S. Government or its agencies and instrumentalities. In addition, this
limitation does not apply to investments by "money market funds" as that term is
used under the 1940 Act, in obligations of domestic banks.
2. Make loans, except that a Fund may purchase and hold debt instruments
(whether such instruments are part of a public offering or privately placed),
may enter into repurchase agreements and may lend portfolio securities in
accordance with its investment policies.
3. Nations Prime Fund, Nations Treasury Fund, Nations Government Money Market
Fund, Nations Tax Exempt Fund, Nations Value Fund, Nations Equity Income Fund,
Nations International Equity Fund, Nations International Growth Fund, Nations
Emerging Markets Fund, Nations Pacific Growth Fund, Nations Capital Growth Fund,
Nations Emerging Growth Fund, Nations Small Company Growth Fund, Nations
Disciplined Equity Fund, Nations Equity Index Fund, Nations Managed Index Fund,
Nations Managed SmallCap Index Fund, Nations Managed Value Index Fund, Nations
Managed SmallCap Value Index Fund, Nations Balanced Assets Fund, Nations U.S.
Government Bond Fund, Nations Short-Intermediate Government Fund, Nations
Government Securities Fund, Nations Short-Term Income Fund, Nations Diversified
Income Fund, Nations
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<PAGE>
Strategic Fixed Income Fund, Nations Intermediate Municipal Bond Fund, Nations
Municipal Income Fund and Nations Short-Term Municipal Income Fund may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of such Fund's
total assets would be invested in the securities of such issuer, except
that up to 25% of the value of the Fund's total assets may be invested
without regard to these limitations and with respect to 75% of such Fund's
assets, such Fund will not hold more than 10% of the voting securities of
any issuer.
Nations Global Government Income Fund, the State Intermediate Municipal Bond
Funds and the State Municipal Bond Funds may not:
Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 25% of the value of a Fund's
total assets would be invested in the securities of one issuer, and with
respect to 50% of such Fund's total assets, more than 5% of its assets
would be invested in the securities of one issuer.
In addition, as a matter of non-fundamental policy, Nations Tax Exempt Fund may
not purchase any securities other than obligations the interest on which is
exempt from Federal income tax and stand-by commitments with respect to such
obligations.
Also, as a matter of fundamental policy, except during defensive periods, the
State Intermediate Municipal Bond Funds and the State Municipal Bond Funds will
invest at least 80% of their respective total net assets in Municipal Securities
the interest on which is exempt from Federal income tax and the pertinent
state's income taxes (with the exception of Texas and Florida). Similarly, as a
matter of fundamental policy, except during defensive periods, Nations Municipal
Income Fund, Nations Short-Term Municipal Income Fund and Nations Intermediate
Municipal Bond Fund will invest at least 80% of their respective total net
assets in Municipal Securities the interest on which is exempt from Federal
income taxes. For purposes of these fundamental policies, private activity bonds
are included in the term "Municipal Securities" only if the interest paid
thereon is exempt from Federal income tax and not treated as a specific tax
preference item under the Federal alternative minimum tax.
Nations International Growth Fund may not borrow money except as a temporary
measure and then only in amounts not exceeding 5% of the value of the Fund's
total assets or from banks or in connection with reverse repurchase agreements
provided that immediately after such borrowing, all borrowings of the Fund do
not exceed one-third of the Fund's total assets and no purchases of portfolio
instruments will be made while such Fund has borrowings outstanding in an amount
exceeding 5% of its total assets.
Each of Nations Small Company Growth Fund and Nations U.S. Government Bond Fund
may not borrow money except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse repurchase agreements
and mortgage rolls; provided that the Fund will maintain asset coverage of 300%
for all borrowings.
The investment objective and policies of each Fund, unless otherwise specified,
are non-fundamental and may be changed without shareholder approval.
Shareholders of Nations Small Company Growth Fund, Nations International Growth
Fund and Nations U.S. Government Bond Fund, however, must receive at least 30
days' prior written notice in the event an investment objective is changed. If
the investment objective or policies of a Fund change, shareholders should
consider whether the Fund remains an apprpriate investment in light of their
current position and needs.
In order to register a Fund's shares for sale in certain states, a Fund may make
commitments more restrictive than the investment policies and limitations
described in this Prospectus and the SAI. Should a Fund determine that any such
commitment is no longer in the best interests of the Fund, it may consider
terminating sales of its shares in the states involved.
How Performance Is Shown
MONEY MARKET FUNDS: From time to time the Money Market Funds may advertise the
yield and effective yield on a class of shares and Nations Tax Exempt Fund also
may advertise the tax-equivalent yield of a class of shares. YIELD, EFFECTIVE
YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON HISTORICAL DATA AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of a class of shares in a
Fund refers to the income generated by an investment in such class over a
seven-day period identified in the advertisement. This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly, but, when annualized, the income earned by an investment in a class
of shares in the Fund is
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<PAGE>
assumed to be reinvested. The "effective yield" will be slightly higher than the
"yield" because of the compounding effect of this assumed reinvestment. The
"tax-equivalent yield" of each class of shares in Nations Tax Exempt Fund shows
the level of taxable yield needed to produce an after-tax equivalent to such
class's tax-free yield. This is done by increasing the class's yield (calculated
as above) by the amount necessary to reflect the payment of Federal income tax
at a stated tax rate.
NON-MONEY MARKET FUNDS: From time to time the Non-Money Market Funds may
advertise the total return and yield on a class of shares. Nations Municipal
Income Fund, Nations Short-Term Municipal Income Fund, Nations Intermediate
Municipal Bond Fund, the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds also may advertise the tax-equivalent yield of a class of
shares. TOTAL RETURN, YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON
HISTORICAL DATA AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total
return" of a class of shares of a Non-Money Market Fund may be calculated on an
average annual total return basis or an aggregate total return basis. Average
annual total return refers to the average annual compounded rates of return over
one-, five-, and ten-year periods or the life of the Fund (as stated in the
advertisement) that would equate an initial amount invested at the beginning of
a stated period to the ending redeemable value of the investment, assuming the
reinvestment of all dividend and capital gain distributions. Aggregate total
return reflects the total percentage change in the value of the investment over
the measuring period again assuming the reinvestment of all dividends and
capital gain distributions. Total return may also be presented for other
periods.
"Yield" is calculated by dividing the annualized net investment income per share
during a recent 30-day (or one month) period of a class of shares of a Fund by
the maximum public offering price per share on the last day of that period.
The "tax-equivalent yield" of Nations Municipal Income Fund, Nations Short-Term
Municipal Income Fund, Nations Intermediate Municipal Bond Fund, the State
Intermediate Municipal Bond Funds and the State Municipal Bond Funds also may be
quoted from time to time, which shows the level of taxable yield needed to
produce an after-tax equivalent to the Fund's tax-free yield. This is done by
increasing the Fund's yield (calculated as above) by the amount necessary to
reflect the payment of Federal income tax at a stated tax rate.
Set forth below is certain performance data for the Enhanced Equity Index Common
Trust Fund and Enhanced Small Cap Equity Index Common Trust Fund (the "CTFs"),
each of which is currently managed on behalf of NationsBank by TradeStreet.
(Prior to the formation of TradeStreet in 1995, the CTFs were managed solely by
NationsBank.) The performance data for the CTFs is deemed relevant because the
Enhanced Equity Index and Enhanced Small Cap Equity Index Common Trust Funds
have investment objectives and policies that are substantially similar to those
of Nations Managed Index Fund and Nations Managed SmallCap Index Fund,
respectively. Moreover, the portfolio manager of TradeStreet (who currently
manages the CTFs and the Funds) employs the same quantitative investment process
for the Funds that has, and continues to be, utilized for the CTFs. THIS
PERFORMANCE DATA REPRESENTS PAST PERFORMANCE OF THE CTFS AND IS NOT NECESSARILY
INDICATIVE OF THE FUTURE PERFORMANCE OF THE CTFS OR THE FUNDS.
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS INDICATED THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Since
Inception
One Year Three Year Five Year (12/31/88)**
Enhanced Equity
Index Common Trust
Fund* 19.98% 22.31% 16.08% 16.52%
S&P 500 Index 19.77% 22.28% 16.39% 16.28%
Lipper S&P 500
Index Funds
Average*** 19.19% 21.73% 15.89% 15.66%
</TABLE>
ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Enhanced Lipper
Equity S&P 500
Index Index
Common S&P Funds
Year Trust Fund* 500 Index Average***
1989 34.12% 31.55% 30.58%
1990 -1.52% -3.15% -3.57%
1991 31.72% 30.56% 29.65%
1992 5.52% 7.64% 7.12%
1993 10.47% 9.99% 9.52%
1994 0.69% 1.31% 0.90%
1995 37.66% 37.45% 36.82%
1996 23.62% 23.08% 22.30%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS INDICATED THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Since
One Inception
Year (10/1/95)
Enhanced Small Cap Equity Index Common
Trust Fund* 11.76% 11.68%
S&P 600 Index 8.39% 9.83%
</TABLE>
72
<PAGE>
* The total returns above reflect the deduction of 0.50% of fees and expenses
per annum. The CTFs are not subject to certain investment limitations,
diversification requirements, and other restrictions imposed by the 1940 Act
and the Internal Revenue Code, which if applicable, may have adversely
affected the performance results of the CTFs.
** Prior to 12/31/88 the Enhanced Equity Index Common Trust Fund was managed
with a different objective and policies and therefore performance prior
thereto is not included in the prior performance calculations.
*** The Lipper S&P 500 Index Funds Average represents the average performance of
mutual funds with similar objectives monitored by Lipper Analytical
Services, Inc. during the periods shown.
Set forth below is certain performance data for the Pacific Ex-Japan Composite,
the Emerging Markets Composite and the Global Government Bond Ex-U.K. Composite,
reflecting the performance of private accounts, including U.K. authorized unit
trusts, managed by Gartmore plc, as defined below. The performance data for
these accounts is deemed relevant because the Pacific Ex-Japan Composite, the
Emerging Markets Composite and the Global Government Bond Ex-U.K. Composite have
investment objectives, policies and restrictions that are substantially similar
to those of Nations Pacific Growth Fund, Nations Emerging Markets Fund and
Nations Global Government Income Fund, respectively. There is substantial
continuity between the portfolio managers of Gartmore plc who were responsible
for managing those accounts and the portfolio managers of Gartmore who are
responsible for managing Nations Pacific Growth Fund, Nations Emerging Markets
Fund and Nations Global Government Income Fund, respectively. THIS PERFORMANCE
DATA REPRESENTS PAST PERFORMANCE AND IS NOT NECESSARILY INDICATIVE OF THE FUTURE
PERFORMANCE OF GARTMORE OR THE FUNDS.
PACIFIC EX-JAPAN COMPOSITE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS INDICATED THROUGH MARCH 31, 1997*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
One Year Two Years Three Years Four Years
Pacific Ex-Japan Composite 3.95% 8.44% 7.79% 17.11%
Morgan Stanley Capital
Int'l. Combined
Far East
(Ex-Japan)
Free Index(diamond) -2.44% 8.58% 7.08% 15.62%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS INDICATED THROUGH MARCH 31, 1997*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Since
Inception
Five Years Six Years Seven Years (1/1/88)
Pacific Ex-Japan Composite 18.84% 18.08% 14.79% 20.42%
Morgan Stanley Capital
Int'l. Combined
Far East
(Ex-Japan)
Free Index(diamond) 16.69% 16.61% 15.77% 19.02%
</TABLE>
ANNUAL TOTAL RETURNS*
<TABLE>
<CAPTION>
<S> <C> <C>
Morgan Stanley
Capital
International
Pacific Combined Far East
Ex-Japan (Ex-Japan)
Composite Free Index(diamond)
1988 11.9% 30.0%
1989 58.40% 32.1%
1990 0.0% -6.5%
1991 22.1% 31.0%
1992 22.9% 21.8%
1993 110.0% 103.4%
1994 -13.9% -17.5%
1995 4.0% 8.8%
1996 13.5 11.1
</TABLE>
* The average annual total returns and annual total returns are net of
fees. The fees for these accounts were 1% per annum until September
30, 1988, and 1.5% per annum thereafter. The accounts are not subject
to certain investment limitations, diversification requirements, and
other restrictions imposed by the 1940 Act and the Internal Revenue
Code, which, if applicable, may have adversely affected the
performance results of the accounts.
(diamond) The Morgan Stanley Capital International Combined Far East (Ex-Japan)
Free Index is a capitalization-weighted index that tracks 7 countries
and represents only those securities that are available for investment
by international investors; many issues are still restricted to
domestic investors in certain Pacific Basin countries.
EMERGING MARKETS COMPOSITE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS INDICATED THROUGH MARCH 31, 1997*
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Four Years
Since
Inception
One Year Two Years Three Years 1/1/93
Emerging Markets Composite 16.2% 11.1% -1.8% 10.2%
IFC Investables Index(diamond) 11.4% 13.4% 3.1% 13.39%
</TABLE>
73
<PAGE>
ANNUAL TOTAL RETURNS*
<TABLE>
<CAPTION>
<S> <C> <C>
Emerging
Markets IFC Investables
Composite Index(diamond)
1993 76.5% 79.6%
1994 -19.0% -12.0%
1995 -11.3% -8.5%
1996 13.0% 9.4%
</TABLE>
* The average annual total returns and annual total returns have been
calculated since inception (1/1/93) and are net of fees. The fees for
these accounts were 1.5% per annum. The accounts are not subject to
certain investment limitations, diversification requirements, and
other restrictions imposed by the 1940 Act and the Internal Revenue
Code, which, if applicable, may have adversely affected the
performance results of the accounts.
(diamond) The IFC Investables Index includes over 1,100 stocks representing 27
stock markets in developing countries, and reflects the accessibility
of markets and individual stocks for foreign ownership.
GLOBAL GOVERNMENT BOND
EX-U.K. COMPOSITE
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS INDICATED THROUGH MARCH 31, 1997*
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Two Years Three Years
Global Government Bond
Ex-U.K.
Composite** -1.2% 4.4% 6.1%
J.P. Morgan Global
Government Bonds
Index(diamond) 1.0% 3.9% 6.5%
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS INDICATED THROUGH MARCH 31, 1997*
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Since
Inception
Four Years Five Years 10/1/90
Global Government Bond
Ex-U.K. Composite** 6.2% 8.4% 10.31%
J.P. Morgan Global
Government Bonds Index(diamond) 6.5% 7.9% 8.97%
</TABLE>
ANNUAL TOTAL RETURNS*
<TABLE>
<CAPTION>
<S> <C> <C>
Global J.P. Morgan
Government Global
Bond Ex-U.K. Government
Composite Bonds Index(diamond)
1991 20.8% 16.0%
1992 4.8% 5.2%
1993 15.0% 11.6%
1994 -0.9% 1.5%
1995 22.8% 19.6%
1996 0.6% 3.5%
</TABLE>
* The average annual total returns and annual total returns have been
calculated since inception (10/1/90) and are net of fees. The fees on
these accounts varied by contractual agreement and have been assumed
to be 1.5% per annum. The accounts are not subject to certain
investment limitations, diversification requirements, and other
restrictions imposed by the 1940 Act and the Internal Revenue Code,
which, if applicable, may have adversely affected the performance
results of the accounts.
** The accounts of the Global Government Bond Ex-U.K. Composite do not
invest in securities of U.K. issuers, which are permissible
investments for Nations Global Government Income Fund. However,
inclusion of such securities, to the extent of their representation in
the J.P. Morgan Global Government Bond Index, would not have
materially affected their total returns.
(diamond) The J.P. Morgan Global Government Bonds Index is a
capitalization-weighted index that tracks government bonds issued in
13 countries located in the United States, Europe and the Far East.
Set forth below is the average annual total return and annual total return for
Nations International Equity Fund for the periods ending March 31, 1997:
NATIONS INTERNATIONAL
EQUITY FUND
AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS
INDICATED THROUGH MARCH 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Since
Inception
One Year Three Years Five Years on 12/2/91
Nations
International
Equity Fund 1.32% 6.23% 8.24% 7.10%
Morgan Stanley
Capital
International EAFE
Index(diamond) 1.46% 6.53% 10.57% 6.01%
</TABLE>
74
<PAGE>
ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
<S> <C> <C>
Morgan Stanley
Nations Capital
International International
Equity Fund EAFE Index(diamond)
1992 -8.6% -12.2%
1993 27.21% 32.6%
1994 2.6% 7.8%
1995 8.5% 11.2%
1996 8.5% 6.1%
</TABLE>
(diamond) The Morgan Stanley Capital International EAFE Index represents an
unmanaged index used to portray the pattern of common stock price
movement in Europe, Australia and the Far East.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of a Fund's portfolio and such Fund's
operating expenses. Investment performance also often reflects the risks
associated with a Fund's investment objective and policies. These factors should
be considered when comparing a Fund's investment results to those of other
mutual funds and other investment vehicles. Since yields fluctuate, yield data
cannot necessarily be used to compare an investment in the Funds with bank
deposits, savings accounts, and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
In addition to Primary A Shares, the Money Market Funds offer Primary B,
Investor A, Investor B, Investor C and Daily Shares. In addition to Primary A
Shares, the Non-Money Market Funds offer Primary B, Investor A, Investor B
(formerly Investor N) and Investor C Shares. Each class of shares may bear
different sales charges, shareholder servicing fees, loads and other expenses,
which may cause the performance of a class to differ from the performance of the
other classes. Performance quotations will be computed separately for each class
of a Fund's shares. Any fees charged by an institution directly to its
customers' accounts in connection with investments in the Funds will not be
included in calculations of total return or yield. Each Fund's annual report
contains additional performance information and is available upon request
without charge from the Funds' distributor or an investor's Institution, as
defined below or by calling Nations Funds at the toll-free number indicated on
the cover of this Prospectus.
How The Funds Are Managed
The business and affairs of each of Nations Fund Trust, Nations Fund, Inc. and
Nations Portfolios are managed under the direction of their Board of Trustees
and Boards of Directors, respectively. Nations Fund Trust's SAI contains the
names of and general background information concerning each Trustee of Nations
Fund Trust. Nations Fund, Inc.'s and Nations Portfolios' SAIs contain the names
of and general background information concerning each Director of Nations Fund,
Inc. and Nations Portfolios, respectively.
Nations Funds and the Adviser have adopted codes of ethics which contain
policies on personal securities transactions by "access persons," including
portfolio managers and investment analysts. These policies substantially comply
in all material respects with the recommendations set forth in the May 9, 1994
Report of the Advisory Group on Personal Investing of the Investment Company
Institute.
INVESTMENT ADVISER: NationsBanc Advisors, Inc. serves as investment adviser to
the Funds. NBAI is a wholly owned subsidiary of NationsBank, which in turn is a
wholly owned banking subsidiary of NationsBank Corporation, a bank holding
company organized as a North Carolina corporation. NBAI has its principal
offices at One NationsBank Plaza, Charlotte, North Carolina 28255.
TradeStreet Investment Associates, Inc., with principal offices at One
NationsBank Plaza, Charlotte, North Carolina 28255, serves as investment
sub-adviser to all of the Funds except for those Funds listed below, for which
Gartmore Global Partners or Boatmen's serves as investment sub-adviser.
TradeStreet is a wholly owned subsidiary of NationsBank. TradeStreet provides
investment management services to individuals, corporations and institutions.
Gartmore Global Partners, with principal offices at One NationsBank Plaza,
Charlotte, North Carolina 28255, serves as investment sub-adviser to Nations
International Equity Fund, Nations Emerging Markets Fund, Nations Pacific Growth
Fund, Nations International Growth Fund and Nations Global Government Income
Fund pursuant to a sub-advisory agreement. Gartmore is a joint venture
structured as a general partnership between NB Partner Corp., a wholly owned
subsidiary of NationsBank, and Gartmore U.S. Limited, an indirect wholly owned
subsidiary of Gartmore Investment Management plc ("Gartmore plc"), a UK company
which is the holding company for a leading UK-based international fund
management group of companies, National Westminster Bank plc and affiliated
entities (collectively, "NatWest") own 100% of the equity of Gartmore Investment
Management plc.
Boatmen's Capital Management, Inc. serves as investment sub-adviser to Nations
U.S Government Bond
75
<PAGE>
Fund. Its principal offices are located at 100 North Broadway, St. Louis,
Missouri 63178-4737. Boatmen's is an indirect subsidiary of NationsBank
Corporation.
Subject to the general supervision of Nations Fund Trust's Board of Trustees and
Nations Fund, Inc.'s and Nations Portfolios' Boards of Directors, and in
accordance with each Fund's investment policies, the Adviser formulates
guidelines and lists of approved investments for each Fund, makes decisions with
respect to and places orders for each Fund's purchases and sales of portfolio
securities and maintains records relating to such purchases and sales. With
respect to the Non-Money Market Funds and Nations Tax Exempt Fund, the Adviser
is authorized to allocate purchase and sale orders for portfolio securities to
certain financial institutions, including, in the case of agency transactions,
financial institutions which are affiliated with the Adviser or which have sold
shares in such Funds, if the Adviser believes that the quality of the
transaction and the commission are comparable to what they would be with other
qualified brokerage firms. From time to time, to the extent consistent with its
investment objective, policies and restrictions, each Fund may invest in
securities of companies with which NationsBank has a lending relationship.
For the services provided and expenses assumed pursuant to various Investment
Advisory Agreements, NBAI is entitled to receive advisory fees, computed daily
and paid monthly, at the annual rates of: .25% of the first $250 million of the
combined average daily net assets of both Nations Prime Fund and Nations
Treasury Fund, plus .20% of the combined average daily net assets of such Funds
in excess of $250 million; .40% of the average daily net assets of each of
Nations Government Money Market Fund and Nations Tax Exempt Fund; .50% of the
average daily net assets of each of the Nations Managed Index Fund, Nations
Managed SmallCap Index Fund, Nations Managed Value Index Fund, Nations Managed
SmallCap Value Index Fund, Nations Equity Index Fund, Nations Short-Term
Municipal Income Fund, Nations Intermediate Municipal Bond Fund and the State
Intermediate Municipal Bond Funds; 1.00% of the average daily net assets of
Nations Small Company Growth Fund; .60% of the average daily net assets of each
of the Nations U.S. Government Bond Fund, Nations Short-Intermediate Government
Fund, Nations Short-Term Income Fund, Nations Diversified Income Fund, Nations
Strategic Fixed Income Fund, Nations Municipal Income Fund and the State
Municipal Bond Funds; .75% of the average daily net assets of each of Nations
Value Fund, Nations Capital Growth Fund, Nations Emerging Growth Fund, Nations
Disciplined Equity Fund and Nations Balanced Assets Fund; .65% of the first $100
million of Nations Government Securities Fund's average daily net assets, plus
.55% of the Fund's average daily net assets in excess of $100 million and up to
$250 million, plus .50% of the Fund's average daily net assets in excess of $250
million; .75% of the first $100 million of Nations Equity Income Fund's average
daily net assets, plus .70% of the Fund's average daily net assets in excess of
$100 million and up to $250 million, plus .60% of the Fund's average daily net
assets in excess of $250 million; .90% of the average daily net assets of
Nations International Equity Fund, Nations International Growth Fund and Nations
Pacific Growth Fund; 1.10% of the average daily net assets of Nations Emerging
Markets Fund; and .70% of the average daily net assets of Nations Global
Government Income Fund.
For the services provided pursuant to sub-advisory agreements, NBAI will pay
TradeStreet sub-advisory fees, computed daily and paid monthly, at the annual
rates of: .055% of Nations Prime Fund's, Nations Treasury Fund's, Nations
Government Money Market Fund's and Nations Tax Exempt Fund's average daily net
assets; .20% of Nations Equity Income Fund's average daily net assets; .10% of
Nations Managed Index Fund's, Nations Managed SmallCap Index Fund's, Nations
Managed Value Index Fund's, Nations Managed SmallCap Value Index Fund's, and
Nations Equity Index Fund's average daily net assets; .25% of Nations Value
Fund's, Nations Balanced Assets Fund's, Nations Capital Growth Fund's, Nations
Small Company Growth Fund's, Nations Emerging Growth Fund's and Nations
Disciplined Equity Fund's average daily net assets; .15% of Nations
Short-Intermediate Government Fund's, Nation's Government Securities Fund's,
Nations Short-Term Income Fund's, Nations Diversified Income Fund's and Nations
Strategic Fixed Income Fund's average daily net assets; and .07% of Nations
Municipal Income Fund's, Nations Short-Term Municipal Income Fund's, Nations
Intermediate Municipal Bond Fund's, Nations Florida Municipal Bond Fund's,
Nations Georgia Municipal Bond Fund's, Nations Maryland Municipal Bond Fund's,
Nations North Carolina Municipal Bond Fund's, Nations South Carolina Municipal
Bond Fund's, Nations Tennessee Municipal Bond Fund's, Nations Texas Municipal
Bond Fund's, Nations Virginia Municipal Bond Fund's, Nations Florida
Intermediate Municipal Bond Fund's, Nations Georgia Intermediate Municipal Bond
Fund's, Nations Maryland Intermediate Municipal Bond Fund's, Nations North
Carolina Intermediate Municipal Bond Fund's, Nations South Carolina Intermediate
Municipal Bond Fund's, Nations Tennessee Intermediate Municipal Bond Fund's,
Nations Texas Intermediate Municipal Bond Fund's and Nations Virginia
Intermediate Municipal Bond Fund's average daily net assets.
For services provided pursuant to a sub-advisory agreement, Gartmore is entitled
to receive from NBAI sub-advisory fees, computed daily and paid monthly, at the
annual rate of .70% of Nations International Equity Fund's average daily net
assets; .85% of Nations Emerging Markets Fund's average daily net assets; .70%
of Nations Pacific Growth Fund's average daily net assets
76
<PAGE>
and .54% of Nations Global Government Income Fund's average daily net assets.
For services provided and expenses assumed, Gartmore is entitled to receive from
NBAI sub-advisory fees, computed daily and paid monthly, at the annual rate of
40% of Nations International Growth Fund's average daily net assets up to and
including $325,000,000 in assets and .25% on assets in excess of $325,000,000.
As of the date of this Prospectus, the Board of Directors has approved, and
recommended to shareholders that they approve, an increase in the fees to be
paid by NBAI to Gartmore to .70% of the Nations International Growth Fund's
average daily net assets. This increase will be implemented as soon as
practicable following receipt of shareholder approval.
For services provided pursuant to a sub-advisory agreement, NBAI will pay
Boatmen's sub-advisory fees at the rate of 0.15% of the average daily net assets
of Nations U.S. Government Bond Fund.
From time to time, NBAI (and/or TradeStreet, Gartmore or Boatmen's) may waive or
reimburse (either voluntarily or pursuant to applicable state limitations)
advisory fees or expenses payable by a Fund.
For the fiscal period from April 1, 1996 to March 31, 1997, after waivers,
Nations Fund Trust paid NBAI under the Investment Advisory Agreement advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Government Money Market Fund -- .14%, Nations Tax Exempt Fund -- .16%,
Nations Value Fund -- .75%, Nations Capital Growth Fund -- .75%, Nations
Emerging Growth Fund -- .75%, Nations Disciplined Equity Fund -- .75%, Nations
Equity Index Fund -- .19%, Nations Managed Index Fund -- .06%, Nations Managed
SmallCap Index Fund -- .00%, Nations Balanced Assets Fund -- .75%, Nations
Short-Intermediate Government Fund -- .40%, Nations Short-Term Income
Fund -- .30%, Nations Diversified Income Fund -- .50%, Nations Strategic Fixed
Income Fund -- .50%, Nations Municipal Income Fund -- .29%, Nations Short-Term
Municipal Income Fund -- .06%, Nations Intermediate Municipal Bond Fund -- .19%,
Nations Florida Intermediate Municipal Bond Fund -- .19%, Nations Georgia
Intermediate Municipal Bond Fund -- .20%, Nations Maryland Intermediate
Municipal Bond Fund -- .22%, Nations North Carolina Intermediate Municipal Bond
Fund -- .18%, Nations South Carolina Intermediate Municipal Bond Fund -- .21%,
Nations Tennessee Intermediate Municipal Bond Fund -- .07%, Nations Texas
Intermediate Municipal Bond Fund -- .16%, Nations Virginia Intermediate
Municipal Bond Fund -- .26%, Nations Florida Municipal Bond Fund -- .27%,
Nations Georgia Municipal Bond Fund -- .15%, Nations Maryland Municipal Bond
Fund -- .08%, Nations North Carolina Municipal Bond Fund -- .26%, Nations South
Carolina Municipal Bond Fund -- .20%, Nations Tennessee Municipal Bond
Fund -- .03%, Nations Texas Municipal Bond Fund -- .17% and Nations Virginia
Municipal Bond Fund -- .22%. No fees were paid with respect to Nations Managed
Value Index Fund or Nations Managed SmallCap Value Index Fund because neither
Fund had yet commenced operations during the period indicated above.
For the fiscal period from April 1, 1996 to March 31, 1997, after waivers,
Nations Fund, Inc. paid NBAI under the Investment Advisory Agreement advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Prime Fund -- .16%, Nations Treasury Fund -- .16%, Nations Equity Income
Fund -- .67%, Nations International Equity Fund -- .90% and Nations Government
Securities Fund -- .50%.
For the fiscal period from April 1, 1996 to March 31, 1997, after waivers,
Nations Portfolios paid NBAI under the Investment Advisory Agreement advisory
fees at the indicated rates of the following Funds' average daily net assets:
Nations Emerging Markets Fund -- 1.10%, Nations Pacific Growth Fund -- .90% and
Nations Global Government Income Fund -- .70%.
For the fiscal period from September 1, 1996 to May 16, 1997, after waivers, the
Pilot Funds paid Boatmen's Trust Company, under a previous investment advisory
agreement, advisory fees at the indicated rates of the following Funds' average
daily net assets: Nations Small Company Growth Fund (formerly the Pilot Small
Capitalization Equity Fund) -- .75%, Nations International Growth Fund (formerly
the Pilot U.S. Government Securities Fund) -- .40%. During the same period,
after waivers, the Pilot Funds paid Kleinwort Benson Investment Management
Americas Inc., under a previous sub-advisory agreement, sub-advisory fees at the
rate of .32% of Nations International Growth Fund's average daily net assets.
For the fiscal period from April 1, 1996 to March 31, 1997, after waivers, NBAI
paid TradeStreet under the Sub-Advisory Agreements sub-advisory fees at the
indicated rates of the following Funds' average daily net assets: Nations
Government Money Market Fund -- .055%, Nations Tax Exempt Fund -- .055%, Nations
Value Fund -- .25%, Nations Capital Growth Fund -- .25%, Nations Emerging Growth
Fund -- .25%, Nations Disciplined Equity Fund -- .25%, Nations Equity Index
Fund -- .10%, Nations Managed Index Fund -- .10%, Nations Managed SmallCap Index
Fund -- .10%, Nations Balanced Assets Fund -- .25%, Nations Short-Intermediate
Government Fund -- .15%, Nations Short-Term Income Fund -- .15%, Nations
Diversified Income Fund -- .15%, Nations Strategic Fixed Income Fund -- .15%,
Nations Municipal Income Fund -- .07%, Nations Short-Term Municipal Income
Fund -- .07%, Nations Intermediate Municipal Bond Fund -- .07%, Nations Florida
Intermediate Municipal Bond Fund -- .07%, Nations Georgia Intermediate Municipal
Bond Fund -- .07%, Nations Maryland Intermediate Municipal Bond Fund -- .07%,
Nations North Carolina Intermediate
77
<PAGE>
Municipal Bond Fund -- .07%, Nations South Carolina Intermediate Municipal Bond
Fund -- .07%, Nations Tennessee Intermediate Municipal Bond Fund -- .07%,
Nations Texas Intermediate Municipal Bond Fund -- .07%, Nations Virginia
Intermediate Municipal Bond Fund -- .07%, Nations Florida Municipal Bond Fund --
.07%, Nations Georgia Municipal Bond Fund -- .07%, Nations Maryland Municipal
Bond Fund -- .07%, Nations North Carolina Municipal Bond Fund -- .07%, Nations
South Carolina Municipal Bond Fund -- .07%, Nations Tennessee Municipal Bond
Fund -- .07%, Nations Texas Municipal Bond Fund -- .07%, Nations Virginia
Municipal Bond Fund -- .07%, Nations Prime Fund -- .055%, Nations Treasury
Fund -- .055%, Nations Equity Income Fund -- .20% and Nations Government
Securities Fund -- .15%.
For the fiscal period from April 1, 1996 to March 31, 1997, after waivers, NBAI
paid Gartmore under the Sub-Advisory Agreements sub-advisory fees at the
indicated rates of the following Funds' average daily net assets: Nations
Emerging Markets Fund -- .85%, Nations Pacific Growth Fund -- .70%, Nations
Global Government Income Fund -- .54%, Nations International Equity
Fund -- .70%.
Melinda Allen Crosby is a Product Manager, Municipal Fixed Income Management for
TradeStreet and is Portfolio Manager for Nations Tax Exempt Fund. She has been
Portfolio Manager for Nations Tax Exempt Fund since 1991. Prior to assuming her
position with TradeStreet, she was Vice President and Portfolio Manager for the
Investment Management Group at NationsBank. She has worked in the investment
community since 1973. Her past experience includes consulting and municipal
credit analysis for NationsBank Capital Markets. Ms. Crosby received a B.A. in
Business Administration from the University of North Carolina at Charlotte and
an M.B.A. from the McColl School of Business, Queens College. She was a founding
member and past president of the Southern Municipal Finance Society and
participated in the establishment of the National Federation of Municipal
Analysts.
Sandra L. Duck is a Product Manager, Money Market Management for TradeStreet and
is Portfolio Manager for Nations Treasury Fund and Nations Government Money
Market Fund. She has been Portfolio Manager for the Funds since 1993. Prior to
assuming her position with TradeStreet, she was Vice President and Portfolio
Manager for the Investment Management Group at NationsBank. Ms. Duck has worked
in the investment community since 1980. Her past experience includes product
management and trading for Interstate/Johnson Lane and First Charlotte
Corporation. Ms. Duck graduated from King's College.
Greg W. Golden is a Structured Products Manager, Equity Management for
TradeStreet and is Portfolio Manager for Nations Equity Index Fund, Nations
Managed Index Fund and Nations Managed SmallCap Index Fund. He has been
Portfolio Manager for these Funds since their inception. Prior to assuming his
position with TradeStreet in 1996, he was Vice President and Structured Products
Manager for the Investment Management Group at NationsBank. He has worked in the
investment community since 1990. His past experience includes portfolio
management, derivatives management and quantitative analysis for the Investment
Management Group at NationsBank and Sovran Bank of Tennessee. Mr. Golden
received a B.B.A. in Finance from Belmont University. He is a Chartered
Financial Analyst candidate and a member of the Chicago Quantitative Alliance,
the Association for Investment Management and Research as well as the North
Carolina Society of Financial Analysts, Inc.
Jeffrey C. Moser, is a Senior Product Manager, Equity Management for TradeStreet
and Senior Portfolio Manager for Nations Managed Value Index Fund and Nations
Managed SmallCap Value Index Fund. Mr. Moser has been with TradeStreet since
1996 and Portfolio Manager for Nations Managed Value Index Fund and Nations
Managed SmallCap Value Index Fund since the inception of the Funds. He is also
the Portfolio Manager for Nations Disciplined Equity Fund and has been since
1995. Prior to assuming his position with TradeStreet, he was Senior Vice
President and Senior Portfolio Manager for the Investment Management Group at
NationsBank. Mr. Moser has worked for the Investment Management Group at
NationsBank since 1983 where his responsibilities included institutional
portfolio management and equity analysis. Mr. Moser graduated Phi Beta Kappa
with a B.S. in Mathematics from Wake Forest University. He holds the Chartered
Financial Analyst designation and is a member of the Association for Investment
Management and Research as well as the North Carolina Society of Financial
Analysts, Inc.
Martha L. Sherman is a Senior Product Manager, Money Market Management for
TradeStreet and is Senior Portfolio Manager for Nations Prime Fund. She has been
Portfolio Manager of the Nations Prime Fund since 1988. Prior to assuming her
position with TradeStreet, she was Vice President and Senior Portfolio Manager
for the Investment Management Group at NationsBank. Ms. Sherman has worked in
the investment community since 1981. Her past experience includes investment
research for William Lowry & Associates. Ms. Sherman received a B.S. in Business
Administration from the University of Texas at Dallas.
Sharon M. Herrmann, is a Director of Equity Management for TradeStreet and
Senior Portfolio Manager for Nations Value Fund. Ms. Herrmann has been the
Portfolio Manager of Nations Value Fund since 1989. Prior to assuming her
position with TradeStreet, she was Senior Vice President and Portfolio Manager
for the Investment Management Group at NationsBank. Ms. Herrmann has
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<PAGE>
worked for the Investment Management Group at NationsBank since 1981 where her
responsibilities included fund management and institutional portfolio
management. She attended Virginia Wesleyan College. Ms. Herrmann holds the
Chartered Financial Analyst designation and is a member of the Association for
Investment Management and Research as well as the North Carolina Society of
Financial Analysts, Inc.
Eric S. Williams, is a Senior Product Manager, Equity Management for TradeStreet
and Senior Portfolio Manager for Nations Equity Income Fund. Mr. Williams has
been the Portfolio Manager for Nations Equity Income Fund since 1991. Prior to
assuming his position with TradeStreet, he was Senior Vice President and Senior
Portfolio Manager for the Investment Management Group at NationsBank. He has
worked in the investment community since 1980. His past experience includes fund
analysis and portfolio management for National Bank of Detroit. Mr. Williams
received a B.S. in Accounting from East Carolina University, Summa Cum Laude and
an M.B.A. from Indiana University. He holds the Chartered Financial Analyst
designation, is on the Advisory Board of Indiana University's Investment
Management Academy, and is a member of the Association for Investment Management
and Research as well as the North Carolina Society of Financial Analysts, Inc.
Stephen Watson is Principal Portfolio Manager of Nations International Equity
Fund and has been the Portfolio Manager since February, 1995. He joined Gartmore
as a Global Fund Manager in 1993 and currently holds the position of Head of the
International and Global Portfolio Team. Previously, Mr. Watson was a director
and global fund manager with James Capel Fund Managers, London, as well as
Client Services Manager for international clients. From 1980 to 1987 he
associated with Capel-Cure Myers in their Portfolio Management Division. He
began his career in 1976 when he joined the investment division at Samuel
Montagu. Mr. Watson is a member of the Securities Institute.
Philip Ehrmann is Principal Portfolio Manager of Nations Emerging Markets Fund
and is the Head of the Gartmore Emerging Markets Team. He has been the Portfolio
Manager for the Fund since 1995. Prior to joining Nations Gartmore in 1995, Mr.
Ehrmann was the Director of Emerging Markets for Invesco in London. He began his
career in 1981 as an institutional stockbroker with Rowe & Pitman Inc. and also
spent a brief period with Prudential Bache Securities as an institutional
salesman before joining Invesco in 1984. Mr. Ehrmann graduated from the London
School of Economics with a degree in Economics, Industry and Trade.
Seok Teoh is Principal Portfolio Manager of Nations Pacific Growth Fund and has
been the Portfolio Manager since the Fund's inception. She has been associated
with Gartmore since 1990 as the London based manager on its Far East Team.
Previously, Ms. Teoh managed Far East equities for Rothschild Asset Management
in Tokyo and in Singapore. She was also responsible for Singaporean and
Malaysian equity sales at Overseas Union Bank Securities in Singapore. Ms. Teoh,
who is a native of Singapore, is fluent in Mandarin and Cantonese and received
an Economics degree from the University of Durham.
Philip J. Sanders, is a Senior Product Manager, Equity Management for
TradeStreet and Senior Portfolio Manager for Nations Capital Growth Fund. Mr.
Sanders has been Portfolio Manager for Nations Capital Growth Fund since 1995.
Prior to assuming his position with TradeStreet, he was Senior Vice President
and Senior Portfolio Manager for the Investment Management Group at NationsBank.
Mr. Sanders has worked in the financial investment community since 1981. His
past experience includes portfolio management, equity research and financial
analysis for the Investment Management Group at NationsBank and Duke Power
Company. Mr. Sanders received a B.A. in Economics from the University of
Michigan and an M.B.A. from University of North Carolina at Charlotte. He holds
the Chartered Financial Analyst designation and is a member of the Association
for Investment Management and Research as well as the North Carolina Society of
Financial Analysts, Inc.
Scott A. Billeadeau is a Senior Portfolio Manager, Equity Management for
TradeStreet and Senior Portfolio Manager for Nations Emerging Growth Fund and
Nations Small Company Growth Fund. Mr. Billeadeau has been Portfolio Manager of
the Funds since June 1997. Previously he was Senior Analyst and Senior Portfolio
Manager for BankAmerica's Pacific Horizon Aggressive Growth Fund at Security
Pacific Corp. since 1991. Mr. Billeadeau has worked in the investment community
since 1986. His past experience also includes quantitative analysis for American
Express Financial Advisors, Inc. Mr. Billeadeau received an AB in Economics from
Princeton University. He holds the Chartered Financial Analyst designation and
is a member of the Association for Investment Management and Research, as well
as the Seattle Society of Securities Analysts.
Julie L. Hale, is a Senior Product Manager, Equity Management for TradeStreet
and Senior Portfolio Manager for Nations Balanced Assets Fund. Ms. Hale has been
Portfolio Manager for the Nations Balanced Assets Fund since 1995. Prior to
assuming her position with TradeStreet, she was Vice President and Senior
Portfolio Manager for the Investment Management Group at NationsBank. She has
worked in the investment community since 1981. Her past experience includes
research analysis and portfolio management for Mercantile Safe Deposit and
Trust, and National City Bank. Ms. Hale received a B.S. in Business and Finance
from Mount St. Mary's College and an M.B.A. from Kent State University. She
holds the Chartered Financial
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Analyst designation and is a member of the Association for Investment Management
and Research as well as the North Carolina Society of Security Analysts, Inc.
She is also a member of the National Association for Petroleum Investment
Analysts and the World Affairs Council of Washington, D.C.
Mark Rimmer is Principal Portfolio Manager of the Nations Global Government
Income Fund and has been the Portfolio Manager since the Fund's inception. He
has been associated with Gartmore since 1990 as an International Fixed Income
Fund Manager. Previously, Mr. Rimmer managed multi-currency funds for
institutional clients at Gulf International Bank in Bahrain, and prior to that
he was a senior trader for Sumitomo Finance International, London. He graduated
from Cambridge University with a degree in Economics.
Gregory H. Cobb is a Senior Product Manager, Fixed Income Management for
TradeStreet and Senior Portfolio Manager for Nations Strategic Fixed Income
Fund. Mr. Cobb has been Portfolio Manager for Nations Strategic Fixed Income
Fund since 1995. Prior to assuming his position with TradeStreet, he was Vice
President and Senior Portfolio Manager for the Investment Management Group at
NationsBank. Mr. Cobb has worked in the investment community since 1987. His
past experience includes portfolio management of intermediate duration and
insurance products for Trust Company Bank and Barnett Bank Trust Company Inc.
Mr. Cobb received a B.A. in Economics from the University of North Carolina at
Chapel Hill.
Mark S. Ahnrud, is a Director of Fixed Income Management for TradeStreet and the
Senior Portfolio Manager for Nations Diversified Income Fund. Mr. Ahnrud has
been the Portfolio Manager for the Nations Diversified Income Fund since 1992.
Prior to assuming his position with TradeStreet, he was Senior Vice President
and Senior Portfolio Manager for the Investment Management Group at NationsBank.
Mr. Ahnrud has worked for the Investment Management Group at NationsBank since
1985 where his responsibilities initially included institutional investment
management sales and later involved high yield credit analysis. Mr. Ahnrud
received a dual B.S. in Finance and Investments from Babson College and an
M.B.A. from Duke University, Fuqua School of Business. He holds the Chartered
Financial Analyst designation and is a member of the Association for Investment
Management and Research as well as the North Carolina Society of Financial
Analysts, Inc.
Christopher G. Gunster is a Portfolio Manager, Fixed Income Management for
TradeStreet and Portfolio Manager for Nations Government Securities Fund. Mr.
Gunster has been the lead Portfolio Manager since July 1997. Prior to assuming
his position with TradeStreet, he was Assistant Vice President and Associate
Portfolio Manager for the Investment Management Group at NationsBank since 1993.
Mr. Gunster has worked in the investment community since 1987. His past
experience includes investment marketing for The Boston Company and options
trading for Shatkin Investments, a regional broker/dealer. Mr. Gunster received
a B.A. in Chemistry from Kenyon College and an M.B.A. in Finance from Babson
Graduate School of Business. He holds the Chartered Financial Analyst
designation and is a member of the Association for Investment Management and
Research as well as the North Carolina Society of Financial Analysts, Inc.
John S. Swaim is a Senior Product Manager, Fixed Income Management for
TradeStreet and Senior Portfolio Manager for Nations Short-Intermediate
Government Fund. Mr. Swaim has been Portfolio Manager for the Fund since 1995.
Prior to assuming his position with TradeStreet, he was Vice President and
Senior Portfolio Manager for the Investment Management Group at NationsBank. Mr.
Swaim has worked in the investment community since 1986. His past experience
includes derivative products manager for the NationsBank Texas Corporate
Investment Division portfolio. Mr. Swaim received a B.S. from University of
North Texas and an M.B.A. from University of Texas at Arlington.
Michele M. Poirier is a Director, Municipal Fixed Income Management for
TradeStreet and is Senior Portfolio Manager for Nations Municipal Income Fund,
Nations Florida Intermediate Municipal Bond Fund, Nations Florida Municipal Bond
Fund, Nations Georgia Intermediate Municipal Bond Fund, Nations Georgia
Municipal Bond Fund, Nations South Carolina Intermediate Municipal Bond Fund and
Nations South Carolina Municipal Bond Fund. Ms. Poirier has been Portfolio
Manager for Nations Municipal Income Fund, Nations Florida Intermediate
Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond Fund, and South
Carolina Intermediate Municipal Bond Fund since 1992. She has been Portfolio
Manager for the other Funds since 1993. Prior to assuming her position with
TradeStreet, she was Senior Vice President and Senior Portfolio Manager for the
Investment Management Group at NationsBank. She has worked in the investment
community since 1974. Her past experience includes serving as Director of
Trading, Institutional Sales, and Municipal Trader for Financial Service
Corporation, Bankers Trust Company and The Robinson-Humphrey Company
respectively. Ms. Poirier received a B.B.A. in Marketing from Georgia State
University.
Mathew M. Kiselak is a Product Manager, Municipal Fixed Income Management for
TradeStreet and Portfolio Manager for Nations Intermediate Municipal Bond Fund,
Nations North Carolina Intermediate Municipal Bond Fund, Nations North Carolina
Municipal Bond Fund, Nations Tennessee Intermediate Municipal Bond Fund, Nations
Tennessee Municipal Bond Fund, Nations Texas Intermediate Municipal Bond Fund
and Nations Texas Municipal Bond Fund. Mr. Kiselak has been Port-
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folio Manager for Nations North Carolina Intermediate Municipal Bond Fund and
Nations North Carolina Municipal Bond Fund since 1995. He has been Portfolio
Manager for the other Funds since 1994. Prior to assuming his position with
TradeStreet, he was Vice President and Portfolio Manager for the Investment
Management Group at NationsBank. He has worked in the investment community since
1987. His past experience includes Portfolio Manager and Municipal Credit
Analysis for Reich & Tang Inc. Mr. Kiselak received a B.A. in Economics from
Pace University.
Dawn Daggy-Mangerson is a Portfolio Manager, Municipal Fixed Income Management
for TradeStreet and is Portfolio Manager of the Nations Short-Term Municipal
Income Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations Maryland
Municipal Bond Fund, Nations Virginia Intermediate Municipal Bond Fund and
Nations Virginia Municipal Bond Fund. Ms. Daggy-Mangerson has been Portfolio
Manager of the Funds since April 1997. Prior to assuming her position with
TradeStreet, she was a Portfolio Manager for Boatmen's Trust Company since 1995.
Ms. Daggy-Mangerson has worked in the investment community since 1988. Her past
experience also includes portfolio management and trading for Stein Roe Farnham,
a large investment advisory firm. Ms. Daggy-Mangerson received a B.A. in
Commerce and Finance from DePaul University.
J. Patrick Frith is a Portfolio Manager, Fixed Income Management for TradeStreet
and Portfolio Manager of Nations Short-Term Income Fund. Mr. Frith has been the
Portfolio Manager of Nations Short-Term Income Fund since October 1997.
Previously he was Vice President and Senior Portfolio Manager of the Investment
Management Group at NationsBank. Mr. Frith received a B.S. from the University
of Virginia with a double-major in Marketing and Management Information Systems.
He also received an M.B.A. from the Colgate Darden Graduate School of Business
Administration at the University of Virginia. Mr. Frith holds the Chartered
Financial Analyst designation and is a member of the Association for Investment
Management and Research as well as the North Carolina Society of Financial
Analysts, Inc.
The Fixed Income Committee of Boatmen's is responsible for the day-to-day
management of the investment portfolio of Nations U.S. Government Bond Fund.
Brian O'Neill is the Principal Senior Investment Manager of the Gartmore Global
Portfolio Team and has been the Portfolio Manager of Nations International
Growth Fund since July, 1997. Mr. O'Neill joined Gartmore as a Senior Investment
Manager on the Global Portfolio Team in 1981 with responsibility for a variety
of specialized global funds, including resource funds. Mr. O'Neill began his
career with Royal Insurance in 1970 as an investment analyst specializing in
United Kingdom research. He then expanded his field of expertise to include
management of global equities, and in 1978 he moved to Antony Gibbs & Sons where
he was appointed as a fund manager, specializing in global equities. Mr. O'Neill
graduated from Glasgow University in 1969 with a MA Honours degree in Political
Economy.
Morrison & Foerster LLP, counsel to Nations Funds and special counsel to
NationsBank has advised Nations Funds and NationsBank that NationsBank and its
affiliates may perform the services contemplated by the various Investment
Advisory Agreements and this Prospectus without violation of the Glass-Steagall
Act. Such counsel has pointed out, however, that there are no controlling
judicial or administrative interpretations or decisions and that future judicial
or administrative interpretations of, or decisions relating to, present federal
or state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such federal or state statutes, regulations and
judicial or administrative decisions or interpretations, could prevent such
entities from continuing to perform, in whole or in part, such services. If any
such entity were prohibited from performing any of such services, it is expected
that new agreements would be proposed or entered into with another entity or
entities qualified to perform such services.
OTHER SERVICE PROVIDERS: Stephens Inc. ("Stephens"), with principal offices at
111 Center Street, Little Rock, Arkansas 72201, serves as the administrator of
Nations Funds pursuant to Administration Agreements. Pursuant to the terms of
the Administration Agreements, Stephens provides various administrative and
corporate secretarial services to the Funds, including providing general
oversight of other service providers, office space, utilities and various legal
and administrative services in connection with the satisfaction of various
regulatory requirements applicable to the Funds.
First Data Investor Services Group, Inc. ("First Data"), formerly The
Shareholder Services Group, Inc., a wholly owned subsidiary of First Data
Corporation, with principal offices at One Exchange Place, Boston, Massachusetts
02109, serves as the co-administrator of Nations Funds pursuant to
Co-Administration Agreements. Under the Co-Administration Agreements, First Data
provides various administrative and accounting services to the Funds including
performing the calculations necessary to determine net asset value per share and
dividends, preparing tax returns and financial statements and maintaining the
portfolio records and certain of the general accounting records for the Funds.
For the services rendered pursuant to the Administration and Co-Administration
Agreements, Stephens and First Data are entitled to receive a combined fee at
the annual rate of up to 0.10% of each Fund's average daily net assets.
For the fiscal period from April 1, 1996 to March 31, 1997, after waivers,
Nations Fund Trust paid its administrators combined fees at the indicated rates
of the fol-
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lowing Funds' average daily net assets: Nations Government Money Market
Fund -- .09%, Nations Tax Exempt Fund -- .09%, Nations Value Fund -- .10%,
Nations Capital Growth Fund -- .10%, Nations Emerging Growth Fund -- .10%,
Nations Disciplined Equity Fund -- .10%, Nations Equity Index Fund -- .10%,
Nations Managed Index Fund -- .10%, Nations Managed SmallCap Index Fund -- .10%,
Nations Balanced Assets Fund -- .10%, Nations Short-Intermediate Government
Fund -- .10%, Nations Short-Term Income Fund -- .10%, Nations Diversified Income
Fund -- .10%, Nations Strategic Fixed Income Fund -- .10%, Nations Municipal
Income Fund -- .09%, Nations Short-Term Municipal Income Fund -- .09%, Nations
Intermediate Municipal Bond Fund -- .09%, Nations Florida Intermediate Municipal
Bond Fund -- .09%, Nations Georgia Intermediate Municipal Bond Fund -- .09%,
Nations Maryland Intermediate Municipal Bond Fund -- .09%, Nations North
Carolina Intermediate Municipal Bond Fund -- .09%, Nations South Carolina
Intermediate Municipal Bond Fund -- .09%, Nations Tennessee Intermediate
Municipal Bond Fund -- .09%, Nations Texas Intermediate Municipal Bond
Fund -- .09%, Nations Virginia Intermediate Municipal Bond Fund -- .09%, Nations
Florida Municipal Bond Fund -- .09%, Nations Georgia Municipal Bond
Fund -- .09%, Nations Maryland Municipal Bond Fund -- .09%, Nations North
Carolina Municipal Bond Fund -- .09%, Nations South Carolina Municipal Bond
Fund -- .09%, Nations Tennessee Municipal Bond Fund -- .09%, Nations Texas
Municipal Bond Fund -- .09%, and Nations Virginia Municipal Bond Fund -- .09%.
No fees were paid with respect to Nations Managed Value Index Fund or Nations
Managed SmallCap Value Index Fund because neither Fund had yet commenced
operations during the period indicated above.
For the fiscal period from April 1, 1996 to March 31, 1997, after waivers,
Nations Fund, Inc. paid its administrators combined fees at the indicated rates
of the following Funds' average daily net assets: Nations Prime Fund -- .09%,
Nations Treasury Fund -- .09%, Nations Equity Income Fund -- .10%, Nations
International Equity Fund -- .10% and Nations Government Securities
Fund -- .10%.
For the fiscal period from April 1, 1996 to March 31, 1997, after waivers,
Nations Portfolios paid its administrators combined fees at the indicated rates
of the following Funds' average daily net assets: Nations Emerging Markets
Fund -- .10%, Nations Pacific Growth Fund -- .10% and Nations Global Government
Income Fund -- .10%.
NationsBank serves as sub-administrator for Nations Funds pursuant to a
Sub-Administration Agreement. Pursuant to the terms of the Sub-Administration
Agreement, NationsBank assists Stephens in supervising, coordinating and
monitoring various aspects of the Funds' administrative operations. For
providing such services, NationsBank shall be entitled to receive a monthly fee
from Stephens based on an annual rate of 0.01% of the Funds' average daily net
assets.
Shares of the Funds are sold on a continuous basis by Stephens, as the Funds'
sponsor and distributor. Stephens is a registered broker/dealer. Nations Funds
has entered into distribution agreements with Stephens which provide that
Stephens has the exclusive right to distribute shares of the Funds. Stephens may
pay service fees or commissions to Institutions which assist customers in
purchasing Primary A Shares of the Funds.
NationsBank of Texas, N.A. ("NationsBank of Texas" and, collectively with The
Bank of New York ("BONY"), called "Custodians") serves as Custodian for the
assets of all Funds, except the international portfolios. NationsBank of Texas
is located at 1401 Elm Street, Dallas, Texas 75202, and is a wholly owned
subsidiary of NationsBank Corporation. In return for providing custodial
services to the Nations Funds Family, NationsBank of Texas is entitled to
receive, in addition to out-of-pocket expenses, fees at the rate of (i) $300,000
per annum, to be paid monthly in payments of $25,000 for custodian services for
up to and including 50 Funds; and (ii) $6,000 per annum, to be paid in equal
monthly payments, for custodian services for each additional Fund above 50
Funds.
BONY, Avenue des Arts, 35 1040 Brussels, Belgium, serves as Custodian for the
assets of the Nations International Equity Fund, Nations International Growth
Fund, Nations Emerging Markets Fund, Nations Pacific Growth Fund and Nations
Global Government Income Fund.
BONY has entered into an agreement with each of the Funds and NationsBank of
Texas, whereby BONY will serve as sub-custodian ("Sub-Custodian") for the assets
of all Funds except the international portfolios, for which BONY is already
serving as Custodian. BONY is located at 90 Washington Street, New York, New
York 10286. In return for providing sub-custodial services, BONY receives, in
addition to out of pocket expenses, fees at the rate of (i) 3/4 of one basis
point per annum on the aggregate net assets of all Nations' Non-Money Market
Funds up to $10 billion; and (ii) 1/2 of one basis point on the excess,
including all Nations' Money Market Funds.
First Data serves as transfer agent (the "Transfer Agent") for the Funds'
Primary Shares. The Transfer Agent is located at One Exchange Place, Boston,
Massachusetts 02109. NationsBank of Texas also serves as the sub-transfer agent
for each Fund's Primary Shares and is entitled to receive an annual fee of
$251,000 from First Data for performing such services.
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Price Waterhouse LLP serves as independent accountant to Nations Funds. Their
address is 160 Federal Street, Boston, Massachusetts 02110.
EXPENSES: The accrued expenses of each Fund are deducted from the Fund's total
accrued income before dividends are declared. These expenses include, but are
not limited to: fees paid to the Adviser, Stephens and First Data; taxes;
interest; fees (including fees paid to Nations Funds' trustees, directors and
officers); federal and state securities registration and qualification fees;
brokerage fees and commissions; costs of preparing and printing prospectuses for
regulatory purposes and for distribution to existing shareholders; charges of
the Custodians and Transfer Agent; certain insurance premiums; outside auditing
and legal expenses; costs of shareholder reports and shareholder meetings; other
expenses which are not expressly assumed by the Adviser, Stephens or First Data
under their respective agreements with Nations Funds; and any extraordinary
expenses. Any general expenses of Nations Fund Trust, Nations Fund, Inc. and/or
Nations Portfolios that are not readily identifiable as belonging to a
particular investment portfolio are allocated among all portfolios in the
proportion that the assets of a portfolio bears to the assets of Nations Fund
Trust, Nations Fund, Inc. and/or Nations Portfolios or in such other manner as
the Board of Trustees or the relevant Board of Directors deems appropriate.
Organization And History
The Funds are members of the Nations Funds Family, which consists of Nations
Fund Trust, Nations Fund, Inc., Nations Portfolios, Nations Institutional
Reserves and Nations LifeGoal Funds, Inc. The Nations Funds Family currently has
more than 52 distinct investment portfolios and total assets in excess of $27
billion.
NATIONS FUND TRUST: Nations Fund Trust was organized as a Massachusetts business
trust on May 6, 1985. Nations Fund Trust's fiscal year end is March 31; prior to
1996, Nations Fund Trust's fiscal year end was November 30. The Money Market
Funds currently offer six classes of shares -- Primary A Shares, Primary B
Shares, Investor A Shares, Investor B Shares, Investor C Shares and Daily
Shares. The Non-Money Market Funds currently offer five classes of
shares -- Primary A Shares, Primary B Shares, Investor A Shares, Investor B
(formerly Investor N) Shares and Investor C Shares. Certain Funds, however, do
not offer shares of each class. This Prospectus relates only to the Primary A
Shares of the following funds of Nations Fund Trust: Nations Government Money
Market Fund, Nations Tax Exempt Fund, Nations Value Fund, Nations Capital Growth
Fund, Nations Emerging Growth Fund, Nations Managed Index Fund, Nations Managed
SmallCap Index Fund, Nations Managed Value Index Fund, Nations Managed SmallCap
Value Index Fund, Nations Disciplined Equity Fund, Nations Equity Index Fund,
Nations Balanced Assets Fund, Nations Short-Intermediate Government Fund,
Nations Short-Term Income Fund, Nations Diversified Income Fund, Nations
Strategic Fixed Income Fund, Nations Municipal Income Fund, Nations Short-Term
Municipal Income Fund, Nations Intermediate Municipal Bond Fund, Nations Florida
Intermediate Municipal Bond Fund, Nations Georgia Intermediate Municipal Bond
Fund, Nations Maryland Intermediate Municipal Bond Fund, Nations North Carolina
Intermediate Municipal Bond Fund, Nations South Carolina Intermediate Municipal
Bond Fund, Nations Tennessee Intermediate Municipal Bond Fund, Nations Texas
Intermediate Municipal Bond Fund, Nations Virginia Intermediate Municipal Bond
Fund, Nations Florida Municipal Bond Fund, Nations Georgia Municipal Bond Fund,
Nations Maryland Municipal Bond Fund, Nations North Carolina Municipal Bond
Fund, Nations South Carolina Municipal Bond Fund, Nations Tennessee Municipal
Bond Fund, Nations Texas Municipal Bond Fund and Nations Virginia Municipal Bond
Fund. To obtain additional information regarding the Funds' other classes of
shares which may be available to you, contact your Institution (as defined
below) or Nations Funds at 1-800-765-2668.
Each share of Nations Fund Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of Nations
Fund Trust's Board of Trustees. Nations Fund Trust's Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of Nations Fund Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See Nations Fund Trust's SAI for examples of when the
1940 Act requires voting by fund.
As of July 15, 1997, NationsBank and its affiliates possessed or shared power to
dispose or vote with respect to more than 25% of the outstanding shares of
Nations Fund Trust and therefore could be considered to be a controlling person
of Nations Fund Trust for purposes of
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the 1940 Act. For more detailed information concerning the percentage of each
class or series of shares over which NationsBank and its affiliates possessed or
shared power to dispose or vote as of a certain date, see Nations Fund Trust's
SAI.
Nations Fund Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
Nations Fund Trust's Code of Regulations provides that special meetings of
shareholders shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of Nations Fund Trust entitled to
be voted at such meeting.
NATIONS FUND, INC.: Nations Fund, Inc. was incorporated in Maryland on December
13, 1983, but had no operations prior to December 15, 1986. Nations Fund, Inc.'s
fiscal year end is March 31; prior to 1996, Nations Fund, Inc.'s fiscal year end
was May 31. As of the date of this Prospectus, the authorized capital stock of
Nations Fund, Inc. consists of 420,000,000,000 shares of common stock, par value
of $.001 per share, which are divided into series or funds each of which
consists of separate classes of shares. This Prospectus relates only to the
Primary A Shares of the following funds of Nations Fund, Inc.: Nations Prime
Fund, Nations Treasury Fund, Nations Equity Income Fund, Nations International
Equity Fund, Nations International Growth Fund, Nations Small Company Growth
Fund, Nations U.S. Government Bond Fund and Nations Government Securities Fund.
To obtain additional information regarding the Funds' other classes of shares
which may be available to you, contact your Institution (as defined below) or
Nations Funds at 1-800-765-2668.
Shares of each fund and class have equal rights with respect to voting, except
that the holders of shares of a particular fund or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such fund
or class. In the event of dissolution or liquidation, holders of each class will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of that portion of the assets allocated to that class held in the
respective fund of Nations Fund, Inc., less (b) the liabilities of Nations Fund,
Inc. attributable to the respective fund or class or allocated among the funds
or classes based on the respective liquidation value of each fund or class.
Shareholders of Nations Fund, Inc. do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Fund, Inc. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Fund, Inc.
There are no preemptive rights applicable to any of Nations Fund, Inc.'s shares.
Nations Fund, Inc.'s shares, when issued, will be fully paid and non-assessable.
As of July 15, 1997, NationsBank and its affiliates possessed or shared power to
dispose of or vote with respect to more than 25% of the outstanding shares of
Nations Fund, Inc. and therefore could be considered to be a controlling person
of Nations Fund, Inc. for purposes of the 1940 Act. For more detailed
information concerning the percentage of each class or series over which
NationsBank and its affiliates possessed or shared power to dispose or vote as
of a certain date, see Nations Fund, Inc.'s SAI. It is anticipated that Nations
Fund, Inc. will not hold annual shareholder meetings on a regular basis unless
required by the 1940 Act or Maryland law.
NATIONS PORTFOLIOS: Nations Portfolios was incorporated in Maryland on January
23, 1995. Nations Portfolios' fiscal year end is March 31. As of the date of
this Prospectus, the authorized capital stock of Nations Portfolios consists of
150,000,000,000 shares of common stock, par value of $.001 per share, which are
divided into series or funds each of which consists of separate classes of
shares. This Prospectus relates only to the Primary A Shares of Nations Emerging
Markets Fund, Nations Pacific Growth Fund and Nations Global Government Income
Fund of Nations Portfolios. To obtain additional information regarding the
Funds' other classes of shares which may be available to you, contact your
Institution (as defined below) or Nations Funds at 1-800-765-2668.
Shares of a fund and class have equal rights with respect to voting, except that
the holders of shares of a fund or class will have the exclusive right to vote
on matters affecting only the rights of the holders of such fund or class. In
the event of dissolution or liquidation, holders of each class will receive pro
rata, subject to the rights of creditors, (a) the proceeds of the sale of that
portion of the assets allocated to that class held in the respective fund of
Nations Portfolios, less (b) the liabilities of Nations Portfolios attributable
to the respective fund or class or allocated among the funds or classes based on
the respective liquidation value of each fund or class.
Shareholders of Nations Portfolios do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all funds
voting together for election of directors may elect all of the members of the
Board of Directors of Nations Portfolios. Meetings of shareholders may be called
upon the request of 10% or more of the outstanding shares of Nations Portfolios.
There are no preemptive rights applicable to any of Nations Portfolios' shares.
Nations Portfolios' shares, when issued, will be fully paid and non-assessable.
As of July 15, 1997, NationsBank and its affiliates possessed or shared power to
dispose of or vote with respect to more than 25% of the outstanding shares of
Nations
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Portfolios and, therefore, could be considered to be a controlling person of
Nations Portfolios for purposes of the 1940 Act. For more detailed information
concerning the percentage of each class or series over which NationsBank and its
affiliates possessed or shared power to dispose or vote as of a certain date,
see Nations Portfolios' SAI. It is anticipated that Nations Portfolios will not
hold annual shareholder meetings on a regular basis unless required by the 1940
Act or Maryland law.
Because this Prospectus combines disclosures on three separate investment
companies, there is a possibility that one investment company could become
liable for a misstatement, inaccuracy or incomplete disclosure in this
Prospectus concerning the other investment company. Nations Fund Trust, Nations
Fund, Inc. and Nations Portfolios have entered into an indemnification agreement
that creates a right of indemnification from the investment company responsible
for any such misstatement, inaccuracy or incomplete disclosure that may appear
in this Prospectus.
PENDING LEGAL PROCEEDINGS: A purported class action lawsuit against, among
others, Nations Government Securities Fund and Nations Short-Intermediate
Government Fund was filed by Lawrence Bergelt on May 21, 1996. The complaint was
amended and consolidated on July 11, 1996 in the United States District Court
for the Middle District of Florida, Tampa Division by Mr. Bergelt and others in
an action against the two funds, NationsBank Corporation and certain of its
affiliates, Dean Witter Distributors and certain of its affiliates, and Stephens
Inc. (Case No. 94-995-Civ.-T-23E). As relevant to Nations Government Securities
Fund and Nations Short-Intermediate Government Fund, plaintiffs allege that,
among other things, defendants violated the Securities Exchange Act of 1934 and
various state securities fraud statutes by employing a scheme to defraud
plaintiffs into purchasing shares of the funds and making untrue statements of
material fact and omitting to state material facts in connection with sales of
shares of the funds. Plaintiffs further allege that, among other things,
defendants concealed the risks associated with such funds by blurring the
distinctions between banks and non-bank subsidiaries and by obscuring the
differences between traditional, federally insured bank products and uninsured,
non-depository products.
About Your Investment
How To Buy Shares
There is a minimum initial investment of $250,000 for each record holder; there
is no minimum subsequent investment.
Primary A Shares of the Funds may be sold to financial institutions (including
NationsBank and its affiliated and correspondent banks) and fee-based planners
acting on behalf of their customers, employee benefit plans, charitable
foundations, endowments and to other funds in the Nations Funds Family.
Primary A Shares are sold at net asset value without the imposition of a sales
charge. Financial institutions ("Institutions") acting on behalf of their
customers ("Customers") may establish certain procedures for processing
Customers' purchase orders and may charge their Customers for services provided
to them in connection with their investments.
Purchases of the Money Market Funds may be effected on days on which the Federal
Reserve Bank of New York is open for business (a "Bank Business Day"). Purchases
of the Non-Money Market Funds may be effected on days on which the New York
Stock Exchange (the "Exchange") is open for business (a "NYSE Business Day").
Unless otherwise specified, the term Business Day in this Prospectus refers to a
Bank Business Day with respect to a Money Market Fund, and a NYSE Business Day
with respect to a Non-Money Market Fund.
Nations Funds and Stephens reserve the right to reject any purchase order. The
issuance of Primary A Shares is recorded on the books of the Funds, and share
certificates are not issued. It is the responsibility of Institutions, when
applicable, to record beneficial ownership of Primary A Shares and to reflect
such ownership in the account statements provided to their Customers.
EFFECTIVE TIME OF PURCHASES -- MONEY MARKET FUNDS: Purchases will be effected
only when federal funds are available for investment on the Business Day the
purchase order is received by Stephens or by the Transfer Agent. A purchase
order must be received by Stephens or by the Transfer Agent by 3:00 p.m.,
Eastern time (12 noon, Eastern time, with respect to Nations Tax Exempt Fund and
Nations Government Money Market Fund). A purchase order received by Stephens or
the Transfer Agent after such time will not be accepted; notice thereof will be
given to the Institution or investor placing the order, and any funds received
will be returned promptly to the sending Institution or investor. If federal
funds are not available by 4:00 p.m., Eastern time, the order will be canceled.
Primary A Shares are purchased at the net asset value per share next
deter-
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mined after receipt of the order by Stephens or by the Transfer Agent.
EFFECTIVE TIME OF PURCHASES -- NON-MONEY MARKET FUNDS: Purchase orders for
Primary A Shares in the Non-Money Market Funds which are received by Stephens or
by the Transfer Agent before the close of regular trading hours on the Exchange
(currently 4:00 p.m., Eastern time) on any Business Day are priced according to
the net asset value determined on that day but are not executed until 4:00 p.m.,
Eastern time, on the Business Day on which immediately available funds in
payment of the purchase price are received by the Fund's Custodian. Such payment
must be received no later than 4:00 p.m., Eastern time, by the third Business
Day following receipt of the order. If funds are not received by such date, the
order will not be accepted and notice thereof will be given to the Institution
or investor placing the order. Payment for orders which are not received or
accepted will be returned after prompt inquiry to the sending Institution or
investor. Primary A Shares are purchased at the net asset value per share next
determined after receipt of the order by Stephens or by the Transfer Agent.
Institutions are responsible for transmitting orders for purchases of Primary A
Shares by their Customers, and for delivering required funds, on a timely basis.
It is Stephens' responsibility to transmit orders it receives to Nations Funds.
Institutions should be aware that during periods of significant economic or
market change, telephone transactions may be difficult to complete.
How To Redeem Shares
With respect to the Money Market Funds, redemption orders must be received on a
Business Day before 3:00 p.m., Eastern time (12 noon, Eastern time, with respect
to Nations Tax Exempt Fund and Nations Government Money Market Fund), and
payment will normally be wired the same day to the Institution or investor.
Nations Funds reserves the right to wire redemption proceeds within three
Business Days after receiving the redemption orders if, in the judgment of the
Adviser, an earlier payment could adversely impact a Fund. However, redemption
proceeds for shares purchased by check may not be remitted until at least 15
days after the date of purchase to ensure that the check has cleared; a
certified check, however, is deemed to be cleared immediately. Redemption orders
will not be accepted by Stephens or by the Transfer Agent after 3:00 p.m.,
Eastern time (12 noon, Eastern time, with respect to Nations Tax Exempt Fund and
Nations Government Money Market Fund) for execution on that Business Day.
With respect to the Non-Money Market Funds, redemption proceeds are normally
remitted in federal funds wired to the redeeming Institution or investor within
three Business Days following receipt of the order.
Institutions are responsible for transmitting redemption orders to Stephens or
to the Transfer Agent and for crediting their Customers' accounts with the
redemption proceeds on a timely basis. It is the responsibility of Stephens to
transmit orders it receives to Nations Funds. No charge for wiring redemption
payments is imposed by Nations Funds, although Institutions may charge their
Customer accounts for these or other services provided in connection with the
redemption of Primary A Shares and may establish additional procedures.
Information concerning any charges or procedures is available from the
Institutions. Redemption orders are effected at the net asset value per share
next determined after acceptance of the order by Stephens or by the Transfer
Agent.
Nations Funds may redeem a shareholder's Primary A Shares if the balance in such
shareholder's account with the Fund drops below $500 as a result of redemptions,
and the shareholder does not increase the balance to at least $500 on 60 days'
written notice. If a Customer has agreed with a particular Institution to
maintain a minimum balance in his or her account at the Institution, and the
balance in such Institution account falls below that minimum, the Customer may
be obliged to redeem all or a part of his or her Primary A Shares in the Funds
to the extent necessary to maintain the required minimum balance in such
Institution account. Nations Funds also may redeem shares involuntarily or make
payment for redemption in readily marketable securities or other property under
certain circumstances in accordance with the 1940 Act.
How To Exchange Shares
The exchange feature enables a shareholder of Primary A Shares of a Fund to
acquire Primary A Shares of another Fund when that shareholder believes that a
shift between Funds is an appropriate investment decision. An exchange of
Primary A Shares for Primary A Shares of another Fund is made on the basis of
the next calculated net asset value per share of each Fund after the exchange
order is received.
The Funds and each of the other funds of Nations Funds may limit the number of
times this exchange feature may be exercised by a shareholder within a specified
period of time. Also, the exchange feature may be terminated or revised at any
time by Nations Funds upon such notice as may be required by applicable
regulatory agencies (presently 60 days for termination or material revision),
provided that the exchange feature may be ter-
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minated or materially revised without notice under certain unusual
circumstances.
The current prospectus for each fund of Nations Funds describes its investment
objective and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement and any other conditions imposed by each fund. In the case of any
shareholder holding a share certificate or certificates, no exchanges may be
made until all applicable share certificates have been received by the Transfer
Agent and deposited in the shareholder's account. An exchange will be treated
for Federal income tax purposes the same as a redemption of shares, on which the
shareholder may realize a capital gain or loss. However, the ability to deduct
capital losses on an exchange may be limited in situations where there is an
exchange of shares within 90 days after the shares are purchased.
Nations Funds reserves the right to reject any exchange request. Only shares
that may legally be sold in the state of the investor's residence may be
acquired in an exchange. Only shares of a class that is accepting investments
generally may be acquired in an exchange.
If you have telephone exchange privileges, during periods of significant
economic or market change, such telephone exchanges may be difficult to
complete. In such event, shares may be exchanged by mailing your request
directly to the entity through which the original shares were purchased.
Investors should consult their Institution or Stephens for further information
regarding exchanges.
Primary A Shares may be exchanged by directing a request directly to the
Institution, if any, through which the original Primary A Shares were purchased
or in other cases Stephens or the Transfer Agent. Investors should consult their
Institution, Stephens, or the Transfer Agent for further information regarding
exchanges. Your exchange feature may be governed by your account agreement with
your Institution.
How The Funds Value Their Shares
The net asset value of a share of each class is calculated by dividing the total
value of its assets, less liabilities, by the number of shares in the class
outstanding. Shares of the Money Market Funds are valued as of 3:00 p.m.,
Eastern time (1:00 p.m., Eastern time, with respect to Nations Tax Exempt Fund
and Nations Government Money Market Fund), each Bank Business Day. Shares of the
Non-Money Market Funds are valued as of the close of regular trading on the
Exchange (currently 4:00 p.m., Eastern time) on each NYSE Business Day.
Currently, the days on which the Federal Reserve Bank of New York is closed
(other than weekends) are: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Memorial Day (observed), Independence Day, Labor Day, Columbus
Day, Thanksgiving Day and Christmas Day. Currently, the days on which the
Exchange is closed (other than weekends) are: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
The assets in the Money Market Funds are valued based upon the amortized cost
method. Although Nations Funds seeks to maintain the net asset value per share
of these Funds at $1.00, there can be no assurance that their net asset value
per share will not vary.
With respect to the Non-Money Market Funds, portfolio securities for which
market quotations are readily available are valued at market value. Short-term
investments that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities are valued at their fair
value following procedures approved by the Trustees or Directors.
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How Dividends And Distributions Are Made;
Tax Information
DIVIDENDS AND DISTRIBUTIONS
MONEY MARKET FUNDS: Dividends from net investment income of each of the Money
Market Funds are declared daily to shareholders at 3:00 p.m., Eastern time (1:00
p.m., Eastern time, with respect to Nations Tax Exempt Fund and Nations
Government Money Market Fund), on the day of declaration. Primary A Shares begin
earning dividends on the day the purchase order is executed and continue earning
dividends through and including the day before the redemption order is executed
(E.G., the settlement date). Dividends are paid within five Business Days after
the end of each month. Dividends are paid in cash within five Business Days
after a shareholder's complete redemption of his Primary A Shares in a Fund. To
the extent that there are any net short-term capital gains, they will be paid at
least annually.
NON-MONEY MARKET FUNDS: Dividends from net investment income are declared daily
and paid monthly by the Bond Funds. Dividends from net investment income are
also declared and paid monthly by Nations Capital Growth Fund, Nations
Disciplined Equity Fund, Nations Equity Income Fund, Nations Managed Index Fund,
Nations Value Fund and Nations Small Company Growth Fund. Dividends from net
investment income are declared and paid annually by Nations International Growth
Fund. Dividends from net investment income are declared and paid each calendar
quarter by all other Equity Funds, Index Funds and the Balanced Fund. Each
Fund's net realized capital gains (including net short-term capital gains) are
distributed at least annually.
Primary A Shares of the Bond Funds are eligible to begin earning dividends that
are declared on the day the purchase order is executed and continue to be
eligible for dividends through and including the day before the redemption order
is executed. Primary A Shares of the Equity Funds, Index Funds and the Balanced
Fund are eligible to receive dividends when declared, provided, however, that
the purchase order for such shares is received at least one day prior to the
dividend declaration and such shares continue to be eligible for dividends
through and including the day before the redemption order is executed.
The net asset value of Primary A Shares in the Funds will be reduced by the
amount of any dividend or distribution. Accordingly, dividends and distributions
on newly purchased shares represent, in substance, a return of capital. However,
such dividends and distributions would nevertheless be taxable. Dividends and
distributions are paid in cash within five Business Days of the end of the month
or quarter to which the dividend relates. Dividends are paid within five
Business Days after the end of each month. Dividends are paid in the form of
additional Primary A Shares of the same Fund unless the Customer or investor has
elected prior to the date of distribution to receive payment in cash. Such
election, or any revocation thereof, must be made in writing to the Fund's
Transfer Agent and will become effective with respect to dividends paid after
its receipt. Dividends and distributions payable to a shareholder are paid in
cash within five Business Days after a shareholder's complete redemption of his
or her Primary A Shares in a Fund.
TAX INFORMATION
Each of the Funds intends to qualify as a separate "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves a Fund of liability for Federal income tax to the extent
its earnings are distributed in accordance with the Code.
Each Fund intends to distribute substantially all of its investment company
taxable income and net tax-exempt income each taxable year. Such distributions
by a Fund of its net investment income (including net foreign currency gains)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss will be taxable as ordinary income to shareholders who
are not currently exempt from Federal income tax, whether such income is
received in cash or reinvested in additional shares. (Federal income tax for
distributions to an Individual Retirement Account are generally deferred under
the Code.)
Corporate shareholders in the Funds may be entitled to the dividends-received
deduction for distributions from those Funds investing in the stock of domestic
corporations to the extent of the total qualifying dividends received by the
distributing Fund. Corporate shareholders of Nations International Equity,
Nations Emerging Markets and Nations Pacific Growth Funds may be eligible for
the dividends-received deduction on the dividends (excluding the net capital
gains dividends) paid by these Funds to the extent that each such Fund's income
is derived from dividends (which, if received directly, would qualify for such
deduction) received from domestic corporations. In order to qualify for the
dividends-received deduction, a corporate shareholder must hold the fund shares
paying the dividends upon which the deduction is based for at least 46 days.
Substantially all of the net realized long-term capital gains of the Non-Money
Market Funds, if any, will be
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distributed at least annually to such Funds' shareholders. These Funds will
generally have no tax liability with respect to such gains, and the
distributions will be taxable to such shareholders who are not currently exempt
from Federal income tax as long-term capital gains, regardless of how long the
shareholders have held such Funds' shares and whether such gains are received in
cash or reinvested in additional shares. The Money Market Funds do not expect to
realize long-term capital gains and, therefore, do not expect to distribute any
capital gain dividends.
Each year, shareholders will be notified as to the amount and Federal tax status
of all dividends and capital gains paid during the prior year. Such dividends
and capital gains may also be subject to state and local taxes.
Dividends declared in October, November or December of any year payable to
shareholders of record on a specified date in such months will be deemed to have
been received by shareholders and paid by a Fund on December 31 of such year in
the event such dividends are actually paid during January of the following year.
Federal law requires Nations Funds to withhold 31% from any dividends (other
than exempt-interest dividends) paid by Nations Funds and/or redemptions
(including exchange redemptions) that occur in certain shareholder accounts if
the shareholder has not properly furnished a certified correct Taxpayer
Identification Number and has not certified that withholding does not apply. If
the Internal Revenue Service has notified Nations Funds that the Taxpayer
Identification Number listed on a shareholder account is incorrect according to
its records, or that the shareholder is subject to backup withholding, the Fund
is required by the Internal Revenue Service to withhold 31% of any dividend
(other than exempt-interest dividends) and/or redemption (including exchanges
and redemptions-in-kind). Amounts withheld are applied to the shareholder's
Federal tax liability, and a refund may be obtained from the Internal Revenue
Service if withholding results in overpayment of taxes. Federal law also
requires the Funds to withhold tax on dividends, distributions and proceeds from
the disposition of Fund shares paid to certain foreign shareholders.
Portions of each Fund's investment income may be subject to foreign income taxes
withheld at their source. Tax conventions between certain countries and the
United States may reduce or eliminate such taxes. Generally, if more than 50% of
the value of the total assets of each Fund consists of securities of foreign
issuers, it may elect to "pass through" to its shareholders these foreign taxes,
if any. Upon such an election, each shareholder will be required to include his
or her pro rata portion thereof in his or her gross income, but will be able to
deduct or (subject to various limitations) claim a foreign tax credit against
U.S. income tax for such amount.
NATIONS TAX EXEMPT FUND, NATIONS MUNICIPAL INCOME FUND, NATIONS SHORT-TERM
MUNICIPAL INCOME FUND, NATIONS INTERMEDIATE MUNICIPAL BOND FUND, THE STATE
INTERMEDIATE MUNICIPAL BOND FUNDS AND THE STATE MUNICIPAL BOND FUNDS
As regulated investment companies, each of these Funds is entitled to pass
through to their shareholders tax-exempt interest income ("exempt-interest
dividends") subject to certain conditions which these Funds intend to satisfy.
To the extent that any of these Funds earn taxable income or realize long-term
capital gains, distributions to shareholders from such sources will be subject
to Federal income tax. The policy of Nations Municipal Income Fund, Nations
Short-Term Municipal Income Fund, Nations Intermediate Municipal Bond Fund, the
State Intermediate Municipal Bond Funds and the State Municipal Bond Funds is to
pay to their shareholders an amount equal to at least 90% of their
exempt-interest income net of certain deductions and 90% of their investment
company taxable income. Nations Tax Exempt Fund does not intend to earn
investment company taxable income or long-term capital gains. Exempt-interest
dividends may be treated by shareholders as items of interest excludable from
their Federal gross income under Section 103(a) of the Code unless, under the
circumstances applicable to the particular shareholder, the exclusion would be
disallowed. (See Nations Fund Trust's SAI under "Additional Information
Concerning Taxes.") Distributions of net investment income by Nations Tax Exempt
Fund, Nations Municipal Income Fund, Nations Intermediate Municipal Bond Fund
and Nations Short-Term Municipal Income Fund may be taxable to investors under
state or local law even though a substantial portion of such distributions may
be derived from interest on tax-exempt obligations which, if realized directly,
would be exempt from such income taxes.
With respect to the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds, it is anticipated that exempt-interest dividends derived
from tax-exempt interest paid on municipal obligations of the pertinent state
and that state's political subdivisions, agencies, instrumentalities and
authorities, and certain other issuers, including Puerto Rico and Guam, will be
exempt from state income tax with respect to those states which impose a state
income tax. Florida and Texas do not impose income taxes, but Florida imposes a
tax upon intangible personal property which may apply to shares of Nations
Florida Intermediate Municipal Bond Fund and Nations Florida Municipal Bond Fund
held by residents of that state. Florida has issued a Technical Assistance
Advisement indicating that shares in such Funds will not be subject to Florida's
intangibles tax, subject to certain requirements which the Funds intend to
satisfy. See Nations Fund Trust's SAI for further details about state tax
treatment relevant to shareholders of these Funds.
In addition to annual disclosures as to Federal tax consequences of dividends
and distributions, shareholders of
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the State Intermediate Municipal Bond Funds and the State Municipal Bond Funds
will also be advised as to the state tax consequences of dividends and
distributions made each year.
The foregoing discussion is based on tax laws and regulations that were in
effect as of the date of this Prospectus and summarizes only some of the
important tax considerations generally affecting the Funds and their
shareholders. It is not intended as a substitute for careful tax planning.
Accordingly, potential investors should consult their tax advisors with specific
reference to their own tax situations. Further tax information is contained in
the SAIs.
Appendix A -- Portfolio Securities
The following are summary descriptions of certain types of instruments in which
a Fund may invest. The "How Objectives Are Pursued" section of this Prospectus
identifies each Fund's permissible investments, and the SAIs contain more
information concerning such investments.
ASSET-BACKED SECURITIES: Asset-backed securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset-backed
securities consist of both mortgage- and non-mortgage-backed securities.
Interests in pools of these assets may differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal paid at maturity or specified call dates. Conversely,
asset-backed securities provide periodic payments which may consist of both
interest and principal payments.
The life of an asset-backed security varies depending upon rate of the
prepayment of the underlying debt instruments. The rate of such prepayments will
be a function of current market interest rates and other economic and
demographic factors. For example, falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while rising interest
rates generally decrease the rate of prepayments. An acceleration in prepayments
in response to sharply falling interest rates will shorten the security's
average maturity and limit the potential appreciation in the security's value
relative to a conventional debt security. Consequently, asset-backed securities
may not be as effective in locking in high, long-term yields. Conversely, in
periods of sharply rising rates, prepayments are generally slow, increasing the
security's average life and its potential for price depreciation.
MORTGAGE-BACKED SECURITIES: Mortgage-backed securities represent an ownership
interest in a pool of mortgage loans.
Mortgage pass-through securities may represent participation interests in pools
of residential mortgage loans originated by U.S. governmental or private lenders
and guaranteed, to the extent provided in such securities, by the U.S.
Government or one of its agencies, authorities or instrumentalities. Such
securities, which are ownership interests in the underlying mortgage loans,
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semi-annually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.
The guaranteed mortgage pass-through securities in which a Fund may invest may
include those issued or guaranteed by GNMA, by FNMA and FHLMC. Such Certificates
are mortgage-backed securities which represent a partial ownership interest in a
pool of mortgage loans issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations. Such mortgage loans may have fixed or
adjustable rates of interest.
The average life of a mortgage-backed security is likely to be substantially
less than the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal invested far in advance of
the maturity of the mortgages in the pool.
The yield which will be earned on mortgage-backed securities may vary from their
coupon rates for the following reasons: (i) Certificates may be issued at a
premium or discount, rather than at par; (ii) Certificates may trade in the
secondary market at a premium or discount after issuance; (iii) interest is
earned and compounded monthly which has the effect of raising the effective
yield earned on the Certificates; and (iv) the actual yield of each Certificate
is affected by the prepayment of mortgages included in the mortgage pool
underlying the Certificates and the rate at which principal so prepaid is
reinvested. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium may result in a loss to the
Fund.
Mortgage-backed securities issued by private issuers, whether or not such
obligations are subject to guarantees by the private issuer, may entail greater
risk than
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obligations directly or indirectly guaranteed by the U.S. Government.
Collateralized Mortgage Obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class pass-
through securities are interests in a trust composed of Mortgage Assets and all
references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distribution on the multi-class pass-through securities.
Moreover, principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of the premium if any has been paid.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semiannual basis.
The principal and interest payments on the Mortgage Assets may be allocated
among the various classes of CMOs in several ways. Typically, payments of
principal, including any prepayments, on the underlying mortgages are applied to
the classes in the order of their respective stated maturities or final
distribution dates, so that no payment of principal is made on CMOs of a class
until all CMOs of other classes having earlier stated maturities or final
distribution dates have been paid in full.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class mortgage
securities. A Fund will only invest in SMBS that are obligations backed by the
full faith and credit of the U.S. Government. SMBS are usually structured with
two classes that receive different proportions of the interest and principal
distributions from a pool of mortgage assets. A Fund will only invest in SMBS
whose mortgage assets are U.S. Government Obligations.
A common type of SMBS will be structured so that one class receives some of the
interest and most of the principal from the Mortgage Assets, while the other
class receives most of the interest and the remainder of the principal. If the
underlying Mortgage Assets experience greater than anticipated prepayments of
principal, a Fund may fail to fully recoup its initial investment in these
securities. The market value of any class which consists primarily or entirely
of principal payments generally is unusually volatile in response to changes in
interest rates.
The average life of mortgage-backed securities varies with the maturities of the
underlying mortgage instruments. The average life is likely to be substantially
less than the original maturity of the mortgage pools underlying the securities
as the result of mortgage prepayments, mortgage refinancings, or foreclosures.
The rate of mortgage prepayments, and hence the average life of the
certificates, will be a function of the level of interest rates, general
economic conditions, the location and age of the mortgage and other social and
demographic conditions. Such prepayments are passed through to the registered
holder with the regular monthly payments of principal and interest and have the
effect of reducing future payments. Estimated average life will be determined by
the Adviser and used for the purpose of determining the average weighted
maturity and duration of the Funds. For additional information concerning
mortgage backed securities, see the related SAI.
The mortgage-backed securities in which the Funds invest are subject to
extension risk. This is the risk that when interest rates rise, prepayments of
the underlying obligations slow thereby lengthening duration and potentially
reducing the value of these securities. The debt securities held by the Funds
also may be subject to credit risk. Credit risk is the risk that the issuers of
securities in which a Fund invests may default in the payment of principal
and/or interest. Any such defaults or adverse changes in an issuer's financial
condition or credit rating may adversely affect the value of the Funds'
portfolio investments and, hence, the value of your investment in the
corresponding Fund.
NON-MORTGAGE ASSET-BACKED SECURITIES: Non-mortgage asset-backed securities
include interests in pools of receivables, such as motor vehicle installment
purchase obligations and credit card receivables. Such securities are generally
issued as pass-through certificates, which represent undivided fractional
ownership interests in the underlying pools of assets. Such securities also may
be debt instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt. Such securities also
may include instruments issued by certain trusts, partnerships or other special
purpose issuers, including pass-through certificates representing participations
in, or debt instruments backed by, the securities and other assets owned by such
issuers.
Non-mortgage-backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities.
The purchase of non-mortgage-backed securities raises considerations peculiar to
the financing of the instruments underlying such securities. For example, most
organizations that issue asset-backed securities relating to motor vehicle
installment purchase obligations perfect
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their interests in their respective obligations only by filing a financing
statement and by having the servicer of the obligations, which is usually the
originator, take custody thereof. In such circumstances, if the servicer were to
sell the same obligations to another party, in violation of its duty not to do
so, there is a risk that such party could acquire an interest in the obligations
superior to that of the holders of the asset-backed securities. Also, although
most such obligations grant a security interest in the motor vehicle being
financed, in most states the security interest in a motor vehicle must be noted
on the certificate of title to perfect such security interest against competing
claims of other parties. Due to the larger number of vehicles involved, however,
the certificate of title to each vehicle financed, pursuant to the obligations
underlying the asset-backed securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the asset-backed securities. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and Federal laws give
the motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related asset-backed securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and Federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike most
other asset-backed securities, credit card receivables are unsecured obligations
of the card holder.
BANK INSTRUMENTS: Bank instruments consist mainly of certificates of deposit,
time deposits and bankers' acceptances. Nations Prime Fund generally limits
investments in bank instruments to (a) U.S. dollar-denominated obligations of
U.S. banks which have total assets exceeding $1 billion and which are members of
the Federal Deposit Insurance Corporation (including obligations of foreign
branches of such banks) or of the 75 largest foreign commercial banks in terms
of total assets; or (b) U.S. dollar-denominated bank instruments issued by other
banks believed by the Adviser to present minimal credit risks. For purposes of
the foregoing, total assets may be determined on the basis of the bank's most
recent annual financial statements.
The Funds (except Nations Tax Exempt Fund and Nations International Growth Fund)
will limit their investments in bank obligations so they do not exceed 25% of
each Fund's total assets at the time of purchase. Nations Small Company Growth
Fund and Nations U.S. Government Bond Fund will limit their investments in
interest-bearing savings deposits of commercial and savings banks to 5% of total
assets. Nations Prime Fund may invest up to 100% of its assets in obligations
issued by banks. Nations Prime Fund may invest in U.S. dollar-denominated
obligations issued by foreign branches of domestic banks ("Eurodollar"
obligations) and domestic branches of foreign banks ("Yankee dollar"
obligations).
Eurodollar, Yankee dollar, and other foreign obligations involve special
investment risks, including the possibility that liquidity could be impaired
because of future political and economic developments, the obligations may be
less marketable than comparable domestic obligations of domestic issuers, a
foreign jurisdiction might impose withholding taxes on interest income payable
on such obligations, deposits may be seized or nationalized, foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal of and interest on such obligations,
the selection of foreign obligations may be more difficult because there may be
less publicly available information concerning foreign issuers, there may be
difficulties in enforcing a judgment against a foreign issuer or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign issuers may differ from those applicable to domestic
issuers. In addition, foreign banks are not subject to examination by U.S.
Government agencies or instrumentalities.
BORROWINGS: When a Fund borrows money, the net asset value of a share may be
subject to greater fluctuation until the borrowing is paid off. The Funds may
borrow money from banks for temporary purposes in amounts of up to one-third of
their respective total assets, provided that borrowings in excess of 5% of the
value of the Funds' total assets must be repaid prior to the purchase of
portfolio securities. Pursuant to line of credit arrangements, certain of the
Funds may borrow primarily for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities.
Reverse repurchase agreements and dollar roll transactions may be considered to
be borrowings. When a Fund invests in a reverse repurchase agreement, it sells a
portfolio security to another party, such as a bank or broker/dealer, in return
for cash, and agrees to buy the security back at a future date and price.
Reverse repurchase agreements may be used to provide cash to satisfy unusually
heavy redemption requests without having to sell portfolio securities, or for
other temporary or emergency purposes. In addition, certain of the Funds may use
reverse repurchase agreements for the purpose of investing the proceeds in
tri-party repurchase agreements. Generally, the effect of such a transaction is
that the Funds can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement, while
they will be able to keep the interest income associated with those portfolio
securities. Such transactions are only advantageous if the interest cost to the
Funds of the reverse repurchase
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transaction is less than the cost of obtaining the cash otherwise.
At the time a Fund enters into a reverse repurchase agreement, it may establish
a segregated account with its custodian bank in which it will maintain cash,
U.S. Government Securities or other liquid high grade debt obligations equal in
value to its obligations in respect of reverse repurchase agreements. Reverse
repurchase agreements involve the risk that the market value of the securities
the Funds are obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. In addition, there is a risk of delay
in receiving collateral or securities or in repurchasing the securities covered
by the reverse repurchase agreement or even of a loss of rights in the
collateral or securities in the event the buyer of the securities under the
reverse repurchase agreement files for bankruptcy or becomes insolvent. The Fund
only enters into reverse repurchase agreements (and repurchase agreements) with
counterparties that are deemed by the Adviser to be credit worthy. Reverse
repurchase agreements are speculative techniques involving leverage, and are
subject to asset coverage requirements if the Funds do not establish and
maintain a segregated account (as described above). Under the requirements of
the 1940 Act, the Funds are required to maintain an asset coverage (including
the proceeds of the borrowings) of at least 300% of all borrowings. Depending on
market conditions, the Funds' asset coverage and other factors at the time of a
reverse repurchase, the Funds may not establish a segregated account when the
Adviser believes it is not in the best interests of the Funds to do so. In this
case, such reverse repurchase agreements will be considered borrowings subject
to the asset coverage described above.
Dollar roll transactions consist of the sale by a Fund of mortgage-backed or
other asset-backed securities, together with a commitment to purchase similar,
but not identical, securities at a future date, at the same price. In addition,
a Fund is paid a fee as consideration for entering into the commitment to
purchase. If the broker/dealer to whom a Fund sells the security becomes
insolvent, the Fund's right to purchase or repurchase the security may be
restricted; the value of the security may change adversely over the term of the
dollar roll; the security that the Fund is required to repurchase may be worth
less than the security that the Fund originally held, and the return earned by
the Fund with the proceeds of a dollar roll may not exceed transaction costs.
Currently, Nations Treasury Fund has entered into an arrangement whereby it
reinvests the proceeds of a reverse repurchase agreement in a tri-party
repurchase agreement and receives the net interest rate differential.
COMMERCIAL INSTRUMENTS: Commercial instruments consist of short-term U.S.
dollar-denominated obligations issued by domestic corporations or foreign
corporations and domestic and foreign commercial banks. The Nations Prime Fund
will limit purchases of commercial instruments to instruments which: (a) if
rated by at least two NRSROs, are rated in the highest rating category for
short-term debt obligations given by such organizations, or if only rated by one
such organization, are rated in the highest rating category for short-term debt
obligations given by such organization; or (b) if not rated, are (i) comparable
in priority and security to a class of short-term instruments of the same issuer
that has such rating(s), or (ii) of comparable quality to such instruments as
determined by Nations Fund, Inc.'s Board of Directors on the advice of the
Adviser.
Investments by a Fund in commercial paper will consist of issues rated in a
manner consistent with such Fund's investment policies and objective. In
addition, a Fund may acquire unrated commercial paper and corporate bonds that
are determined by the Adviser at the time of purchase to be of comparable
quality to rated instruments that may be acquired by a Fund. Commercial
instruments include variable-rate master demand notes, which are unsecured
instruments that permit the indebtedness thereunder to vary and provide for
periodic adjustments in the interest rate, and variable- and floating-rate
instruments.
CONVERTIBLE SECURITIES, PREFERRED STOCK, AND WARRANTS: Certain of the Funds may
invest in debt securities convertible into or exchangeable for equity
securities, preferred stocks or warrants. Preferred stocks are securities that
represent an ownership interest in a corporation providing the owner with claims
on a company's earnings and assets before common stock owners, but after bond or
other debt security owners. Warrants are options to buy a stated number of
shares of common stock at a specified price any time during the life of the
warrants.
FIXED INCOME INVESTING: The performance of the fixed income debt component of a
Fund's portfolio depends primarily on interest rate changes, the average
weighted maturity of the portfolio and the quality of the securities held. The
debt component of a Fund's portfolio will tend to decrease in value when
interest rates rise and increase when interest rates fall. A Fund's share price
and yield depend, in part, on the maturity and quality of its debt instruments.
FOREIGN CURRENCY TRANSACTIONS: Certain of the Funds may enter into foreign
currency exchange transactions to convert foreign currencies to and from the
U.S. dollar. A Fund either enters into these transactions on a spot (I.E., cash)
basis at the spot rate prevailing in
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the foreign currency exchange market, or uses forward contracts to purchase or
sell foreign currencies. A forward foreign currency exchange contract is an
obligation by a Fund to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract.
Foreign currency hedging transactions are an attempt to protect a Fund against
changes in foreign currency exchange rates between the trade and settlement
dates of specific securities transactions or changes in foreign currency
exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. Neither spot transactions nor forward
foreign currency exchange contracts eliminate fluctuations in the prices of a
Fund's portfolio securities or in foreign exchange rates, or prevent loss if the
prices of these securities should decline.
A Fund will generally enter into forward currency exchange contracts only under
two circumstances: (i) when the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, to "lock" in the U.S.
dollar price of the security; and (ii) when the Adviser believes that the
currency of a particular foreign country may experience a substantial movement
against another currency. Under certain circumstances, the Fund may commit a
substantial portion of its portfolio to the execution of these contracts. The
Adviser will consider the effects such a commitment would have on the investment
program of the Fund and the flexibility of the Fund to purchase additional
securities. Although forward contracts will be used primarily to protect the
Fund from adverse currency movements, they also involve the risk that
anticipated currency movements will not be accurately predicted.
FOREIGN SECURITIES: Foreign securities include debt and equity obligations
(dollar- and non-dollar-denominated) of foreign corporations and banks as well
as obligations of foreign governments and their political subdivisions (which
will be limited to direct government obligations and government-guaranteed
securities). Such investments may subject a Fund to special investment risks,
including future political and economic developments, the possible imposition of
withholding taxes on income (including interest, distributions and disposition
proceeds), possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such obligations. In addition, foreign issuers in general may be
subject to different accounting, auditing, reporting, and record keeping
standards than those applicable to domestic companies, and securities of foreign
issuers may be less liquid and their prices more volatile than those of
comparable domestic issuers.
Investments in foreign securities may present additional risks, whether made
directly or indirectly, including the political or economic instability of the
issuer or the country of issue and the difficulty of predicting international
trade patterns. In addition, there may be less publicly available information
about a foreign company than about a U.S. company. Further, foreign securities
markets are generally not as developed or efficient as those in the U.S., and in
most foreign markets volume and liquidity are less than in the United States.
Fixed commissions on foreign securities exchanges are generally higher than the
negotiated commissions on U.S. exchanges, and there is generally less government
supervision and regulation of foreign securities exchanges, brokers, and
companies than in the United States. With respect to certain foreign countries,
there is a possibility of expropriation or confiscatory taxation, limitations on
the removal of funds or other assets, or diplomatic developments that could
affect investments within those countries. Because of these and other factors,
securities of foreign companies acquired by a Fund may be subject to greater
fluctuation in price than securities of domestic companies.
The Funds may invest indirectly in the securities of foreign issuers through
sponsored or unsponsored ADRs and EDRs or other securities representing
securities of companies based in countries other than the United States.
Transactions in these securities may not necessarily be settled in the same
currency as the underlying securities which they represent. Ownership of
unsponsored ADRs, ADSs, GDRs and EDRs may not entitle the Funds to financial or
other reports from the issuer, to which it would be entitled as the owner of
sponsored ADRs, ADSs, GDRs or EDRs. Generally, ADRs and ADSs, in registered
form, are designed for use in the U.S. securities markets. GDRs are designed for
use in both the U.S. and European securities markets. EDRs, in bearer form, are
designed for use in European securities markets. ADRs, ADSs, GDRs and EDRs also
involve certain risks of other investments in foreign securities.
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS: Certain of the Funds may
attempt to reduce the overall level of investment risk of particular securities
and attempt to protect a Fund against adverse market movements by investing in
futures, options and other derivative instruments. These include the purchase
and writing of options on securities (including index options) and options on
foreign currencies, and investing in futures contracts for the purchase or sale
of instruments based on financial indices, including interest rate indices or
indices of U.S. or foreign government, equity or fixed income securities
("futures contracts"), options on futures contracts, forward contracts and swaps
and
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swap-related products such as interest rate swaps, currency swaps, caps, collars
and floors.
The use of futures, options, forward contracts and swaps exposes a Fund to
additional investment risks and transaction costs. If the Adviser incorrectly
analyzes market conditions or does not employ the appropriate strategy with
respect to these instruments, a Fund could be left in a less favorable position.
Additional risks inherent in the use of futures, options, forward contracts and
swaps include: imperfect correlation between the price of futures, options and
forward contracts and movements in the prices of the securities or currencies
being hedged; the possible absence of a liquid secondary market for any
particular instrument at any time; and the possible need to defer closing out
certain hedged positions to avoid adverse tax consequences. A Fund may not
purchase put and call options which are traded on a national stock exchange in
an amount exceeding 5% of its net assets. Further information on the use of
futures, options and other derivative instruments, and the associated risks, is
contained in the SAIs.
GUARANTEED INVESTMENT CONTRACTS: Guaranteed investment contracts, investment
contracts or funding agreements (each referred to as a "GIC") are investment
instruments issued by highly rated insurance companies. Pursuant to such
contracts, a Fund may make cash contributions to a deposit fund of the insurance
company's general or separate accounts. The insurance company then credits to a
Fund guaranteed interest. The insurance company may assess periodic charges
against a GIC for expense and service costs allocable to it, and the charges
will be deducted from the value of the deposit fund. The purchase price paid for
a GIC generally becomes part of the general assets of the issuer, and the
contract is paid from the general assets of the issuer.
A Fund will only purchase GICs from issuers which, at the time of purchase, meet
quality and credit standards established by the Adviser. Generally, GICs are not
assignable or transferable without the permission of the issuing insurance
companies, and an active secondary market in GICs does not currently exist.
Also, a Fund may not receive the principal amount of a GIC from the insurance
company on seven days' notice or less, at which point the GIC may be considered
to be an illiquid investment.
ILLIQUID SECURITIES: Certain securities may be sold only pursuant to certain
legal restrictions, and may be difficult to sell. The Money Market Funds will
not hold more than 10% of the value of their respective net assets in securities
that are illiquid or such lower percentage as may be required by the states in
which the appropriate Fund sells its shares. The Non-Money Market Funds will not
hold more than 15% of the value of their respective net assets in securities
that are illiquid or such lower percentage as may be required by the states in
which the appropriate Fund sells its shares. Repurchase agreements, time
deposits and GICs that do not provide for payment to a Fund within seven days
after notice, and illiquid restricted securities are subject to the limitation
on illiquid securities. In addition, interests in privately arranged loans
acquired by the Nations Prime Fund, the State Intermediate Municipal Bond Funds
and the State Municipal Bond Funds may be subject to this limitation.
If otherwise consistent with their investments objective and policies, certain
Funds may purchase securities that are not registered under the Securities Act
of 1933, as amended (the "1933 Act") but which can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the 1933 Act, or which
were issued under section 4(2) of the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by a Fund's Board of Trustees or
Board of Directors or the Adviser, acting under guidelines approved and
monitored by such Fund's Board, after considering trading activity, availability
of reliable price information and other relevant information, that an adequate
trading market exists for that security. To the extent that, for a period of
time, qualified institutional or other buyers cease purchasing such restricted
securities pursuant to Rule 144A or otherwise, the level of illiquidity of a
Fund holding such securities may increase during such period.
INTEREST RATE TRANSACTIONS: In order to attempt to protect the value of their
portfolios from interest rate fluctuations, certain of the Funds may enter into
various hedging transactions, such as interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps involve the exchange
by a Fund with another party of their respective commitments to pay or receive
interest, E.G., an exchange of floating-rate payments for fixed-rate payments. A
Fund will enter into a swap transaction on a net basis, I.E. the payment
obligations of the Fund and the counterparty will be netted out with the Fund
receiving or paying, as the case may be, only the net amount of the two payment
obligations. A Fund will segregate, on a daily basis, cash or liquid high
quality debt securities with a value at least equal to the Fund's net
obligations, if any, under a swap agreement.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor. The Adviser expects to enter into these
transactions on behalf of a Fund primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipated purchasing at a later
date rather than for speculative purposes. A Fund will not sell interest rate
caps or floors that it does not own.
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LOWER-RATED DEBT SECURITIES: Certain of the Funds may invest in lower-rated debt
securities. Lower rated, high-yielding securities are those rated "Ba" or "B" by
Moody's or "BB" or "B" by S&P which are commonly referred to as "junk bonds."
These bonds provide poor protection for payment of principal and interest.
Lower-quality bonds involve greater risk of default or price changes due to
changes in the issuer's creditworthiness than securities assigned a higher
quality rating. These securities are considered to have speculative
characteristics and indicate an aggressive approach to income investing.
The market for lower-rated securities may be thinner and less active than that
for higher quality securities, which can adversely affect the price at which
these securities can be sold. If market quotations are not available, these
lower-rated securities will be valued in accordance with procedures established
by the Funds' Boards, including the use of outside pricing services. Adverse
publicity and changing investor perceptions may affect the ability of outside
pricing services used by a Fund to value its portfolio securities, and a Fund's
ability to dispose of these lower-rated bonds.
The market prices of lower-rated securities may fluctuate more than higher-rated
securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates. During an economic
downturn or a prolonged period of rising interest rates, the ability of issuers
of lower quality debt to service their payment obligations, meet projected
goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower-rated securities, the Adviser will
try to minimize the risks inherent in investing in lower-rated debt securities
by engaging in credit analysis, diversification, and attention to current
developments and trends affecting interest rates and economic conditions. The
Adviser will attempt to identify those issuers of high-yielding securities whose
financial condition is adequate to meet future obligations, have improved, or
are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated securities,
but they may not be attractive to as many buyers. Each Fund's policies regarding
lower-rated debt securities is not fundamental and may be changed at any time
without shareholder approval.
MONEY MARKET INSTRUMENTS: With respect to Non-Money Market Funds, the term
"money market instruments" refers to instruments with remaining maturities of
one year or less. With respect to Money Market Funds, the term "money market
instruments" refers to instruments with remaining maturities of 397 days or less
or obligations with greater maturities, provided such obligations are subject to
demand features or resets which are less than 397 days. Money market instruments
may include, among other instruments, certain U.S. Treasury Obligations, U.S.
Government Obligations, bank instruments, commercial instruments, repurchase
agreements and municipal securities. Such instruments are described in this
Appendix A.
MUNICIPAL SECURITIES: The two principal classifications of municipal securities
are "general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are normally
issued by special purpose public authorities. If the issuer of moral obligation
bonds is unable to meet its debt service obligations from current revenues, it
may draw on a reserve fund, the restoration of which is a moral commitment but
not a legal obligation of the state or municipality which created the issuer.
Municipal securities may include variable- or floating-rate instruments issued
by industrial development authorities and other governmental entities. While
there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments purchased by a
Fund will be determined by the Adviser to be of comparable quality at the time
of purchase to instruments rated "high quality" by any major rating service.
Where necessary to ensure that an instrument is of comparable "high quality," a
Fund will require that an issuer's obligation to pay the principal of the note
may be backed by an unconditional bank letter or line of credit, guarantee, or
commitment to lend.
Municipal Securities may include participations in privately arranged loans to
municipal borrowers, some of which may be referred to as "municipal leases."
Generally such loans are unrated, in which case they will be determined by the
Adviser to be of comparable quality at the time of purchase to rated instruments
that may be
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acquired by a Fund. Frequently, privately arranged loans have variable interest
rates and may be backed by a bank letter of credit. In other cases, they may be
unsecured or may be secured by assets not easily liquidated. Moreover, such
loans in most cases are not backed by the taxing authority of the issuers and
may have limited marketability or may be marketable only by virtue of a
provision requiring repayment following demand by the lender. Such loans made by
a Fund may have a demand provision permitting the Fund to require payment within
seven days. Participations in such loans, however, may not have such a demand
provision and may not be otherwise marketable. To the extent these securities
are illiquid, they will be subject to each Fund's limitation on investments in
illiquid securities. Recovery of an investment in any such loan that is illiquid
and payable on demand may depend on the ability of the municipal borrower to
meet an obligation for full repayment of principal and payment of accrued
interest within the demand period, normally seven days or less (unless a Fund
determines that a particular loan issue, unlike most such loans, has a readily
available market). As it deems appropriate, the Adviser will establish
procedures to monitor the credit standing of each such municipal borrower,
including its ability to meet contractual payment obligations.
Municipal Securities may include units of participation in trusts holding pools
of tax-exempt leases. Municipal participation interests may be purchased from
financial institutions, and give the purchaser an undivided interest in one or
more underlying municipal security. To the extent that municipal participation
interests are considered to be "illiquid securities," such instruments are
subject to each Fund's limitation on the purchase of illiquid securities.
Municipal leases and participating interests therein which may take the form of
a lease or an installment sales contract, are issued by state and local
governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying leases are exempt from Federal
income tax.
Municipal participation interests may be purchased from financial institutions,
and give the purchaser an undivided interest in one or more underlying Municipal
Securities. To the extent that municipal participation interests are considered
to be "illiquid securities" such instruments are subject to each Fund's
limitation on the purchase of illiquid securities.
In addition, certain of the Funds may acquire "stand-by commitments" from banks
or broker/dealers with respect to municipal securities held in their portfolios.
Under a stand-by commitment, a dealer would agree to purchase at a Fund's option
specified Municipal Securities at a specified price. A Fund will acquire
stand-by commitments solely to facilitate portfolio liquidity and does not
intend to exercise its rights thereunder for trading purposes.
A Fund may invest in short-term securities, in commitments to purchase such
securities on a "when-issued" basis, and reserves the right to engage in "put"
transactions on a daily, weekly or monthly basis. Securities purchased on a
"when-issued" basis are subject to settlement within 45 days of the purchase
date. The interest rate realized on these securities is fixed as of the purchase
date and no interest accrues to the Fund before settlement. These securities are
subject to market fluctuation due to changes in market interest rates. The Funds
will only commit to purchase a security on a when-issued basis with the
intention of actually acquiring the security and will segregate sufficient
liquid assets to meet its purchase obligation.
A "put" feature permits a Fund to sell a security at a fixed price prior to
maturity. The underlying Municipal Securities subject to a put may be sold at
any time at the market rates. However, unless the put was an integral part of
the security as originally issued, it may not be marketable or assignable.
Therefore, the put would only have value to the Fund. In certain cases a premium
may be paid for put features. A premium paid will have the effect of reducing
the yield otherwise payable on the underlying security. The purpose of engaging
in transactions involving puts is to maintain flexibility and liquidity to
permit the Fund to meet redemptions and remain as fully invested as possible in
municipal securities. The Funds will limit their put transactions to
institutions which the Adviser believes present minimal credit risk, pursuant to
guidelines adopted by the Boards. Nations Tax Exempt Fund may invest more than
40% of its portfolio in securities with put or demand features guaranteed by
banks and other financial institutions. Accordingly, changes in the credit
quality of these institutions could cause losses to the Fund and affect its
share price.
Although the Funds do not presently intend to do so on a regular basis, each may
invest more than 25% of its total assets in municipal securities the interest on
which is paid solely from revenues of similar projects if such investment is
deemed necessary or appropriate by the Adviser. To the extent that more than 25%
of a Fund's total assets are invested in Municipal Securities that are payable
from the revenues of similar projects, a Fund will be subject to the peculiar
risks presented by such projects to a greater extent than it would be if its
assets were not so concentrated.
Since each of the State Intermediate Municipal Bond Funds and the State
Municipal Bond Funds will invest primarily in securities issued by issuers
located in one state, each of these Funds is susceptible to changes in value due
to political and economic factors affecting that state's issuers. A comparable
municipal bond fund which is not concentrated in obligations issued by issuers
located in one state would be less susceptible to these risks. If any issuer of
securities held by one of these Funds is unable to meets its financial
obligations, that
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Fund's income, capital, and liquidity may be adversely affected.
The fourth most populous state, Florida, rated "Aa" by Moody's and "AA" by both
S&P and Fitch, has been and continues to be a leading tourist and retiree
destination. Florida's growing population and manageable debt load are just two
of the factors that will help Florida remain a solid investment. Led by the
service, construction and trade sectors, job growth in Florida has rebounded
from the lows of 1991-1992 and is projected to be almost double the national
average for 1996. Tourism was back in 1995 after it had suffered in the prior
two years due to hurricane Andrew and a rash of violent crimes involving foreign
tourists.
Georgia's state government is enjoying very robust fiscal health as evidenced by
the ratings given to General Obligation Bonds issued on April 1, 1997, which
were rated by Moody's as "Aaa," "AA+ with a positive outlook" by Standard &
Poors, and "AAA" by Fitch. The Federal Reserve Bank of Atlanta predicts that
1997 will be a very good year for Georgia in terms of economic growth. However,
a comparison to economic performance for the state in 1996 will be somewhat
distorted because of the estimated $3 billion boost to the state economy from
the 1996 Summer Olympic Games. The Olympic Games served to value-add to the
basic strength of the Georgia economy, which is expected to continue to flourish
in the near term by the expansion of existing business and by the continued
in-migration of new business from around the United States and from around the
world.
Maryland is one of the wealthiest states in the U.S. and has been rated "Aa" by
Moody's, and "AA" rating by S&P, despite the contraction of government and
defense related industries. Maryland's economic base is highly diversified with
a lower than average dependence on manufacturing. Slow growth in Maryland is
expected to continue, as government cutbacks and downsizing reduce the
employment opportunities within the state. Debt ratios are moderate and, with
Maryland ranked sixth in per capita income, it's no surprise that income taxes
and highway use taxes provide the vast majority of support for general
obligation debt. As defense cutbacks continue, Maryland's dependence on income
taxes could depress growth within the state below national levels.
North Carolina, rated "Aaa" by Moody's, and "AAA" by both S&P and Fitch, has
benefited from an inflow of people as well as businesses. This is due in part to
North Carolina's affordable housing, above-average growth in per capita income
and below-average cost of doing business. North Carolina's textile industry has
begun to give way to the high-tech and financial sectors, as evidenced by the
title of "Banking Center of the South." Consequently, high wage job growth has
been expanding at a pace greater than national averages and is expected to
continue to do so for the foreseeable future.
The dominance of the manufacturing sector has been both a positive and a
negative for South Carolina. On the positive side, the expansion of
manufacturing, specifically autos and related parts, has lessened the impact of
the naval base closure in Charleston and provided a much needed infusion of new
jobs. On the negative side, the cyclical nature of South Carolina's
manufacturing economy has kept per capita income below national and regional
levels. That said, South Carolina's low debt burden, strong security
arrangements and lack of credit extension have led to a "Aaa" rating by Moody's,
"AAA" rating by S&P and a "AAA" rating by Fitch, for the state. Combine this
with a conservative plan of finance, and South Carolina looks to be in a very
strong financial position, despite its reliance on the manufacturing sector.
Tennessee's very low debt burden, nearly exclusive use of general obligation
debt and conservative financial policies all combine to give the state of
Tennessee a "Aaa" rating by Moody's, "AA+" rating by S&P, and a "AAA" rating by
Fitch. Tennessee's economy remains in a developing mode, as the state continues
to shift its growth in manufacturing output to autos (Tennessee ranks third in
the nation in automobile production) and related products from textiles.
Tennessee relies on sales tax revenues as a main source of funds. This could
prove to be a limiting factor were it not for Tennessee's strong pattern of job
growth and growing population.
Texas has proven its ability to adapt and rebound to a changing economic
environment, both within the state and abroad. Texas has also historically taken
a conservative approach to financial management, as is reflected in the state's
"Aa" rating by Moody's, "AA" rating by S&P, and "AA+" rating by Fitch. Although
Texas has consistently led the U.S. in employment growth, unemployment in Texas
is above the national average. This is due, in part, to the heavy migration into
the state (in 1994 Texas replaced New York as the second most populous state).
The mix of job growth in Texas provides a strong base for sustainable growth
because the new jobs are largely in industries with bright prospects for future
growth, such as knowledge-based services and manufacturing.
The state of Virginia has earned its "Aa2" rating by Moody's and "AA" rating by
S&P and Fitch, by having a low relative tax rate, high per capita income and
strong growth in service sector jobs. A very high share of Virginia's population
is college educated, so it's no surprise that Virginia has the highest per
capita income of any of the southern states. Virginia has experienced strong
growth in the labor force and benefits from a low unemployment rate. Although it
has a large exposure to defense and related industries, Virginia's prudent
financial management and low debt burden should help to insulate it from any
government cutbacks in those areas.
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There can be no assurance that the economic conditions on which the above
ratings for a specific state are based will continue or that particular bond
issues may not be adversely affected by changes in economic or political
conditions. More detailed information about matters relating to each of the
State Intermediate Municipal Bond Funds and State Municipal Bond Funds is
contained in Nations Fund Trust's SAI.
OTHER INVESTMENT COMPANIES: Each Fund may invest in securities issued by other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and permissible under the 1940 Act. As
a shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.
Pursuant to an exemptive order issued by the SEC, the Nations' Non-Money Market
Funds may purchase shares of Nations' Money Market Funds.
REAL ESTATE INVESTMENT TRUSTS: A real estate investment trust ("REIT") is a
managed portfolio of real estate investments which may include office buildings,
apartment complexes, hotels and shopping malls. An Equity REIT holds equity
positions in real estate, and it seeks to provide its shareholders with income
from the leasing of its properties, and with capital gains from any sales of
properties. A Mortgage REIT specializes in lending money to developers of
properties, and passes any interest income it may earn to its shareholders.
REITs may be affected by changes in the value of the underlying property owned
or financed by the REIT, while Mortgage REITs also may be affected by the
quality of credit extended. Both Equity and Mortgage REITs are dependent upon
management skill and may not be diversified. REITs also may be subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free pass-through of income under the
Code.
REPURCHASE AGREEMENTS: A repurchase agreement involves the purchase of a
security by a Fund and a simultaneous agreement (generally with a bank or
broker/dealer) to repurchase that security from the Fund at a specified price
and date or upon demand. This technique offers a method of earning income on
uninvested cash. A risk associated with repurchase agreements is the failure of
the seller to repurchase the securities as agreed, which may cause a Fund to
suffer a loss if the market value of such securities declines before they can be
liquidated on the open market. Repurchase agreements with a duration of more
than seven days are considered illiquid securities and are subject to the limit
stated above. A Fund may enter into joint repurchase agreements jointly with
other investment portfolios of Nations Funds.
SECURITIES LENDING: To increase return on portfolio securities, the Funds may
lend their portfolio securities to broker/dealers and other institutional
investors pursuant to agreements requiring that the loans be continuously
secured by collateral equal at all times in value to at least the market value
of the securities loaned. There is a risk of delay in receiving collateral or in
recovering the securities loaned or even a loss of rights in the collateral
should the borrower of the securities fail financially. However, loans are made
only to borrowers deemed by the Adviser to be credit worthy and when, in their
judgment, the income to be earned from the loan justifies the attendant risks.
The aggregate of all outstanding loans of a Fund may not exceed 33% of the value
of its total assets. Cash collateral received by a Nations Fund may be invested
in a Nations' Money Market Fund.
SHORT-TERM TRUST OBLIGATIONS: Certain of the Funds may invest in short-term
obligations issued by special purpose trusts established to acquire specific
issues of government or corporate securities. Such obligations entitle the Fund
to a proportional fractional interest in payments received by the trust, either
from the underlying securities owned by the trust or pursuant to other
arrangements entered into by the trust. A trust may enter into a swap
arrangement with a highly rated investment firm, pursuant to which the trust
grants to the counterparty certain of its rights with respect to the securities
owned by the trust in exchange for the obligation of the counterparty to make
payments to the trust according to an established formula. The trust obligations
purchased by the Fund must satisfy the quality and maturity requirements
generally applicable to the Fund pursuant to Rule 2a-7 under the 1940 Act.
STOCK INDEX, INTEREST RATE AND CURRENCY FUTURES CONTRACTS: Certain of the Funds
may purchase and sell futures contracts and related options with respect to
non-U.S. stock indices, non-U.S. interest rates and foreign currencies, that
have been approved by the CFTC for investment by U.S. investors, for the purpose
of hedging against changes in values of a Fund's securities or changes in the
prevailing levels of interest rates or currency exchange rates. The contracts
entail certain risks, including but not limited to the following: no assurance
that futures contracts transactions can be offset at favorable prices; possible
reduction of a Fund's total return due to the use of hedging; possible lack of
liquidity due to daily limits on price fluctuation; imperfect correlation
between the contracts and the securities or currencies being hedged; and
potential losses in excess of the amount invested in the futures contracts
themselves.
Trading on foreign commodity exchanges presents additional risks. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risks than trading on
domestic exchanges. For example,
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some foreign exchanges are principal markets for which no common clearing
facility exists and a trader may look only to the broker for performance of the
contract. In addition, unless a Fund hedges against fluctuations in the exchange
rate between the U.S. dollar and the currencies in which trading is done on
foreign exchanges, any profits that such Fund might realize could be eliminated
by adverse changes in the exchange rate, or the Fund could incur losses as a
result of those changes.
U.S. GOVERNMENT OBLIGATIONS: U.S. Government Obligations consist of marketable
securities and instruments issued or guaranteed by the U.S. Government or any of
its agencies, authorities or instrumentalities. Direct obligations are issued by
the U.S. Treasury and include all U.S. Treasury instruments. U.S. Treasury
Obligations differ only in their interest rates, maturities and time of
issuance. Obligations of U.S. Government agencies, authorities and
instrumentalities are issued by government-sponsored agencies and enterprises
acting under authority of Congress. Although obligations of federal agencies,
authorities and instrumentalities are not debts of the U.S. Treasury, some are
backed by the full faith and credit of the U.S. Treasury, such as direct
pass-through certificates of the Government National Mortgage Association; some
are supported by the right of the issuer to borrow from the U.S. Government,
such as obligations of Federal Home Loan Banks, and some are backed only by the
credit of the issuer itself, such as obligations of the Federal National
Mortgage Association. No assurance can be given that the U.S. Government would
provide financial support to government-sponsored instrumentalities if it is not
obligated to do so by law.
The market value of U.S. Government Obligations may fluctuate due to
fluctuations in market interest rates. As a general matter, the value of debt
instruments, including U.S. Government Obligations, declines when market
interest rates increase and rises when market interest rates decrease. Certain
types of U.S. Government Obligations are subject to fluctuations in yield or
value due to their structure or contract terms.
VARIABLE- AND FLOATING-RATE INSTRUMENTS: Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic and foreign banks and
corporations may carry variable or floating rates of interest. Such instruments
bear interest rates which are not fixed, but which vary with changes in
specified market rates or indices, such as a Federal Reserve composite index. A
variable-rate demand instrument is an obligation with a variable or floating
interest rate and an unconditional right of demand on the part of the holder to
receive payment of unpaid principal and accrued interest. An instrument with a
demand period exceeding seven days may be considered illiquid if there is no
secondary market for such security.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD COMMITMENT SECURITIES: The purchase of
new issues of securities on a "when-issued," "delayed delivery" or "forward
commitment" basis occurs when the payment for and delivery of securities take
place at a future date. Because actual payment for and delivery of such
securities generally take place 15 to 45 days after the purchase date,
purchasers of such securities bear the risk that interest rates on debt
securities at the time of delivery may be higher or lower than those contracted
for on the security purchased.
Appendix B -- Description Of Ratings
The following summarizes the highest six ratings used by S&P for corporate and
municipal bonds. The first four ratings denote investment grade securities.
AAA -- This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA -- Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.
BB, B -- Bonds rated BB and B are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB represents the lowest
degree of speculation and B a higher degree of speculation. While such
bonds will likely have some quality and protective characteris-
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tics, these are outweighed by large uncertainties or major risk exposures
to adverse conditions.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's for corporate
and municipal bonds. The first four ratings denote investment grade securities.
Aaa -- Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A -- Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds that are rated Baa are considered medium grade obligations,
I.E., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds
rated Aa through B. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category. With regard to municipal bonds, those bonds
in the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aa1, A1 or Baa1,
respectively.
The following summarizes the highest four ratings used by D&P for bonds, each of
which denotes that the securities are investment grade:
AAA -- Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA -- Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest, but may vary slightly from time to time
because of economic conditions.
A -- Bonds that are rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
BBB -- Bonds that are rated BBB have below average protection factors but
still are considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major categories.
The following summarizes the highest four ratings used by Fitch for bonds, each
of which denotes that the securities are investment grade:
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
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A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable-rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality,
with ample margins of protection although not so large as in the preceding
group.
The following summarizes the two highest ratings used by S&P for short-term
municipal notes:
SP-1 -- Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which
denotes that the securities are investment grade, are D-1, D-2 and D-3. D&P
employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-1+ indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is judged to be "outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations." D-1 indicates very high
certainty of timely payment. Liquidity factors are excellent and supported by
good fundamental protection factors. Risk factors are considered to be minor.
D-1- indicates high certainty of timely payment. Liquidity factors are strong
and supported by good fundamental protection factors. Risk factors are very
small. D-2 indicates good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. D-3 indicates satisfactory liquidity and other protection factors which
qualify the issue as investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
The following summarizes the two highest rating categories used by Fitch for
short-term obligations:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree
than issues rated F-1+.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of senior short-term obligations. Issuers
rated Prime-2 (or related supporting institutions) are considered to have a
strong capacity for repayment of senior short-term obligations. This will
normally be evidenced by many of the characteristics of issuers rated Prime-1,
but to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
For commercial paper, D&P uses the short-term debt ratings described above.
For commercial paper, Fitch uses the short-term debt ratings described above.
BankWatch ratings are based upon a qualitative and quantitative analysis of all
segments of the organization including, where applicable, holding company and
operating subsidiaries. BankWatch ratings do not constitute a recommendation to
buy or sell securities of any of these companies. Further, BankWatch does not
suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term rat-
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ings specifically assess the likelihood of untimely payment of principal or
interest over the term to maturity of the rated instrument. The following are
the four investment grade ratings used by BankWatch for long-term debt:
AAA -- The highest category; indicates ability to repay principal and
interest on a timely basis is extremely high.
AA -- The second highest category; indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
A -- The third highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.
BBB -- The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however,
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 -- The highest category; indicates a very high likelihood that
principal and interest will be paid on a timely basis.
TBW-2 -- The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree
of safety is not as high as for issues rated "TBW-1".
TBW-3 -- The lowest investment grade category; indicates that while more
susceptible to adverse developments (both internal and external) than
obligations with higher ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 -- The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the four highest long-term ratings used by IBCA:
AAA -- Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
AA -- Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions
may increase investment risk albeit not very significantly.
A -- Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.
BBB -- Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial
conditions are more likely to lead to increased investment risk than for
obligations in other categories.
A plus or minus sign may be appended to a rating below AAA to denote relative
status within major rating categories.
The following summarizes the two highest short-term debt ratings used by IBCA:
A1+ -- When issues possess a particularly strong credit feature.
A1 -- Obligations supported by the highest capacity for timely repayment.
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