<PAGE> 1
[NATIONS FUNDS LOGO]
Annual Report For The
Year Ended March 31, 1998
[PICTURE OF TREE]
Investments For A Lifetime(SM)
lifeGoals
LifeGoal
Income & Growth
Portfolio
LifeGoal
Balanced Growth
Portfolio
LifeGoal
Growth
Portfolio
<PAGE> 2
[BACKGROUND DEPICTING BASKETS]
This Report is submitted for
the general information of
shareholders of Nations Funds.
This material must be preceded or
accompanied by a current Nations
Funds prospectus.
Nations Funds Distributor:
Stephens Inc. Stephens Inc., which
is not affiliated with NationsBank,
N.A., is not a bank, and securities
offered by it are not guaranteed by
any bank or insured by the FDIC.
Stephens Inc., member NYSE, SIPC.
Nations Funds Investment Adviser:
NationsBanc Advisors, Inc.
Nations Funds Investment Sub-
Advisers: TradeStreet Investment
Associates, Inc., Gartmore Global
Partners, Boatmen's Capital
Management, Inc. and Marsico
Capital Management, LLC.
- -----------------
[DOWNWARD ARROW]
NOT FDIC-
INSURED
- -----------------
May Lose Value
- -----------------
No Bank Guarantee
- -----------------
<PAGE> 3
Presidents'
Message
Dear Shareholder:
The past 12 months have been very rewarding for many
investors. Even with domestic markets feeling the
effects of the Asian financial crisis, the Standard &
Poor's 500 Composite Stock Price Index (S&P 500
Index) -- a widely known indicator of stock market
activity -- returned 47.98%.*
Even though the markets have experienced recent
success, the prudent investor realizes these conditions
cannot continue indefinitely. While the markets have
continued to perform well during the first three months
of 1998, we encourage you to consider:
-- BUILDING A DIVERSIFIED PORTFOLIO. A portfolio
comprised of different types of
investments -- stocks, bonds, money market
instruments -- has the potential to serve you best
in volatile markets.
-- CHOOSING AN INVESTMENT STRATEGY THAT COMPLEMENTS
YOUR LIFESTYLE AND FINANCIAL OBJECTIVES, and
maintaining that strategy as you pursue your
investment goals.
-- INVESTING FOR THE LONG TERM. If you can afford to
invest throughout inevitable market fluctuations,
you should benefit since historically, market prices
have generally gone up over the long term. This is
often a better strategy than attempting to "time"
the market.
-- INVESTING ON A REGULAR BASIS. This technique, known
as dollar-cost averaging, may enable you to buy more
shares when prices are lower and fewer when prices
are higher. Systematic investing generally provides
an easy, disciplined way to increase your assets.
Such a strategy does not assure a profit and does not
protect against loss in declining markets. Since
this strategy involves continuous investment in
securities regardless of fluctuating price levels,
you should carefully consider your financial ability
to continue your purchases through periods of
declining price levels.
Following these guidelines may help you create an
investment portfolio with the potential to make the
most of current market conditions, as well as those to
come.
With Nations Funds as a component of that portfolio,
your investment is part of over $33 billion in assets
under management. We are very pleased with the overall
performance of the Funds over the past 12 months.
Please refer to the individual fund commentary for
performance results.
NEW OPPORTUNITIES FOR YOUR DIVERSIFIED PORTFOLIO
We have continued to expand the Nations Funds family of
funds, including the addition of two new growth funds
managed by Tom Marsico, one of
* The S&P 500 Index is an unmanaged index of 500 widely
held common stocks. It is unavailable for investment.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
<PAGE> 4
Presidents'
Message continued...
the most respected portfolio managers in the industry.
Mr. Marsico is widely known in the investment community
for having managed the Janus Twenty Fund and Janus
Growth and Income Fund; during his tenure of nearly 10
years at Janus, these Funds grew from $7 million in
assets to more than $7 billion.
In addition, we created Nations Annuity Trust, which
consists of eight investment portfolios that serve as
underlying investment vehicles for annuity products.
One of those products, Nations Variable Annuity issued
by Hartford Life Insurance Company, is now available
for your long-term tax-deferred investing needs.
RECOGNITION FOR SUPERIOR SHAREHOLDER SERVICES
The Nations Funds product line and its performance,
however, lacks importance if it isn't backed by
helpful, professional services to its shareholders.
That's why, among all the Funds' accomplishments this
year, we are particularly proud of the recognition the
industry bestowed on Nations Funds.
In its first year as a participant in the annual survey
conducted by DALBAR, Inc. -- an independent research
firm that measures customer service and establishes
benchmarks in the financial services industry --
Nations Funds was honored with the Key Honors Award for
superior customer service. This award "designates those
firms that demonstrate their commitment to the
shareholder by providing consistently solid service."
NATIONS FUNDS PROVIDES INVESTMENTS FOR A LIFETIME
We want to thank you for your confidence in Nations
Funds, and for making them part of your investment
strategy. As we strive to provide an ever-diverse range
of investment products, we recognize that the
strongest, most important asset is you, the
shareholder.
Sincerely,
<TABLE>
<S> <C>
/s/ A. Max Walker /s/ Robert H. Gordon
A. MAX WALKER ROBERT H. GORDON
PRESIDENT AND CHAIRMAN PRESIDENT
OF THE BOARD NATIONSBANC ADVISORS, INC.
</TABLE>
March 31, 1998
P.S.: If you have any questions or comments on your
annual report or the information in it, please contact
us at 1-800-321-7854 or send us a message through the
Nations Funds Web Site at
www.nationsbank.com/nationsfunds.
<PAGE> 5
Table
Of
Contents
<TABLE>
<S> <C>
NATIONS FUNDS SPECTRUM 2
ECONOMIC OVERVIEW 4
PORTFOLIO MANAGER COMMENTARY
Nations LifeGoal Income and Growth Portfolio 6
Nations LifeGoal Balanced Growth Portfolio 10
Nations LifeGoal Growth Portfolio 15
FINANCIAL STATEMENTS
Schedules of Investments 20
Statements of Assets and Liabilities 23
Statements of Operations 25
Statements of Changes in Net Assets 26
Schedules of Capital Stock Activity 28
Financial Highlights 30
Notes to Financial Statements 36
---------------------------------------------------------------------------------
NATIONS FUNDS [DALBAR KEY HONORS LOGO]
RECOGNIZED FOR DALBAR, Inc., is a well-respected research firm
OUTSTANDING that measures customer service levels and
CUSTOMER SERVICE establishes benchmarks in the financial services
industry.
In recognition of our
commitment to retail
shareholders through
consistently providing
superior customer service,
Nations Funds was awarded
DALBAR Key Honors in 1997.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
The
Nations Funds
Family At A Glance
STABILITY
- ---------------- CURRENT INCOME
- ----------------------------------------------------------------------------------
GROWTH & INCOME
-----------------------
MONEY SHORTER INTERMEDIATE LONGER TERM LARGE CAPITALIZATION
MARKET MATURITY MATURITY DOMESTIC VALUE FUNDS
FUNDS BOND FUNDS BOND FUNDS AND GLOBAL
BOND FUNDS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - Nations - Nations Short- - Nations - Nations Global - Nations
Prime Fund Intermediate Strategic Fixed Government Value Fund
Government Income Fund Income Fund
- - Nations Government Fund - Nations
Money Market - Nations - Nations Managed
Fund - Nations Government Diversified Value Index
Short-Term Securities Fund Income Fund Fund
- - Nations Income Fund
Treasury Fund - Nations - Nations - Nations
- - Nations Tax - Nations Short- Intermediate U.S. Government Equity Income
Exempt Fund Term Municipal Municipal Bond Fund Fund
Income Fund Bond Fund
- Nations - Nations
- Nations Municipal Balanced Assets
State-Specific Income Fund Fund
Intermediate
Municipal Bond - Nations
Funds State-Specific
Long-Term
Municipal Bond
Funds
</TABLE>
POTENTIAL RETURN
RISK (VARIABILITY)
2
<PAGE> 7
[NATIONS FUNDS LOGO]
Investments For A Lifetime(SM)
<TABLE>
<CAPTION>
GROWTH & INCOME
- -------------------------
GROWTH
- ----------------------------------------------------------
AGGRESSIVE GROWTH
-------------------------------------------------------------------------------
LARGE LARGE MID SMALL
CAPITALIZATION CAPITALIZATION INTERNATIONAL CAPITALIZATION CAPITALIZATION REGION-SPECIFIC
FUNDS GROWTH FUNDS EQUITY FUNDS FUNDS FUNDS INTERNATIONAL FUNDS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- - Nations - Nations - Nations - Nations - Nations - Nations
Marsico Marsico Focused International Emerging Small Company Emerging
Growth Equities Fund Growth Fund Growth Fund Growth Fund Markets Fund
& Income
Fund - Nations - Nations - Nations - Nations
Disciplined International Managed Pacific Growth
- - Nations Equity Fund Equity Fund SmallCap Fund
Managed Index Fund
Index Fund - Nations
Capital Growth - Nations
Fund Managed
SmallCap
Value Index
Fund
</TABLE>
The Nations Funds family also includes Nations Equity Index Fund, which seeks
investment results that correspond, before fees and expenses, to the total
return of the Standard and Poor's 500 Composite Stock Price Index.
LIFEGOAL PORTFOLIOS
- - LifeGoal Income and Growth Portfolio
- - LifeGoal Balanced Growth Portfolio
- - LifeGoal Growth Portfolio
3
<PAGE> 8
Economic
Overview
For the 12-month period ended March 31, 1998, economic
conditions in the United States were stellar, fueling a
steady rise in the financial markets and giving
investors plenty to cheer about.
Economic activity was robust, and the pace of growth
for the year was the fastest of the current expansion,
which is now entering its eighth year. With business
booming, corporate profits rose by more than 10%.
Nearly three million new jobs were created, sending the
national unemployment rate down to a 30-year low of
4.6%. What's more, in this high employment environment,
U.S. workers have enjoyed rising wages.
Fortunately, the inflationary impact of rising labor
costs has been more than offset by other strong forces.
In fact, overall inflation was almost nonexistent for
the reporting period, with the Consumer Price Index,
the most commonly used measure of inflation at the
retail level, up less than 2%. Meanwhile, wholesale
inflation actually dropped over the past 12 months.
What explains the economic balancing act that allows
for continual growth without the threat of inflation?
The answer is that the United States is benefiting from
a moderate economic expansion, driven by capital
spending that is expanding capacity rather than
pressuring it. Productivity gains have been impressive,
and inflation is being subdued by increasingly global
markets for labor and products, along with a freer
world trade environment. As long as these trends remain
in place, our economy should continue to grow while
experiencing stable prices for goods and services. We
remain bullish about long-term economic prospects in
the United States.
These ideal economic conditions have helped propel the
financial markets to new significant highs. During the
past 12 months, the Dow Jones Industrial Average* broke
through the 7,000 and 8,000 barriers, closing the
period at 8,799.81 -- up over 35%. Even more amazing is
that the Dow soared by over 20% for the third year in a
row, an unprecedented feat for the blue-chip average.
All other domestic stock indexes rose as well, some
higher than others. By all measures, the past year was
a rewarding one for stock investors.
* The Dow Jones Industrial Average is a price-weighted
index of 30 of the largest, most widely held stocks
traded on the New York Stock Exchange. It is
unmanaged and unavailable for investment.
Source for all statistical data -- TradeStreet
Investment Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
4
<PAGE> 9
Economic
Overview continued...
With news on the inflation front remaining positive,
the bond market also performed well during the period.
Interest rates drifted to lower levels and bond values
rose accordingly. This translated into attractive
results for bond funds, with total returns generally
ranging from 9% to 12% for the period.
Looking ahead, the next several months will likely be
dominated by news about the financial crisis in Asia
and its impact on U.S. companies. However, we do not
expect the so-called "Asian contagion" to cause U.S.
economic conditions to deteriorate. We believe the
positive cyclical themes of 1997 -- moderate growth,
low inflation and continued profit growth -- will
remain intact in the year ahead, and we remain
optimistic that the expansion will continue
uninterrupted.
The U.S. economy has climbed to a level envied by most
other countries in the world. For stock investors in
particular, the view from this lofty perch is
spectacular. Could our markets soar to even higher
levels? Yes, as long as favorable conditions remain in
place.
But investors must remember that stock markets do not
go up indefinitely. Today, our challenge is to fight
off the euphoria that can often accompany a bull market
and remind ourselves that investing is a long-term
endeavor. Historically, stocks have risen over time,
but there have been plenty of ups and downs along the
way. The next stock market correction may be out there,
even if we can't see any dark clouds yet.
On behalf of Nations Funds shareholders, we will keep
our eye on the horizon.
E. KEITH WIRTZ, CFA
CHIEF INVESTMENT OFFICER
TRADESTREET INVESTMENT ASSOCIATES, INC.
March 31, 1998
5
<PAGE> 10
Nations
LifeGoal Income and Growth
Portfolio Portfolio Manager's Commentary*
IN THE FOLLOWING INTERVIEW, MR. WIRTZ SHARES HIS VIEWS
ON NATIONS LIFEGOAL INCOME AND GROWTH PORTFOLIO'S
PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 1998
AND HIS CURRENT OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGERS PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND
E. Keith Wirtz, CFA, is PHILOSOPHY.
Co-Portfolio Manager of Nations Nations LifeGoal Income and Growth Portfolio is the most
LifeGoal Income and Growth conservative of the three Nations LifeGoal Funds. While
Portfolio and Chief Investment allocating a relatively small percentage of assets to stock
Officer of TradeStreet funds to pursue some growth potential, the Portfolio invests
Investment Associates, Inc., primarily in bond funds to provide current income potential
the investment sub-adviser to and help reduce the risk of a pure stock investment. By
the Portfolio. diversifying investments across other Nations Funds mutual
C. Thomas Clapp, CFA, is funds, Nations LifeGoal Income and Growth Portfolio gives
Co-Portfolio Manager of Nations investors the opportunity to participate in short- to
LifeGoal Income and Growth intermediate-term bond funds, money market funds, large- and
Portfolio and Director of the small-capitalization domestic stock funds and international
Equity Management Group for stock funds.
TradeStreet Investment WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
Associates, Inc. REPORTING PERIOD?
INVESTMENT OBJECTIVE During the 12-month period ended March 31, 1998, investors
The Portfolio seeks current enjoyed a nearly ideal economic environment in which to make
income and modest growth to investment decisions. The United States economy benefited
protect against inflation and from a combination of steady growth, low inflation, falling
to preserve purchasing power. interest rates, low unemployment, rising wages and stellar
PERFORMANCE REVIEW corporate profits. In addition, optimism that U.S. fiscal
For the 12-month period ended policy would result in a balanced federal budget for fiscal
March 31, 1998, Nations year 1999 contributed to investor enthusiasm.
LifeGoal Income and Growth Against this encouraging backdrop, U.S. stock market indexes
Portfolio Primary A Shares posted increases ranging from approximately 35% to 50% for
provided a total return of the period. Bond market returns were also positive,
13.56%. approaching 10% -- good by historical standards and the best
performance for fixed-income investments since 1995.
IN BROAD TERMS, HOW DID THE VARIOUS ASSET CLASSES PERFORM
DURING THE PERIOD?
In general, these were the performance trends among the
major asset classes:
-- Stocks outperformed bonds
-- Domestic stocks outperformed international stocks
-- Domestic bonds outperformed international bonds
-- Large-capitalization stocks outperformed
small-capitalization stocks
-- Growth stocks outperformed value stocks
-- Bonds outperformed money market securities
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
Source for all statistical data -- TradeStreet Investment
Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
6
<PAGE> 11
Nations
LifeGoal Income and Growth
Portfolio Portfolio Manager's Commentary continued...
<TABLE>
<S> <C>
CAN YOU DESCRIBE THE ASSET ALLOCATION PROCESS AND HOW THE
PORTFOLIO WAS POSITIONED AT THE BEGINNING OF THE REPORTING
PERIOD?
We use a structured, disciplined process to determine the
appropriate asset allocation for Nations LifeGoal Income and
Growth Portfolio. Quantitative models allow us to develop
anticipated returns and profiles for each asset class. We
also analyze historical relationships among asset classes in
varying market environments. Using this information, we aim
to allocate the Portfolio's assets as efficiently as
possible -- which means seeking to provide the highest
return potential for a given level of risk, while staying
true to the Portfolio's investment objective.
In keeping with its emphasis on current income, the
Portfolio is designed so that a minimum of 50% and a maximum
of 90% of its assets are invested in bond funds. At the
beginning of the reporting period, the Portfolio's
allocation to bond funds was 70% -- a neutral weighting
relative to our target ranges. Of this 70% weighting, 55%
was invested in Nations Short-Term Income Fund and 15% was
invested in Nations Short-Intermediate Government Fund.**
The Portfolio's strategic target allocation to domestic
stock funds ranges from 10% to 30%. At the beginning of the
period, 20% of the Portfolio's assets were invested in
Nations Equity Income Fund -- a neutral position.
For added growth potential, the Portfolio may invest up to
10% of its assets in international stock funds. At the
beginning of the reporting period, 10% of the Portfolio's
assets (the maximum allocation allowed) was invested in
Nations International Equity Fund to take advantage of
attractive valuations we perceived in non-U.S. stock
markets.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S ASSET
ALLOCATION DURING THE REPORTING PERIOD?
We made two significant shifts during the reporting period.
One, we reduced the Portfolio's international stock fund
exposure by 5% in order to increase its domestic stock fund
weighting. Two, we took a more aggressive stance with regard
to the U.S. stock market, shifting 10% out of Nations Equity
Income Fund and into the more growth-oriented Nations
Disciplined Equity Fund.
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL
RISKS, INCLUDING FOREIGN TAXATION, CURRENCY RISKS, RISKS
ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS
AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
**Portfolio holdings were current as of March 31, 1998, are
subject to change and may not be representative of current
holdings.
</TABLE>
7
<PAGE> 12
Nations
LifeGoal Income and Growth
Portfolio Portfolio Manager's Commentary continued...
<TABLE>
<S> <C>
WHICH ASSET ALLOCATION DECISIONS HELPED PORTFOLIO
PERFORMANCE?
In absolute terms, Portfolio returns were strong. The
Portfolio captured the robust performance of the domestic
stock market through its investment in Nations Equity Income
Fund and Nations Disciplined Equity Fund. In addition, the
Portfolio was well positioned to participate in the positive
gains of the bond market, thanks to its significant
allocations to Nations Short-Term Income Fund and Nations
Short-Intermediate Government Fund. Our strategy of
underweighting money market funds, which underperformed
among domestic asset classes, also helped overall Portfolio
returns.
WHICH ASSET ALLOCATION DECISIONS HAD A NEGATIVE IMPACT ON
PORTFOLIO PERFORMANCE?
Because of the relatively weak performance of international
stocks, the allocation to Nations International Equity Fund
detracted from overall Portfolio returns for the period.
In terms of the Portfolio's fixed-income holdings, the lack
of exposure to longer-term bonds slightly hindered returns.
In a bull market for bonds, securities with longer
maturities tend to benefit the most from falling interest
rates. By design, however, the fixed-income component of
Nations LifeGoal Income and Growth Portfolio has a short- to
intermediate-term investment horizon.
LOOKING AHEAD, WHAT INVESTMENT OPPORTUNITIES DO YOU
ANTICIPATE AND HOW ARE YOU POSITIONING THE PORTFOLIO TO TAKE
ADVANTAGE OF THEM?
Overall, we remain optimistic about the U.S. economy. We see
nothing on the horizon that suggests the current business
expansion will be impeded. However, even though we expect
growth to continue, the pace of growth may slow somewhat. We
expect corporate profit growth to be more moderate, and
after three consecutive calendar years of double-digit
increases, we believe stock market returns are likely to be
in single digits for the remainder of 1998.
Slower growth means that inflationary pressures should
remain subdued, keeping interest rates low. In such an
environment, we expect bond market returns to be competitive
with stock market returns. This should benefit the
Portfolio, which is designed with a strategic bias toward
fixed-income investments.
On the international front, we believe the worst of the
Asian crisis has already occurred. While we continue to
monitor the region's stock markets carefully, in the long
run we do not expect current developments in Asia to
threaten the global economy or derail the current bull
market. In fact, with stock markets in Asia likely to bottom
out over the coming year, 1998 could provide an outstanding
buying opportunity for aggressive investors with a long-term
investment horizon.
</TABLE>
8
<PAGE> 13
Nations
LifeGoal Income and Growth
Portfolio Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period LifeGoal Income and Lehman Aggregate Bond
(Fiscal Year Covered) Growth $11,650 Index $11,470
<S> <C> <C>
Oct. 15 1996 10000 10000
1996 10208 10230
10259 10242
10767 10619
11110 10971
1997 11099 11294
Mar. 31 1998 11650 11470
</TABLE>
Investor B Shares (as of 3/31/98)*
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period LifeGoal Income
(Fiscal Year Covered) and Growth $10,033 Lehman Aggregate Bond Index $10,518
<S> <C> <C>
Aug. 7 1997 10000 10000
10071 10061
1997 10050 10357
Mar. 31 1998 10033 10518
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
Since Inception
(10/15/96 through 3/31/98) 11.03%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations LifeGoal Income and
Growth Portfolio from the date each
class of shares was first offered.
Figures for the Lehman Aggregate Bond
Index, which is an unmanaged index
comprised of the Government Corporate
Bond Index, the Asset-Backed Securities
Index and the Mortgage-Backed
Securities Index and includes U.S.
Treasury issues, agency issues,
corporate bond issues and
mortgage-backed issues, include
reinvestment of dividends. It is
unavailable for investment. The
performance shown reflects the
performance of Primary A and Investor B
Shares. The performance of Investor A
and Investor C Shares may vary based on
the differences in sales loads and fees
paid by the shareholders investing in
each class.
Nations LifeGoal Income and Growth
Portfolio's Primary A, Investor A and
Investor C Shares commenced investment
operations on October 2, 1996. Shares
were offered to the public on October
15, 1996.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
Since Inception NAV CDSC*
(8/7/97 through
3/31/98) 5.33% 0.33%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PRIMARY A INVESTOR A INVESTOR B INVESTOR C
Inception Date 10/15/96 10/15/96 8/7/97 10/15/96
NAV CDSC*
- ---------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 13.56% 13.38% NA NA 12.83%
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
Since Inception 11.03% 10.87% 5.33% 0.33% 10.51%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
9
<PAGE> 14
Nations
LifeGoal Balanced Growth
Portfolio Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MR. WIRTZ SHARES HIS VIEWS
ON NATIONS LIFEGOAL BALANCED GROWTH PORTFOLIO'S
PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 1998
AND HIS CURRENT OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGERS PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND
E. Keith Wirtz, CFA, is PHILOSOPHY.
Co-Portfolio Manager of Nations Nations LifeGoal Balanced Growth Portfolio aims to provide a
LifeGoal Balanced Growth moderate approach to growth by investing in a combination of
Portfolio and Chief Investment stock funds for growth potential and bond funds for current
Officer of TradeStreet income potential and to help reduce the risk of a portfolio
Investment Associates, Inc., comprised entirely of stocks. By diversifying investments
the investment sub-adviser to across other Nations Funds mutual funds, Nations LifeGoal
the Portfolio. Balanced Growth Portfolio gives investors the opportunity to
C. Thomas Clapp, CFA, is participate in large- and small-capitalization domestic
Co-Portfolio Manager of Nations stock funds, diversified bond funds and international stock
LifeGoal Balanced Growth funds.
Portfolio and Director of the
Equity Management Group for WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
TradeStreet Investment REPORTING PERIOD?
Associates, Inc. During the 12-month period ended March 31, 1998, investors
INVESTMENT OBJECTIVE enjoyed a nearly ideal economic environment in which to make
The Portfolio seeks total investment decisions. The United States economy benefited
return through a balanced from a combination of steady growth, low inflation, falling
portfolio of equity and fixed interest rates, low unemployment, rising wages and stellar
income securities. corporate profits. In addition, optimism that U.S. fiscal
PERFORMANCE REVIEW policy would result in a balanced federal budget for fiscal
For the 12-month period ended year 1999 contributed to investor enthusiasm.
March 31, 1998, Nations
LifeGoal Balanced Growth Against this encouraging backdrop, U.S. stock market indexes
Portfolio Primary A Shares posted increases ranging from approximately 35% to 50% for
provided a total return of the period. Bond market returns were also positive,
21.74%. approaching 10% -- good by historical standards and the best
performance for fixed-income investments since 1995.
IN BROAD TERMS, HOW DID THE VARIOUS ASSET CLASSES PERFORM
DURING THE PERIOD?
In general, these were the performance trends among the
major asset classes:
-- Stocks outperformed bonds
-- Domestic stocks outperformed international stocks
-- Domestic bonds outperformed international bonds
-- Large-capitalization stocks outperformed
small-capitalization stocks
-- Growth stocks outperformed value stocks
-- Bonds outperformed money market securities
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
Source for all statistical data -- TradeStreet Investment
Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
10
<PAGE> 15
Nations
LifeGoal Balanced Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
HOW MUCH OF A FACTOR WAS STOCK MARKET VOLATILITY?
The stock market's rise was not without its volatile
moments, the most notable being the 554-point drop in the
Dow Jones Industrial Average** (a widely known indicator of
market activity) on October 27, 1997, triggered by financial
crises in Hong Kong and other Asian markets. By the final
quarter of the reporting period, however, the stock market
had not only stabilized but resumed its rise to new record
levels. Market events like the October correction and the
so-called "Asian flu" demonstrate precisely why stock
investors need to take a long-term perspective.
CAN YOU DESCRIBE THE ASSET ALLOCATION PROCESS AND HOW THE
PORTFOLIO WAS POSITIONED AT THE BEGINNING OF THE REPORTING
PERIOD?
We use a structured, disciplined process to determine the
appropriate asset allocation for Nations LifeGoal Balanced
Growth Portfolio. Quantitative models allow us to develop
anticipated returns and profiles for each asset class. We
also analyze historical relationships among asset classes in
varying market environments. Using this information, we aim
to allocate the Portfolio's assets as efficiently as
possible -- which means seeking to provide the highest
return potential for a given level of risk, while staying
true to the Portfolio's investment objective.
In keeping with its emphasis on balanced growth, the
Portfolio is designed so that a minimum of 25% and a maximum
of 55% of its assets are invested in domestic stock funds.
At the beginning of the reporting period, the Portfolio's
allocation to domestic stock funds was 34% -- a slight
underweighting relative to our target ranges. Of this 34%
weighting, 14% was invested in Nations Value Fund, 10% in
Nations Equity Income Fund and 5% each in Nations Emerging
Growth Fund and Nations Managed SmallCap Index Fund.***
The Portfolio's strategic target allocation to bond funds
ranges from 40% to 60%. At the beginning of the period, 51%
of the Portfolio's assets were invested in bond funds -- a
neutral position. Of this 51% weighting, 21% was invested in
Nations Diversified Income Fund, 20% in Nations Strategic
Fixed Income Fund and 10% in Nations Global Government
Income Fund.
For added growth potential, the Portfolio may invest between
5% and 15% of its assets in international stock funds. At
the beginning of the reporting period, 15% of the
Portfolio's assets (the maximum allocation allowed) was
invested in Nations International Equity Fund to take
advantage of attractive valuations we perceived in non-U.S.
stock markets.
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL
RISKS, INCLUDING FOREIGN TAXATION, CURRENCY RISKS, RISKS
ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS
AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
**The Dow Jones Industrial Average is a price-weighted index
of 30 of the largest, most widely held stocks traded on the
New York Stock Exchange. It is unmanaged and unavailable for
investment.
***Portfolio holdings were current as of March 31, 1998, are
subject to change and may not be representative of current
holdings.
</TABLE>
11
<PAGE> 16
Nations
LifeGoal Balanced Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S ASSET
ALLOCATION DURING THE REPORTING PERIOD?
Changes in the Portfolio's asset allocation over the
12-month period centered on two themes: taking a more
aggressive stance with regard to the U.S. stock market, and
decreasing overall exposure to non-U.S. stock and bond
markets.
During the period, the environment for non-U.S. stocks began
to weaken, while conditions in the U.S. stock market
remained favorable. We took advantage of these market
dynamics to build up the Portfolio's domestic stock position
and scale back its international stock exposure to a neutral
weighting. In November 1997, we shifted assets out of
Nations International Equity Fund and Nations Global
Government Income Fund. In addition, we reduced the position
in Nations Equity Income Fund. We reinvested the proceeds
domestically into Nations Disciplined Equity Fund and
Nations Managed SmallCap Index Fund.
WHICH ASSET ALLOCATION DECISIONS HELPED THE PORTFOLIO'S
PERFORMANCE?
In absolute terms, Portfolio returns were strong. The
Portfolio captured the robust performance of the U.S. stock
market through its investment in several Nations Funds
domestic stock funds. Increasing the overall exposure to
U.S. stocks and raising the weighting in growth-oriented
stock funds also proved beneficial.
In addition, the Portfolio was well positioned to
participate in the positive gains of the U.S. bond market,
thanks to significant allocations to Nations Diversified
Income Fund and Nations Strategic Income Fund. Both of these
funds benefited from their exposure to corporate bonds and
other yield-oriented fixed-income investments, which
performed well during the period.
WHICH ASSET ALLOCATION DECISIONS HAD A NEGATIVE IMPACT ON
PORTFOLIO PERFORMANCE?
Because of the relatively weak performance of international
stocks, the allocation to Nations International Equity Fund
detracted from overall Portfolio returns for the period.
The Portfolio's 10% weighting in Nations Global Government
Income Fund, which it held for part of the period, dampened
overall Portfolio returns, as international bonds
significantly underperformed their U.S. counterparts.
</TABLE>
12
<PAGE> 17
Nations
LifeGoal Balanced Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
LOOKING AHEAD, WHAT INVESTMENT OPPORTUNITIES DO YOU
ANTICIPATE AND HOW ARE YOU POSITIONING THE PORTFOLIO TO TAKE
ADVANTAGE OF THEM?
Overall, we remain optimistic about the U.S. economy. We see
nothing on the horizon that suggests the current business
expansion will be impeded. However, even though we expect
growth to continue, the pace of growth may slow somewhat. We
expect corporate profit growth to be more moderate, and
after three consecutive calendar years of double-digit
increases, we believe stock market returns are likely to be
in single digits for the remainder of 1998.
Slower growth means that inflationary pressures should
remain subdued, keeping interest rates low. In such an
environment, we expect bond market returns to be competitive
with stock market returns. This should benefit the
Portfolio, which allocates roughly half of its assets on a
strategic basis to fixed-income investments.
On the international front, we believe the worst of the
Asian crisis has already occurred. While we continue to
monitor the region's stock markets carefully, in the long
run we do not expect current developments in Asia to
threaten the global economy or derail the current bull
market. In fact, with stock markets in Asia likely to bottom
out over the coming year, 1998 could provide an outstanding
buying opportunity for aggressive investors with a long-term
investment horizon.
</TABLE>
13
<PAGE> 18
Nations
LifeGoal Balanced Growth
Portfolio Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
Assumes the reinvestment of all distributions
<TABLE>
<CAPTION>
S&P 500
Measurement Period LifeGoal Balanced Lehman Aggregate Composite Stock
(Fiscal Year Covered) Growth $12,284 Bond Index $11,470 Price Index $16,459
<S> <C> <C> <C>
Oct. 15 1996 10000 10000 10000
1996 10247 10300 10833
10090 10242 11124
10898 10619 13064
11464 10971 14043
1997 11418 11294 14446
Mar. 31 1998 12284 11470 16459
</TABLE>
Investor B Shares (as of 3/31/98)*
Assumes the reinvestment of all distributions
<TABLE>
<CAPTION>
S&P
Measurement Period 500 Composite Stock Price Lehman Aggregate Bond LifeGoal Balanced
(Fiscal Year Covered) Index $11,671 Index $10,518 Growth $10,470
<S> <C> <C> <C>
Aug. 13 1997 10000 10000 10000
9957 10061 10249
1997 10243 10357 10197
Mar. 31 1998 11671 10518 10470
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
Since Inception
(10/15/96 through 3/31/98) 15.13%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations LifeGoal Balanced
Growth Portfolio from the date each
class of shares was first offered.
Figures for the Standard & Poor's 500
Composite Stock Price Index, an
unmanaged index of 500 widely held
common stocks, include reinvestment of
dividends. Figures for the Lehman
Aggregate Bond Index, which is an
unmanaged index comprised of the
Government Corporate Bond Index, the
Asset-Backed Securities Index and the
Mortgage-Backed Securities Index and
includes U.S. Treasury issues, agency
issues, corporate bond issues and
mortgage-backed issues, include
reinvestment of dividends. Indices are
unavailable for investment. The
performance shown reflects the
performance of Primary A and Investor B
Shares. The performance of Primary B,
Investor A and Investor C Shares may
vary based on the differences in sales
loads and fees paid by the shareholders
investing in each class.
Nations LifeGoal Balanced Growth
Portfolio's Primary A, Investor A and
Investor C Shares commenced investment
operations on October 2, 1996. Shares
were offered to the public on October
15, 1996.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
Since Inception NAV CDSC*
(8/13/97 through
3/31/98) 9.70% 4.70%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PRIMARY A PRIMARY B INVESTOR A INVESTOR B INVESTOR C
Inception Date 10/15/96 08/04/97 10/15/96 8/13/97 10/15/96
NAV CDSC*
- ---------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 21.74% NA 21.76% NA NA 21.10%
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
Since Inception 15.13% 9.24% 15.12% 9.70% 4.70% 14.68%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
14
<PAGE> 19
Nations
LifeGoal Growth
Portfolio Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MR. WIRTZ SHARES HIS VIEWS
ON NATIONS LIFEGOAL GROWTH FUND'S PERFORMANCE FOR THE
12-MONTH PERIOD ENDED MARCH 31, 1998 AND HIS CURRENT
OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGERS PLEASE DESCRIBE THE PORTFOLIO'S INVESTMENT STYLE AND
E. Keith Wirtz, CFA, is PHILOSOPHY.
Co-Portfolio Manager of Nations Nations LifeGoal Growth Portfolio is the most aggressive of
LifeGoal Growth Portfolio and the three Nations LifeGoal Portfolios. The Portfolio aims to
Chief Investment Officer of provide long-term capital appreciation for growth-oriented
TradeStreet Investment investors who have an investment time frame of at least five
Associates, Inc., the years and who are comfortable assuming moderate-to-high
investment sub-adviser to the risk. By diversifying investments across other Nations Funds
Portfolio. mutual funds, Nations LifeGoal Growth Portfolio gives
C. Thomas Clapp, CFA, is investors the opportunity to participate in a variety of
Co-Portfolio Manager of Nations large- and small-capitalization domestic stock funds and
LifeGoal Growth Portfolio and international stock funds.
Director of the Equity WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
Management Group for REPORTING PERIOD?
TradeStreet Investment During the 12-month period ended March 31, 1998, investors
Associates, Inc. enjoyed a nearly ideal economic environment in which to make
INVESTMENT OBJECTIVE investment decisions. The United States economy benefited
The Portfolio seeks capital from a combination of steady growth, low inflation, falling
appreciation through exposure interest rates, low unemployment, rising wages and stellar
to a variety of equity market corporate profits. In addition, optimism that U.S. fiscal
segments. policy would result in a balanced federal budget for fiscal
PERFORMANCE REVIEW year 1999 contributed to investor enthusiasm.
For the 12-month period ended Against this encouraging backdrop, U.S. stock market indexes
March 31, 1998, Nations posted increases ranging from approximately 35% to 50% for
LifeGoal Growth Portfolio the period. Bond market returns were also positive,
Primary A Shares provided a approaching 10% -- good by historical standards and the best
total return of 29.80%. performance for fixed-income investments since 1995.
IN BROAD TERMS, HOW DID THE VARIOUS ASSET CLASSES PERFORM
DURING THE PERIOD?
In general, these were the performance trends among the
major
asset classes:
-- Stocks outperformed bonds
-- Domestic stocks outperformed international stocks
-- Domestic bonds outperformed international bonds
-- Large-capitalization stocks outperformed
small-capitalization stocks
-- Growth stocks outperformed value stocks
-- Bonds outperformed money market securities
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
Source for all statistical data -- TradeStreet Investment
Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
15
<PAGE> 20
Nations
LifeGoal Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
HOW MUCH OF A FACTOR WAS STOCK MARKET VOLATILITY?
The stock market's rise was not without its volatile
moments, the most notable being the 554-point drop in the
Dow Jones Industrial Average** on October 27, 1997,
triggered by financial crises in Hong Kong and other Asian
markets. By the final quarter of the reporting period,
however, the stock market had not only stabilized but
resumed its rise to new record levels. Market events like
the October correction and the so-called "Asian flu"
demonstrate precisely why stock investors need to take a
long-term perspective.
CAN YOU DESCRIBE THE ASSET ALLOCATION PROCESS AND HOW THE
PORTFOLIO WAS POSITIONED AT THE BEGINNING OF THE REPORTING
PERIOD?
We use a structured, disciplined process to determine the
appropriate asset allocation for Nations LifeGoal Growth
Portfolio. Quantitative models allow us to develop expected
returns and profiles for each asset class. We also analyze
historical relationships among asset classes in varying
market environments. Using this information, we aim to
allocate the Portfolio's assets as efficiently as
possible -- which means seeking to provide the highest
return potential for a given level of risk, while staying
true to the Portfolio's investment objective.
The Portfolio is designed so that a minimum of 35% and a
maximum of 75% of its assets are invested in
large-capitalization domestic stock funds. At the beginning
of the reporting period, the Portfolio's allocation to
large-capitalization domestic stock funds was 45% -- a
slight underweighting relative to our target ranges. Of this
45% weighting, 30% was invested in Nations Value Fund and
15% was invested in Nations Disciplined Equity Fund.***
The Portfolio's strategic target allocation to small- and
mid-capitalization domestic stock funds ranges from 20% to
35%. At the beginning of the period, 24% of the Portfolio's
assets were invested in this segment of the equity market --
a slightly underweight position. Of this 24% weighting, 14%
was invested in Nations Emerging Growth Fund and 10% was
invested in Nations Managed SmallCap Index Fund.
For added growth potential, the Portfolio may invest between
10% and 20% of its assets in core international stock funds.
At the beginning of the reporting period, 20% of the
Portfolio's assets (the maximum allocation allowed) was
invested in Nations International Equity Fund to take
advantage of attractive valuations we perceived in non-U.S.
stock markets.
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL
RISKS, INCLUDING FOREIGN TAXATION, CURRENCY RISKS, RISKS
ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS
AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
**The Dow Jones Industrial Average is a price-weighted index
of 30 of the largest, most widely held stocks traded on the
New York Stock Exchange. It is unmanaged and unavailable for
investment.
***Portfolio holdings were current as of March 31, 1998, are
subject to change and may not be representative of current
holdings.
</TABLE>
16
<PAGE> 21
Nations
LifeGoal Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
In addition, the Portfolio may seek further growth potential
by investing up to 10% of its assets in region specific
international funds. At the beginning of the reporting
period, 10% of its assets (the maximum allocation allowed)
were invested in Nations Pacific Growth Fund to capitalize
on attractive opportunities we perceived in this region.
WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO'S ASSET
ALLOCATION DURING THE REPORTING PERIOD?
Changes in the Portfolio's asset allocation over the
12-month period centered on two themes: taking a more
aggressive stance with regard to the U.S. stock market, and
decreasing overall exposure to non-U.S. stock markets.
The Portfolio began the period with an overweight position
in non-U.S. stock funds relative to our target ranges.
During the period, the environment for non-U.S. stocks began
to weaken, particularly in light of the Asian financial
crisis, while fundamental conditions in the U.S. stock
market remained favorable. We took advantage of these market
dynamics to build up the domestic stock position and scale
back the international stock exposure to a neutral
weighting.
In November 1997, we reduced the Portfolio's 20% allocation
to Nations International Equity Fund by 10%, shifting these
assets into the domestic stock market. Within the domestic
component of the Portfolio, we increased the exposure to
funds at the more aggressive end of the risk-return
spectrum. We raised the Portfolio's weighting in Nations
Disciplined Equity Fund from 15% to 25% and in Nations
SmallCap Managed Index Fund from 10% to 30%. These increases
were accompanied by corresponding reductions in other funds.
In addition to lowering the Portfolio's international
exposure, we eliminated the position in Nations Emerging
Growth Fund and reduced the Portfolio's 30% allocation to
Nations Value Fund by 15%.
WHICH ASSET ALLOCATION DECISIONS HELPED THE PORTFOLIO'S
PERFORMANCE?
In absolute terms, Portfolio returns were strong. The
Portfolio captured the robust performance of the U.S. stock
market through its investment in several Nations Funds
domestic stock funds, including Nations Disciplined Equity
Fund, which outperformed the Standard & Poor's 500 Composite
Stock Price Index (a widely known indicator of stock market
performance) for the period. Increasing overall exposure to
the U.S. stock market and shifting the Portfolio's emphasis
to more aggressive domestic stock funds also proved
beneficial.
</TABLE>
17
<PAGE> 22
Nations
LifeGoal Growth
Portfolio Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
WHICH ASSET ALLOCATION DECISIONS HAD A NEGATIVE IMPACT ON
PORTFOLIO PERFORMANCE?
Because of the relatively weak performance of international
stocks, the Portfolio's allocations to Nations International
Equity Fund and Nations Pacific Growth Fund detracted from
overall Portfolio returns for the period.
DID THE FINANCIAL AND STOCK MARKET CRISIS IN ASIA CAUSE YOU
TO REVISIT THE PORTFOLIO'S 10% WEIGHTING IN NATIONS PACIFIC
GROWTH FUND?
The situation in Asia presented investors with the first
major international financial crisis since the Mexican peso
devaluation in late 1994. However, it's important to
remember that Nations LifeGoal Growth Portfolio has a
long-term investment horizon, and this includes a strategic
commitment to international stock markets.
While we took a more neutral stance toward non-U.S. markets
overall during the period, we did not want to abandon the
Portfolio's Nations Pacific Growth Fund weighting,
particularly after stock market valuations in the region had
fallen so sharply. We continue to view Asia's short-term
market declines as an opportunity to build on the
Portfolio's long-term positions in that region at what we
believe are significantly reduced prices. As stock prices in
Asia recover over time, we will seek to rebalance the
Portfolio by selling stocks when they appreciate to levels
that allow us to maintain a strategic 10% weighting.
LOOKING AHEAD, WHAT INVESTMENT OPPORTUNITIES DO YOU
ANTICIPATE AND HOW ARE YOU POSITIONING THE PORTFOLIO TO TAKE
ADVANTAGE OF THEM?
Overall, we remain optimistic about the U.S. economy. We see
nothing on the horizon that suggests the current business
expansion will be impeded. However, even though we expect
growth to continue, the pace of growth may slow somewhat. We
expect corporate profit growth to be more moderate, and
after three consecutive calendar years of double-digit
increases, we believe stock market returns are likely to be
in single digits for the remainder of 1998.
On the international front, we believe the worst of the
Asian crisis has already occurred. While we continue to
monitor the region's stock markets carefully, in the long
run we do not expect current developments in Asia to
threaten the global economy or derail the current bull
market. In fact, with stock markets in Asia likely to bottom
out over the coming year, 1998 could provide an outstanding
buying opportunity for aggressive investors with a long-term
investment horizon.
</TABLE>
18
<PAGE> 23
Nations
LifeGoal Growth
Portfolio Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
Assumes the reinvestment of all distributions
<TABLE>
<CAPTION>
S&P 500 Composite
Measurement Period LifeGoal Growth Stock Price Index
(Fiscal Year Covered) $13,252 $16,459
<S> <C> <C>
Oct. 15 1996 10000 10000
1996 10352 10833
10200 11124
11612 13064
12497 14043
1997 11873 14446
Mar. 31 1998 13252 16459
</TABLE>
Investor B Shares (as of 3/31/98)*
Assumes the reinvestment of all distributions
<TABLE>
<CAPTION>
S&P
Measurement Period 500 Composite Stock Price
(Fiscal Year Covered) LifeGoal Growth $10,355 Index $11,671
<S> <C> <C>
Aug. 12 1997 10000 10000
10259 9957
1997 9742 10243
Mar. 31 1998 10355 11671
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
Since Inception
(10/15/96 through 3/31/98) 21.28%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations LifeGoal Growth
Portfolio from the date each class of
shares was first offered. Figures for
the Standard & Poor's 500 Composite
Stock Price Index, an unmanaged index
of 500 widely held common stocks,
include reinvestment of dividends. It
is unavailable for investment. The
performance shown reflects the
performance of Primary A and Investor B
Shares. The performance of Primary B,
Investor A and Investor C Shares may
vary based on the differences in sales
loads and fees paid by the shareholders
investing in each class.
Nations LifeGoal Growth Portfolio's
Primary A, Investor A and Investor C
Shares commenced investment operations
on October 2, 1996. Shares were offered
to the public on October 15, 1996.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
Since Inception NAV CDSC*
(8/12/97 through 3/31/98) 8.55% 3.55%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PRIMARY A PRIMARY B INVESTOR A INVESTOR B INVESTOR C
Inception Date 10/15/96 9/19/97 10/15/96 8/12/97 10/15/96
NAV CDSC*
- ---------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 29.80% NA 29.68% NA NA 28.89%
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
Since Inception 21.28% 6.24% 21.16% 8.55% 3.55% 20.62%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
19
<PAGE> 24
NATIONS FUNDS
LifeGoal Income and Growth Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES -- 100.1%
9,087 Nations Disciplined Equity Fund -- 10.6%.................... $ 201,451
14,974 Nations Equity Income Fund -- 11.0%......................... 208,742
6,803 Nations International Equity Fund -- 5.3%................... 100,747
92,675 Nations Prime Fund -- 4.9%.................................. 92,675
112,781 Nations Short-Intermediate Government Fund -- 24.4%......... 464,659
85,418 Nations Short-Term Income Fund -- 43.9%..................... 834,529
----------
TOTAL INVESTMENT COMPANY SECURITIES
(Cost $1,863,058)......................................... 1,902,803
==========
TOTAL INVESTMENTS
(Cost $1,863,058*)........................................ 100.1% 1,902,803
OTHER ASSETS AND LIABILITIES (NET).......................... (0.1) (1,733)
----- ----------
NET ASSETS.................................................. 100.0% $1,901,070
===== ==========
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $36,950 and gross
depreciation of $0 for federal income tax purposes. At March 31, 1998, the
aggregate cost of securities for federal income tax purposes was $1,865,853.
SEE NOTES TO FINANCIAL STATEMENTS.
20
<PAGE> 25
NATIONS FUNDS
LifeGoal Balanced Growth Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES -- 99.3%
58,254 Nations Disciplined Equity Fund -- 20.6%.................... $1,291,493
112,819 Nations Diversified Income Fund -- 19.0%.................... 1,190,237
26 Nations Emerging Growth Fund -- 0.0%#....................... 433
47 Nations Equity Income Fund -- 0.0%#......................... 656
63 Nations Global Government Income Fund -- 0.0%#.............. 614
43,294 Nations International Equity Fund -- 10.2%.................. 641,182
67,608 Nations Managed SmallCap Index Fund -- 15.2%................ 953,278
118,316 Nations Strategic Fixed Income Fund -- 18.9%................ 1,186,706
48,380 Nations Value Fund -- 15.4%................................. 963,737
----------
TOTAL INVESTMENT COMPANY SECURITIES
(Cost $5,947,610)......................................... 6,228,336
==========
TOTAL INVESTMENTS
(Cost $5,947,610*)........................................ 99.3% 6,228,336
OTHER ASSETS AND LIABILITIES (NET).......................... 0.7 44,355
----- ----------
NET ASSETS.................................................. 100.0% $6,272,691
===== ==========
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $274,576 and gross
depreciation of $0 for federal income tax purposes. At March 31, 1998, the
aggregate cost of securities for federal income tax purposes was $5,953,760.
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 26
NATIONS FUNDS
LifeGoal Growth Portfolio
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANY SECURITIES -- 100.1%
92,050 Nations Disciplined Equity Fund -- 25.5%.................... $2,040,750
167 Nations Emerging Growth Fund -- 0.0%#....................... 2,769
54,925 Nations International Equity Fund -- 10.2%.................. 813,439
169,784 Nations Managed SmallCap Index Fund -- 30.0%................ 2,393,955
97,671 Nations Pacific Growth Fund -- 8.9%......................... 711,042
102,305 Nations Value Fund -- 25.5%................................. 2,037,908
----------
TOTAL INVESTMENT COMPANY SECURITIES
(Cost $7,580,645)......................................... 7,999,863
==========
TOTAL INVESTMENTS
(Cost $7,580,645*)........................................ 100.1% 7,999,863
OTHER ASSETS AND LIABILITIES (NET).......................... (0.1) (6,134)
----- ----------
NET ASSETS.................................................. 100.0% $7,993,729
===== ==========
</TABLE>
- ---------------
* Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $392,212 and gross
depreciation of $68,357 for federal income tax purposes. At March 31, 1998,
the aggregate cost of securities for federal income tax purposes was
$7,676,008.
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 27
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 1998
<TABLE>
<CAPTION>
LIFEGOAL LIFEGOAL
INCOME AND BALANCED LIFEGOAL
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value. See accompanying schedules........... $1,902,803 $6,228,336 $7,999,863
Dividends receivable........................................ 6,019 10,382 --
Receivable for Portfolio shares sold........................ 828 116,854 10,125
Receivable for investment securities sold................... -- 53,623 --
---------- ---------- ----------
Total Assets........................................... 1,909,650 6,409,195 8,009,988
---------- ---------- ----------
LIABILITIES:
Dividends payable........................................... 265 -- --
Payable for Portfolio shares redeemed....................... -- 120,619 --
Payable for investment securities purchased................. 6,960 10,382 9,496
Investment advisory fee payable............................. 375 1,194 1,741
Shareholder servicing and distribution fees payable......... 980 4,309 5,022
---------- ---------- ----------
Total Liabilities...................................... 8,580 136,504 16,259
---------- ---------- ----------
NET ASSETS.................................................. $1,901,070 $6,272,691 $7,993,729
========== ========== ==========
Investments, at cost........................................ $1,863,058 $5,947,610 $7,580,645
========== ========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 28
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MARCH 31, 1998
<TABLE>
<CAPTION>
LIFEGOAL LIFEGOAL
INCOME AND BALANCED LIFEGOAL
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------
<S> <C> <C> <C>
NET ASSETS CONSIST OF:
Paid in capital............................................. $1,840,471 $5,895,982 $7,338,703
Undistributed net investment income......................... 1,178 -- --
Accumulated net realized gain on investments sold........... 19,676 95,983 235,808
Net unrealized appreciation of investments.................. 39,745 280,726 419,218
---------- ---------- ----------
$1,901,070 $6,272,691 $7,993,729
========== ========== ==========
NET ASSETS:
Primary A Shares............................................ $ 475,660 $ 103,468 $ 289,138
Primary B Shares............................................ -- 25,981 6,405
Investor A Shares........................................... 126,242 489,045 1,526,402
Investor B Shares........................................... 1,212,122 4,917,310 5,829,395
Investor C Shares........................................... 87,046 736,887 342,389
SHARES OUTSTANDING:
Primary A Shares............................................ 44,441 9,471 23,152
Primary B Shares............................................ -- 2,375 513
Investor A Shares........................................... 11,790 44,683 122,071
Investor B Shares........................................... 113,231 450,164 466,894
Investor C Shares........................................... 8,133 67,487 27,471
PRIMARY A SHARES:
Net asset value, offering and redemption price per share.... $10.70 $10.92 $12.49
PRIMARY B SHARES:
Net asset value, offering and redemption price per share.... -- $10.94 $12.49
INVESTOR A SHARES:
Net asset value, offering and redemption price per share.... $10.71 $10.94 $12.50
INVESTOR B SHARES:
Net asset value and offering price per share*............... $10.70 $10.92 $12.49
INVESTOR C SHARES:
Net asset value, offering and redemption price per share.... $10.70 $10.92 $12.46
</TABLE>
- ---------------
* Redemption price per share is equal to Net Asset Value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE> 29
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
LIFEGOAL LIFEGOAL
INCOME AND BALANCED LIFEGOAL
GROWTH GROWTH GROWTH
PORTFOLIO(a) PORTFOLIO(a)(b) PORTFOLIO(a)(b)
------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 38,342 $102,363 $ 36,427
-------- -------- --------
EXPENSES:
Investment advisory fee................................... 2,167 8,202 10,146
Shareholder servicing and distribution fees:
Primary B Shares........................................ -- 70 15
Investor A Shares....................................... 350 875 3,180
Investor B Shares....................................... 2,350 9,518 17,843
Investor C Shares....................................... 343 4,610 1,580
-------- -------- --------
Total expenses....................................... 5,210 23,275 32,764
-------- -------- --------
NET INVESTMENT INCOME..................................... 33,132 79,088 3,663
-------- -------- --------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments during the year.......... 8,254 133,739 82,664
Capital gain distributions received....................... 25,118 121,936 355,808
Net unrealized appreciation of investments during the
year.................................................... 44,759 353,970 501,362
-------- -------- --------
Net realized and unrealized gain on investments........... 78,131 609,645 939,834
-------- -------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $111,263 $688,733 $943,497
======== ======== ========
</TABLE>
- ---------------
(a) LifeGoal Income and Growth Portfolio's, LifeGoal Balanced Growth Portfolio's
and LifeGoal Growth Portfolio's Investor B Shares commenced operations on
August 7, August 13, and August 12, 1997, respectively.
(b) LifeGoal Balanced Growth Portfolio's and LifeGoal Growth Portfolio's Primary
B Shares commenced operations on August 4, and September 19, 1997,
respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE> 30
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LIFEGOAL INCOME AND GROWTH LIFEGOAL BALANCED
PORTFOLIO(a)(c) GROWTH PORTFOLIO(a)(b)(c)
-------------------------- ---------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
3/31/98 3/31/97 3/31/98 3/31/97
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income............................. $ 33,132 $ 2,297 $ 79,088 $ 8,648
Net realized gain/(loss) on investments during the
year............................................ 8,254 (34) 133,739 (146)
Capital gain distributions received............... 25,118 655 121,936 704
Change in unrealized appreciation/(depreciation)
of investments during the year.................. 44,759 (5,014) 353,970 (73,244)
---------- -------- ----------- ----------
Net increase/(decrease) in net assets resulting
from operations................................. 111,263 (2,096) 688,733 (64,038)
Distributions to shareholders from net investment
income:
Primary A Shares................................ (15,224) (1,688) (24,128) (7,739)
Primary B Shares................................ -- -- (461) --
Investor A Shares............................... (5,043) (531) (9,659) (162)
Investor B Shares............................... (10,359) -- (31,123) --
Investor C Shares............................... (1,403) (3) (14,412) (52)
Distributions to shareholders in excess of net
investment income:
Primary A Shares................................ (4,487) -- (27,930) --
Primary B Shares................................ -- -- (533) --
Investor A Shares............................... (1,487) -- (11,180) --
Investor B Shares............................... (3,053) -- (36,027) --
Investor C Shares............................... (413) -- (16,683) --
Distributions to shareholders from net realized
gain on investment:
Primary A Shares................................ (3,042) -- (4,494) --
Primary B Shares................................ -- -- (1,080) --
Investor A Shares............................... (891) -- (17,192) --
Investor B Shares............................... (534) -- (16,830) --
Investor C Shares............................... (410) -- (28,301) --
Net increase/(decrease) in net assets from
Portfolio share transactions:
Primary A Shares................................ 225,788 195,503 (2,219,027) 2,153,893
Primary B Shares................................ -- -- 25,821 --
Investor A Shares............................... (14,517) 132,419 367,512 95,005
Investor B Shares............................... 1,186,902 -- 4,749,344 --
Investor C Shares............................... 83,321 960 675,267 18,021
---------- -------- ----------- ----------
Net increase in net assets........................ 1,546,411 324,564 4,047,617 2,194,928
NET ASSETS:
Beginning of period............................... 354,659 30,095 2,225,074 30,146
---------- -------- ----------- ----------
End of period..................................... $1,901,070 $354,659 $ 6,272,691 $2,225,074
========== ======== =========== ==========
Undistributed net investment income at end of
period.......................................... $ 1,178 $ 75 $ -- $ 695
========== ======== =========== ==========
</TABLE>
- ---------------
(a) LifeGoal Income and Growth Portfolio's, LifeGoal Balanced Growth Portfolio's
and LifeGoal Growth Portfolio's Investor B Shares commenced operations on
August 7, August 13, and August 12, 1997, respectively.
(b) LifeGoal Balanced Growth Portfolio's and LifeGoal Growth Portfolio's Primary
B Shares commenced operations on August 4, and September 19, 1997,
respectively.
(c) LifeGoal Income and Growth Portfolio's, LifeGoal Balanced Growth Portfolio's
and LifeGoal Growth Portfolio's Primary A, Investor A and Investor C Shares
commenced investment operations on October 2, 1996. Shares were offered to
the public on October 15, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE> 31
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
LIFEGOAL GROWTH
PORTFOLIO(a)(b)(c)
--------------------------
YEAR ENDED PERIOD ENDED
3/31/98 3/31/97
--------------------------
<S> <C> <C>
Net investment income....................................... $ 3,663 $ 1,982
Net realized gain on investments during the year............ 82,664 1,056
Capital gain distributions received......................... 355,808 2,176
Change in unrealized appreciation/(depreciation) of
investments during the year............................... 501,362 (82,144)
---------- ----------
Net increase/(decrease) in net assets resulting from
operations................................................ 943,497 (76,930)
Distributions to shareholders from net investment income:
Primary A Shares.......................................... (523) (1,219)
Primary B Shares.......................................... (4) --
Investor A Shares......................................... (1,271) (588)
Investor B Shares......................................... (1,868) --
Investor C Shares......................................... (171) (1)
Distributions to shareholders in excess of net investment
income:
Primary A Shares.......................................... (18,071) --
Primary B Shares.......................................... (125) --
Investor A Shares......................................... (43,960) --
Investor B Shares......................................... (64,597) --
Investor C Shares......................................... (5,926) --
Distributions to shareholders from net realized gain on
investment:
Primary A Shares.......................................... (5,416) --
Primary B Shares.......................................... (103) --
Investor A Shares......................................... (24,087) --
Investor B Shares......................................... (40,449) --
Investor C Shares......................................... (3,162) --
Net increase/(decrease) in net assets from Portfolio share
transactions:
Primary A Shares.......................................... (768,158) 939,556
Primary B Shares.......................................... 6,260 --
Investor A Shares......................................... 623,419 707,365
Investor B Shares......................................... 5,482,703 --
Investor C Shares......................................... 223,312 84,008
---------- ----------
Net increase in net assets.................................. 6,301,300 1,652,191
NET ASSETS:
Beginning of period......................................... 1,692,429 40,238
---------- ----------
End of period............................................... $7,993,729 $1,692,429
========== ==========
Undistributed net investment income at end of period........ $ -- $ 174
========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE> 32
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
LIFEGOAL INCOME AND GROWTH PORTFOLIO
YEAR ENDED PERIOD ENDED
MARCH 31, 1998(b) MARCH 31, 1997(a)
------------------------- ----------------------
SHARES DOLLARS SHARES DOLLARS
-----------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold...................................................... 52,950 $ 542,742 19,568 $197,843
Issued as reinvestment of dividends....................... 637 6,592 169 1,688
Redeemed.................................................. (31,482) (323,546) (401) (4,028)
------- ---------- ------ --------
Net increase.............................................. 22,105 225,788 19,336 195,503
------- ---------- ------ --------
INVESTOR A SHARES:
Sold...................................................... 5,308 54,854 13,267 133,673
Issued as reinvestment of dividends....................... 662 6,847 52 524
Redeemed.................................................. (7,324) (76,218) (175) (1,778)
------- ---------- ------ --------
Net increase.............................................. (1,354) (14,517) 13,144 132,419
------- ---------- ------ --------
INVESTOR B SHARES:
Sold...................................................... 113,062 1,185,143
Issued as reinvestment of dividends....................... 1,241 12,973
Redeemed.................................................. (1,072) (11,214)
------- ----------
Net increase.............................................. 113,231 1,186,902
------- ---------
INVESTOR C SHARES:
Sold...................................................... 12,493 129,783 96 960
Issued as reinvestment of dividends....................... 216 2,225 -- --
Redeemed.................................................. (4,672) (48,687) -- --
------- ---------- ------ --------
Net increase.............................................. 8,037 83,321 96 960
------- ---------- ------ --------
Total net increase........................................ 142,019 $1,481,494 32,576 $328,882
======= ========== ====== ========
</TABLE>
- ---------------
(a) LifeGoal Income and Growth Portfolio's Primary A Shares, Investor A Shares
and Investor C Shares commenced operations on October 2, 1996. Shares were
offered to the public on October 15, 1996.
(b) LifeGoal Income and Growth Portfolio's Investor B Shares commenced
operations on August 7, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 33
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
LIFEGOAL BALANCED GROWTH PORTFOLIO
YEAR ENDED PERIOD ENDED
MARCH 31, MARCH 31,
1998(b)(c) 1997(a)
------------------------ -----------------------
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold......................... 27,766 $ 293,077 209,694 $2,155,343
Issued as reinvestment of
dividends.................. 4,751 51,027 770 7,739
Redeemed..................... (235,596) (2,563,131) (914) (9,189)
-------- ----------- ------- ----------
Net increase................. (203,079) (2,219,027) 209,550 2,153,893
-------- ----------- ------- ----------
PRIMARY B SHARES:
Sold......................... 2,174 23,747
Issued as reinvestment of
dividends.................. 201 2,074
Redeemed..................... -- --
-------- -----------
Net increase................. 2,375 25,821
-------- -------------
INVESTOR A SHARES:
Sold......................... 38,251 400,052 9,407 94,998
Issued as reinvestment of
dividends.................. 3,352 34,697 16 157
Redeemed..................... (6,328) (67,237) (15) (150)
-------- ----------- ------- ----------
Net increase................. 35,275 367,512 9,408 95,005
-------- ----------- ------- ----------
INVESTOR B SHARES:
Sold......................... 464,087 4,903,979
Issued as reinvestment of
dividends.................. 8,320 83,980
Redeemed..................... (22,243) (238,615)
-------- -----------
Net increase................. 450,164 4,749,344
-------- -------------
INVESTOR C SHARES:
Sold......................... 69,661 718,126 1,998 20,417
Issued as reinvestment of
dividends.................. 5,752 59,395 5 52
Redeemed..................... (9,689) (102,254) (240) (2,448)
-------- ----------- ------- ----------
Net increase................. 65,724 675,267 1,763 18,021
-------- ----------- ------- ----------
Total net increase........... 350,459 $ 3,598,917 220,721 $2,266,919
======== =========== ======= ==========
<CAPTION>
LIFEGOAL GROWTH PORTFOLIO
YEAR ENDED PERIOD ENDED
MARCH 31, MARCH 31,
1998(b)(c) 1997(a)
------------------------ ----------------------
SHARES DOLLARS SHARES DOLLARS
-------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold......................... 60,356 $ 697,330 102,688 $1,097,781
Issued as reinvestment of
dividends.................. 1,179 13,422 118 1,220
Redeemed..................... (129,990) (1,478,910) (15,199) (159,445)
-------- ----------- ------- ----------
Net increase................. (68,455) (768,158) 87,607 939,556
-------- ----------- ------- ----------
PRIMARY B SHARES:
Sold......................... 492 6,028
Issued as reinvestment of
dividends.................. 21 232
Redeemed..................... -- --
-------- -----------
Net increase................. 513 6,260
-------- -------------
INVESTOR A SHARES:
Sold......................... 90,784 1,026,417 67,184 707,978
Issued as reinvestment of
dividends.................. 5,937 66,809 57 588
Redeemed..................... (41,776) (469,807) (115) (1,201)
-------- ----------- ------- ----------
Net increase................. 54,945 623,419 67,126 707,365
-------- ----------- ------- ----------
INVESTOR B SHARES:
Sold......................... 473,938 5,565,346
Issued as reinvestment of
dividends.................. 8,943 100,127
Redeemed..................... (15,987) (182,770)
-------- -----------
Net increase................. 466,894 5,482,703
-------- -------------
INVESTOR C SHARES:
Sold......................... 20,299 234,020 8,070 84,008
Issued as reinvestment of
dividends.................. 826 9,263 -- --
Redeemed..................... (1,724) (19,971) -- --
-------- ----------- ------- ----------
Net increase................. 19,401 223,312 8,070 84,008
-------- ----------- ------- ----------
Total net increase........... 473,298 $ 5,567,536 162,803 $1,730,929
======== =========== ======= ==========
</TABLE>
- ---------------
(a) LifeGoal Balanced Growth Portfolio's and LifeGoal Growth Portfolio's Primary
A Shares, Investor A Shares and Investor C Shares commenced operations on
October 2, 1996. Shares were offered to the public on October 15, 1996.
(b) LifeGoal Balanced Growth Portfolio's and LifeGoal Growth Portfolio's Primary
B Shares commenced operations on August 4, 1997, and September 19,
respectively.
(c) LifeGoal Balanced Growth Portfolio's and LifeGoal Growth Portfolio's
Investor B Shares commenced operations on August 13, 1997, and August 12,
respectively.
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 34
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE
-----------------------------------------------------------
NET INCREASE
NET ASSET NET REALIZED IN NET ASSETS
VALUE NET AND UNREALIZED RESULTING FROM
BEGINNING INVESTMENT GAIN/LOSS ON INVESTMENT
OF YEAR INCOME INVESTMENTS OPERATIONS
-----------------------------------------------------------
<S> <C> <C> <C> <C>
LIFEGOAL INCOME AND GROWTH PORTFOLIO
PRIMARY A SHARES
Year ended 03/31/98.......................... $ 9.97 $0.43(a) $ 0.89 $ 1.32
Period ended 03/31/97*....................... 10.03 0.32 (0.06) 0.26
INVESTOR A SHARES
Year ended 03/31/98.......................... $ 9.97 $0.41(a) $ 0.89 $ 1.30
Period ended 03/31/97*....................... 10.03 0.31 (0.06) 0.25
INVESTOR B SHARES
Period ended 03/31/98**...................... $10.51 $0.19(a) $ 0.36 $ 0.55
INVESTOR C SHARES
Year ended 03/31/98.......................... $ 9.97 $0.36(a) $ 0.89 $ 1.25
Period ended 03/31/97*....................... 10.03 0.31 (0.06) 0.25
</TABLE>
- ---------------
<TABLE>
<C> <S>
* LifeGoal Income and Growth Portfolio's Primary A Shares,
Investor A Shares and Investor C Shares commenced investment
operations on October 2, 1996. Shares were offered to the
public on October 15, 1996.
** LifeGoal Income and Growth Portfolio's Investor B Shares
commenced investment operations on August 7, 1997.
+ Annualized.
++ Total return represents aggregate total return for the
period indicated and does not reflect the deduction of any
applicable sales charges.
+++ The Portfolio's expenses do not include the expenses of the
underlying funds.
(a) Per share amounts have been calculated using the monthly
average shares method, which more appropriately represents
the per share data for the period.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 35
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DISTRIBUTIONS
- -----------------------------------------------------------------
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS NET ASSET
FROM NET IN EXCESS OF NET FROM NET VALUE
INVESTMENT INVESTMENT REALIZED TOTAL END OF TOTAL
INCOME INCOME CAPITAL GAINS DISTRIBUTIONS YEAR RETURN++
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$(0.40) $(0.12) $(0.07) $(0.59) $10.70 13.56%
(0.32) -- -- (0.32) 9.97 2.59%
$(0.38) $(0.11) $(0.07) $(0.56) $10.71 13.38%
(0.31) -- -- (0.31) 9.97 2.54%
$(0.22) $(0.07) $(0.07) $(0.36) $10.70 5.33%
$(0.35) $(0.10) $(0.07) $(0.52) $10.70 12.83%
(0.31) -- -- (0.31) 9.97 2.54%
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA
- --------------------------------------------------------
RATIO OF RATIO OF
NET ASSETS OPERATING NET INVESTMENT
END OF EXPENSES TO INCOME TO PORTFOLIO
YEAR AVERAGE AVERAGE TURNOVER
(IN 000'S) NET ASSETS+++ NET ASSETS RATE
- --------------------------------------------------------
<S> <C> <C> <C>
$ 476 0.25% 4.17% 64%
223 0.25%+ 6.34%+ 2%
$ 126 0.50% 3.92% 64%
131 0.50%+ 6.09%+ 2%
$1,212 1.25%+ 3.17%+ 64%
$ 87 1.09% 3.33% 64%
1 0.75%+ 5.84%+ 2%
</TABLE>
31
<PAGE> 36
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE
-----------------------------------------------------------
NET INCREASE/
(DECREASE)
NET ASSET NET REALIZED IN NET ASSETS
VALUE NET AND UNREALIZED RESULTING FROM
BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT
OF YEAR INCOME INVESTMENTS OPERATIONS
-----------------------------------------------------------
<S> <C> <C> <C> <C>
LIFEGOAL BALANCED GROWTH PORTFOLIO
PRIMARY A SHARES
Year ended 03/31/98.......................... $ 9.95 $0.33(a) $ 1.74 $ 2.07
Period ended 03/31/97*....................... 10.05 0.19 (0.10) 0.09
PRIMARY B SHARES
Period ended 03/31/98**...................... $10.95 $0.16(a) $ 0.77 $ 0.93
INVESTOR A SHARES
Year ended 03/31/98.......................... $ 9.95 $0.28(a) $ 1.79 $ 2.07
Period ended 03/31/97*....................... 10.05 0.19 (0.10) 0.09
INVESTOR B SHARES
Period ended 03/31/98**...................... $10.88 $0.11(a) $ 0.87 $ 0.98
INVESTOR C SHARES
Year ended 03/31/98.......................... $ 9.95 $0.23(a) $ 1.78 $ 2.01
Period ended 03/31/97*....................... 10.05 0.19 (0.10) 0.09
</TABLE>
- ---------------
<TABLE>
<C> <S>
* LifeGoal Balanced Growth Portfolio's Primary A Shares,
Investor A Shares and Investor C Shares commenced investment
operations on October 2, 1996. Shares were offered to the
public on October 15, 1996.
** LifeGoal Balanced Growth Portfolio's Primary B Shares and
Investor B Shares commenced investment operations on August
4, and August 13, 1997, respectively.
+ Annualized.
++ Total return represents aggregate total return for the
period indicated and does not reflect the deduction of any
applicable sales charges.
+++ The Portfolio's expenses do not include the expenses of the
underlying Funds.
(a) Per share amounts have been calculated using the monthly
average shares method, which more appropriately represents
the per share data for the period.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 37
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DISTRIBUTIONS
----------------------------------------------------------------
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS NET ASSET
FROM NET IN EXCESS OF NET FROM NET VALUE
INVESTMENT INVESTMENT REALIZED TOTAL END OF TOTAL
INCOME INCOME CAPITAL GAINS DISTRIBUTIONS YEAR RETURN++
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$(0.28) $(0.32) $(0.50) $(1.10) $10.92 21.74%
(0.19) -- -- (0.19) 9.95 0.90%
$(0.20) $(0.24) $(0.50) $(0.94) $10.94 9.24%
$(0.27) $(0.31) $(0.50) $(1.08) $10.94 21.76%
(0.19) -- -- (0.19) 9.95 0.86%
$(0.20) $(0.24) $(0.50) $(0.94) $10.92 9.70%
$(0.25) $(0.29) $(0.50) $(1.04) $10.92 21.10%
(0.19) -- -- (0.19) 9.95 0.85%
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
- --------------------------------------------------------
RATIO OF RATIO OF
NET ASSETS OPERATING NET INVESTMENT
END OF EXPENSES TO INCOME TO PORTFOLIO
YEAR AVERAGE AVERAGE TURNOVER
(IN 000'S) NET ASSETS+++ NET ASSETS RATE
- --------------------------------------------------------
<S> <C> <C> <C>
$ 103 0.25% 2.87% 94%
2,114 0.25%+ 3.94%+ 1%
$ 26 0.75%+ 2.37%+ 94%
$ 489 0.50% 2.62% 94%
94 0.50%+ 3.69%+ 1%
$4,917 1.25%+ 1.87%+ 94%
$ 737 1.09% 2.03% 94%
18 0.75%+ 3.44%+ 1%
</TABLE>
33
<PAGE> 38
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
<TABLE>
<CAPTION>
OPERATING PERFORMANCE
-----------------------------------------------------------
NET INCREASE
NET REALIZED IN NET ASSETS
NET ASSET AND RESULTING
VALUE NET UNREALIZED FROM
BEGINNING INVESTMENT GAIN ON INVESTMENT
OF YEAR INCOME/(LOSS) INVESTMENTS OPERATIONS
-----------------------------------------------------------
<S> <C> <C> <C> <C>
LIFEGOAL GROWTH PORTFOLIO
PRIMARY A SHARES
Year ended 03/31/98.......................... $10.15 $ 0.08(a) $2.87 $2.95
Period ended 03/31/97*....................... 10.06 0.12 0.09 0.21
PRIMARY B SHARES
Period ended 03/31/98**...................... $12.25 $ 0.01(a) $0.70 $0.71
INVESTOR A SHARES
Year ended 03/31/98.......................... $10.15 $ 0.05(a) $2.89 $2.94
Period ended 03/31/97*....................... 10.06 0.12 0.09 0.21
INVESTOR B SHARES
Period ended 03/31/98**...................... $11.98 $(0.02)(a) $0.99 $0.97
INVESTOR C SHARES
Year ended 03/31/98.......................... $10.15 $(0.02)(a) $2.89 $2.87
Period ended 03/31/97*....................... 10.06 0.11 0.09 0.20
</TABLE>
- ---------------
<TABLE>
<C> <S>
* LifeGoal Growth Portfolio's Primary A Shares, Investor A
Shares and Investor C Shares commenced investment operations
on October 2, 1996. Shares were offered to the public on
October 15, 1996.
** LifeGoal Growth Portfolio's Primary B Shares and Investor B
Shares commenced investment operations on September 19, and
August 12, 1997, respectively.
+ Annualized.
++ Total return represents aggregate total return for the
period indicated and does not reflect the deduction of any
applicable sales charges.
+++ The Portfolio's expenses do not include the expenses of the
underlying Funds.
(a) Per share amounts have been calculated using the monthly
average shares method, which more appropriately represents
the per share for the period.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE> 39
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
DISTRIBUTIONS
----------------------------------------------------------------
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS NET ASSET
FROM NET IN EXCESS OF NET FROM NET VALUE
INVESTMENT INVESTMENT REALIZED TOTAL END OF TOTAL
INCOME INCOME CAPITAL GAINS DISTRIBUTIONS YEAR RETURN++
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$(0.01) $(0.39) $(0.21) $(0.61) $12.49 29.80%
(0.12) -- -- (0.12) 10.15 2.10%
$(0.01) $(0.25) $(0.21) $(0.47) $12.49 6.24%
$(0.01) $(0.37) $(0.21) $(0.59) $12.50 29.68%
(0.12) -- -- (0.12) 10.15 2.05%
$(0.01) $(0.24) $(0.21) $(0.46) $12.49 8.55%
$(0.01) $(0.34) $(0.21) $(0.56) $12.46 28.89%
(0.11) -- -- (0.11) 10.15 2.01%
<CAPTION>
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
------------- --------------------------------------------------------
RATIO OF RATIO OF
NET ASSETS OPERATING NET INVESTMENT
END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO
YEAR AVERAGE TO AVERAGE TURNOVER
(IN 000'S) NET ASSETS+++ NET ASSETS RATE
- -------------------------------------------------------
<S> <C> <C> <C>
$ 289 0.25% 0.65% 69%
929 0.25%+ 1.11%+ 25%
$ 6 0.75%+ 0.15%+ 69%
$1,526 0.50% 0.40% 69%
681 0.50%+ 0.86%+ 25%
$5,829 1.25%+ (0.35)%+ 69%
$ 342 1.09% (0.19)% 69%
82 0.75%+ 0.61%+ 25%
</TABLE>
35
<PAGE> 40
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Nations LifeGoal Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Company offers three portfolios: LifeGoal Income and
Growth Portfolio, LifeGoal Balanced Growth Portfolio, and LifeGoal Growth
Portfolio (each, a "Portfolio" and collectively, the "Portfolios"). The
Portfolios invest in other mutual funds (the "Underlying Funds") distributed by
Stephens Inc. ("Stephens") and advised by NationsBanc Advisors, Inc. ("NBAI").
The Portfolios offer five classes of shares: Primary A Shares, Primary B Shares,
Investor A Shares, Investor B Shares and Investor C Shares. As of March 31,
1998, Nations LifeGoal Income and Growth Portfolio's Primary B Shares have not
been issued to the public. Each class of shares of a Portfolio has identical
voting rights (except shareholders of a class have exclusive voting rights on
matters that relate solely to that class), dividend, liquidation and other
rights, except each class bears different shareholder servicing and distribution
plan fees.
On October 15, 1996, the Company commenced the sale of its shares to the public.
On October 2, 1996, Stephens Inc., the Company's distributor, made an initial
capital investment into each Portfolio, which was in turn invested into the
Underlying Funds. The operating results from October 2, 1996 through October 14,
1996 are reflected in the beginning net asset values reported in the Statement
of Changes in Net Assets and the Financial Highlights.
1. SIGNIFICANT ACCOUNTING POLICIES.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Portfolios in the preparation of
their financial statements.
Securities Valuation: Investments in the Underlying Funds are valued at the net
asset value of each Primary A Share of the respective Underlying Fund determined
as of the close of the New York Stock Exchange on the valuation date.
Securities Transactions and Investment Income: Securities transactions are
accounted for on a trade date basis. Realized gains and losses are computed
based on the specific identification of the securities sold. Distributions from
the Underlying Funds are recorded on the ex-dividend date. Each Portfolio's
investment income and realized and unrealized gains and losses are allocated
among its classes based upon the relative net assets of each class of shares.
Dividends and Distributions to Shareholders: It is the policy of each Portfolio
to declare and pay dividends from net investment income each calendar quarter.
Each Portfolio will distribute net realized capital gains (including net
short-term capital gains), at least annually after the fiscal year in which the
capital gains were earned, unless offset by any available capital loss
carryforward. Income distributions and capital gain distributions on a Portfolio
level are determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles.
Certain reclassifications are made to each Portfolio's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryforwards) under Federal income tax regulations. These reclassifications are
due to different book and tax accounting for short-term capital gain
distributions received and differing characterizations of distributions made by
the Portfolios.
Reclassifications for the year ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
INCREASE/
(DECREASE) INCREASE/
UNDISTRIBUTED (DECREASE)
NET ACCUMULATED
INVESTMENT NET REALIZED
INCOME GAIN/(LOSS)
----------------------------
<S> <C> <C>
LifeGoal Income and Growth............. 9,440 (9,440)
LifeGoal Balanced Growth............... 92,353 (92,353)
LifeGoal Growth........................ 132,679 (132,679)
</TABLE>
Federal Income Tax: Each Portfolio intends to continue to qualify as a
regulated investment company by complying with the requirements of the Internal
Revenue Code of 1986, as amended, applicable to regulated investment companies
and by distributing substantially all of its earnings to its shareholders.
Therefore, no Federal income or excise tax provision is applicable.
Expenses: General expenses of the Company are allocated to the relevant
Portfolios based upon relative net assets. In addition, the Portfolios
indirectly bear their pro rata share of expenses of the Underlying Funds.
Operating expenses directly attributable to a Portfolio or class of shares are
charged to that Portfolio's or class's operations.
36
<PAGE> 41
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Expenses of each Portfolio not directly attributable to the operations of any
class of shares are prorated among the classes based on the relative net assets
of each class of shares.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS.
The Company has, on behalf of its Portfolios, entered into an investment
advisory agreement (the "Investment Advisory Agreement") with NBAI, a
wholly-owned subsidiary of NationsBank, N.A. ("NationsBank"), pursuant to which
NBAI provides investment advisory services to the Portfolios. Under the terms of
this Investment Advisory Agreement, NBAI is entitled to receive advisory fees at
the annual rate of 0.25% of the average daily net assets of each Portfolio and
has agreed to bear any and all fees and expenses of the Portfolios (other than
the management fee payable under the agreement, taxes, brokerage fees and
commissions, extraordinary expenses, and any applicable Rule 12b-1 fees,
shareholder servicing fees and/or shareholder administration fees).
The Company has, on behalf of its Portfolios, entered into a sub-advisory
agreement with NBAI and TradeStreet Investment Associates, Inc. ("TradeStreet"),
a wholly-owned subsidiary of NationsBank, pursuant to which TradeStreet is
entitled to receive a sub-advisory fee from NBAI at the annual rate of 0.05% of
the average daily net assets of each Portfolio.
Stephens Inc. ("Stephens") serves as the administrator of the Company pursuant
to an Administration Agreement. Stephens receives no compensation for its
services as administrator. First Data Investor Services Group, Inc. ("First
Data"), a wholly-owned subsidiary of First Data Corporation, serves as the co-
administrator of the Company.
NationsBank of Texas, N.A. ("NationsBank of Texas") serves as the custodian for
the Portfolios' assets. First Data Investor Services Group, Inc. ("First Data"),
a wholly-owned subsidiary of First Data Corporation, serves as the transfer
agent for the Portfolios' shares. NationsBank of Texas serves as the
sub-transfer agent for the Primary A and Primary B Shares of the Portfolios.
NBAI may, from time to time, voluntarily reduce its respective fees and/or
reimburse expenses payable by each Portfolio. For the year ended March 31, 1998,
NBAI did not waive or reimburse any fees.
Stephens also serves as distributor of the Portfolios' shares. For the year
ended March 31, 1998, the Portfolios were informed that the distributor received
$9,311 contingent deferred sales charges from shares which were subject to such
charges. A substantial portion of these fees are paid to affiliates of
NationsBank and NBAI.
NBAI pays each unaffiliated Director an annual fee of $1,000 ($3,000 for the
Chairman of the Board), plus $500 per Portfolio and an additional $1,000 for
each in-person board meeting, and $500 for each telephonic board meeting
attended. NBAI also reimburses expenses incurred by each unaffiliated Director
in attending such meetings.
A significant portion of each Fund's Primary A Shares represent investments by
fiduciary accounts over which NationsBank N.A. has either sole or joint
investment discretion.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS.
The Company has adopted a shareholder administration plan (the "Administration
Plan") for Primary B Shares of each Portfolio, and shareholder servicing plans
and distribution plans pursuant to Rule 12b-1 under the 1940 Act, for the
Investor A, Investor B and Investor C Shares of each Portfolio. The
Administration Plan permits the Portfolios to compensate institutions for
shareholder administration services provided to their customers that own Primary
B Shares. The shareholder servicing plans permit the Portfolios to compensate or
reimburse servicing agents for shareholder services provided by the servicing
agents. The distribution plans, adopted pursuant to Rule 12b-1 under the 1940
Act, permit the Portfolios to compensate or reimburse the distributor (and for
Investor A Shares, the distributor and/or selling agents) for activities or
expenses primarily intended to result in the sale of each class's shares.
Payments under the Primary B shareholder administration plan are limited to
0.50% of Primary B Shares average daily net assets. Payments under the Investor
A shareholder servicing and distribution plan are limited to 0.25% of Investor A
Shares average daily net assets. Payments under the shareholder servicing plan
and distribution plan, respectively, for both Investor B and Investor C Shares
are limited to 0.25% and 0.75% of each
37
<PAGE> 42
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
respective class's average daily net assets. Actual rates charged are set from
time to time by the Board of Directors. A substantial portion of the amounts
paid pursuant to these plans are paid to affiliates of NationsBank and NBAI.
At March 31, 1998, the rates in effect, as a percentage of average daily net
assets, were as follows:
<TABLE>
<S> <C>
Primary B Administration Plan............................ 0.50%
Investor A Shareholder Servicing and Distribution Plan... 0.25%
Investor B Distribution Plan............................. 0.75%
Investor B Shareholder Servicing Plan.................... 0.25%
Investor C Distribution Plan*............................ 0.75%
Investor C Shareholder Servicing Plan.................... 0.25%
</TABLE>
- ---------------
* Reflects a rate change effective August 1, 1997 from 0.25%.
4. PURCHASES AND SALES OF SECURITIES.
The aggregate cost of purchases and proceeds from sales of the Underlying Funds
for the year ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------
<S> <C> <C>
LifeGoal Income and Growth............. $2,072,681 $ 577,704
LifeGoal Balanced Growth............... $6,716,253 $3,201,496
LifeGoal Growth........................ $8,608,955 $2,854,712
</TABLE>
5. CAPITAL STOCK.
At March 31, 1998, 1,200,000,000 shares of $.001 par value capital stock were
authorized for the Company. The Company's Articles of Incorporation authorize
the Board of Directors to classify or reclassify any authorized, but unissued
shares into one or more additional classes or series of shares. See Schedule of
Capital Stock Activity.
6. RISK FACTORS OF THE PORTFOLIOS.
Investing in the Underlying Funds through the Portfolios involves certain
additional expenses and tax results that would not be present in a direct
investment in the Underlying Funds. Under certain circumstances, an Underlying
Fund may determine to pay a redemption request by a Portfolio wholly or partly
by a distribution in kind of securities from its portfolio, instead of cash, in
accordance with the rules of the Securities and Exchange Commission. In such
cases, the Portfolios may hold securities distributed by an Underlying Fund
until NBAI determines that it is appropriate to dispose of such securities.
Each of the Underlying 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 and financial
futures and options. Certain of the Underlying Funds may invest in restricted
securities; instruments issued by trusts, partnerships or other issuers,
including pass-through certificates representing participations in, or debt
instruments backed by, the securities owned by such issuers. These Underlying
Funds also may engage in securities lending, reverse repurchase agreements and
dollar roll transactions. In addition, certain of the Underlying Funds may
invest in below-investment grade debt, debt obligations of foreign issuers and
stocks of foreign corporations, securities in foreign investment funds or
trusts, derivative securities including futures contracts, options, interest
rate and currency swap transactions, and various other investment vehicles, each
with inherent risks.
The officers and directors of the Company also serve as officers and
directors/trustees of the Underlying Funds. In addition, NBAI and TradeStreet
are wholly-owned subsidiaries of NationsBank. NationsBank of Texas was a
wholly-owned subsidiary of NationsBank during the period. Conflicts may arise as
these companies seek to fulfill their fiduciary responsibilities to both the
Portfolios and the Underlying Funds.
From time to time, one or more of the Underlying Funds used for investment by
the Portfolios may experience relatively large investments or redemptions due to
reallocations or rebalancings by the Portfolios as recommended by NBAI. These
transactions will affect the Underlying Funds, since the Underlying Funds that
experience redemptions as a result of the reallocations or rebalancings may have
to sell portfolio securities and the Underlying Funds that receive additional
cash will have to invest such cash. While it is impossible to predict the
overall impact of these transactions over time, there could be adverse effects
on portfolio management to the extent that the Underlying Funds may be required
to sell securities or invest cash at times when they would not otherwise do so.
These transactions could also have tax consequences if sales of securities
resulted in gains and could also increase transactions costs. NBAI, representing
the interests of the Underlying Funds, is committed to minimizing the impact of
Portfolio transactions on the Underlying Funds to the extent it is consistent
with pursuing the investment objectives of the Portfolios. NBAI may,
nevertheless, face conflicts in fulfilling its responsibilities to both the
Portfolios and the Underlying Funds.
38
<PAGE> 43
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. SUBSEQUENT EVENT.
NationsBank of Texas merged into NationsBank on May 6, 1998. NationsBank began
serving as custodian of the Company's assets and as sub-transfer agent for the
Primary Shares on that date and is providing the same services as were
previously provided by NationsBank of Texas.
39
<PAGE> 44
NATIONS FUNDS
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND DIRECTORS OF NATIONS LIFEGOAL FUNDS, INC.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Nations LifeGoal Income and Growth
Portfolio, Nations LifeGoal Balanced Growth Portfolio and Nations LifeGoal
Growth Portfolio (constituting Nations LifeGoal Funds, Inc., hereafter referred
to as the "Portfolios") at March 31, 1998, and the results of each of their
operations, the changes in each of their net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Portfolios'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at March 31, 1998 by correspondence with the
custodian and the application of alternative auditing procedures where
securities purchased had not been received by the custodian, provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
May 28, 1998
40
<PAGE> 45
NATIONS FUNDS
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
Of the distributions made by the following Portfolios, the corresponding
percentage represents the amount of each distribution which will qualify for the
dividends received deduction available to corporate shareholders:
LifeGoal Income and Growth Portfolio....................... 8.58%
LifeGoal Balanced Growth Portfolio........................ 12.40%
LifeGoal Growth Portfolio..................................24.75%
For the year ended March 31, 1998 the amount of long term capital gain
distributed to shareholders by the Portfolios was as follows:
<TABLE>
<CAPTION>
FUND 28% RATE GAIN 20% RATE GAIN TOTAL
- ---- ------------- ------------- ------
<S> <C> <C> <C>
LifeGoal Income and Growth Portfolio..... 2,968 -- 2,968
LifeGoal Balanced Growth Portfolio....... 35,238 -- 35,238
LifeGoal Growth Portfolio................ 56,055 -- 56,055
</TABLE>
41
<PAGE> 46
[BACKGROUND DEPICTING BASKETS]
<PAGE> 47
[NATIONS FUNDS LOGO] BULK RATE
U.S. POSTAGE
P.O. BOX 32602 PAID
Charlotte, NC 28234-4602 N READING, MA
Toll Free 1-800-982-2271 PERMIT NO.
105
AR5 IN96120 3/98
