<PAGE> 1
[GRAPHIC: PHOTO OF BUILDINGS] Nations
Short-Term
Income Fund
Nations
Short-Intermediate
Government Fund
Nations
Government
Securities Fund
Nations
U.S. Government
Bond Fund
Nations
Intermediate
Bond Fund
Nations
Investment Grade
Bond Fund
Nations
Strategic
Income Fund
Nations
High Yield
Bond Fund
GOVERNMENT &
CORPORATE BOND FUNDS
ANNUAL REPORT FOR THE YEAR
ENDED MARCH 31, 2000
[NATIONS FUNDS LOGO]
<PAGE> 2
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., which is not affiliated with Bank of
America 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: Banc of America Advisors, Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
<PAGE> 3
PRESIDENTS' MESSAGE
Dear Shareholder:
As we report on the past 12 months ending March 31,
2000, we need to remind ourselves of two major
investment tenets -- diversification and investing
for the long term. Keep these points in mind as we
take a look back at the past year and where we are
today.
THE YEAR IN REVIEW
For most of 1999, the threat of Y2K was on everyone's
minds. Many companies in the U.S. and around the
world went to great lengths to make sure that
computer systems were compliant and ready to "squash"
the Y2K bug. Fortunately, we entered the 21st century
relatively unscathed. But in the months that led up
to the year 2000 and in the first quarter of the new
year, the markets have put on quite a show. We've
seen an unusual level of volatility and it doesn't
look like things are going to calm down any time
soon.
While large-company stocks continued to perform well
in 1999 and into 2000, markets began to broaden with
small and mid-size company stocks staging turnarounds
and actually outperforming large-company stocks. The
Standard & Poor's 500 Composite Stock Price Index was
up 17.94% for the 12 months ending March 31, 2000,
while the S&P MidCap 400 Index and Russell 2000 Index
were up 38.20% and 37.29%, respectively.* Value
stocks also regained some ground during the period
after several quarters of underperformance versus
growth stocks.
International markets also showed new life in 1999
and into 2000, especially in Asia where it's been a
long recovery since the Asian "malaise" began in
1997. The Morgan Stanley Capital International (MSCI)
Europe, Australasia and Far East (EAFE) Index gained
25.09% for the 12 months ending March 31, 2000,
thanks in large part to the economic recovery in
Japan.**
MARKET MAYHEM As of late, we have witnessed wild
swings in the U.S. stock markets, setting new
milestones for one-day gains and losses. It's a
tumultuous time in the markets and now, more than
ever, it's important to remember that one key to a
successful investment strategy is diversification.
Investing in a number of sectors allows you to take
advantage of those sectors that are in favor today,
and those that may be in favor tomorrow. And, as
shown by how quickly the markets have rebounded from
these dramatic highs and lows, you need to remember
to stay focused on long-term goals. Investing takes
discipline and a conviction to hold true to your
long-term objectives. As we've said before, investors
that took themselves out of the market based on
short-term volatility and Y2K fears lost out on
potential gains in their investments during that time
and face possible tax implications and fees as a
result of their withdrawal. It's true that over the
long term, the market has trended upward. While there
is no assurance that this trend will continue, the
advantages of long-term investing are clear.
*The Standard & Poor's 500 Composite Stock Price
Index is an unmanaged index of 500 widely held common
stocks. The Standard & Poor's MidCap 400 Index is a
market-value weighted index that measures the market
value of 400 domestic stocks chosen for market size,
liquidity, and industry representation. It is
unmanaged and unavailable for investment. The Russell
2000 Index is an unmanaged capitalization-weighted
index that tracks the performance of 2000 small
company stocks. It is unavailable for investment.
**The Morgan Stanley Capital International Europe,
Australasia and Far East Index is an unmanaged,
capitalization-weighted index that tracks stocks
traded in twenty countries in Europe, Australia, and
the Far East. It is unavailable for investment.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
<PAGE> 4
PRESIDENTS' MESSAGE CONTINUED...
At Nations Funds, we firmly believe in the value of
advice, especially in times of uncertainty. An
investment professional can keep you abreast of
current market conditions and work with you to
determine the best strategy for surviving short-term
volatility and successfully reaching your long-term
goals.
WHAT'S NEW AT NATIONS FUNDS
In its continuing effort to provide world-class
investment management, Bank of America reorganized a
number of internal investment management units into
Banc of America Capital Management, Inc. (BACAP).
Focusing on both equity and fixed income funds, this
Nations Funds Manager of Distinction(SM) is
responsible for the portfolio management of more than
40 Nations Funds. This entity was developed to
synergize research and investment capabilities into a
premier investment management organization. And the
media has taken notice. You may have seen BACAP
investment professionals regularly featured on
programs on CNBC and CNNfn. When the media looks to
the industry for expert analysis, they are now
turning regularly to the investment professionals of
BACAP.
In addition to the changes at BACAP, we enhanced our
investment management expertise with the addition of
MacKay Shields LLC as our newest Manager of
Distinction to manage Nations High Yield Bond Fund,
which debuted in February. The Fund rounds out our
line of fixed income fund offerings. On the equity
side, we launched a new Fund for a new era -- Nations
Marsico 21st Century Fund. This latest offering
managed by Marsico Capital Management, LLC is
positioned to invest in companies of any size that
are changing the way the world does business.
Not only are new products important to us. Quality
shareholder service continues to be of utmost
importance. We were recognized by DALBAR, Inc. -- an
independent evaluator of customer service in the
mutual fund industry -- with the 1999 Mutual Fund
Service Award. This award was given to us in
recognition of our commitment to provide shareholders
with the highest level of client service in the
mutual fund industry. We will strive to maintain this
level of excellence throughout 2000 and beyond.
We are excited about our growth over the past year
and the opportunities ahead of us. Should you have
any questions or comments on your annual report,
please contact your investment professional or call
us at 1.800.321.7854. You can also visit us online at
www.nations-funds.com.
Thank you for being a part of the Nations Funds
family.
Sincerely,
/s/ A. Max Walker
A. MAX WALKER
PRESIDENT AND CHAIRMAN OF THE BOARD
NATIONS FUNDS
/s/ Robert H. Gordon
ROBERT H. GORDON
PRESIDENT
BANC OF AMERICA ADVISORS, INC.
March 31, 2000
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<S> <C>
NATIONS FUNDS SPECTRUM 2
ECONOMIC OVERVIEW 3
PORTFOLIO COMMENTARY
Nations Short-Term Income Fund 5
Nations Short-Intermediate Government Fund 9
Nations Government Securities Fund 14
Nations U.S. Government Bond Fund 18
Nations Intermediate Bond Fund 22
Nations Investment Grade Bond Fund 26
Nations Strategic Income Fund 30
Nations High Yield Bond Fund 35
FINANCIAL STATEMENTS
Statements of net assets 39
Statements of operations 58
Statements of changes in net assets 60
Schedules of capital stock activity 63
Financial highlights 72
Notes to financial statements 88
Statement of net assets -- Nations Master Investment Trust
Nations Intermediate Bond Master Portfolio 99
Nations High Yield Bond Master Portfolio 102
Statement of operations 106
Statement of changes in net assets 107
Supplementary data 107
Notes to financial statements 108
</TABLE>
<TABLE>
<S> <C>
------------------------------------------------------------------------------
NATIONS FUNDS [DALBAR SERVICE AWARD LOGO]
RECOGNIZED FOR
OUTSTANDING DALBAR, Inc., is a well-respected
CUSTOMER SERVICE research firm that measures
customer service levels and
IN RECOGNITION OF ITS COMMITMENT TO establishes benchmarks in the
PROVIDE SHAREHOLDERS WITH THE financial services industry.
HIGHEST LEVEL OF CUSTOMER SERVICE
IN THE MUTUAL FUND INDUSTRY,
NATIONS FUNDS RECEIVED THE DALBAR
MUTUAL FUND SERVICE AWARD IN 1999.
------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
THE NATIONS FUNDS FAMILY OF FUNDS
As of March 31, 2000
LOWER RISK/REWARD POTENTIAL
MONEY MARKET FUNDS
Nations Prime Fund
Nations Cash Reserves
Nations Money Market Reserves
Nations Government Money Market Fund
Nations Government Reserves
Nations Treasury Fund
Nations Treasury Reserves
Nations Tax Exempt Fund
Nations Municipal Reserves
Nations California Tax-Exempt Reserves
FIXED INCOME FUNDS
INCOME FUNDS
Nations High Yield Bond Fund
Nations Strategic Income Fund
Nations U.S. Government Bond Fund
Nations Government Securities Fund
Nations Investment Grade Bond Fund
Nations Intermediate Bond Fund
Nations Short-Intermediate Government Fund
Nations Short-Term Income Fund
TAX-EXEMPT INCOME FUNDS
Nations Municipal Income Fund
Nations State-Specific Long-Term Municipal
Bond Funds (CA, FL, GA,
MD, NC, SC, TN, TX, VA)
Nations Intermediate Municipal Bond Fund
Nations State-Specific Intermediate Municipal
Bond Funds (FL, GA, MD,
NC, SC, TN, TX, VA)
Nations Short-Term Municipal Income Fund
DOMESTIC EQUITY FUNDS
GROWTH FUNDS
Nations Small Company Fund
Nations MidCap Growth Fund
Nations Marsico Focused Equities Fund
Nations Disciplined Equity Fund
Nations Capital Growth Fund
Nations Strategic Growth Fund
Nations Blue Chip Fund
GROWTH AND INCOME FUNDS
Nations Marsico Growth & Income Fund
Nations Value Fund
Nations Equity Income Fund
Nations Asset Allocation Fund
Nations Balanced Assets Fund
Nations Convertible Securities Fund
INTERNATIONAL FUNDS
Nations Emerging Markets Fund
Nations International Growth Fund
Nations International Equity Fund
Nations International Value Fund
HIGHER RISK/REWARD POTENTIAL
INDEX FUNDS
Nations LargeCap Index Fund
Nations Managed Index Fund
Nations SmallCap Index Fund
Nations Managed SmallCap Value Index Fund
Nations Managed Value Index Fund
ASSET ALLOCATION PORTFOLIOS
Nations LifeGoal Balanced Growth Portfolio
Nations LifeGoal Growth Portfolio
Nations LifeGoal Income and Growth Portfolio
2
<PAGE> 7
ECONOMIC OVERVIEW
BANC OF AMERICA CAPITAL MANAGEMENT*
THE YEAR IN REVIEW
Both the U.S. economy and stock market scored
impressive performances in the year ended March 31,
2000. Our economy launched an unprecedented tenth
year of expansion, marking the longest upswing in
American history. And the stock market's continued
climb reflected favorable short-term fundamentals and
a long-term revolution in technology and
communications.
In the year ended March 31, the Standard & Poor's 500
Composite Stock Price Index advanced by 17.94%. While
investors turned in March to some of those economic
sectors largely overlooked in the rush to technology,
the Nasdaq Composite Index still sparkled with an 86%
advance for the past 12 months. A renewed interest in
smaller-capitalization stocks also drove the Russell
2000 Index 37% higher as of March 31.**
During the past year, U.S. real GDP (gross domestic
product) expanded an estimated 5%, while inflation
remained subdued. Despite a near tripling in oil
costs, consumer prices increased by only 2.4%. Two
primary forces deserve credit for this nearly
flawless performance. First, U.S. economic policies
have spawned an environment conducive to
non-inflationary growth. These policies include
deficit reduction, monetary discipline, deregulation
and free foreign trade. Second, a once-in-a-century
wave of innovation has sparked large gains in
productivity through advances in the internet,
computers and information sharing. These advances in
output per hour have restrained inflation and helped
companies achieve double-digit profit gains.
Economic and stock market advances have continued
despite five interest rate hikes enacted by the
Federal Reserve Board (the Fed) over the past year.
Three of those increases simply reversed the easings
triggered by Russia's crisis in 1998. The last two
advances in the Federal Funds rate have restored the
monetary target to the 6.0% level of 1995. The Fed is
attempting to achieve a tempered and sustainable
economic growth rate consistent with an ongoing low
rate of inflation.
The long-term bond market appears confident that the
Fed will succeed. The yield on 30-year U.S. Treasury
bonds slid below 6.0% by the end of March 2000,
reflecting in part the conviction that economic
growth will ultimately moderate and that inflation
will stay in check. In addition, the Treasury's
decision to buy back
*Banc of America Capital Management is the investment
management group of Bank of America, N.A.
and includes Banc of America Capital Management,
Inc., investment sub-adviser to many Nations Funds,
and other non-bank affiliates of Bank of America.
**The Standard & Poor's 500 Composite Stock Price
Index is an unmanaged index of 500 widely held
common stocks. It is unavailable for investment.
The Nasdaq Composite Index tracks the performance of
domestic common stocks traded on the regular
Nasdaq market as National Market System traded
foreign stocks and ADRs. It is unmanaged and
unavailable for investment.
The Russell 2000 Index is an unmanaged,
capitalization-weighted index that tracks the
performance of 2000 small company stocks. It is
unavailable for investment.
Source for all statistical data -- Banc of America
Capital Management.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
3
<PAGE> 8
ECONOMIC OVERVIEW CONTINUED...
$30 billion in government debt because of the
emergence of sizable federal budget surpluses has
been a major force pushing long-term Treasury bond
yields lower.
The past 12 months have also witnessed the emergence
of a global recovery. Much of Asia has rebounded
smartly from the scourge of devaluations that began
in 1997. Japan's economy has continued to struggle
but appears to be on a modest upward track. The new
"Eurozone" has moved forward, although growth has
been moderate. Even Russia has begun to emerge from
the turmoil of 1998. Finally, while parts of Latin
America -- such as Venezuela and
Argentina -- continue to struggle, Brazil appears to
have turned the corner and Mexico has prospered.
The major non-event of the year turned out to be the
"Y2K" date change. Although computer failures could
have wreaked havoc on financial markets and the
global economy, extensive investment and preparation
by the technology-dependent countries allowed markets
to celebrate the new year with barely a hiccup.
THE YEAR AHEAD
Look for the U.S. economy to continue its expansion
during the coming year, with no recession looming on
the horizon. We forecast growth to moderate, however,
to 3.5% or less over the course of the next 12
months. This pace will be more consistent with a
long-term sustainable trend.
Inflation should remain constrained. Although low
unemployment may cause additional upward pressure on
wages and benefits, productivity gains should offset
much of that increase. Meanwhile, a step-up in
production by oil producing countries should cause
energy prices to subside from the peaks reached in
early 2000.
We also anticipate one or two more interest rate
hikes from the Fed as monetary authorities attempt to
rein in growth and ensure that the economy does not
overheat. Long-term interest rates have already
largely incorporated expectations of such additional
tightening.
The stock market has displayed extreme volatility
recently, and large swings are likely to continue.
Strong profit growth and moderate interest rates
should support a further rise in overall stock prices
during the coming year. However, general gains of
more than 10% should be more difficult to achieve,
especially as the surge in the technology sector has
tended to overstate some of the general strength in
the market.
While the long-term fundamentals underpinning the
technology sector remain compelling, a reallocation
in portfolios generally has begun. Investors have
started to switch from internet, communications, and
biotechnology stocks with very high valuations to
other market segments with much lower
price-to-earnings ratios***. We think this
rebalancing of the market is healthy, especially as
it involves some broadening in its strength to
encompass the financial, consumer noncyclical and
industrial sectors of the market. Also, look for
investors to continue to discern between internet and
other new firms that are likely to be long-term
survivors and those that have set up shop with only a
concept and a promise.
LYNN REASER, PH.D.
CHIEF ECONOMIST
BANC OF AMERICA CAPITAL MANAGEMENT
March 31, 2000
***The price-to-earnings ratio gives investors an
idea of how much they are paying for a company's
earning power.
4
<PAGE> 9
NATIONS SHORT-TERM
INCOME FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY*
<TABLE>
<S> <C>
IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON
NATIONS SHORT-TERM INCOME FUND'S PERFORMANCE FOR THE
12-MONTH PERIOD ENDED MARCH 31, 2000 AND ITS OUTLOOK FOR THE
FUTURE.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Fixed We believe returns and consistency of returns are enhanced
Income Management Team at Banc of through a disciplined risk management process that seeks to
America Capital Management, Inc., control interest rate risk and emphasizes a quantitative
investment sub-adviser to the approach to sector allocation, sector rotation and relative
Fund. value security selection. Simply put, we believe that if we
INVESTMENT OBJECTIVE maximize the yield of the portfolio and match its
The Fund seeks high current income duration -- or interest-rate sensitivity -- to an
consistent with minimal appropriate benchmark, the higher yield should enhance the
fluctuations of principal. return of the portfolio. At the same time, we believe the
PERFORMANCE REVIEW neutral duration of the portfolio compared to the benchmark
For the 12-month period ended will lessen unnecessary portfolio performance volatility.
March 31, 2000, Nations Short-Term The goal of Nations Short-Term Income Fund is to outperform
Income Fund Investor A Shares the Merrill Lynch 1-3 Year Treasury Index.***
provided shareholders with a total Our strategy is focused on adding yield to the portfolio by
return of 2.76%.** over-weighting shorter duration corporate securities and
under-weighting U.S. Treasury and agency securities. The
security selection process is based on seeking relative
value and uses both quantitative and fundamental credit
analyses.
WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
REPORTING PERIOD?
A combination of factors created one of the most volatile
periods in fixed income history. These included a strong
U.S. economy, fears of a Y2K disaster, the announcement of
the U.S. Treasury debt reduction program, the dramatic
increase in oil prices, and the recent proposal to eliminate
the implied government guarantees on some mortgage-related
securities.
The Federal Reserve Board (the Fed), citing tight labor
markets and continued strength in the U.S. economy, raised
short-term rates a total of five times over the past year,
from 4.75% to 6.00%. This pushed the yields on most
longer-maturity securities higher, although long-term U.S.
Treasury yields did decline late in the period on news of
the government's debt reduction program.
With uncertainty comes volatility among securities with
credit risk. The corporate bond sector had poor total
returns relative to comparable duration U.S. Treasury
securities. The other sectors of the fixed income markets
also suffered, but their yield advantages were enough to
offset the decline in their prices relative to U.S. Treasury
securities.
</TABLE>
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual funds.
**The performance shown does not reflect the maximum
front-end sales charge of 1.00%, which may apply to
purchases of Investor A Shares. For standardized
performance, please refer to the Performance table.
The performance shown includes the effects of fee
waivers by the investment adviser, which has the
effect of increasing total return.
***The Merrill Lynch 1-3 year Treasury Index is an
unmanaged index of U.S. Treasury securities with
maturities of one to three years. It is unavailable
for investment.
Source for all statistical data -- Banc of America
Capital Management, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
5
<PAGE> 10
NATIONS SHORT-TERM
INCOME FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY continued
<TABLE>
<S> <C>
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
Despite the volatility, we remained faithful to our strategy
of maximizing the yield of the portfolio while minimizing
its risk relative to the benchmark. While this may cause
some interim performance volatility, we believe the strategy
will produce top quartile returns over a three to five year
period.
WHAT INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S
PERFORMANCE, AND WHAT DECISIONS HELD BACK PERFORMANCE?+
The Fund's strategic overweighting of "spread
sectors" -- those sectors with yield advantages or "spreads"
over Treasuries -- helped performance. However, our
consistent overweighting of the spread sectors and lack of
U.S. Treasury exposure made it difficult to take advantage
of short-term investment opportunities in the agency,
corporate and asset-backed markets. When we overweight
spread product, we typically do this at the expense of
owning U.S. Treasuries. In many cases, the portfolio will
only have 5% to 10% of its assets in U.S. Treasury
securities. When spreads widen, we may not have the room to
add more exposure to corporate bonds, mortgage-backed
securities or asset-backed securities if the Fund doesn't
have any U.S. Treasuries to sell against them. One thing we
do to counter this is to extend duration in spread product.
If we think spreads are going to tighten, we often will sell
shorter duration securities and buy longer duration
securities.
WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST
OF 2000?
We forecast that the Fed will raise interest rates to slow
the U.S. economy at least one more time. While there is a
risk of additional rate increases, the recent volatility in
the stock market should help to dampen consumer confidence
and U.S. GDP (gross domestic product) growth.
The biggest issues facing fixed income investors over the
next year are the combination of a shrinking U.S. Treasury
market and the potential that U.S. government sponsored
agencies may lose their implied government guarantees.
HOW IS THE FUND POSITIONED IN THIS ENVIRONMENT?
Because our process involves taking a consistent level of
market exposure while remaining duration-neutral to the
Fund's benchmark, we do not have to rely on historically
inaccurate economic forecasting techniques to position the
portfolio.
Spreads between the yields of U.S. Treasuries and the yields
of corporate, mortgage-backed and asset-backed securities
have widened to levels that we have not seen since the
recession of 1991. While we anticipate that spreads will be
under pressure for the remainder of the year, we will
continue to add incremental exposure to the corporate,
mortgage-backed and asset-backed securities markets as
spreads widen further. Once the markets stabilize, spreads
should revert to more reasonable levels and we are
optimistic that the Fund's investments in these sectors
should fulfill their potential to enhance the returns of the
portfolio.
</TABLE>
+Portfolio characteristics are subject to change and
may not be representative of current characteristics.
6
<PAGE> 11
NATIONS SHORT-TERM
INCOME FUND
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/00)
[PIE CHART]
<TABLE>
<S> <C>
Other 3.5%
Corporate bonds and notes 54.3%
U.S. Treasury obligations 5.3%
Mortgage-backed securities 15.3%
Asset-backed securities 21.6%
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 2000, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
<TABLE>
<C> <S> <C>
TOP 10 HOLDINGS
-------------------------------------------------
1 EQCC Home Equity Loan Trust, Series
1998-1, Class A4F, 6.459% 03/15/21 2.7%
-------------------------------------------------
2 GE Capital Mortgage Services, Inc.,
Series 1997-HE4, Class A3, 6.590%
12/25/12 2.5%
-------------------------------------------------
3 Premier Auto Trust, Series 1997-2,
Class A-5, 6.320% 03/06/02 2.5%
-------------------------------------------------
4 ERAC USA Finance Company, 7.500%
06/15/03 2.4%
-------------------------------------------------
5 Metris Master Trust, Series 1997-1,
Class B, 7.110%, 10/20/05 2.1%
-------------------------------------------------
6 Columbia Gas System, Series A, 6.390%
11/28/00 2.0%
-------------------------------------------------
7 Sears Roebuck Acceptance Corporation,
6.860% 10/02/01 2.0%
-------------------------------------------------
8 Paramount Communications, Sr. Notes,
7.500% 01/15/02 1.9%
-------------------------------------------------
9 BankBoston RV Trust, Series 1997-1,
Class A-7, 6.480% 07/15/08 1.9%
-------------------------------------------------
10 J. Seagram & Sons, Inc., 6.250%
12/15/01 1.9%
-------------------------------------------------
THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE
EXAMPLES OF THE INDUSTRIES AND SECURITIES IN
WHICH THE FUND MAY INVEST.
</TABLE>
7
<PAGE> 12
NATIONS SHORT-TERM
INCOME FUND
PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
[INVESTOR A SHARES AT MOP* RETURN CHART]
<TABLE>
<CAPTION>
NATIONS SHORT-TERM INCOME FUND MERRILL LYNCH 1-3 YEAR TREASURY
$14,228 INDEX $14,737
----------------------------- -------------------------------
<S> <C> <C>
Oct. 2 1992 9900.00 10000.00
1992 9815.00 10018.00
10124.00 10239.00
10295.00 10350.00
10480.00 10498.00
1993 10536.00 10560.00
10431.00 10507.00
10389.00 10516.00
10488.00 10620.00
1994 10484.00 10620.00
10817.00 10976.00
11192.00 11329.00
11361.00 11499.00
1995 11648.00 11789.00
11673.00 11827.00
11783.00 11947.00
11968.00 12144.00
1996 12192.00 12375.00
12262.00 12456.00
12497.00 12730.00
12725.00 12980.00
1997 12902.00 13198.00
13080.00 13392.00
13288.00 13597.00
13608.00 14016.00
1998 13686.00 14122.00
13846.00 14207.00
13878.00 14288.00
14014.00 14468.00
1999 14097.00 14555.00
Mar. 31 2000 14228.00 14737.00
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
NATIONS SHORT-TERM INCOME FUND MERRILL LYNCH 1-3 YEAR TREASURY
$14,371 INDEX $14,737
----------------------------- -------------------------------
<S> <C> <C>
Oct. 2 1992 10000.00 10000.00
1992 9914.00 10018.00
10226.00 10239.00
10399.00 10350.00
10586.00 10498.00
1993 10642.00 10560.00
10536.00 10507.00
10494.00 10516.00
10594.00 10620.00
1994 10590.00 10620.00
10926.00 10976.00
11305.00 11329.00
11476.00 11499.00
1995 11764.00 11789.00
11791.00 11827.00
11902.00 11947.00
12089.00 12144.00
1996 12315.00 12375.00
12386.00 12456.00
12623.00 12730.00
12354.00 12980.00
1997 13032.00 13198.00
13212.00 13392.00
13422.00 13597.00
13746.00 14016.00
1998 13824.00 14122.00
13986.00 14207.00
14018.00 14288.00
14156.00 14468.00
1999 14239.00 14555.00
Mar. 31 2000 14371.00 14737.00
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
SINCE INCEPTION NAV** MOP*
<S> <C> <C>
(10/2/92
through
3/31/00) 4.96% 4.82%
</TABLE>
The charts to the left show the
growth in value of a
hypothetical $10,000 investment
in Investor A Shares of Nations
Short-Term Income Fund from the
inception of the share class.
Figures for the Merrill Lynch
1-3 Year Treasury Index, an
unmanaged index comprised of
U.S. Treasury securities with
maturities of 1-3 years, include
reinvestment of dividends. It is
unavailable for investment. The
performance of Primary A,
Investor B and Investor C Shares
may vary based on the
differences in sales loads and
fees paid by the shareholders
investing in each class.
[CHART LEGEND]
TOTAL RETURN (AS OF 3/31/00)
<TABLE>
<CAPTION>
INVESTOR A INVESTOR B INVESTOR C
PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC***
<S> <C> <C> <C> <C> <C> <C> <C>
Inception date 9/30/92 10/2/92 6/7/93 10/2/92
-----------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 3.00% 2.76% 1.72% 2.40% -2.45% 1.97% 1.00%
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS 5.30% 5.08% 4.72% 4.85% 3.95% 4.69% 4.69%
5 YEARS 5.85% 5.63% 5.42% 5.43% 5.11% 5.33% 5.33%
SINCE INCEPTION 5.20% 4.96% 4.82% 4.83% 4.83% 4.68% 4.68%
</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 returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 1.00%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
8
<PAGE> 13
NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY*
<TABLE>
<S> <C>
IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND'S PERFORMANCE FOR
THE 12-MONTH PERIOD ENDED MARCH 31, 2000 AND ITS OUTLOOK FOR
THE FUTURE.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Fixed We believe returns and consistency of returns are enhanced
Income Management Team of Banc of through a disciplined risk management process that seeks to
America Capital Management, Inc., control interest rate risk and emphasizes a quantitative
investment sub-adviser to the approach to sector allocation, sector rotation and relative
Fund. value security selection. Simply put, we believe that if we
INVESTMENT OBJECTIVE maximize the yield of the portfolio and match its
The Fund seeks high current income duration -- or interest-rate sensitivity -- to an
consistent with modest fluctuation appropriate benchmark, the higher yield of the portfolio
of principal. should enhance the return of the portfolio. At the same
PERFORMANCE REVIEW time, we believe the neutral duration of the portfolio
For the 12-month period ended compared to the benchmark will lessen unnecessary portfolio
March 31, 2000, Nations performance volatility.
Short-Intermediate Government Fund The goal of Nations Short-Intermediate Government Fund is to
Investor A Shares provided outperform the Lehman Intermediate Government Bond Index.
shareholders with a total return The Index is comprised of all U.S. Treasury and agency
of 1.43%.** issues with maturities from one to 10 years. It has an
average duration of 3.5 years.
Our strategy is focused on adding yield to the portfolio by
maintaining a large exposure to agency mortgage-backed
securities and under-weighting U.S. Treasury securities. The
security selection process is based on seeking relative
value and it uses both quantitative and fundamental analyses
of the mortgage market.
WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
REPORTING PERIOD?
A combination of factors created one of the most volatile
periods in fixed income history. These included a strong
U.S. economy, fears of a Y2K disaster, the announcement of
the U.S. Treasury debt reduction program, the dramatic
increase in oil prices, and the recent proposal to eliminate
the implied government guarantees on some mortgage-related
securities.
The Federal Reserve Board (the Fed), citing tight labor
markets and continued strength in the U.S. economy, raised
short-term rates a total of five times over the past year,
from 4.75% to 6.00%. This pushed the yields on most
longer-maturity securities higher, although long-term U.S.
Treasury yields did decline late in the period on news of
the government's debt reduction program.
</TABLE>
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual funds.
**The performance shown does not reflect the maximum
front-end sales charge of 4.75%, which may apply to
purchases of Investor A Shares. For standardized
performance, please refer to the Performance table.
The performance shown includes the effects of fee
waivers by the investment adviser, which has the
effect of increasing total return.
Source for all statistical data -- Banc of America
Capital Management, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
9
<PAGE> 14
NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY continued
<TABLE>
<S> <C>
With uncertainty comes volatility among securities with
credit risk. The corporate bond sector had poor total
returns relative to comparable duration U.S. Treasury
securities. The other sectors of the fixed income markets
also suffered, but their yield advantages were enough to
offset the decline in their prices relative to U.S. Treasury
securities.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
Despite the volatility, we remained faithful to our strategy
of maximizing the yield of the portfolio while minimizing
its risk relative to the benchmark. While this may cause
some interim performance volatility, we believe the strategy
will produce top quartile returns over a three-to-five year
period.
WHAT INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S
PERFORMANCE, AND WHAT DECISIONS HINDERED PERFORMANCE?***
Performance for the Fund was mixed for the past 12 months.
While agency mortgage-backed securities outperformed U.S.
Treasury securities for the period, agency debentures
dramatically underperformed U.S. Treasury securities. Agency
debentures underperformed because of a Senate proposal that
would limit the amount of agency debt that banks can
purchase and eliminate the agencies' implicit government
guarantee. The Fund's exposure to the agency debenture
market reduced the return of the portfolio.
The Fund's performance was helped by its exposure to agency
mortgage-backed securities. While it appears that these two
sectors should be affected equally by the proposal,
mortgage-backed securities are collateralized by home loans
and are therefore less likely to rely on any agency
guarantees. This effectively increases the credit rating of
these securities relative to unsecured agency debentures.
WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST
OF 2000?
We forecast that the Fed will raise interest rates to slow
the U.S. economy at least one more time. While there is a
risk of additional rate increases, the recent volatility in
the stock market should help to dampen consumer confidence
and U.S. GDP (gross domestic product) growth.
The biggest issues facing fixed income investors over the
next year are the combination of a shrinking U.S. Treasury
market and the potential that U.S. government sponsored
agencies may lose their implied government guarantees.
HOW IS THE FUND POSITIONED FOR THIS ENVIRONMENT?
Because our process involves taking a consistent level of
market exposure while remaining duration neutral to the
Fund's benchmark, we do not have to rely on historically
inaccurate economic forecasting techniques to position the
portfolio.
</TABLE>
***Portfolio characteristics are subject to change
and may not be representative of current
characteristics.
10
<PAGE> 15
NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY continued
<TABLE>
<S> <C>
The spreads between the yields of U.S. Treasuries and those
of corporate, mortgage-backed and asset-backed securities
have widened to levels that we have not seen since the
recession of 1991. While we anticipate spreads will be under
pressure for the remainder of the year, we will continue to
add incremental exposure to these markets as spreads widen.
Once the markets stabilize, spreads should revert to more
reasonable levels and we are optimistic that the Fund's
exposure to mortgage-backed securities should enhance the
returns of the portfolio.
</TABLE>
11
<PAGE> 16
NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/00)
[PIE CHART]
<TABLE>
<S> <C>
Mortgage-backed securities 64.1%
Other 3.7%
U.S. Treasury obligations 20%
U.S. government and agency obligations 12%
Short-term investments 0.2%
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 2000, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
<TABLE>
<C> <S> <C>
TOP 10 HOLDINGS
-------------------------------------------------
1 Federal National Mortgage Association
(FNMA) Certificates, 6.500% 08/15/04 12.7%
-------------------------------------------------
2 Federal National Mortgage Association
(FNMA) Certificates, 7.500% 09/01/29 7.9%
-------------------------------------------------
3 Federal Home Loan Mortgage
Corporation (FHLMC) Certificates,
6.250% 10/15/02 7.1%
-------------------------------------------------
4 Federal Home Loan Bank (FHLB)
Certificates, 5.125% 04/17/01 6.8%
-------------------------------------------------
5 Federal National Mortgage Association
(FNMA) Certificates, 5.125% 02/13/04 5.1%
-------------------------------------------------
6 Federal National Mortgage Association
(FNMA) Certificates, 5.750% 04/15/03 4.4%
-------------------------------------------------
7 Government National Mortgage
Association (GNMA) Certificates,
6.500% 07/15/29 3.5%
-------------------------------------------------
8 Federal National Mortgage Association
(FNMA) Certificates, 6.500% 03/01/28 3.0%
-------------------------------------------------
9 Federal Home Loan Mortgage
Corporation (FHLMC) Certificates,
7.000% 07/01/29 2.7%
-------------------------------------------------
10 Government National Mortgage
Association (GNMA) Certificates,
5.500% 06/20/29 2.5%
-------------------------------------------------
THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE
EXAMPLES OF THE INDUSTRIES AND SECURITIES IN
WHICH THE FUND MAY INVEST.
</TABLE>
12
<PAGE> 17
NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND
PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
SINCE INCEPTION NAV** MOP*
<S> <C> <C>
(8/5/91 through
3/31/00) 5.70% 5.31%
</TABLE>
The charts to the left show the
growth in value of a
hypothetical $10,000 investment
in Investor A Shares of Nations
Short-Intermediate Government
Fund from the inception of the
share class. Figures for the
Lehman Intermediate Government
Bond Index, an unmanaged index
comprised of U.S. government
agency and U.S. Treasury
securities, include reinvestment
of dividends. It is unavailable
for investment. The performance
of Primary A, Primary B,
Investor B and Investor C Shares
may vary based on the
differences in sales loads and
fees paid by the shareholders
investing in each class.
[INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
<TABLE>
<CAPTION>
NATIONS SHORT-INTERMEDIATE LEHMAN INTERMEDIATE GOVERNMENT
GOVERNMENT FUND $15,630 BOND INDEX $17,545
-------------------------- ------------------------------
<S> <C> <C>
Aug. 5 1991 9675.00 10000.00
10088.00 10363.00
1991 10569.00 10862.00
10412.00 10748.00
10874.00 11165.00
11255.00 11655.00
1992 11171.00 11616.00
11594.00 12051.00
11771.00 12287.00
12031.00 12546.00
1993 12047.00 12565.00
11832.00 12332.00
11712.00 12263.00
11766.00 12358.00
1994 11735.00 12345.00
12177.00 12859.00
12629.00 13459.00
12806.00 13668.00
1995 13168.00 14125.00
13047.00 14028.00
13059.00 14122.00
13278.00 14365.00
1996 13561.00 14697.00
13541.00 14694.00
13896.00 15104.00
14218.00 15491.00
1997 14517.00 15833.00
14710.00 16072.00
14948.00 16370.00
15401.00 17134.00
1998 15444.00 17177.00
15410.00 17131.00
15299.00 17098.00
15423.00 17271.00
1999 15478.00 17264.00
Mar. 31 2000 15630.00 17545.00
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
NATIONS SHORT-INTERMEDIATE LEHMAN INTERMEDIATE GOVERNMENT
GOVERNMENT FUND $16,156 BOND INDEX $17,545
-------------------------- ------------------------------
<S> <C> <C>
Aug. 5 1991 10000.00 10000.00
10427.00 10363.00
1991 10924.00 10862.00
10762.00 10748.00
11239.00 11165.00
11633.00 11655.00
1992 11547.00 11616.00
11983.00 12051.00
12167.00 12287.00
12435.00 12546.00
1993 12452.00 12565.00
12230.00 12332.00
12105.00 12263.00
12161.00 12358.00
1994 12129.00 12345.00
12587.00 12859.00
13053.00 13459.00
13236.00 13668.00
1995 13611.00 14125.00
13486.00 14028.00
13498.00 14122.00
13724.00 14365.00
1996 14017.00 14697.00
13996.00 14694.00
14362.00 15104.00
14696.00 15491.00
1997 15004.00 15833.00
15204.00 16072.00
15450.00 16370.00
15918.00 17134.00
1998 15963.00 17177.00
15928.00 17131.00
15813.00 17098.00
15941.00 17271.00
1999 15999.00 17264.00
Mar. 31 2000 16156.00 17545.00
</TABLE>
TOTAL RETURN (AS OF 3/31/00)
<TABLE>
<CAPTION>
INVESTOR A INVESTOR B INVESTOR C
PRIMARY A PRIMARY B NAV** MOP* NAV** CDSC*** NAV** CDSC***
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inception date 8/1/91 6/28/96 8/5/91 6/7/93 6/17/92
-----------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 1.63% 1.23% 1.43% -1.92% 0.70% -2.18% 0.74% -0.22%
-----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS 5.11% 4.72% 4.90% 3.78% 4.26% 3.96% 4.28% 4.28%
5 YEARS 5.33% -- 5.12% 4.45% 4.56% 4.56% 4.62% 4.62%
SINCE INCEPTION 5.87% 4.73% 5.70% 5.31% 3.88% 3.88% 4.35% 4.35%
</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 returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 3.25%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
13
<PAGE> 18
NATIONS GOVERNMENT
SECURITIES FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY*
<TABLE>
<S> <C>
IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON
NATIONS GOVERNMENT SECURITIES FUND'S PERFORMANCE FOR THE
12-MONTH PERIOD ENDED MARCH 31, 2000 AND THEIR OUTLOOK FOR
THE FUTURE.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Fixed We believe returns and consistency of returns are enhanced
Income Management Team of Banc of through a disciplined risk management process that seeks to
America Capital Management, Inc., control interest rate risk and emphasizes a quantitative
investment sub-adviser to the approach to sector allocation, sector rotation and relative
Fund. value security selection. Simply put, we believe that if we
INVESTMENT OBJECTIVE maximize the yield of the portfolio and match its
The Fund seeks high current income duration -- or interest-rate sensitivity -- to an
consistent with moderate appropriate benchmark, the higher yield should enhance the
fluctuation of principal. return of the portfolio. At the same time, we believe the
PERFORMANCE REVIEW neutral duration of the portfolio compared to the benchmark
For the 12-month period ended will lessen unnecessary portfolio performance volatility.
March 31, 2000, Nations Government The goal of Nations Government Securities Fund is to
Securities Fund Investor A Shares outperform the Lehman Government Bond Index.*** The Index is
provided shareholders with a total comprised of all U.S. Treasury and agency issues with
return of 0.80%.** maturities longer than one year and it has an average
duration of 5.35 years.
Our strategy is focused on adding yield to the portfolio by
maintaining a large exposure to agency mortgage-backed
securities and under-weighting U.S. Treasury and agency
securities. The security selection process is relative value
oriented and is based upon both quantitative and fundamental
analyses of the mortgage market.
WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
REPORTING PERIOD?
A combination of factors created one of the most volatile
periods in fixed income history. These included a strong
U.S. economy, fears of a Y2K disaster, the announcement of
the U.S. Treasury debt reduction program, the dramatic
increase in oil prices, and the recent proposal to eliminate
the implied government guarantees on some mortgage-related
securities.
The Federal Reserve Board (the Fed), citing tight labor
markets and continued strength in the U.S. economy, raised
short-term rates a total of five times over the past year,
from 4.75% to 6.00%. This pushed the yields on most
longer-maturity securities higher, although long-term
Treasury yields did decline late in the period on news of
the government's debt reduction program.
</TABLE>
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual funds.
**The performance shown does not reflect the maximum
front-end sales charge of 4.75%, which may apply to
purchases of Investor A Shares. For standardized
performance, please refer to the Performance table.
The performance shown includes the effects of fee
waivers by the investment adviser, which has the
effect of increasing total return.
***The Lehman Government Bond Index is unmanaged and
represents the return of government bonds with an
average maturity of approximately nine years. It is
unavailable for investment.
Source for all statistical data -- Banc of America
Capital Management, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
14
<PAGE> 19
NATIONS GOVERNMENT
SECURITIES FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY continued
<TABLE>
<S> <C>
With uncertainty comes volatility among securities with
credit risk. The corporate bond sector had poor total
returns relative to comparable duration U.S. Treasury
securities. The other sectors of the fixed income markets
also suffered, but their yield advantages were enough to
offset the decline in their prices relative to U.S. Treasury
securities.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
Despite the volatility, we remained faithful to our strategy
of maximizing the yield of the portfolio while minimizing
its risk relative to the benchmark. While this may cause
some interim performance volatility, we believe the strategy
will produce top-quartile returns over a three-to-five year
period.
WHAT INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S
PERFORMANCE AND DID ANY DECISIONS HOLD BACK PERFORMANCE?+
The Fund's strategic overweighting of the spread
sectors -- or sectors with higher yields than U.S. Treasury
securities -- managed to overcome the marginal spread
widening that occurred over the period. However, the
consistent overweighting of spread product and lack of U.S.
Treasury exposure made it difficult to take advantage of
short-term trading opportunities in the agency and
commercial mortgage markets.
WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST
OF 2000?
We forecast that the Fed will raise interest rates to slow
the U.S. economy at least one more time. While there is a
risk of additional rate increases, the recent volatility in
the stock market should help to dampen consumer confidence
and U.S. GDP (gross domestic product) growth.
The biggest issues facing fixed income investors over the
next year are the combination of a shrinking U.S. Treasury
market and the potential that U.S. government-sponsored
agencies may lose their implied government guarantees.
HOW IS THE FUND POSITIONED IN THIS ENVIRONMENT?
Because our process involves taking a consistent level of
market exposure while remaining duration neutral to the
Fund's benchmark, we do not have to rely on historically
inaccurate economic forecasting techniques to position the
portfolio.
Spreads between the yields on U.S. Treasuries and the yields
on corporate, mortgage-backed and asset-backed securities
have widened to levels that we have not seen since the
recession of 1991. While we anticipate that spreads will be
under pressure for the remainder of the year, we will
continue to add incremental exposure to these markets as
spreads widen. Once the markets stabilize, spreads should
revert to more reasonable levels and we are optimistic the
Fund's exposure to mortgage-backed securities should enhance
the returns of the portfolio.
</TABLE>
+Portfolio characteristics are subject to change and
may not be representative of current characteristics.
15
<PAGE> 20
NATIONS GOVERNMENT
SECURITIES FUND
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/00)
[PIE CHART]
<TABLE>
<S> <C>
Asset-backed securities 0.7%
U.S. Treasury obligations 20.1%
Other 1.9%
Mortgage-backed securities 77.3%
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 2000, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
<TABLE>
<C> <S> <C>
TOP 10 HOLDINGS
-------------------------------------------------
1 Government National Mortgage
Association (GNMA) Certificates,
6.500% 05/15/29 8.4%
-------------------------------------------------
2 Government National Mortgage
Association (GNMA) Certificates,
8.000% 11/15/29 5.2%
-------------------------------------------------
3 Federal Home Loan Mortgage
Corporation (FHLMC) Certificates,
6.500% 09/15/25 5.1%
-------------------------------------------------
4 Federal National Mortgage Association
(FNMA) Certificates, 8.000% 10/01/29 3.4%
-------------------------------------------------
5 Federal National Mortgage Association
(FNMA) Certificates, 6.565% 07/01/16 3.3%
-------------------------------------------------
6 Federal National Mortgage Association
(FNMA) Certificates, 6.000% 06/01/29 3.2%
-------------------------------------------------
7 Federal National Mortgage Association
(FNMA) Certificates, 5.625% 05/14/04 2.7%
-------------------------------------------------
8 Federal National Mortgage Association
(FNMA) Certificates, 6.500% 03/01/29 2.4%
-------------------------------------------------
9 Government National Mortgage
Association (GNMA) Certificates,
6.500% 01/15/29 2.3%
-------------------------------------------------
10 Government National Mortgage
Association (GNMA) Certificates,
6.000% 07/15/29 2.3%
-------------------------------------------------
THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE
EXAMPLES OF THE INDUSTRIES AND SECURITIES IN
WHICH THE FUND MAY INVEST.
</TABLE>
16
<PAGE> 21
NATIONS GOVERNMENT
SECURITIES FUND
PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
[INVESTOR A SHARES AT MOP* RETURN CHART]
<TABLE>
<CAPTION>
SALOMON BROTHERS LEHMAN INTERMEDIATE NATIONS GOVERNMENT
MORTGAGE INDEX TREASURY INDEX SECURITIES FUND LEHMAN GOVERNMENT
$18,932 $18,058 $15,545 BOND INDEX $19,830
---------------- ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Apr. 17 1991 10000.00 10000.00 9525.00 10000.00
10202.00 10167.00 9624.00 10135.00
10767.00 10651.00 10121.00 10713.00
1991 11243.00 11170.00 10619.00 11287.00
11184.00 11047.00 10429.00 11484.00
11634.00 11477.00 10837.00 11939.00
11977.00 11988.00 11186.00 12529.00
1992 12071.00 11944.00 11159.00 12534.00
12425.00 12394.00 11491.00 13101.00
12688.00 12640.00 11728.00 13479.00
12803.00 12908.00 12002.00 13917.00
1993 12919.00 12927.00 12009.00 13870.00
12647.00 12685.00 11644.00 13452.00
12579.00 12616.00 11440.00 13299.00
12680.00 12711.00 11375.00 13355.00
1994 12735.00 12697.00 11372.00 13402.00
13408.00 13222.00 11930.00 14033.00
14102.00 13842.00 12475.00 14903.00
14387.00 14052.00 12682.00 15167.00
1995 14872.00 14527.00 13077.00 15860.00
14817.00 14424.00 12807.00 15501.00
14918.00 14518.00 12786.00 15576.00
15233.00 14768.00 12992.00 15837.00
1996 15673.00 15107.00 13373.00 16300.00
15692.00 15097.00 13167.00 16168.00
16263.00 15515.00 13628.00 16729.00
16731.00 15914.00 13975.00 17289.00
1997 17124.00 16268.00 14482.00 17863.00
17404.00 16514.00 14666.00 18133.00
17701.00 16818.00 15044.00 18612.00
18165.00 17634.00 15694.00 19641.00
1998 18319.00 17671.00 15664.00 19625.00
18504.00 17605.00 15421.00 19345.00
18428.00 17574.00 15196.00 19180.00
18604.00 17762.00 15292.00 19307.00
1999 18656.00 17742.00 15149.00 19187.00
Mar. 31 2000 18932.00 18058.00 15545.00 19830.00
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
NATIONS GOVERNMENT LEHMAN INTERMEDIATE SALOMON BROTHERS
SECURITIES FUNDS TREASURY INDEX MORTGAGE INDEX LEHMAN GOVERNMENT
$16,320 $18,058 $18,932 BOND INDEX $19,830
------------------ ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Apr. 17 1991 10000.00 10000.00 10000.00 10000.00
10104.00 10167.00 10202.00 10135.00
10625.00 10651.00 10767.00 10713.00
1991 11148.00 11170.00 11243.00 11287.00
10949.00 11047.00 11184.00 11484.00
11378.00 11477.00 11634.00 11939.00
11744.00 11988.00 11977.00 12529.00
1992 11716.00 11944.00 12071.00 12534.00
12064.00 12394.00 12425.00 13101.00
12312.00 12640.00 12688.00 13479.00
12601.00 12908.00 12803.00 13917.00
1993 12608.00 12927.00 12919.00 13870.00
12225.00 12685.00 12647.00 13452.00
12011.00 12616.00 12579.00 13299.00
11942.00 12711.00 12680.00 13355.00
1994 11939.00 12697.00 12735.00 13402.00
12525.00 13222.00 13408.00 14033.00
13097.00 13842.00 14102.00 14903.00
13315.00 14052.00 14387.00 15167.00
1995 13729.00 14527.00 14872.00 15860.00
13448.00 14424.00 14817.00 15501.00
13423.00 14518.00 14918.00 15576.00
13639.00 14768.00 15233.00 15837.00
1996 14040.00 15107.00 15673.00 16300.00
13824.00 15097.00 15692.00 16168.00
14308.00 15515.00 16263.00 16729.00
14671.00 15914.00 16731.00 17289.00
1997 15204.00 16268.00 17124.00 17863.00
15397.00 16514.00 17404.00 18133.00
15794.00 16818.00 17701.00 18612.00
16477.00 17634.00 18165.00 19641.00
1998 16445.00 17671.00 18319.00 19625.00
16190.00 17605.00 18504.00 19345.00
15954.00 17574.00 18428.00 19180.00
16054.00 17762.00 18604.00 19307.00
1999 15905.00 17742.00 18656.00 19187.00
Mar. 31 2000 16320.00 18058.00 18932.00 19830.00
</TABLE>
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
SINCE INCEPTION NAV** MOP*
<S> <C> <C>
(4/17/91
through
3/31/00) 5.62% 5.05%
</TABLE>
The charts to the left show the
growth in value of a
hypothetical $10,000 investment
in Investor A Shares of Nations
Government Securities Fund from
the inception of the share
class. Figures for the Lehman
Intermediate Treasury Index
track the market value of U.S.
Treasury securities with
maturities of 3 to 10 years. The
Salomon Brothers Mortgage Index
is comprised of 30-year and
15-year GNMA, FNMA and FHLMC
securities and FNMA and FHLMC
balloon mortgages. Figures for
the Lehman Government Bond Index
represent the return of
government bonds with an average
maturity of approximately nine
years and include reinvestment
of dividends. All of the Indices
are unmanaged and unavailable
for investment. The performance
of Primary A, Investor B and
Investor C Shares may vary based
on the differences in sales
loads and fees paid by the
shareholders investing in each
class.
[CHART LEGEND]
TOTAL RETURN (AS OF 3/31/00)
<TABLE>
<CAPTION>
INVESTOR A INVESTOR B INVESTOR C
PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC***
<S> <C> <C> <C> <C> <C> <C> <C>
Inception date 4/11/91 4/17/91 6/7/93 7/6/92
---------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 1.12% 0.80% -3.97% 0.22% -3.59% -0.22% -1.17%
---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS 5.97% 5.69% 3.98% 5.09% 4.17% 4.95% 4.95%
5 YEARS 5.71% 5.44% 4.41% 4.91% 4.75% 4.85% 4.85%
SINCE INCEPTION 5.87% 5.62% 5.05% 3.83% 3.83% 4.07% 4.07%
</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 returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 4.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
The annual reports for the fiscal year ended March 31, 1999 and prior years
compare the Fund's performance to the Lehman Intermediate Treasury Index and the
Salomon Brothers Mortgage Index. Fund management believes the Lehman Government
Bond Index is a more appropriate benchmark because the composition of the Index
more closely resembles the composition of the Fund.
17
<PAGE> 22
NATIONS U.S. GOVERNMENT
BOND FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY*
<TABLE>
<S> <C>
IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON
NATIONS U.S. GOVERNMENT BOND FUND'S PERFORMANCE FOR THE
12-MONTH PERIOD ENDED MARCH 31, 2000 AND ITS OUTLOOK FOR THE
FUTURE.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Fixed
Income Management Team of Banc of We believe returns and consistency of returns are enhanced
America Capital Management, Inc., through a disciplined risk management process that seeks to
investment sub-adviser to the control interest rate risk and emphasizes a quantitative
Fund. approach to sector allocation, sector rotation and relative
value security selection. Simply put, we believe that if we
INVESTMENT OBJECTIVE maximize the yield of the portfolio and match its
The Fund seeks total return and duration -- or interest-rate sensitivity -- to an
preservation of capital by appropriate benchmark, its higher yield should enhance the
investing in U.S. government return of the portfolio, while the neutral duration of the
securities and repurchase portfolio compared to the benchmark will lessen unnecessary
agreements collateralized by such portfolio performance volatility.
securities or instrumentalities.
The investment goal of Nations U.S. Government Fund is to
PERFORMANCE REVIEW outperform the Lehman Government Bond Index. The Index is
For the 12-month period ended comprised of all U.S. Treasury and agency issues with
March 31, 2000, Nations U.S. maturities longer than one year and it has an average
Government Bond Fund Investor A duration of 5.35 years. We think this index is well matched
Shares provided shareholders with to the Lipper General U.S. Government Funds Universe.***
a total return of -0.80%.**
Our strategy is focused on adding yield to the portfolio by
maintaining a large exposure to agency mortgage-backed
securities and under-weighting U.S. Treasury and agency
securities. The security selection process searches for
relative value and is based upon both quantitative and
fundamental analyses of the mortgage market.
WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
REPORTING PERIOD?
A combination of factors created one of the most volatile
periods in fixed income history. These included a strong
U.S. economy, fears of a Y2K disaster, the announcement of
the U.S. Treasury debt reduction program, the dramatic
increase in oil prices, and the recent proposal to eliminate
the implied government guarantees on some mortgage-related
securities.
The Federal Reserve Board (the Fed), citing tight labor
markets and continued strength in the U.S. economy, raised
short-term rates a total of five times over the past year,
from 4.75% to 6.00%. This pushed the yields on most
longer-maturity securities higher, although long-term U.S.
Treasury yields did decline late in the period on news of
the government's debt reduction program.
</TABLE>
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual funds.
**The performance shown does not reflect the maximum
front-end sales charge of 4.75%, which may apply to
purchases of Investor A Shares. For standardized
performance, please refer to the Performance table.
The performance shown includes the effects of fee
waivers by the investment adviser, which has the
effect of increasing total return.
***Lipper, Inc. is an independent mutual fund
performance monitor. Funds in the Lipper General U.S.
Government Funds Universe invest at least 65% of
their assets in U.S. government and agency issues.
Source for all statistical data -- Banc of America
Capital Management, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
18
<PAGE> 23
NATIONS U.S. GOVERNMENT
BOND FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY continued
<TABLE>
<S> <C>
With uncertainty comes volatility among securities with
credit risk. The corporate bond sector had poor total
returns relative to comparable duration U.S. Treasury
securities. The other sectors of the fixed income markets
also suffered, but their yield advantages were enough to
offset the decline in their prices relative to U.S. Treasury
securities.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
The investment strategy for the Fund changed in mid-February
of this year from one of active duration management to a
strategy that seeks relative value, with neutral interest
rate sensitivity relative to the Fund's benchmark. The
Fund's investment strategy is now identical to that of
Nations Government Securities Fund.
WHAT INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S
PERFORMANCE, AND WHAT DECISIONS HINDERED PERFORMANCE?+
With the exception of the fourth quarter of 1999, Treasury
securities outperformed spread sectors -- those sectors that
offered yield advantages or "spreads" above the yield of
Treasuries. During the period, the portfolio was
systematically overweighted in U.S. Treasury securities,
which helped performance. Prior to the change in strategy
the duration of the portfolio was consistently long relative
to both the Lipper General U.S. Government Funds Universe
and the Lehman Government Bond Index. This caused
substantial volatility in the Fund and detracted from
performance.
WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST
OF 2000?
We forecast that the Fed will raise interest rates in an
effort to slow the U.S. economy at least one more time.
While there is a risk of additional rate increases, the
recent volatility in the stock market should help to dampen
consumer confidence and U.S. GDP (gross domestic product)
growth.
The biggest issues facing fixed income investors over the
next year are the combination of a shrinking U.S. Treasury
market and the potential that U.S. government-sponsored
agencies may lose their implied government guarantees.
HOW IS THE FUND POSITIONED IN THIS ENVIRONMENT?
Because our process involves taking a consistent level of
market exposure while remaining duration neutral to the
Fund's benchmark, we do not have to rely on historically
inaccurate economic forecasting techniques to position the
portfolio.
Spreads between the yields on Treasuries and the yields on
corporate, mortgage-backed, and asset-backed securities have
widened to levels that we have not seen since the recession
of 1991. While we anticipate that spreads will be under
pressure for the remainder of the year, we will continue to
add incremental exposure to these markets as spreads widen.
Once the markets stabilize, spreads should revert to more
reasonable levels and we are optimistic that our exposure to
mortgage-backed securities should enhance the returns of the
portfolio.
</TABLE>
+Portfolio characteristics are subject to change and
may not be representative of current characteristics.
19
<PAGE> 24
NATIONS U.S. GOVERNMENT
BOND FUND
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/00)
[PIE CHART]
<TABLE>
<S> <C>
U.S. Treasury obligations 48.3%
Other 1.6%
Mortgage-backed securities 37.9%
U.S. government and agency obligations 12.2%
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 2000, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
<TABLE>
<C> <S> <C>
TOP 10 HOLDINGS
-------------------------------------------------
1 Federal Home Loan Mortgage
Corporation (FHLMC) Certificates,
5.75% 04/15/08 11.2%
-------------------------------------------------
2 Federal Home Loan Mortgage
Corporation (FHLMC) Certificates,
5.75% 07/15/03 8.4%
-------------------------------------------------
3 Federal National Mortgage Association
(FNMA) Certificates, 6.00% 03/01/13 7.8%
-------------------------------------------------
4 Federal Home Loan Mortgage
Corporation (FHLMC) Certificates,
6.00% 09/01/13 6.4%
-------------------------------------------------
5 Federal National Mortgage Association
(FNMA) Certificates, 6.00% 03/01/13 5.4%
-------------------------------------------------
6 Federal National Mortgage Association
(FNMA) Certificates, 6.00% 11/01/28 4.4%
-------------------------------------------------
7 Government National Mortgage
Association (GNMA) Certificates,
7.50% 04/15/29 3.0%
-------------------------------------------------
8 Government National Mortgage
Association (GNMA) Certificates,
7.50% 04/15/29 2.3%
-------------------------------------------------
9 Federal Home Loan Bank (FHLB)
Certificates, 5.13% 09/15/03 1.2%
-------------------------------------------------
10 Federal National Mortgage Association
(FNMA) Certificates, 6.00% 05/01/13 0.6%
-------------------------------------------------
THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE
EXAMPLES OF THE INDUSTRIES AND SECURITIES IN
WHICH THE FUND MAY INVEST.
</TABLE>
20
<PAGE> 25
NATIONS U.S. GOVERNMENT
BOND FUND
PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
SINCE INCEPTION NAV** MOP*
<S> <C> <C>
(2/7/95 through
3/31/00) 6.12% 5.13%
</TABLE>
The charts to the left show the
growth in value of a
hypothetical $10,000 investment
in Investor A Shares of Nations
U.S. Government Bond Fund from
the inception of the share
class. Figures for the Lehman
Government Bond Index, an
unmanaged index, represent the
return of government bonds with
an average maturity of
approximately nine years and
include reinvestment of
dividends. It is unavailable for
investment. The performance of
Primary A, Investor B and
Investor C Shares may vary based
on the differences in sales
loads and fees paid by the
shareholders investing in each
class.
[INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
<TABLE>
<CAPTION>
NATIONS U.S. GOVERNMENT BOND LEHMAN GOVERNMENT BOND INDEX
FUND $12,930 $14,525
---------------------------- ----------------------------
<S> <C> <C>
Feb. 7 1995 9525.00 10000.00
9750.00 10279.00
10453.00 10916.00
10639.00 11110.00
1995 11149.00 11617.00
10832.00 11355.00
10901.00 11409.00
11041.00 11601.00
1996 11346.00 11940.00
11274.00 11843.00
11616.00 12254.00
11925.00 12664.00
1997 12259.00 13085.00
12345.00 13282.00
12696.00 13633.00
13272.00 14387.00
1998 13255.00 14375.00
13034.00 14170.00
12819.00 14049.00
12866.00 14142.00
1999 12653.00 14054.00
Mar. 31 2000 12930.00 14525.00
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
NATIONS U.S. GOVERNMENT BOND LEHMAN GOVERNMENT BOND INDEX
FUND $13,575 $14,525
---------------------------- ----------------------------
<S> <C> <C>
Feb. 7 1995 10000.00 10000.00
10236.00 10279.00
10974.00 10916.00
11169.00 11110.00
1995 11705.00 11617.00
11372.00 11355.00
11445.00 11409.00
11591.00 11601.00
1996 11912.00 11940.00
11836.00 11843.00
12196.00 12254.00
12520.00 12664.00
1997 12871.00 13085.00
12961.00 13282.00
13329.00 13633.00
13934.00 14387.00
1998 13916.00 14375.00
13684.00 14170.00
13458.00 14049.00
13508.00 14142.00
1999 13284.00 14054.00
Mar. 31 2000 13575.00 14525.00
</TABLE>
TOTAL RETURN (AS OF 3/31/00)
<TABLE>
<CAPTION>
INVESTOR A INVESTOR B INVESTOR C
PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC***
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Inception date 11/7/94 2/7/95 11/10/94 9/19/97
-----------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE -0.55% -0.80% -5.49% -1.48% -5.26% -1.67% -2.62%
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS 4.97% 4.67% 3.00% 4.07% 3.19%
5 YEARS 6.05% 5.80% 4.78% 5.09% 4.94%
SINCE INCEPTION 7.34% 6.12% 5.13% 6.34% 6.34% 2.67% 2.67%
</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 returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 4.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
21
<PAGE> 26
NATIONS INTERMEDIATE
BOND FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY*
<TABLE>
<S> <C>
IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON
NATIONS INTERMEDIATE BOND FUND'S PERFORMANCE FOR THE
12-MONTH PERIOD ENDED MARCH 31, 2000 AND ITS OUTLOOK FOR THE
FUTURE.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Fixed We believe returns and consistency of returns are enhanced
Income Management Team of Banc of through a disciplined risk management process that seeks to
America Capital Management, Inc., control interest rate risk and emphasizes a quantitative
investment sub-adviser to the approach to sector allocation, sector rotation and relative
Fund. value security selection. Simply put, we believe that if we
INVESTMENT OBJECTIVE maximize the yield of the portfolio and match its
The Fund seeks to obtain interest duration -- or interest-rate sensitivity -- to an
income and capital appreciation. appropriate benchmark, the higher yield of the portfolio
PERFORMANCE REVIEW should enhance the return of the portfolio. At the same
For the 12-month period ended time, we believe the neutral duration of the portfolio
March 31, 2000, Nations compared to the benchmark will lessen unnecessary portfolio
Intermediate Bond Fund Investor A performance volatility.
Shares provided shareholders with The goal of Nations Intermediate Bond Fund is to outperform
a total return of 0.92%.** the Lehman Intermediate Government/Corporate Bond Index. The
Index is comprised of all publicly issued investment grade
corporate, U.S. Treasury, and U.S. agency securities with
maturities of one to 10 years. It has an average duration of
3.5 years.
Our strategy is focused on adding yield to the portfolio by
over-weighting shorter duration corporate securities and
"AAA" rated commercial mortgage-backed securities and
under-weighting U.S. Treasury and agency securities. The
security selection process is based on seeking relative
value and it uses both quantitative and fundamental credit
analyses.
WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THE
REPORTING PERIOD?
A combination of factors created one of the most volatile
periods in fixed income history. These included a strong
U.S. economy, fears of a Y2K disaster, the announcement of
the U.S. Treasury debt reduction program, the dramatic
increase in oil prices, and the recent proposal to eliminate
the implied government guarantees on some mortgage-related
securities.
The Federal Reserve Board (the Fed), citing tight labor
markets and continued strength in the U.S. economy, raised
short-term interest rates a total of five times over the
past year, from 4.75% to 6.00%. This pushed the yields on
most longer-maturity securities higher, although long-term
U.S. Treasury yields did decline late in the period on news
of the government's debt reduction program.
With uncertainty comes volatility among securities with
credit risk. The corporate bond sector had poor total
returns relative to comparable duration U.S. Treasury
securities. The other sectors of the fixed income markets
also suffered, but their
</TABLE>
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual funds.
**The performance shown does not reflect the maximum
front-end sales charge of 4.75%, which may apply to
purchases of Investor A Shares. For standardized
performance, please refer to the Performance table.
The performance shown includes the effects of fee
waivers by the investment adviser, which has the
effect of increasing total return.
Source for all statistical data -- Banc of America
Capital Management, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
22
<PAGE> 27
NATIONS INTERMEDIATE
BOND FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY continued
<TABLE>
<S> <C>
yield advantages were enough to offset the decline in their
prices relative to U.S. Treasury securities.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
Despite the volatility, we remained faithful to our strategy
of maximizing the yield of the portfolio while minimizing
its risk relative to the benchmark. While this may cause
some interim performance volatility, we believe the strategy
will produce top quartile returns over a three-to-five year
period.
WHAT INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S
PERFORMANCE? DID ANY DECISIONS HINDER PERFORMANCE?+
During the year, we overweighted the "spread"
sectors -- those sectors that offered yield advantages or
"spreads" above the yields of Treasuries. This decision
helped performance. The duration of the portfolio is shorter
than that of its peer group, the Lipper Intermediate
Investment Grade Funds Universe.++ The shorter duration of
the portfolio enabled it to substantially outperform its
Lipper peer group. However, the Fund's consistent
overweighting of spread product and its lack of U.S.
Treasury exposure made it difficult to take advantage of
short-term trading opportunities in the agency and
commercial mortgage markets.
WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST
OF 2000?
We forecast that the Fed will raise interest rates in an
effort to slow the U.S. economy at least one more time.
While there is a risk of additional rate increases, the
recent volatility in the stock market should help to dampen
consumer confidence and U.S. GDP (gross domestic product)
growth.
The biggest issues facing fixed income investors over the
next year are the combination of a shrinking U.S. Treasury
market and the potential that U.S. government-sponsored
agencies may lose their implied government guarantees.
HOW IS THE FUND POSITIONED FOR THIS OUTLOOK?
Because our process involves taking a consistent level of
market exposure while remaining duration neutral to the
Fund's benchmarks, we do not have to rely on historically
inaccurate economic forecasting techniques to position the
portfolio.
The spreads between the yields on Treasuries and the yields
on corporate, mortgage-backed and asset-backed securities
have widened to levels that we have not seen since the
recession of 1991. While we anticipate that spreads will be
under pressure for the remainder of the year, we will
continue to add incremental exposure to these markets as
spreads widen. Once the markets stabilize, spreads should
revert to more reasonable levels and we are optimistic that
the Fund's exposure to corporate, asset-backed and
mortgage-backed securities should enhance the returns of the
portfolio.
</TABLE>
+Portfolio characteristics are subject to change and
may not be representative of current characteristics.
++Lipper Inc. is an independent mutual fund
performance monitor. Funds included in the Lipper
Intermediate Investment Grade Debt Funds Universe
invest at least 65% of their assets in investment
grade debt issues with dollar-weighted average
maturities of five to ten years.
23
<PAGE> 28
NATIONS INTERMEDIATE
BOND FUND
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/00)
[PIE CHART]
<TABLE>
<S> <C>
Corporate bonds and notes 42.6%
Other 2.4%
Mortgage-backed securities 40.2%
Asset-backed securities 7.5%
U.S. Treasury obligations 4.9%
Foreign bonds and notes 2.4%
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 2000, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
<TABLE>
<C> <S> <C>
TOP 10 HOLDINGS
-------------------------------------------------
1 Federal National Mortgage Association
(FNMA) Certificates, 7.000% 10/01/29 8.4%
-------------------------------------------------
2 Federal Home Loan Mortgage
Corporation (FHLMC) Certificates,
5.500% 05/15/02 6.4%
-------------------------------------------------
3 Federal Home Loan Mortgage
Corporation (FHLMC) Certificates,
6.500% 04/01/29 2.5%
-------------------------------------------------
4 Mortgage Capital Funding, Inc.,
Series 1998-MC1, Class A2,
6.663% 01/18/08 2.3%
-------------------------------------------------
5 GMAC Commercial Mortgage Securities
Inc., Series 1997-C2, Class A3,
6.566% 11/15/07 1.8%
-------------------------------------------------
6 CS First Boston Mortgage Securities
Corporation, Series 1998-C1, Class
A1B, 6.480% 05/17/08 1.8%
-------------------------------------------------
7 Prudential Securities Secured
Financing Corporation, Series
1998-C1, Class A1B, 6.506% 07/15/08 1.7%
-------------------------------------------------
8 World Omni Automobile Lease
Securitization Trust, Series 1997-A,
Class A4, 6.900% 06/25/03 1.7%
-------------------------------------------------
9 Nomura Asset Securities Corporation,
Series 1998-D6, Class A1B, 6.590%
03/17/28 1.7%
-------------------------------------------------
10 AESOP Funding II LLC, Series 1997-1A,
Class A1, 6.220% 10/20/01 1.7%
-------------------------------------------------
THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE
EXAMPLES OF THE INDUSTRIES AND SECURITIES IN
WHICH THE FUND MAY INVEST.
</TABLE>
24
<PAGE> 29
NATIONS INTERMEDIATE
BOND FUND
PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
SINCE INCEPTION NAV** MOP*
<S> <C> <C>
(1/24/94
through
3/31/00) 4.79% 4.22%
</TABLE>
The charts to the left show the
growth in value of a
hypothetical $10,000 investment
in Investor A Shares of Nations
Intermediate Bond Fund from the
inception of the share class.
The Lehman Intermediate
Government/Corporate Bond Index
is an unmanaged index consisting
of investment grade corporates,
agency securities and U.S.
Treasury securities with
maturities between 1 and 10
years. It is unavailable for
investment. The performance of
Primary A, Investor B, Investor
C and Seafirst Shares may vary
based on the differences in
sales loads and fees paid by the
shareholders investing in each
class.
[INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
<TABLE>
<CAPTION>
LEHMAN INTERMEDIATE
NATIONS INTERMEDIATE BOND FUND GOVERNMENT/CORPORATE BOND INDEX
$12,917 $13,874
------------------------------ -------------------------------
<S> <C> <C>
Jan. 24 1994 9675.00 10000.00
9438.00 9690.00
9386.00 9632.00
9473.00 9711.00
9480.00 9700.00
1995 9870.00 10126.00
10314.00 10631.00
10505.00 10808.00
10857.00 11188.00
1996 10742.00 11095.00
10796.00 11165.00
10953.00 11363.00
11198.00 11641.00
1997 11164.00 11628.00
11466.00 11971.00
11770.00 12295.00
11931.00 12558.00
1998 12109.00 12754.00
12333.00 12993.00
12754.00 13577.00
12806.00 13618.00
1999 12800.00 13592.00
12689.00 13537.00
12783.00 13662.00
12807.00 13669.00
Mar. 31 2000 12917.00 13874.00
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
LEHMAN INTERMEDIATE
NATIONS INTERMEDIATE BOND FUND GOVERNMENT/CORPORATE BOND INDEX
$13,351 $13,874
------------------------------ -------------------------------
<S> <C> <C>
Jan. 24 1994 10000.00 10000.00
9755.00 9690.00
9701.00 9632.00
9792.00 9711.00
9798.00 9700.00
1995 10201.00 10126.00
10660.00 10631.00
10857.00 10808.00
11222.00 11188.00
11103.00 11095.00
11159.00 11165.00
11321.00 11363.00
11574.00 11641.00
1997 11539.00 11628.00
11851.00 11971.00
12165.00 12295.00
12332.00 12558.00
12515.00 12754.00
12747.00 12993.00
13183.00 13577.00
13236.00 13618.00
1999 13230.00 13592.00
13115.00 13537.00
13212.00 13662.00
13237.00 13669.00
Mar. 31 2000 13351.00 13874.00
</TABLE>
TOTAL RETURN (AS OF 3/31/00)
<TABLE>
<CAPTION>
INVESTOR A INVESTOR B++ INVESTOR C
PRIMARY A+ SEAFIRST NAV** MOP* NAV** CDSC*** NAV** CDSC***
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Inception date 5/21/99 3/4/88 1/24/94 10/20/99 11/20/96
-----------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 1.29% 1.50% 1.34% -2.34% 1.33% -4.11% 1.18% -0.35%
-----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS 5.00% 4.97% 4.98% 3.82% 4.89% 4.00% 4.63% 4.63%
5 YEARS 5.54% 5.40% 5.53% 4.83% 5.48%
10 YEARS 6.38%
SINCE INCEPTION 4.80% 6.76% 4.79% 4.22% 4.74% 4.74% 3.98% 3.98%
</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 returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 4.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
+Primary A Shares commenced operations on May 21, 1999 and have no performance
prior to that date. Performance prior to May 21, 1999 is that of Investor A
Shares at NAV, which reflects 12b-1 fees of 0.25%. These 12b-1 fees are not
applicable to Primary A Shares.
++Investor B Shares commenced operations on October 20, 1999 and have no
performance prior to that date. Performance prior to October 20, 1999 is that of
Investor A Shares at NAV, which have lower ongoing expenses than Investor B
shares. If the higher ongoing expenses of Investor B Shares had been reflected,
total returns would have been lower.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
25
<PAGE> 30
NATIONS INVESTMENT GRADE
BOND FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY*
<TABLE>
<S> <C>
IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON
NATIONS INVESTMENT GRADE BOND FUND'S PERFORMANCE FOR THE
12-MONTH PERIOD ENDED MARCH 31, 2000 AND ITS OUTLOOK FOR THE
FUTURE.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Fixed We believe returns and consistency of returns are enhanced
Income Management Team of Banc of through a disciplined risk management process that seeks to
America Capital Management, Inc., control interest rate risk and emphasizes a quantitative
investment sub-adviser to the approach to sector allocation, sector rotation and relative
Fund. value security selection. Simply put, we believe that if we
INVESTMENT OBJECTIVE maximize the yield of the portfolio and match its
The Fund seeks total return by duration -- or interest-rate sensitivity -- to an
investing in investment grade appropriate benchmark, the higher yield should enhance the
fixed income securities. return of the portfolio. At the same time, we believe the
PERFORMANCE REVIEW neutral duration of the portfolio compared to the benchmark
For the 12-month period ended will eliminate unnecessary performance volatility.
March 31, 2000, Nations Investment The goal of Nations Investment Grade Bond Fund is to
Grade Bond Fund Investor A Shares outperform the Lehman Aggregate Bond Index, a broad based
provided shareholders with a total measure of the bond market as a whole. The Index has an
return of 0.74%.** average duration of 5 years.***
Our strategy is focused on adding yield to the portfolio by
overweighting shorter duration corporate securities and
AAA-rated commercial mortgage-backed securities and
underweighting U.S. Treasury and agency securities. The
security selection process searches for relative value and
is based upon both quantitative and fundamental credit
analyses.
WHAT WERE THE ECONOMIC AND MARKET CONDITIONS DURING THE
REPORTING PERIOD?
A combination of factors created one of the most volatile
periods in fixed income history. These included a strong
U.S. economy, fears of a Y2K disaster, the announcement of
the U.S. Treasury debt reduction program, the dramatic
increase in oil prices, and the recent proposal to eliminate
the implied government guarantees on some mortgage-related
securities.
The Federal Reserve Board (the Fed), citing tight labor
markets and continued strength in the U.S. economy, raised
short-term rates a total of five times over the past year,
from 4.75% to 6.00%. This pushed the yields on most
longer-maturity
</TABLE>
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual funds.
**The performance shown does not reflect the maximum
front-end sales charge of 4.75%, which may apply to
purchases of Investor A Shares. For standardized
performance, please refer to the Performance table.
The performance shown includes the effects of fee
waivers by the investment adviser, which has the
effect of increasing total return.
***The Lehman Aggregate Bond Index is an unmanaged
index composed 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. It includes reinvestment
of dividends and is unavailable for investment.
Source for all statistical data -- Banc of America
Capital Management, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
26
<PAGE> 31
NATIONS INVESTMENT GRADE
BOND FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY continued
<TABLE>
<S> <C>
securities higher, although long-term U.S. Treasury yields
did decline late in the period on news of the government's
debt reduction program.
With uncertainty comes volatility among securities with
credit risk. The corporate bond sector had poor total
returns relative to comparable duration U.S. Treasury
securities. The other sectors of the fixed income markets
also suffered, but their yield advantages were enough to
offset the decline in their prices relative to U.S. Treasury
securities.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
Despite the volatility, we remained faithful to our strategy
of maximizing the yield of the portfolio while minimizing
its risk relative to the benchmark. While this may cause
some interim performance volatility, we believe the strategy
will produce top quartile returns over a three-to-five
period.
WHAT INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S
PERFORMANCE?+
During the year, we overweighted the "spread
sectors" -- those sectors that offered yield advantages or
"spreads" above the yields of Treasuries. This decision
helped performance, although the Fund's consistent
overweighting of spread product and lack of U.S. Treasury
exposure made it difficult to take advantage of short-term
trading opportunities in the agency and commercial mortgage
markets.
WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST
OF 2000?
We forecast that the Fed will interest rates in an effort to
slow the U.S. economy at least one more time. While there is
a risk of additional rate increases, the recent volatility
in the stock market should help to dampen consumer
confidence and U.S. GDP (gross domestic product) growth.
The biggest issues facing fixed income investors over the
next year are the combination of a shrinking U.S. Treasury
market and the potential that U.S. government-sponsored
agencies may lose their implied government guarantees.
HOW IS THE FUND POSITIONED IN THIS ENVIRONMENT?
Because our process involves taking a consistent level of
market exposure while remaining duration neutral to the
Fund's benchmarks, we do not have to rely on historically
inaccurate economic forecasting techniques to position the
portfolio.
The spreads between the yields on Treasuries and the yields
on corporate, mortgage-backed, and asset-backed securities
have widened to levels that we have not seen since the
recession of 1991. While we anticipate that spreads will be
under pressure for the remainder of the year, we will
continue to add incremental exposure to these markets as
spreads widen. Once the markets stabilize, spreads should
revert to more reasonable levels and we are optimistic that
the Fund's exposure to corporate, asset-backed and
mortgage-backed securities should enhance the returns of the
portfolio.
</TABLE>
+Portfolio characteristics are subject to change and
may not be representative of current characteristics.
27
<PAGE> 32
NATIONS INVESTMENT GRADE
BOND FUND
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/00)
[PIE CHART]
<TABLE>
<S> <C>
Foreign bonds and notes 3.5%
Corporate bonds and notes 29.7%
Asset-backed securities 7.5%
U.S. Treasury obligations 7%
Other 3.5%
Mortgage-backed securities 48.8%
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 2000, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
<TABLE>
<C> <S> <C>
TOP 10 HOLDINGS
-------------------------------------------------
1 Federal National Mortgage Association
(FNMA) Certificates, 7.00% 10/01/29 6.7%
-------------------------------------------------
2 Federal National Mortgage Association
(FNMA) Certificates, 6.50% 04/01/30 3.0%
-------------------------------------------------
3 Federal National Mortgage Association
(FNMA) Certificates, 6.50% 03/01/29 2.2%
-------------------------------------------------
4 Federal National Mortgage Association
(FNMA) Certificates, 6.50% 08/01/13 2.1%
-------------------------------------------------
5 Federal National Mortgage Association
(FNMA) Certificates, 8.00% 11/01/29 2.0%
-------------------------------------------------
6 Morgan Stanley Capital Trust I,
Series 1999-WF1, Class A2, 6.21%
09/15/08 1.6%
-------------------------------------------------
7 CS First Boston Mortgage Securities
Corporation, Series 1998-C1, Class
A1B, 6.48% 05/17/08 1.6%
-------------------------------------------------
8 Prudential Securities Secured
Financing Corporation, Series
1998-C1, Class A1B, 6.51% 07/15/08 1.6%
-------------------------------------------------
9 GMAC Commercial Mortgage Securities
Inc., Series 1998-C2, Class A2, 6.42%
08/15/08 1.6%
-------------------------------------------------
10 Prudential Securities Secured
Financing Corporation, Series
1999-NRF1, Class A2, 6.48% 01/15/09 1.6%
-------------------------------------------------
THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE
EXAMPLES OF THE INDUSTRIES AND SECURITIES IN
WHICH THE FUND MAY INVEST.
</TABLE>
28
<PAGE> 33
NATIONS INVESTMENT GRADE
BOND FUND
PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
SINCE INCEPTION NAV** MOP*
<S> <C> <C>
(11/19/92
through
3/31/00) 5.62% 5.14%
</TABLE>
The charts to the left show the
growth in value of a
hypothetical $10,000 investment
in Investor A Shares of Nations
Investment Grade Bond Fund from
the inception of the share
class. Figures for the Lehman
Aggregate Bond Index, an
unmanaged index comprised of the
Lehman Government/ Corporate
Index, the Asset-Backed
Securities Index and the
Mortgage-Backed Securities Index
which include U.S. Treasury
issues, agency issues, corporate
bond issues and mortgage-backed
securities, include reinvestment
of dividends. It is unavailable
for investment. The performance
of Primary A, Investor B and
Investor C Shares may vary based
on the differences in sales
loads and fees paid by the
shareholders investing in each
class.
[INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
<TABLE>
<CAPTION>
NATIONS INVESTMENT GRADE BOND LEHMAN AGGREGATE BOND INDEX
FUND $14,468 $16,057
----------------------------- ---------------------------
<S> <C> <C>
Nov. 19 1992 9675 10000
9782 10161
10246 10581
10523 10861
10847 11145
1993 10820 11151
10511 10831
10383 10720
10436 10785
10440 10826
10913 11372
11557 12064
11725 12301
1995 12221 12825
11914 12598
11928 12669
12102 12904
12456 13291
12355 13216
12769 13702
13176 14156
1997 13486 14573
13629 14800
13928 15146
14352 15787
14421 15841
14363 15761
14191 15623
14249 15729
1999 14210 15710
Mar. 31 2000 14468 16057
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
NATIONS INVESTMENT GRADE BOND LEHMAN AGGREGATE BOND INDEX
FUND $14,954 $16,057
----------------------------- ---------------------------
<S> <C> <C>
Nov. 19 1992 10000 10000
10111 10161
10590 10581
10876 10861
11211 11145
1993 11183 11151
10864 10831
10732 10720
10787 10785
10791 10826
11280 11372
11945 12064
12118 12301
1995 12631 12825
12314 12598
12329 12669
12509 12904
12874 13291
12770 13216
13198 13702
13619 14156
1997 13939 14573
14086 14800
14396 15146
14834 15787
14905 15841
14846 15761
14668 15623
14728 15729
1999 14688 15710
Mar. 31 2000 14954 16057
</TABLE>
TOTAL RETURN (AS OF 3/31/00)
<TABLE>
<CAPTION>
INVESTOR A INVESTOR B INVESTOR C
PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC***
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Inception date 10/30/92 11/19/92 6/7/93 11/16/92
-----------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 0.97% 0.74% -2.50% 0.05% -2.78% -0.24% -1.18%
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS 5.63% 5.41% 4.26% 4.77% 4.48% 4.76% 4.76%
5 YEARS 6.02% 5.80% 5.11% 5.23% 5.23% 5.28% 5.28%
SINCE INCEPTION 5.83% 5.62% 5.14% 4.46% 4.46% 5.14% 5.14%
</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 returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 3.25%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
29
<PAGE> 34
NATIONS STRATEGIC
INCOME FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY*
<TABLE>
<S> <C>
IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON
NATIONS STRATEGIC INCOME FUND'S PERFORMANCE FOR THE 12-MONTH
PERIOD ENDED MARCH 31, 2000 AND ITS OUTLOOK FOR THE FUTURE.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Fixed We believe returns and consistency of returns are enhanced
Income Management Team of Banc of through a disciplined risk management process that seeks to
America Capital Management, Inc., control interest rate risk and emphasizes a quantitative
investment sub-adviser to the approach to sector allocation, sector rotation and relative
Fund. value security selection. Simply put, we believe that if we
INVESTMENT OBJECTIVE maximize the yield of the portfolio and match its
The Fund seeks total return with duration -- or interest-rate sensitivity -- to an
an emphasis on current income by appropriate benchmark, the higher yield of the portfolio
investing in a diversified should enhance the return of the portfolio. At the same
portfolio of fixed income time, we believe the neutral duration of the portfolio to
securities. the benchmark will lessen unnecessary portfolio performance
PERFORMANCE REVIEW volatility.
For the 12-month period ended The Fund's benchmark is the Lehman Government/Corporate Bond
March 31, 2000, Nations Strategic Index, an index comprised of U.S. government, U.S. Treasury
Income Fund Investor A Shares and agency securities, and corporate and Yankee bonds. It
provided a total return of has an average duration of 5.44 years.
-1.30%.** Our strategy is focused on adding yield to the portfolio by
over-weighting lower quality securities (the portfolio may
invest up to 35% in non-investment grade securities) while
under-weighting higher quality securities. The security
selection process is based on seeking relative value and
uses both quantitative and fundamental credit analysis.
WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
REPORTING PERIOD?
A combination of factors created one of the most volatile
periods in fixed income history. These included a strong
U.S. economy, fears of a Y2K disaster, the announcement of
U.S. Treasury debt reduction program, the dramatic increase
in oil prices, and the recent proposal to eliminate the
implied government guarantees on some mortgage-related
securities.
The Federal Reserve Board (the Fed), citing tight labor
markets and continued strength in the U.S. economy, raised
short-term interest rates a total of five times over the
past year, from 4.75% to 6.00%. This pushed the yields on
most longer-maturity securities higher, although long-term
U.S. Treasury yields did decline late in the period on news
of the government's debt reduction program.
</TABLE>
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual funds.
**The performance shown does not reflect the maximum
front-end sales charge of 4.75%, which may apply to
purchases of Investor A Shares. For standardized
performance, please refer to the Performance table.
The performance shown includes the effects of fee
waivers by the investment adviser, which has the
effect of increasing total return.
Source for all statistical data -- Banc of America
Capital Management, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
30
<PAGE> 35
NATIONS STRATEGIC
INCOME FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY continued
<TABLE>
<S> <C>
With uncertainty comes volatility among securities with
credit risk. The corporate bond sector had poor total
returns relative to comparable duration U.S. Treasury
securities. The other sectors of the fixed income markets
also suffered, but their yield advantages were enough to
offset the decline in their prices relative to U.S. Treasury
securities.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
Despite the volatility, we remained faithful to our strategy
of maximizing the yield of the portfolio while minimizing
its risk relative to the benchmark. While this may cause
some interim performance volatility, we believe the strategy
will produce top quartile returns over a three-to-five year
period.
WHAT INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S
PERFORMANCE, AND WHAT DECISIONS MAY HAVE HINDERED
PERFORMANCE?***
Since the Fund's benchmark is the Lehman
Government/Corporate Bond Index, exposure to U.S. Treasury
and agency securities can have a sizeable impact on the
performance of the Fund relative to the benchmark. For most
of the year, the Fund had a 10% to 15% position in U.S.
government securities. Since corporate bonds underperformed
comparable duration U.S. Treasury securities for the period,
the Fund's underweighted position in corporate bonds helped
the performance of the Fund.
While the underweighting to the corporate market helped the
overall performance of the Fund, it detracted from
performance in the fourth quarter of 1999. In the third
quarter of 1999, corporate bonds drastically underperformed
the U.S. Treasury market. The supply of corporate bonds
increased dramatically over the period as corporations
rushed to issue debt before year-end to avoid any Y2K
liquidity problems. In addition, investors were avoiding
these issues because of the same fears. Once issuance
subsided in the fourth quarter, the market stabilized and
corporate bonds outperformed U.S. Treasury securities.
WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST
OF 2000?
We forecast that the Fed will raise interest rates in an
effort to slow the growth in the U.S. economy at least one
more time. While there is a risk of additional rate
increases, the recent volatility in the stock market should
help to dampen to dampen consumer confidence and slow U.S.
GDP (gross domestic product) growth.
The biggest issues facing fixed income investors over the
next year are related to the combination of a shrinking U.S.
Treasury market and the potential that U.S.
government-sponsored agencies may lose their implied
government guarantees.
</TABLE>
***Portfolio characteristics are subject to change
and may not be representative of current
characteristics.
31
<PAGE> 36
NATIONS STRATEGIC
INCOME FUND
FIXED INCOME MANAGEMENT TEAM COMMENTARY continued
<TABLE>
<S> <C>
HOW IS THE FUND POSITIONED IN THIS ENVIRONMENT?
Because our process involves taking a consistent level of
market exposure while remaining duration neutral to the
benchmark, we do not have to rely on historically inaccurate
economic forecasting techniques to position the portfolio.
Spreads between the yields on Treasuries and the yields on
corporate, mortgage-backed and asset-backed securities have
widened to levels that we have not seen since the recession
of 1991. While we anticipate that spreads will be under
pressure for the remainder of the year, we will continue to
add incremental exposure to these markets as spreads widen.
Once the markets stabilize, spreads should revert to more
reasonable levels and we are optimistic that the Fund's
exposure to corporate, mortgage-backed and asset-backed
securities should enhance the returns of the portfolio.
</TABLE>
32
<PAGE> 37
NATIONS STRATEGIC
INCOME FUND
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/00)
[PIE CHART]
<TABLE>
<S> <C>
Corporate bonds and notes 74.9%
Other 3.9%
Mortgage-backed securities 13.3%
Foreign bonds and notes 5.2%
U.S. Treasury obligations 2.7%
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 2000, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
<TABLE>
<C> <S> <C>
TOP 10 HOLDINGS
-------------------------------------------------
1 Federal National Mortgage Association
(FNMA) Certificates, 5.250% 01/15/09 4.7%
-------------------------------------------------
2 Federal National Mortgage Association
(FNMA) Certificates, 6.250% 05/15/29 4.0%
-------------------------------------------------
3 Federal National Mortgage Association
(FNMA) Certificates, 6.625% 09/15/09 3.7%
-------------------------------------------------
4 PDV America Inc., Gtd. Sr. Notes,
7.875% 08/01/03 2.5%
-------------------------------------------------
5 Rogers Cablesystems Limited, Deb.,
10.000% 12/01/07 2.3%
-------------------------------------------------
6 Federal Express Corporation, Notes,
9.650% 06/15/12 2.1%
-------------------------------------------------
7 PRIMEDIA Inc., 7.625% 04/01/08 2.1%
-------------------------------------------------
8 BWAY Corporation, Sr. Sub. Notes,
10.250% 04/15/07 2.0%
-------------------------------------------------
9 Occidental Petroleum Corporation, Sr.
Deb., 9.250% 08/01/19 2.0%
-------------------------------------------------
10 ERAC USA Finance Company, 6.625%
02/15/05 1.9%
-------------------------------------------------
THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE
EXAMPLES OF THE INDUSTRIES AND SECURITIES IN
WHICH THE FUND MAY INVEST.
</TABLE>
33
<PAGE> 38
NATIONS STRATEGIC
INCOME FUND
PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
SINCE INCEPTION NAV** MOP*
<S> <C> <C>
(11/25/92
through
3/31/00) 6.57% 5.87%
</TABLE>
The charts to the left show the
growth in value of a
hypothetical $10,000 investment
in Investor A Shares of Nations
Strategic Income Fund from the
inception of the share class.
Figures for the Lehman
Government/Corporate Bond Index,
an unmanaged index comprised of
U.S. Government, U.S. Treasury
and agency securities, corporate
and yankee bonds, include
reinvestment of dividends. It is
unavailable for investment. The
performance of Primary A,
Investor B and Investor C Shares
may vary based on the
differences in sales loads and
fees paid by the shareholders
investing in each class.
[INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
<TABLE>
<CAPTION>
LEHMAN GOVERNMENT/CORPORATE
NATIONS STRATEGIC INCOME FUND BOND INDEX
$15,201 $15,306
----------------------------- ---------------------------
<S> <C> <C>
Nov. 25 1992 9525 10000
1992 9656 10171
10285 10574
10691 10802
11081 11046
1993 11165 11065
10862 10840
10697 10775
10784 10864
1994 10859 10852
11424 11328
12272 11893
12486 12091
1995 13098 12517
12674 12413
12709 12491
12953 12712
1996 13387 13023
13271 13009
13742 13393
14094 13754
1997 14501 14049
14704 14268
15091 14536
15463 15189
1998 15555 15234
15401 15052
15202 14888
15076 14968
1999 15100 14907
Mar. 31 2000 15201 15306
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
NATIONS STRATEGIC INCOME FUND LEHMAN GOVERNMENT/CORPORATE
$15,959 BOND INDEX $15,306
----------------------------- ---------------------------
<S> <C> <C>
Nov. 25 1992 10000 10000
1992 10138 10171
10798 10574
11225 10802
11633 11046
1993 11721 11065
11404 10840
11230 10775
11821 10864
1994 11401 10852
11994 11328
12883 11893
13109 12091
1995 13751 12517
13306 12413
13343 12491
13599 12712
1996 14055 13023
13932 13009
14427 13393
14796 13754
1997 15224 14049
15437 14268
15843 14536
16234 15189
1998 16330 15234
16169 15052
15960 14888
15828 14968
1999 15853 14907
Mar. 31 2000 15959 15306
</TABLE>
TOTAL RETURN (AS OF 3/31/00)
<TABLE>
<CAPTION>
INVESTOR A INVESTOR B INVESTOR C
PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC***
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Inception date 10/30/92 11/25/92 6/7/93 11/9/92
-----------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE -0.95% -1.30% -5.95% -1.98% -6.60% -2.04% -2.96%
-----------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
3 YEARS 4.93% 4.63% 2.96% 3.99% 3.11% 3.99% 3.99%
5 YEARS 6.16% 5.88% 4.85% 5.28% 4.96% 5.34% 5.34%
SINCE INCEPTION 6.87% 6.57% 5.87% 4.98% 4.98% 6.13% 6.13%
</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 returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 4.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
34
<PAGE> 39
NATIONS HIGH YIELD
BOND FUND
MANAGEMENT TEAM COMMENTARY*
<TABLE>
<S> <C>
IN THE FOLLOWING INTERVIEW, THE TEAM SHARES ITS VIEWS ON
NATIONS HIGH YIELD BOND FUND'S PERFORMANCE FOR THE PERIOD
FEBRUARY 14 THROUGH MARCH 31, 2000 AND ITS OUTLOOK FOR THE
FUTURE.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY AND STYLE.
The Fund is managed by the High Our investment philosophy emphasizes current yield, while
Yield Portfolio Management Team of looking for total return, through investments in a
MacKay Shields LLC, investment diversified portfolio of high-yield debt securities. We
sub-adviser to the Fund. believe that high-yield managers can add value through
INVESTMENT OBJECTIVE superior credit selection, which may reduce default rates
The Fund seeks maximum income by and result in attractive risk-adjusted returns. The primary
investing in a diversified focus of our investment strategy is to preserve invested
portfolio of high yield debt capital. To this end, we identify securities that offer a
securities. margin of safety. These are securities with strong asset
PERFORMANCE REVIEW coverage or significant free cash flow. The secondary focus
For the period from inception on of our investment process is to generate total return
February 14, 2000 through March through an identified catalyst for price appreciation. In
31, 2000, Nations High Yield Bond our view, companies that can significantly reduce debt
Fund Investor A Shares provided through free cash flow, new equity or an identified
shareholders with a total return restructuring potentially can present opportunities for
of -0.33%.** price appreciation.
NATIONS HIGH YIELD BOND FUND BEGAN OPERATIONS ON FEBRUARY
14, 2000. WHAT MARKET CONDITIONS DID YOU FACE, AND HOW HAVE
YOU MANAGED THE FUND SINCE ITS INCEPTION?***
Economic conditions did not play a significant role in the
first month-and-one-half of operations. However, the period
did see a steady decrease in U.S. Treasury interest rates
and an increase in the price volatility of U.S. equity
markets. These market conditions were favorable for a fund
with excess cash like this one. With retail flows moving out
of the high yield asset class, high yield market technical
factors were weak during the period, allowing us to invest
the portfolio at what we believe are attractive prices.
At inception date, the Fund's assets consisted solely of
cash. We invested assets at a measured pace into high yield
securities that met our stringent investment criteria. We
took advantage of weak market technical factors to construct
gradually a well diversified portfolio at what we believe
are attractive prices.
</TABLE>
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual funds.
**The performance shown includes the effect of fee
waivers by the investment adviser, which have the
effect of increasing total return. The performance
shown does not reflect the maximum front-end sales
charge of 4.75%, which may be charged on purchases of
Investor, A Shares. For standardized
performance, please refer to the Performance table.
***Portfolio characteristics are subject to change
and may not be representative of current
characteristics.
Source for all statistical data -- MacKay Shields LLC
INVESTING IN HIGHER-YIELDING, LOWER-RATED CORPORATE
BONDS (COMMONLY KNOWN AS "JUNK BONDS") HAS A GREATER
RISK OF PRICE FLUCTUATION AND LOSS OF PRINCIPAL AND
INCOME THAN U.S. GOVERNMENT SECURITIES SUCH AS U.S.
TREASURY BONDS AND BILLS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
35
<PAGE> 40
NATIONS HIGH YIELD
BOND FUND
MANAGEMENT TEAM COMMENTARY continued
<TABLE>
<S> <C>
Because the Fund started by being fully invested in cash,
performance was predominantly a function of money market
yields. The decision to invest cash into high yield
securities at a measured pace had a positive effect on
performance. Since its inception on February 14, 2000
through March 31, 2000, the Fund had a slightly negative
return of -0.33%.
This compares very favorably with the performance of its
benchmark, the CS First Boston High Yield Index+, which
returned -3.88% over the period. There were no significant
credit events for the Fund during the reporting period.
WHAT IS YOUR MARKET OUTLOOK FOR THE REMAINDER OF 2000, AND
HOW ARE YOU POSITIONING THE FUND?
We expect economic growth to be relatively robust during the
first half of 2000, but growth may then moderate as the
series of Federal Reserve Board interest rate hikes begin to
take effect. We believe the biggest driver of high yield
returns will be the level of default rates, which we
anticipate should begin to decline during the year.
Our investment process is a bottom-up investment approach,
and not directly driven by anticipated economic
developments. In any market environment, we believe our
process will result in a portfolio constructed to maximize
default-adjusted return. We currently see good value in the
high yield asset class. The interest rate premium of high
yield bonds over comparable U.S. Treasury bonds is well in
excess of 100%. We think managers that can limit exposure to
defaults have a great opportunity to generate attractive
real rates of return.
</TABLE>
+The CS First Boston High Yield Index is an
unmanaged, trader priced portfolio constructed to
mirror the high yield debt market. It is unavailable
for investment.
36
<PAGE> 41
NATIONS HIGH YIELD
BOND FUND
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/00)
[PIE CHART]
<TABLE>
<S> <C>
Corporate bonds and notes 66.9%
Short-term investments 22.7%
Convertible bonds and notes 3.4%
Foreign bonds and notes 3.3%
Preferred stocks 3.0%
Common stocks 0.7%
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 2000, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
<TABLE>
<C> <S> <C>
TOP 10 HOLDINGS
-------------------------------------------------
1 Prudential Funding Company
5.91% 04/04/00 4.0%
-------------------------------------------------
2 Salomon Smith Barney Holdings Inc.
5.92% 04/07/00 4.0%
-------------------------------------------------
3 UBS Finance (Delaware) Inc.
6.06% 04/03/00 3.6%
-------------------------------------------------
4 Xerox Credit Corporation
6.07% 04/18/00 3.4%
-------------------------------------------------
5 Diamond Cable Communication Company,
13.250% 09/30/04 3.0%
-------------------------------------------------
6 General Electric Capital Corporation
5.95% 04/04/00 2.9%
-------------------------------------------------
7 American Express Credit Corporation
5.90% 04/27/00 2.5%
-------------------------------------------------
8 COLT Telocom Group plc,
9.830% 12/15/06 2.4%
-------------------------------------------------
9 Merrill Lynch and Company
6.05% 04/12/00 1.9%
-------------------------------------------------
10 UIH Australia/Pacific Inc.,
11.260% 05/15/06 1.7%
-------------------------------------------------
THE TOP 10 HOLDINGS ARE PRESENTED TO ILLUSTRATE
EXAMPLES OF THE INDUSTRIES AND SECURITIES IN
WHICH THE FUND MAY INVEST.
</TABLE>
37
<PAGE> 42
NATIONS HIGH YIELD
BOND FUND
PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
<TABLE>
<CAPTION>
SINCE INCEPTION NAV** MOP*
<S> <C> <C>
(2/14/00
through
3/31/00) -0.33% -5.08%
</TABLE>
The charts to the left show the
growth in value of a
hypothetical $10,000 investment
in Investor A Shares of Nations
High Yield Bond Fund from the
inception of the share class.
The CS First Boston High Yield
Index is an unmanaged trader
priced portfolio constructed to
mirror the high yield debt
market. It is unavailable for
investment. The performance of
Primary A, Investor B and
Investor C Shares may vary based
on the differences in sales
loads and fees paid by the
shareholders investing in each
class.
[INVESTOR A SHARES AT MOP* RETURN CHART] [CHART LEGEND]
<TABLE>
<CAPTION>
NATIONS HIGH YIELD BOND FUND CSFB HIGH YIELD BOND INDEX
$9,494 $9,612
---------------------------- --------------------------
<S> <C> <C>
Feb. 14 2000 9525 10000
Mar. 31 2000 9494 9612
</TABLE>
[INVESTOR A SHARES AT NAV** RETURN CHART]
<TABLE>
<CAPTION>
NATIONS HIGH YIELD BOND FUND CSFB HIGH YIELD BOND INDEX
$9,967 $9,612
---------------------------- --------------------------
<S> <C> <C>
Feb. 14 2000 10000 10000
Mar. 31 2000 9967 9612
</TABLE>
TOTAL RETURN (AS OF 3/31/00)
<TABLE>
<CAPTION>
INVESTOR A INVESTOR B INVESTOR C
PRIMARY A NAV** MOP* NAV** CDSC*** NAV** CDSC***
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Inception date 2/14/00 2/14/00 2/14/00 3/7/00
---------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE
---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
SINCE INCEPTION -0.12% -0.33% -5.08% -0.47% -5.41% -0.76% -1.74%
</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 returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of distributions.
*Figures at maximum offering price (MOP) reflect the maximum front-end sales
charge of 4.75%.
**Figures at net asset value (NAV) do not reflect any sales charges. Investor A
Shares are available with a reduced or waived sales charge only under certain
circumstances as described in the prospectus.
***Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which have the effect of increasing total return.
38
<PAGE> 43
NATIONS FUNDS
Nations Short-Term Income Fund
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<C> <S> <C> <C>
ASSET-BACKED SECURITIES -- 21.6%
ASSET-BACKED -- AUTO LOANS -- 4.4%
$ 7,900 BankBoston RV Trust,
Series 1997-1, Class A-7,
6.480% 07/15/08........................................ $ 7,838
10,400 Premier Auto Trust,
Series 1997-2, Class A-5,
6.320% 03/06/02........................................ 10,348
--------
18,186
--------
ASSET-BACKED -- CREDIT CARD RECEIVABLES -- 6.5%
7,000 Discover Card Master Trust,
Series 1995-2, Class A,
6.550% 02/18/03........................................ 6,998
8,920 Metris Master Trust,
Series 1997-1, Class B,
7.110% 10/20/05........................................ 8,795
5,980 Sears Credit Account Master Trust,
Series 1998-1, Class A,
5.800% 08/15/05........................................ 5,922
5,150 Spiegel Master Trust,
Series 1995A, Class A,
7.500% 09/15/04........................................ 5,163
--------
26,878
--------
ASSET-BACKED -- HOME EQUITY LOANS -- 7.0%
11,477 EQCC Home Equity Loan Trust,
Series 1998-1, Class A4F,
6.459% 03/15/21........................................ 11,262
10,602 GE Capital Mortgage Services, Inc.,
Series 1997-HE4, Class A3,
6.590% 12/25/12........................................ 10,545
7,300 Residential Asset Securities Corporation,
Series 1999-KS1, Class AI3,
6.110% 05/25/25........................................ 7,077
--------
28,884
--------
ASSET-BACKED -- OTHER -- 3.7%
7,936 Fingerhut Master Trust,
Series 1998-1, Class B,
6.290% 02/15/05........................................ 7,806
8,000 First Sierra Receivables,
Series 1999-1, Class A4,
5.730% 09/15/04........................................ 7,702
--------
15,508
--------
TOTAL ASSET-BACKED SECURITIES
(Cost $90,832)......................................... 89,456
--------
CORPORATE BONDS AND NOTES -- 54.3%
AUTOMOBILE PARTS MANUFACTURERS -- 1.2%
5,000 Goodyear Tire & Rubber
8.125% 03/15/03........................................ 5,003
--------
BANKING AND FINANCE -- 7.6%
4,000 Banco Latinoamericano SA,
7.400% 09/21/01........................................ 4,007
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<C> <S> <C> <C>
BANKING AND FINANCE -- (CONTINUED)
$ 4,000 First Chicago NBD Corporation, Sr. Notes,
6.250% 07/21/00........................................ $ 3,995
5,050 First Maryland Bancorp,
8.375% 05/15/02........................................ 5,122
5,000 First Union Corporation,
6.625% 06/15/04........................................ 4,842
5,125 Golden State Holdings, Escrow Corporation,
7.000% 08/01/03........................................ 4,798
4,000 Popular, Inc., MTN,
6.375% 09/15/03........................................ 3,850
5,000 Wells Fargo Company,
6.500% 09/03/02........................................ 4,912
--------
31,526
--------
BROKERAGE SERVICES -- 10.2%
6,000 Bear Stearns Company, Inc.,
6.450% 08/01/02........................................ 5,862
5,000 Donaldson Lufkin and Jenrette,
5.875% 04/01/02........................................ 4,846
6,000 Goldman Sachs Group LP,
7.125% 03/01/03@....................................... 5,939
4,000 Lehman Brothers Holdings, Inc.,
6.500% 07/18/00........................................ 3,995
5,000 Lehman Brothers Holdings, Inc.,
6.250% 04/01/03........................................ 4,805
7,000 Morgan Stanley Dean Witter and Company,
7.580% 06/11/01........................................ 7,034
3,000 Morgan Stanley Dean Witter and Company, MTN,
6.090% 03/09/11........................................ 2,977
7,000 Salomon Smith Barney Holdings, Inc.,
6.650% 07/15/01........................................ 6,939
--------
42,397
--------
ENERGY -- 3.0%
5,505 Coastal Corporation,
10.000% 02/01/01....................................... 5,617
6,750 PDV America, Inc., Gtd. Sr. Notes,
7.750% 08/01/00........................................ 6,709
--------
12,326
--------
ENTERTAINMENT -- 3.1%
8,000 Paramount Communications, Sr. Notes,
7.500% 01/15/02........................................ 7,976
5,100 Time Warner, Pass-Thru,
6.100% 12/30/01@....................................... 4,991
--------
12,967
--------
FINANCIAL SERVICES -- 10.8%
7,000 Aristar, Inc.,
7.750% 06/15/01........................................ 7,028
7,390 AT&T Capital Corporation,
6.875% 01/16/01........................................ 7,371
6,500 Finova Capital Corporation,
5.875% 10/15/01........................................ 6,341
5,000 Ford Motor Credit Company,
5.125% 10/15/01........................................ 4,836
4,000 General Motors Acceptance Corporation,
5.910% 03/11/02........................................ 3,897
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE> 44
NATIONS FUNDS
Nations Short-Term Income Fund
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<C> <S> <C> <C>
FINANCIAL SERVICES -- (CONTINUED)
$ 7,000 Heller Financial, Inc.,
5.750% 09/25/01........................................ $ 6,834
8,230 Sears Roebuck Acceptance Corporation,
6.860% 10/02/01........................................ 8,177
--------
44,484
--------
HEALTHCARE -- 0.6%
3,010 HEALTHSOUTH Corporation, Sr. Notes,
6.875% 06/15/05........................................ 2,627
--------
INDUSTRIAL -- 6.4%
7,000 Comdisco, Inc.,
6.130% 08/01/01........................................ 6,893
6,525 Comdisco, Inc., MTN,
6.500% 06/15/00........................................ 6,520
8,000 J. Seagram & Sons, Inc.,
6.250% 12/15/01........................................ 7,827
5,500 Waste Management Inc.,
7.700% 10/01/02........................................ 5,247
--------
26,487
--------
INSURANCE -- 1.2%
5,000 Aon Corporation,
7.400% 10/01/02........................................ 4,984
--------
MEDIA -- 1.2%
5,000 News America Holdings,
8.625% 02/01/03........................................ 5,111
--------
RETAIL -- FOOD -- 1.2%
5,000 Safeway, Inc.,
5.875% 11/15/01........................................ 4,877
--------
TRANSPORTATION -- 4.1%
10,100 ERAC USA Finance Company,
7.500% 06/15/03@....................................... 10,029
3,786 Hertz Corporation,
7.000% 04/15/01........................................ 3,765
3,000 Ryder System, Inc., MTN,
7.320% 11/01/00........................................ 3,002
--------
16,796
--------
UTILITIES -- DIVERSIFIED -- 2.6%
8,299 Columbia Gas System, Series A,
6.390% 11/28/00........................................ 8,235
2,500 Transcontinental Gas Pipeline,
8.875% 09/15/02........................................ 2,574
--------
10,809
--------
UTILITIES -- GAS & ELECTRIC -- 1.1%
4,750 Consumers Energy Company,
6.375% 09/15/03........................................ 4,526
--------
TOTAL CORPORATE BONDS AND NOTES
(Cost $228,752)........................................ 224,920
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES -- 15.3%
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.0%
$ 4,000 Mall of America Capital Company LLC, Series 2000-1, Class
B,
6.276%** 03/12/05...................................... $ 4,000
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
CERTIFICATES -- 5.8%
533 5.500% 07/01/01.......................................... 523
233 7.500% 09/01/01.......................................... 234
6,000 4.750% 12/14/01.......................................... 5,793
8,000 5.500% 05/15/02.......................................... 7,772
3,000 6.250% 10/15/02.......................................... 2,950
7,000 5.750% 07/15/03.......................................... 6,744
--------
24,016
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
CERTIFICATES -- 6.7%
1,002 6.000% 06/01/01.......................................... 993
6,000 5.375% 03/15/02.......................................... 5,831
7,000 5.250% 01/15/03.......................................... 6,676
6,000 5.750% 04/15/03.......................................... 5,792
5,097 6.000% 11/01/03.......................................... 4,980
432 6.000% 05/01/04.......................................... 423
532 6.500% 08/01/04.......................................... 519
2,058 6.000% 11/01/04.......................................... 1,976
757 7.500% 11/01/09.......................................... 757
--------
27,947
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
CERTIFICATES -- 1.8%
7,565 6.375% 04/20/22.......................................... 7,629
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $64,652)......................................... 63,592
--------
U.S. TREASURY OBLIGATIONS -- 5.3%
U.S. TREASURY NOTES -- 5.3%
12,000 6.000% 08/15/04.......................................... 11,837
5,000 7.250% 08/15/04.......................................... 5,163
5,000 5.875% 11/15/04.......................................... 4,909
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $21,968)......................................... 21,909
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE> 45
NATIONS FUNDS
Nations Short-Term Income Fund
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
SHARES VALUE
(000) (000)
--------------------------------------------------------------------------------
<C> <S> <C> <C>
INVESTMENT COMPANIES -- 2.7%
(Cost $11,338)
11,338 Nations Cash Reserves#................................... $ 11,338
--------
TOTAL INVESTMENTS
(Cost $417,542*)................................ 99.2% 411,215
--------
OTHER ASSETS AND LIABILITIES (NET)................ 0.8%
Cash..................................................... 13
Receivable for Fund shares sold.......................... 238
Interest receivable...................................... 5,644
Payable for Fund shares redeemed......................... (318)
Investment advisory fee payable.......................... (71)
Administration fee payable............................... (78)
Shareholder servicing and distribution fees payable......
(7)
Distributions payable.................................... (2,178)
Accrued Trustees'/Directors' fees and expenses...........
(26)
Accrued expenses and other liabilities................... (80)
--------
TOTAL OTHER ASSETS AND LIABILITIES (NET)................. 3,137
--------
NET ASSETS........................................ 100.0% $414,352
========
NET ASSETS CONSIST OF:
Accumulated net realized loss on investments sold........
$(10,127)
Net unrealized depreciation of investments............... (6,327)
Paid-in capital.......................................... 430,806
--------
NET ASSETS............................................... $414,352
========
<CAPTION>
VALUE
--------------------------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and redemption price per share
($398,619,963 / 41,912,119 shares outstanding).........
$9.51
=====
INVESTOR A SHARES:
Net asset value and redemption price per share
($11,831,077 / 1,243,627 shares outstanding)...........
$9.51
=====
Maximum sales charge..................................... 1.00%
Maximum offering price per share......................... $9.61
INVESTOR B SHARES:
Net asset value and offering price per share+
($2,913,934 / 306,290 shares outstanding)..............
$9.51
=====
INVESTOR C SHARES:
Net asset value and offering price per share+
($986,905 / 103,736 shares outstanding)................
$9.51
=====
</TABLE>
---------------
* Federal Income Tax Information: Net unrealized depreciation of $6,327 on
investment securities was comprised of gross appreciation of $129 and gross
depreciation of $6,456 for Federal income tax purposes. At March 31, 2000,
the aggregate cost of securities for Federal income tax purposes was
$417,542.
** Variable rate note. The interest rate shown reflects the rate in effect at
March 31, 2000.
@ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ The redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
# Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and sub-advised by Banc of America Capital Management, Inc.
ABBREVIATIONS:
MTN -- Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE> 46
NATIONS FUNDS
Nations Short-Intermediate Government Fund
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES -- 64.1%
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 0.6%
$ 3,416 Vendee Mortgage Trust,
Series 1994-3A, Class 1H,
6.500% 12/15/01..................... $ 3,399
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) CERTIFICATES -- 12.5%
46,000 6.250% 10/15/02-07/15/04.............. 45,146
1,500 6.000% 11/15/10....................... 1,489
694 5.500% 10/15/19....................... 689
22,667 7.000% 12/01/25-07/01/29.............. 21,841
--------
69,165
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) CERTIFICATES -- 39.1%
97,041 6.500% 08/01/00-03/01/28.............. 94,255
1,000 5.500% 12/25/00....................... 990
25,000 5.750% 04/15/03....................... 24,133
14,526 7.000% 05/18/04-12/01/28.............. 14,115
79 6.250% 12/25/05....................... 79
3,435 6.150% 03/01/08....................... 3,202
12,754 6.270% 06/01/08....................... 11,965
3,499 8.000% 12/01/09##..................... 3,541
7,454 6.000% 12/01/13....................... 7,026
4,404 9.000% 04/01/16....................... 4,618
7,194 8.500% 04/01/17....................... 7,363
44,624 7.500% 09/01/29##..................... 43,877
--------
215,164
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) CERTIFICATES -- 11.9%
10,914 6.375% 04/20/22....................... 10,998
13,331 7.500% 02/15/24-4/15/26............... 13,277
8,016 7.000% 01/16/28....................... 7,715
14,006 5.500% 06/20/29....................... 13,868
20,761 6.500% 07/15/29....................... 19,588
--------
65,446
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $360,737)..................... 353,174
--------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 12.0%
FEDERAL FARM CREDIT BANK (FFCB) -- 0.2%
1,000 6.100% 12/29/00....................... 997
--------
FEDERAL HOME LOAN BANK (FHLB) -- 6.7%
38,000 5.125% 04/17/01....................... 37,371
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) -- 5.1%
30,000 5.125% 02/13/04....................... 28,045
--------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS
(Cost $68,617)...................... 66,413
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 20.0%
U.S. TREASURY NOTES -- 18.6%
$60,000 5.000% 04/30/01##..................... $ 59,119
20,000 5.750% 06/30/01....................... 19,825
24,500 5.875% 11/30/01....................... 24,251
--------
103,195
--------
U.S. TREASURY STRIPS -- 1.4%
6,250 Interest only 11/15/04................ 4,674
5,000 Interest only 08/15/09................ 2,786
--------
7,460
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $111,557)..................... 110,655
--------
SHORT TERM INVESTMENTS -- 0.2%
(Cost $999)
FEDERAL HOME LOAN BANK (FHLB) -- 0.2%
1,000 5.650% 04/07/00....................... 1,000
--------
<CAPTION>
SHARES
(000)
---------
<C> <S> <C> <C>
INVESTMENT COMPANIES -- 5.1%
(Cost $28,256)
28,256 Nations Cash Reserves#................ 28,256
--------
TOTAL INVESTMENTS
(Cost $570,166*)............. 101.4% 559,498
--------
OTHER ASSETS AND LIABILITIES
(NET)........................ (1.4)%
Receivable for Fund shares sold....... 3,387
Interest receivable................... 6,963
Receivable for variation margin....... 61
Other assets.......................... 20
Collateral on securities loaned....... (8,762)
Payable for Fund shares redeemed...... (1,236)
Investment advisory fee payable....... (95)
Administration fee payable............ (104)
Shareholder servicing and distribution
fees payable........................ (16)
Due to custodian...................... (60)
Distributions payable................. (2,828)
Payable for investment securities
purchased........................... (4,679)
Accrued Trustees'/Directors' fees and
expenses............................ (40)
Accrued expenses and other
liabilities......................... (115)
--------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)............................... (7,504)
--------
NET ASSETS..................... 100.0% $551,994
========
NET ASSETS CONSIST OF:
Accumulated net realized loss on
investments sold and futures
contracts........................... $(26,153)
Net unrealized depreciation of
investments and future contracts.... (10,558)
Paid-in capital....................... 588,705
--------
NET ASSETS............................ $551,994
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE> 47
NATIONS FUNDS
Nations Short-Intermediate Government Fund
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
VALUE
-------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($497,391,596 / 126,148,244 shares
outstanding)........................ $3.94
=====
PRIMARY B SHARES:
Net asset value, offering and
redemption price per share
($199,793 / 50,676 shares
outstanding)........................ $3.94
=====
INVESTOR A SHARES:
Net asset value and redemption price
per share ($45,340,869 / 11,503,206
shares outstanding)................. $3.94
=====
Maximum sales charge.................. 3.25%
Maximum offering price per share...... $4.07
INVESTOR B SHARES:
Net asset value and offering price per
share+ ($8,400,302 / 2,130,339
shares outstanding)................. $3.94
=====
INVESTOR C SHARES:
Net asset value and offering price per
share+ ($661,011 / 168,071 shares
outstanding)........................ $3.93
=====
</TABLE>
---------------
* Federal Income Tax Information: Net unrealized depreciation of $10,855 on
investment securities was comprised of gross appreciation of $168 and gross
depreciation of $11,023 for Federal income tax purposes. At March 31, 2000,
the aggregate cost of securities for Federal income tax purposes was
$570,353.
## All or a portion of security segregated as collateral for futures contracts.
+ The redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
# Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and sub-advised by Banc of America Capital Management, Inc. A
portion of this amount represents cash collateral received from securities
lending activity (Note 8). The portion that represents cash collateral is
$8,762.
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE> 48
NATIONS FUNDS
Nations Government Securities Fund
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
ASSET-BACKED SECURITIES -- 0.7%
(Cost: $1,383)
$ 1,383 Export Funding Trust, Series 1995-A,
Class A,
8.210% 12/29/06..................... $ 1,428
--------
MORTGAGE-BACKED SECURITIES -- 77.3%
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 3.3%
550 Asset Securitization Corporation,
Series 1997-D5, Class A1C,
6.750% 02/14/41..................... 523
2,840 Commercial Mortgage Asset Trust,
Series 1999-C1, Class A1,
6.250% 08/17/06..................... 2,708
725 DLJ Commercial Mortgage Corporation,
Series 1998-CG1, Class A1B,
6.410% 05/10/08..................... 676
180 First Union-Lehman Brothers-Bank of
America Commercial Mortgage, Series
1998-C2, Class A2,
6.560% 11/18/08..................... 170
230 GMAC Commercial Mortgage Securities
Inc., Series 1992-C2, Class A1,
6.570% 09/15/33..................... 220
650 Mortgage Capital Funding, Inc., Series
1998-MC2, Class A2,
6.423% 05/18/08..................... 602
47,827 Vendee Mortgage Trust, Series 1998-1,
Class 2, IO, .439%** 09/15/27....... 925
43,557 Vendee Mortgage Trust, Series 1998-3,
Class 1, IO, .304%** 03/15/29....... 599
--------
6,423
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) CERTIFICATES -- 7.8%
725 10.000% 07/01/01-09/01/18............. 750
2,079 8.500% 09/01/01-09/01/20.............. 2,105
536 9.000% 02/01/02-12/01/16.............. 548
341 8.000% 08/01/07-05/01/17.............. 342
34 7.500% 08/01/08....................... 34
10,843 6.500% 01/01/09-09/15/25.............. 10,424
820 9.500% 04/01/18-01/01/29.............. 860
--------
15,063
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) CERTIFICATES -- 36.3%
16,356 6.000% 05/01/01-06/01/29.............. 14,925
287 8.500% 11/01/01-07/01/21.............. 293
1,132 7.000% 11/01/02-05/01/29.............. 1,111
5,600 5.625% 05/14/04....................... 5,310
10,549 8.000% 04/01/06-11/1/29............... 10,587
2,330 10.000% 10/01/06-04/01/20............. 2,415
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) CERTIFICATES -- (CONTINUED)
$ 2,458 6.135% 08/01/08....................... $ 2,286
332 7.500% 08/01/08-06/01/09.............. 331
75 8.250% 04/01/09....................... 76
6,769 6.565% 07/01/16....................... 6,420
892 9.000% 12/01/16-09/01/24.............. 919
8,012 9.500% 01/01/19-04/01/20.............. 8,456
1,762 6.990% 06/01/23....................... 1,709
1,704 6.750% 03/18/28....................... 1,640
9,788 5.500% 02/01/29-03/01/29.............. 8,665
4,972 6.500% 03/01/29....................... 4,666
331 7.305%** 08/01/36..................... 342
--------
70,151
--------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA)
CERTIFICATES -- 29.9%
375 10.500% 08/15/00-04/15/21............. 401
311 10.000% 09/15/00-03/15/21............. 326
10 11.750% 09/15/00-12/15/00............. 10
460 9.500% 02/20/01-04/20/06.............. 472
87 11.000% 03/15/01-10/20/20............. 95
724 9.000% 06/15/01-03/15/27.............. 750
277 7.000% 02/15/09-06/15/23.............. 269
3,170 8.500% 10/15/09-02/20/29.............. 3,255
10,153 6.000% 12/15/10-07/15/29.............. 9,306
47 13.000% 01/15/11-04/15/11............. 52
13,484 8.000% 11/15/14-11/15/29.............. 13,662
4,648 7.500% 04/15/22-12/15/25.............. 4,625
26,113 6.500% 01/15/29-08/15/29.............. 24,643
--------
57,866
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $152,273)..................... 149,503
--------
U.S. TREASURY OBLIGATIONS -- 20.1%
U.S. TREASURY NOTES -- 13.0%
10,500 6.250% 01/31/02....................... 10,451
2,400 6.250% 02/28/02....................... 2,389
3,200 6.625% 04/30/02....................... 3,206
9,200 5.500% 01/31/03....................... 8,971
--------
25,017
--------
U.S. TREASURY STRIPS -- 7.1%
24,000 Interest only 02/15/20................ 7,218
6,700 Principal only 11/15/21............... 1,853
22,600 Principal only 02/15/27............... 4,763
--------
13,834
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $37,166)...................... 38,851
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE> 49
NATIONS FUNDS
Nations Government Securities Fund
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
SHARES VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
INVESTMENT COMPANIES -- 15.7%
(Cost $30,436)
30,436 Nations Cash Reserves#................ $ 30,436
--------
TOTAL INVESTMENTS
(Cost $221,258*)............. 113.8% 220,218
--------
OTHER ASSETS AND LIABILITIES
(NET)........................ (13.8)%
Receivable for investment securities
sold................................ 201
Receivable for Fund shares sold....... 1,442
Interest receivable................... 1,395
Collateral on securities loaned....... (24,428)
Payable for Fund shares redeemed...... (817)
Investment advisory fee payable....... (70)
Administration fee payable............ (36)
Shareholder servicing and distribution
fees payable........................ (36)
Distributions payable................. (988)
Payable for investment securities
purchased........................... (3,208)
Accrued Trustees'/Directors' fees and
expenses............................ (21)
Accrued expenses and other
liabilities......................... (142)
--------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)............................... (26,708)
--------
NET ASSETS..................... 100.0% $193,510
========
NET ASSETS CONSIST OF:
Distributions in excess of net
investment income................... $ (393)
Accumulated net realized loss on
investments sold.................... (28,529)
Net unrealized depreciation of
investments......................... (1,040)
Paid-in capital....................... 223,472
--------
NET ASSETS............................ $193,510
========
</TABLE>
<TABLE>
<CAPTION>
VALUE
-------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($108,797,847 / 11,597,854 shares
outstanding)........................ $9.38
=====
INVESTOR A SHARES:
Net asset value and redemption price
per share ($57,485,349 / 6,134,857
shares outstanding)................. $9.37
=====
Maximum sales charge.................. 4.75%
Maximum offering price per share...... $9.84
INVESTOR B SHARES:
Net asset value and offering price per
share+ ($26,988,101 / 2,876,845
shares outstanding)................. $9.38
=====
INVESTOR C SHARES:
Net asset value and offering price per
share+ ($238,416 / 25,514 shares
outstanding)........................ $9.34
=====
</TABLE>
---------------
* Federal Income Tax Information: Net unrealized depreciation of $1,040 on
investment securities was comprised of gross appreciation of $1,924 and gross
depreciation of $2,964 for Federal income tax purposes. At March 31, 2000,
the aggregate cost of securities for Federal income tax purposes was
$221,258.
** Variable rate note. The interest rate shown reflects the rate in effect at
March 31, 2000.
+ The redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
# Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and sub-advised by Banc of America Capital Management, Inc. A
portion of this amount represents cash collateral received from securities
lending activity (Note 8). The portion that represents cash collateral is
$24,428.
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE> 50
NATIONS FUNDS
Nations U.S. Government Bond Fund
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------
<C> <S> <C> <C>
MORTGAGE-BACKED SECURITIES -- 37.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) CERTIFICATES -- 14.6%
$ 6,745 5.75% 07/15/03......................... $ 6,498
5,283 6.00% 09/01/13......................... 4,979
--------
11,477
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) CERTIFICATES -- 17.9%
15,079 6.00% 03/01/13-11/01/28................ 14,125
--------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA)
CERTIFICATES -- 5.4%
4,142 7.50% 09/15/07-04/15/29................ 4,108
129 8.00% 07/15/29......................... 131
--------
4,239
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $31,039)....................... 29,841
--------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 12.2%
FEDERAL HOME LOAN BANK (FHLB) -- 1.2%
1,000 5.13% 09/15/03......................... 943
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) -- 11.0%
9,505 5.75% 04/15/08......................... 8,681
--------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS
(Cost $10,578)....................... 9,624
--------
U.S. TREASURY OBLIGATIONS -- 48.3%
U.S. TREASURY BONDS -- 17.2%
8,650 8.00% 11/15/21......................... 10,531
2,940 6.13% 08/15/29......................... 2,997
--------
13,528
--------
U.S. TREASURY NOTES -- 24.7%
4,100 7.75% 02/15/01......................... 4,146
2,630 5.00% 04/30/01......................... 2,591
10,000 6.25% 01/31/02......................... 9,953
2,755 5.88% 11/15/04......................... 2,705
--------
19,395
--------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
(000) (000)
--------------------------------------------------------------
<C> <S> <C> <C>
U.S. TREASURY STRIPS -- 6.4%
$ 1,500 Interest only 08/15/03................. $ 1,214
500 Interest only 11/15/04................. 374
1,700 Interest only 08/15/09................. 947
205 Interest only 02/15/10................. 111
7,700 Principal only 11/15/21................ 2,129
1,375 Principal only 02/15/27................ 290
--------
5,065
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $37,899)....................... 37,988
--------
INVESTMENT COMPANIES -- 34.7%
(Cost $27,269)
27,269 Nations Cash Reserves#................. $ 27,269
--------
TOTAL INVESTMENTS
(Cost $106,785*).............. 133.1% 104,722
--------
OTHER ASSETS AND LIABILITIES
(NET)......................... (33.1)%
Receivable for investment securities
sold................................. 1,413
Receivable for Fund shares sold........ 328
Interest receivable.................... 1,025
Collateral on securities loaned........ (27,160)
Payable for Fund shares redeemed....... (210)
Investment advisory fee payable........ (29)
Administration fee payable............. (15)
Shareholder servicing and distribution
fees payable......................... (8)
Distributions payable.................. (346)
Payable for investment securities
purchased............................ (967)
Accrued Trustees'/Directors' fees and
expenses............................. (16)
Accrued expenses and other
liabilities.......................... (46)
--------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)................................ (26,031)
--------
NET ASSETS...................... 100.0% $ 78,691
========
NET ASSETS CONSIST OF:
Undistributed net investment income.... $ 20
Accumulated net realized loss on
investments sold..................... (5,280)
Net unrealized depreciation of
investments.......................... (2,063)
Paid-in capital........................ 86,014
--------
NET ASSETS............................. $ 78,691
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE> 51
NATIONS FUNDS
Nations U.S. Government Bond Fund
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
VALUE
--------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($67,775,773 / 7,124,431 shares
outstanding)......................... $9.51
=====
INVESTOR A SHARES:
Net asset value and redemption price
per share ($2,139,017 / 224,851
shares outstanding).................. $9.51
=====
Maximum sales charge................... 4.75%
Maximum offering price per share....... $9.98
INVESTOR B SHARES:
Net asset value and offering price per
share+ ($7,673,491 / 806,696 shares
outstanding)......................... $9.51
=====
INVESTOR C SHARES:
Net asset value and offering price per
share+ ($1,102,879 / 115,935 shares
outstanding)......................... $9.51
=====
</TABLE>
---------------
* Federal Income Tax Information: Net unrealized depreciation of $2,063 on
investment securities was comprised of gross appreciation of $390 and gross
depreciation of $2,453 for Federal income tax purposes. At March 31, 2000, the
aggregate cost of securities for Federal income tax purposes was $106,785.
+ The redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
# Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and sub-advised by Banc of America Capital Management, Inc. A
portion of this amount represents cash collateral received from securities
lending activity (Note 8). The portion that represents cash collateral is
$27,160.
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE> 52
NATIONS FUNDS
Nations Intermediate Bond Fund
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
VALUE
(000)
------------------------------------------------------------
<C> <S> <C> <C>
INVESTMENT COMPANIES -- 99.5%
Investment in Nations Master
Investment Trust, Intermediate Bond
Master Portfolio*................... $90,103
-------
TOTAL INVESTMENTS.............. 99.5% 90,103
-------
OTHER ASSETS AND LIABILITIES
(NET)........................ 0.5%
Receivable for Fund shares sold....... 1,022
Receivable from administrator......... 39
Payable for Fund shares redeemed...... (574)
Shareholder servicing and distribution
fees payable........................ (14)
Accrued Trustees'/Directors' fees and
expenses............................ (16)
Accrued expenses and other
liabilities......................... (40)
-------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)............................... 417
-------
NET ASSETS..................... 100.0% $90,520
=======
NET ASSETS CONSIST OF:
Undistributed net investment income... $ 12
Accumulated net realized loss on
investment sold..................... (1,633)
Net unrealized depreciation of
investment.......................... (3,078)
Paid-in capital....................... 95,219
-------
NET ASSETS............................ $90,520
=======
</TABLE>
<TABLE>
<CAPTION>
VALUE
------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($18,364,838 / 2,012,280 shares
outstanding)........................ $9.13
=====
INVESTOR A SHARES:
Net asset value and redemption price
per share ($45,206,581 / 4,941,459
shares outstanding)................. $9.15
=====
Maximum sales charge.................. 3.25%
Maximum offering price per share...... $9.46
INVESTOR B SHARES:
Net asset value and offering price per
share+ ($256,238 / 28,068 shares
outstanding)........................ $9.13
=====
INVESTOR C SHARES:
Net asset value and offering price per
share+ ($15,100 / 1,621 shares
outstanding)........................ $9.32
=====
SEAFIRST SHARES:
Net asset value, offering and
redemption price per share
($26,677,646 / 2,561,253 shares
outstanding)........................ $10.42
======
</TABLE>
---------------
* The financial statements of the Intermediate Bond Master Portfolio, including
its portfolio of investments, are included elsewhere within this report and
should be read in conjunction with the Intermediate Bond Fund financial
statements.
+ The redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE> 53
NATIONS FUNDS
Nations Investment Grade Bond Fund
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
----------------------------------------------------------------------------------
<C> <S> <C> <C>
ASSET-BACKED SECURITIES -- 7.5%
ASSET-BACKED -- AUTO LOANS -- 3.2%
$ 25,000 Distribution Financial Services RV Trust, Series 1999-1,
Class A4,
5.84% 04/15/09......................................... $ 24,346
10,000 Ford Credit Auto Owner Trust, Series 1997-B, Class CTFS,
6.65% 04/15/03......................................... 9,878
15,000 Ford Credit Auto Owner Trust, Series 1998-A, Class B,
5.95% 10/15/02......................................... 14,751
11,625 Premier Auto Trust, Series 1998-1, Class B,
5.92% 10/06/04......................................... 11,294
----------
60,269
----------
ASSET-BACKED -- CREDIT CARD RECEIVABLES -- 1.4%
15,000 Metris Master Trust, Series 1997-1, Class B,
7.11% 10/20/05......................................... 14,789
10,000 World Financial Network Credit Card Master Trust, Series
1996-B, Class A,
6.95% 04/15/06......................................... 9,951
----------
24,740
----------
ASSET-BACKED -- HOME EQUITY LOANS -- 2.9%
8,541 Amresco Residential Securities Mortgage Loan Trust,
Series 1996-2, Class A1,
7.43% 05/25/27......................................... 8,392
10,905 First Alliance Mortgage Loan Trust, Series 1994-2, Class
A1,
7.63% 07/25/25......................................... 10,899
3,934 First Plus Home Loan Trust, Series 1997-3, Class A4,
6.80% 03/10/12......................................... 3,924
14,411 First Plus Home Loan Trust, Series 1997-4, Class A4,
6.57% 04/10/13......................................... 14,353
14,903 IMC Home Equity Loan Trust, Series 1997-7, Class A3,
6.54% 11/20/12......................................... 14,772
5 The Money Store Home Equity Trust, Series 1993-D, Class
A2,
5.07% 02/15/18......................................... 5
----------
52,345
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $140,258)........................................ 137,354
----------
CORPORATE BONDS AND NOTES -- 29.7%
AEROSPACE AND DEFENSE -- 0.6%
12,500 Raytheon Company,
6.75% 08/15/07......................................... 11,623
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
----------------------------------------------------------------------------------
<C> <S> <C> <C>
AUTOMOBILE PARTS MANUFACTURERS -- 0.7%
$ 13,635 Delphi Automotive Systems Corporation,
6.13% 05/01/04......................................... $ 12,847
----------
BANKING AND FINANCE -- 9.7%
1,000 Abbey National plc,
6.69% 10/17/05......................................... 953
20,000 Banponce Financial Corporation, MTN,
6.55% 10/10/00......................................... 19,950
14,000 Capital One Bank,
6.65% 03/15/04......................................... 13,431
12,500 FCB/NC Capital Trust I, Gtd. Notes,
8.05% 03/01/28......................................... 10,703
18,000 Finova Capital Corporation,
7.25% 11/08/04......................................... 17,138
1,500 First Union Corporation,
7.70% 02/15/05......................................... 1,509
25,500 Goldman Sachs Group, LP,
6.63% 12/01/04@........................................ 24,652
17,985 Heller Financial, Inc.,
6.00% 03/19/04......................................... 17,008
20,495 Lehman Brothers Holdings Inc.,
6.63% 04/01/04......................................... 19,740
18,175 Newcourt Credit Group Inc.,
6.88% 02/16/05......................................... 17,661
15,000 Salomon Smith Barney Holdings, Inc.,
6.25% 05/15/03......................................... 14,528
15,000 Union Planters Capital Trust,
8.20% 12/15/26......................................... 13,143
8,500 Wilmington Trust Corporation,
6.63% 05/01/08......................................... 7,900
----------
178,316
----------
BEVERAGES -- 0.9%
18,000 J. Seagram & Sons, Inc.,
7.60% 12/15/28......................................... 16,573
----------
CHEMICALS -- SPECIALTY -- 0.4%
6,750 Equistar Chemicals, L.P.,
8.50% 02/15/04......................................... 6,598
----------
ELECTRIC POWER -- 0.9%
18,250 Dominion Capital Trust I,
7.83% 12/01/27......................................... 16,544
----------
ENERGY -- 1.1%
21,200 PDV America Inc., Gtd. Sr. Notes,
7.88% 08/01/03......................................... 19,938
----------
ENTERTAINMENT -- 1.4%
25,000 Time Warner Inc.,
8.11% 08/15/06......................................... 25,648
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE> 54
NATIONS FUNDS
Nations Investment Grade Bond Fund
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
----------------------------------------------------------------------------------
<C> <S> <C> <C>
FINANCIAL SERVICES -- 2.9%
$ 16,000 Bear Stearns Companies Inc.,
7.63% 02/01/05......................................... $ 15,967
2,800 DaimlerChrysler NA Holdings,
6.90% 09/01/04......................................... 2,749
19,550 Ford Motor Credit Company,
7.50% 03/15/05......................................... 19,562
9,700 Paine Webber Group, Inc.,
6.38% 05/15/04......................................... 9,280
5,550 Washington Mutual, Inc.,
7.50% 08/15/06......................................... 5,464
----------
53,022
----------
GAS -- 0.4%
7,000 Williams Companies, Inc.,
6.50% 08/01/06......................................... 6,546
----------
HEALTHCARE -- 0.5%
10,615 HEALTHSOUTH Corporation,
Sr. Notes,
6.88% 06/15/05......................................... 9,264
----------
INDUSTRIAL -- 3.8%
10,000 Blount Inc.,
7.00% 06/15/05......................................... 8,625
13,000 Comdisco, Inc.,
6.13% 08/01/01......................................... 12,802
11,675 Georgia-Pacific Corporation,
9.88% 11/01/21......................................... 12,383
12,875 Tyco International Group SA,
6.38% 06/15/05......................................... 12,076
18,000 USA Waste Services Inc.,
7.00% 07/15/28......................................... 13,500
10,818 Xerox Capital Trust I, Gtd. Notes,
8.00% 02/01/27......................................... 9,748
----------
69,134
----------
MEDIA -- 0.9%
18,360 British Sky Broadcasting Group plc,
6.88% 02/23/09......................................... 16,441
----------
OIL -- DOMESTIC -- 1.0%
19,300 Occidental Petroleum Corporation,
Sr. Notes,
7.65% 02/15/06......................................... 18,973
----------
PROFESSIONAL SERVICES -- 0.4%
12,440 Service Corporation International,
6.30% 03/15/03......................................... 6,593
----------
RETAIL -- FOOD -- 0.7%
13,000 Safeway Inc., Sr. Notes,
7.00% 09/15/07......................................... 12,471
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
----------------------------------------------------------------------------------
<C> <S> <C> <C>
RETAIL -- GENERAL -- 0.3%
$ 6,000 J. C. Penney Company, Inc.,
7.40% 04/01/37......................................... $ 5,284
----------
TELECOMMUNICATIONS -- 1.2%
19,630 Sprint Capital Corporation,
5.88% 05/01/04......................................... 18,568
3,900 Vodafone AirTouch plc,
7.63% 02/15/05@........................................ 3,936
----------
22,504
----------
TRANSPORTATION -- 1.9%
15,750 ERAC USA Finance Company,
6.95% 03/01/04@........................................ 15,314
19,500 ERAC USA Finance Company,
6.63% 02/15/05@........................................ 18,678
----------
33,992
----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $572,596)........................................ 542,311
----------
FOREIGN BONDS AND NOTES -- 3.5%
3,000 AT&T Canada Inc.,
8.35%*** 06/15/08...................................... 2,397
16,000 AT&T Canada Inc., Sr. Notes,
7.65% 09/15/06......................................... 16,042
20,000 Banco Latinoamericano,
7.20% 05/28/02@........................................ 19,568
10,000 Enterprise Oil plc,
6.70% 09/15/07......................................... 9,372
13,000 Skandinaviska Enskilda,
8.13% 09/06/49@........................................ 12,414
4,305 Tyco International Group SA,
6.88% 01/15/29......................................... 3,703
----------
TOTAL FOREIGN BONDS AND NOTES
(Cost $66,063)......................................... 63,496
----------
MORTGAGE-BACKED SECURITIES -- 48.8%
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 17.7%
24,150 Commercial Mortgage Asset Trust, Series 1999-C1, Class
A3,
6.64% 09/17/10......................................... 22,603
31,260 CS First Boston Mortgage Securities Corporation, Series
1998-C1, Class A1B,
6.48% 05/17/08##....................................... 29,117
20,000 DLJ Commercial Mortgage Corporation, Series 1998-CG1,
Class A1B,
6.41% 05/10/08##....................................... 18,657
30,000 DLJ Commercial Mortgage Corporation, Series 1999-CG1,
Class A1B,
6.46% 01/10/09##....................................... 27,959
6,100 DLJ Commercial Mortgage Corporation, Series 1999-CG2,
Class A1B,
7.30% 06/10/09......................................... 5,989
9,885 GMAC Commercial Mortgage Securities Inc., Series 1997-C2,
Class A3,
6.57% 11/15/07##....................................... 9,251
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE> 55
NATIONS FUNDS
Nations Investment Grade Bond Fund
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
----------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- (CONTINUED)
$ 31,000 GMAC Commercial Mortgage Securities Inc., Series 1998-C2,
Class A2,
6.42% 08/15/08##....................................... $ 28,870
30,000 GMAC Commercial Mortgage Securities Inc., Series 1999-C1,
Class A2,
6.18% 05/15/33......................................... 27,338
13,000 Heller Financial Commercial Mortgage Asset Corporation,
Series 2000-PH1, Class A2,
7.75% 11/15/09......................................... 13,178
108,375 JP Morgan Commercial Mortgage Finance Corporation, Series
1997-C4, Class X, Interest only,
1.25%** 12/26/28....................................... 5,910
13,150 JP Morgan Commercial Mortgage Finance Corporation, Series
1999-C7, Class A2,
6.51% 10/15/35......................................... 12,288
31,706 Morgan Stanley Capital Trust I, Series 1999-WF1, Class
A2,
6.21% 09/15/08##....................................... 29,247
1,000 Mortgage Capital Funding, Inc., Series 1998-MC2, Class
A2,
6.42% 05/18/08......................................... 927
30,000 Nomura Asset Securities Corporation, Series 1998-D6,
Class A1B,
6.59% 03/17/28##....................................... 28,107
31,000 Prudential Securities Secured Financing Corporation,
Series 1998-C1, Class A1B,
6.51% 07/15/08##....................................... 28,990
30,750 Prudential Securities Secured Financing Corporation,
Series 1999-NRF1, Class A2,
6.48% 01/15/09##....................................... 28,649
4,666 Salomon Brothers Mortgage Securities, Series 2000-NL1,
Class A1,
6.60% 04/15/08@........................................ 4,484
----------
321,564
----------
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
CERTIFICATES -- 1.2%
42 9.00% 06/01/01-01/01/05.................................. 42
430 8.00% 11/01/09-04/01/10.................................. 436
1,510 6.50% 04/01/11-10/01/12.................................. 1,463
1,874 8.50% 11/01/26........................................... 1,911
19,362 7.00% 12/01/26-07/01/28.................................. 18,650
----------
22,502
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
----------------------------------------------------------------------------------
<C> <S> <C> <C>
FEDERAL HOUSING AUTHORITY (FHA) CERTIFICATES -- 1.5%
$ 383 6.75% 01/01/40 TBA....................................... $ 352
8,730 6.75% 01/01/40........................................... 8,018
237 6.85% 01/01/40 TBA....................................... 218
6,158 7.00% 01/01/40........................................... 5,775
259 7.00% 01/01/40 TBA....................................... 243
4,278 6.85% 02/01/40........................................... 3,946
2,779 6.53% 10/01/40 TBA....................................... 2,495
7,017 6.53% 10/01/40........................................... 6,300
----------
27,347
----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
CERTIFICATES -- 21.3%
10,000 5.38% 03/15/02........................................... 9,719
5,000 5.75% 04/15/03........................................... 4,827
44,162 8.00% 12/01/09-11/01/29.................................. 44,374
130,661 7.00% 10/01/11-10/01/29##................................ 125,703
128,434 6.50% 03/01/13-07/01/29.................................. 122,490
26,286 7.50% 09/01/29........................................... 25,846
57,410 6.50% 04/01/30(a)........................................ 53,831
----------
386,790
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
CERTIFICATES -- 7.1%
3 11.00% 11/15/00.......................................... 3
4,270 6.55% 03/15/01........................................... 3,897
360 6.55% 03/15/01(a)........................................ 329
4,467 6.75% 09/15/01........................................... 4,095
7,698 6.75% 09/15/01(a)........................................ 7,058
5,411 6.60% 11/15/01........................................... 4,951
888 6.60% 11/5/01(a)......................................... 812
35 13.00% 01/15/11-02/15/11................................. 40
6,784 8.00% 05/15/17-11/01/23.................................. 6,840
109 9.00% 07/15/17........................................... 113
37,694 7.50% 12/15/23-07/20/28.................................. 37,422
1,653 8.50% 02/15/25........................................... 1,701
37,750 6.50% 09/01/27-05/15/28.................................. 35,567
27,295 7.00% 07/15/28........................................... 26,469
----------
129,297
----------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $932,501)........................................ 887,500
----------
U.S. TREASURY OBLIGATIONS -- 7.0%
U.S. TREASURY NOTES -- 3.1%
59,000 5.38% 06/30/03........................................... 57,202
----------
U.S. TREASURY STRIPS -- 3.9%
37,000 Interest only 08/15/19................................... 11,426
180,450 Principal only 11/15/21.................................. 49,912
46,135 Principal only 02/15/27.................................. 9,723
----------
71,061
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $124,402)........................................ 128,263
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE> 56
NATIONS FUNDS
Nations Investment Grade Bond Fund
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
SHARES VALUE
(000) (000)
----------------------------------------------------------------------------------
<C> <S> <C> <C>
INVESTMENT COMPANIES -- 9.0%
(Cost $165,043)
165,043 Nations Cash Reserves#................................... $ 165,043
----------
TOTAL INVESTMENTS
(Cost $2,000,863*).............................. 105.5% 1,923,967
----------
OTHER ASSETS AND LIABILITIES (NET)................ (5.5)%
Cash..................................................... 98
Receivable for investment securities sold................ 9,641
Receivable for Fund shares sold.......................... 10,338
Interest receivable...................................... 16,932
Receivable for variation margin.......................... 689
Collateral on securities loaned.......................... (52,163)
Payable for Fund shares redeemed......................... (4,983)
Investment advisory fee payable.......................... (616)
Administration fee payable............................... (338)
Shareholder servicing and distribution fees payable...... (11)
Distributions payable.................................... (10,093)
Payable for investment securities purchased.............. (69,085)
Accrued Trustees'/Directors' fees and expenses........... (63)
Accrued expenses and other liabilities................... (409)
----------
TOTAL OTHER ASSETS AND LIABILITIES (NET)................. (100,063)
----------
NET ASSETS........................................ 100.0% $1,823,904
==========
NET ASSETS CONSIST OF:
Accumulated net realized loss on investments sold and
futures contracts...................................... $ (24,948)
Net unrealized depreciation of investments and futures
contracts.............................................. (77,610)
Paid-in capital.......................................... 1,926,462
----------
NET ASSETS............................................... $1,823,904
==========
</TABLE>
<TABLE>
<CAPTION>
VALUE
----------------------------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and redemption price per share
($1,793,912,733 / 191,511,837 shares outstanding)...... $9.37
=====
INVESTOR A SHARES:
Net asset value and redemption price per share
($23,420,528 / 2,500,235 shares outstanding)........... $9.37
=====
Maximum sales charge..................................... 3.25%
Maximum offering price per share......................... $9.68
INVESTOR B SHARES:
Net asset value and offering price per share+
($5,636,927 / 601,794 shares outstanding).............. $9.37
=====
INVESTOR C SHARES:
Net asset value and offering price per share+
($934,032 / 99,726 shares outstanding)................. $9.37
=====
</TABLE>
---------------
* Federal Income Tax Information: Net unrealized depreciation of $78,873 on
investment securities was comprised of gross appreciation of $4,519 and gross
depreciation of $83,392 for Federal income tax purposes. At March 31, 2000,
the aggregate cost of securities for Federal income tax purposes was
$2,002,840.
## All or a portion of security segregated as collateral for futures contracts
and TBA.
** Variable rate note. The interest rate shown reflects the rate in effect at
March 31, 2000.
*** Zero coupon security. The rate shown reflects the yield to maturity.
@ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ The redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
# Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and sub-advised by Banc of America Capital Management, Inc. A
portion of this amount represents cash collateral received from securities
lending activity (Note 8). The portion that represents cash collateral is
$52,163.
(a) TBA -- Securities purchased on a forward commitment basis.
ABBREVIATIONS:
MTN -- Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE> 57
NATIONS FUNDS
Nations Strategic Income Fund
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS AND NOTES -- 74.9%
AEROSPACE AND DEFENSE -- 2.4%
$ 719 Allied Signal,
9.065% 06/01/33...................... $ 826
2,000 Lockheed Martin Corporation,
7.750% 05/01/26...................... 1,867
2,500 Raytheon Company,
6.750% 08/15/07...................... 2,325
--------
5,018
--------
AUTOMOBILE PARTS MANUFACTURERS -- 1.4%
3,350 Federal-Mogul Corporation,
7.500% 07/01/04...................... 2,906
--------
BANKING AND FINANCE -- 11.1%
2,500 Capital One Bank,
6.650% 03/15/04...................... 2,398
3,500 FCB/NC Capital Trust I, Gtd. Notes,
8.050% 03/01/28...................... 2,997
2,200 Finova Capital Corporation,
7.250% 11/08/04...................... 2,095
2,500 First Union Corporation,
7.700% 02/15/05...................... 2,515
3,775 Golden State Holdings, Escrow
Corporation,
7.000% 08/01/03...................... 3,534
500 MCN Investment Corporation,
6.890% 01/16/02...................... 492
2,900 Newcourt Credit Group Inc.,
6.875% 02/16/05...................... 2,818
3,925 Popular, Inc., MTN,
6.375% 09/15/03...................... 3,778
2,750 Wilmington Trust Corporation,
6.625% 05/01/08...................... 2,556
--------
23,183
--------
BEVERAGES -- 1.2%
2,500 J. Seagram & Sons, Inc.,
6.625% 12/15/05...................... 2,375
--------
BROKERAGE SERVICES -- 3.0%
2,500 Lehman Brothers Inc.,
11.625% 05/15/05..................... 2,931
3,300 Morgan Stanley Finance plc, Gtd. Sub.
Deb.,
8.030% 02/28/17...................... 3,348
--------
6,279
--------
CHEMICALS -- SPECIALTY -- 1.5%
3,110 Equistar Chemicals, L.P.,
8.500% 02/15/04...................... 3,040
--------
ELECTRIC POWER -- 2.6%
2,420 CMS Energy Corporation,
8.125% 05/15/02...................... 2,385
500 Consumers Energy Company,
6.200% 05/01/03...................... 476
2,775 Dominion Capital Trust I,
7.830% 12/01/27...................... 2,516
--------
5,377
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C>
ENERGY -- 7.2%
$ 2,480 Barrett Resources Corporation, Sr.
Notes,
7.550% 02/01/07...................... $ 2,317
2,000 Occidental Petroleum Corporation, Sr.
Deb.,
10.125% 09/15/09..................... 2,267
3,635 Occidental Petroleum Corporation, Sr.
Deb.,
9.250% 08/01/19...................... 4,023
5,430 PDV America Inc., Gtd. Sr. Notes,
7.875% 08/01/03##.................... 5,106
1,125 PDV America, Inc., Gtd. Sr. Notes,
7.750% 08/01/00...................... 1,118
--------
14,831
--------
ENTERTAINMENT -- 3.1%
1,500 Paramount Communications, Inc.
8.250% 08/01/22...................... 1,466
2,750 Paramount Communications, Inc.
7.500% 07/15/23...................... 2,477
2,300 Time Warner Inc.,
8.110% 08/15/06...................... 2,360
--------
6,303
--------
FINANCIAL SERVICES -- 2.1%
2,500 Ford Motor Credit Company,
7.500% 03/15/05##.................... 2,502
2,000 Paine Webber Group, Inc.,
6.375% 05/15/04...................... 1,913
--------
4,415
--------
FOREST AND PAPER PRODUCTS -- 1.8%
4,200 Georgia-Pacific Group,
7.250% 06/01/28...................... 3,708
--------
GAS -- 1.6%
3,300 Louis Dreyfus Natural Gas Corporation,
Sr. Sub. Notes,
9.250% 06/15/04...................... 3,275
--------
HEALTHCARE -- 2.9%
3,475 Healthsouth Corporation,
7.000% 06/15/08...................... 2,932
3,180 Tenet Healthcare, Inc.,
7.875% 01/15/03##.................... 3,044
--------
5,976
--------
INDUSTRIAL -- 7.6%
3,245 Allied Waste North America, Inc.,
7.625% 01/01/06...................... 2,645
1,650 American Standard Inc.,
7.375% 04/15/05...................... 1,526
3,805 Blount Inc.,
7.000% 06/15/05...................... 3,282
3,700 Coltec Industries Inc.,
7.500% 04/15/08...................... 3,607
2,600 Fisher Scientific International, Sr.
Notes,
7.125% 12/15/05##.................... 2,249
2,500 Waste Management, Inc.,
6.500% 12/15/02...................... 2,307
--------
15,616
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PAGE> 58
NATIONS FUNDS
Nations Strategic Income Fund
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C>
INSURANCE -- 2.5%
$ 3,000 Conseco Finance Trust III,
8.796% 04/01/27##.................... $ 2,503
2,620 Jefferson-Pilot Capital Trust B,
8.285% 03/01/46@..................... 2,597
--------
5,100
--------
MACHINERY AND EQUIPMENT -- 0.2%
375 Thermo Electron Corporation,
7.625% 10/30/08...................... 354
--------
MANUFACTURING -- 4.2%
4,500 BWAY Corporation, Sr. Sub. Notes,
10.250% 04/15/07##................... 4,062
3,350 Owens-Illinois, Inc.,
7.850% 05/15/04...................... 3,285
1,625 Westpoint Stevens Inc.,
7.875% 06/15/05...................... 1,316
--------
8,663
--------
MEDIA -- 4.2%
2,200 British Sky Broadcasting Group plc,
6.875% 02/23/09...................... 1,970
2,190 Lenfest Communications, Inc.,
10.500% 06/15/06##................... 2,409
4,735 PRIMEDIA Inc.,
7.625% 04/01/08...................... 4,273
--------
8,652
--------
MEDICAL SERVICES -- 1.1%
2,475 Beckman Coulter, Inc.,
7.450% 03/04/08...................... 2,243
--------
OIL -- DOMESTIC -- 0.6%
1,235 Conoco Inc., Class A,
5.900% 04/15/04...................... 1,175
--------
RETAIL -- FOOD -- 1.0%
2,145 Safeway Inc.,
7.250% 09/15/04...................... 2,132
--------
TELECOMMUNICATIONS -- 6.4%
2,500 CSC Holdings, Inc.,
8.125% 07/15/09...................... 2,451
2,000 Jones Intercable Inc., Sr. Notes,
9.625% 03/15/02##.................... 2,064
4,500 Rogers Cablesystems Limited, Deb.,
10.000% 12/01/07..................... 4,692
2,100 Sprint Capital Corporation,
6.875% 11/15/28...................... 1,883
2,100 Vodafone AirTouch plc,
7.625% 02/15/05@..................... 2,119
--------
13,209
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION -- 4.0%
$ 4,025 ERAC USA Finance Company,
6.625% 02/15/05@..................... $ 3,855
3,950 Federal Express Corporation, Notes,
9.650% 06/15/12...................... 4,380
--------
8,235
--------
UTILITIES -- TELEPHONE -- 1.2%
2,500 LCI International, Inc.,
7.250% 06/15/07...................... 2,435
--------
TOTAL CORPORATE BONDS AND NOTES
(Cost $162,643)...................... 154,500
--------
FOREIGN BONDS AND NOTES -- 5.2%
2,200 AT&T Canada Inc., Sr. Notes,
7.650% 09/15/06...................... 2,206
375 Banco Latinoamericano,
7.200% 05/28/02@..................... 367
2,500 Corp Andina De Fomento,
7.750% 03/01/04...................... 2,462
2,200 Tyco International Group SA,
6.875% 01/15/29...................... 1,892
4,500 United Mexican States, Sr. Notes,
6.250% 12/31/19...................... 3,825
--------
TOTAL FOREIGN BONDS AND NOTES
(Cost $10,188)....................... 10,752
--------
MORTGAGE-BACKED SECURITIES -- 13.3%
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) CERTIFICATES -- 0.9%
2,000 5.500% 05/15/02........................ 1,943
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) CERTIFICATES -- 12.4%
11,000 5.250% 01/15/09........................ 9,627
8,000 6.625% 09/15/09........................ 7,694
9,110 6.250% 05/15/29........................ 8,213
--------
25,534
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $27,342)....................... 27,477
--------
U.S. TREASURY OBLIGATIONS -- 2.7%
U.S. TREASURY STRIPS -- 2.7%
5,350 Interest only 08/15/09................. 2,981
9,725 Principal only 11/15/21................ 2,690
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $5,481)........................ 5,671
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<PAGE> 59
NATIONS FUNDS
Nations Strategic Income Fund
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
SHARES VALUE
(000) (000)
-------------------------------------------------------------
<C> <S> <C> <C>
INVESTMENT COMPANIES -- 9.7%
(Cost $20,093)
20,093 Nations Cash Reserves#................ $ 20,093
--------
TOTAL INVESTMENTS
(Cost $225,747*)............. 105.8% 218,493
--------
OTHER ASSETS AND
LIABILITIES (NET)............ (5.8)%
Cash.................................. 43
Receivable for Fund shares sold....... 826
Interest receivable................... 3,701
Variation margin/due to broker........ (66)
Collateral on securities loaned....... (13,379)
Payable for Fund shares redeemed...... (469)
Investment advisory fee payable....... (42)
Administration fee payable............ (39)
Shareholder servicing and distribution
fees payable........................ (57)
Distributions payable................. (1,214)
Payable for investment securities
purchased........................... (1,172)
Accrued Trustees'/Directors' fees and
expenses............................ (27)
Accrued expenses and other
liabilities......................... (122)
--------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)............................... (12,017)
--------
NET ASSETS..................... 100.0% $206,476
========
NET ASSETS CONSIST OF:
Undistributed net investment income... $ 21
Accumulated net realized loss on
investments sold and futures
contracts........................... (18,280)
Net unrealized depreciation of
investments and futures contracts... (7,366)
Paid-in capital....................... 232,101
--------
NET ASSETS............................ $206,476
========
</TABLE>
<TABLE>
<CAPTION>
VALUE
-------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($118,457,476 / 12,435,387 shares
outstanding)........................ $9.53
=====
INVESTOR A SHARES:
Net asset value and redemption price
per share ($30,869,852 / 3,243,024
shares outstanding)................. $9.52
=====
Maximum sales charge.................. 4.75%
Maximum offering price per share...... $10.00
INVESTOR B SHARES:
Net asset value and offering price per
share+ ($55,945,973 / 5,873,945
shares outstanding)................. $9.52
=====
INVESTOR C SHARES:
Net asset value and offering price per
share+ ($1,202,438 / 126,355 shares
outstanding)........................ $9.52
=====
</TABLE>
---------------
* Federal Income Tax Information: Net unrealized depreciation of $7,329 on
investment securities was comprised of gross appreciation of $1,346 and gross
depreciation of $8,675 for Federal income tax purposes. At March 31, 2000,
the aggregate cost of securities for Federal income tax purposes was
$225,822.
## All or a portion of security segregated as collateral for future contracts.
@ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ The redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
# Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and sub-advised by Banc of America Capital Management, Inc. A
portion of this amount represents cash collateral received from securities
lending activity (Note 8). The portion that represents cash collateral is
$13,379.
ABBREVIATIONS:
MTN -- Medium Term Note
SEE NOTES TO FINANCIAL STATEMENTS.
55
<PAGE> 60
NATIONS FUNDS
Nations High Yield Bond Fund
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
VALUE
(000)
-------------------------------------------------------------
<C> <S> <C> <C>
INVESTMENT COMPANIES -- 95.6%
Investment in Nations Master Investment
Trust, High Yield Bond Master
Portfolio*........................... $12,665
-------
TOTAL INVESTMENTS............... 95.6% 12,665
-------
OTHER ASSETS AND LIABILITIES
(NET)......................... 4.4%
Receivable for Fund shares sold........ 516
Receivable from administrator.......... 113
Shareholder servicing and distribution
fees payable......................... (2)
Accrued Trustees'/Directors' fees and
expenses............................. (2)
Accrued expenses and other
liabilities.......................... (40)
-------
TOTAL OTHER ASSETS AND LIABILITIES
(NET)................................ 585
-------
NET ASSETS...................... 100.0% $13,250
=======
NET ASSETS CONSIST OF:
Accumulated net realized gain on
investment sold...................... $ 36
Net unrealized depreciation of
investment........................... (170)
Paid-in capital........................ 13,384
-------
NET ASSETS............................. $13,250
=======
</TABLE>
<TABLE>
<CAPTION>
VALUE
-------------------------------------------------------------
<C> <S> <C> <C>
PRIMARY A SHARES:
Net asset value, offering and
redemption price per share
($9,393,269 / 948,368 shares
outstanding)......................... $9.90
=====
INVESTOR A SHARES:
Net asset value and redemption price
per share ($371,256 / 37,562 shares
outstanding)......................... $9.88
=====
Maximum sales charge................... 4.75%
Maximum offering price per share....... $10.37
INVESTOR B SHARES:
Net asset value and offering price per
share+ ($3,425,894 / 346,779 shares
outstanding)......................... $9.88
=====
INVESTOR C SHARES:
Net asset value and offering price per
share+ ($59,270 / 6,006 shares
outstanding)......................... $9.87
=====
</TABLE>
---------------
* The financial statements of the High Yield Bond Master Portfolio, including
its portfolio of investments, are included elsewhere within this report and
should be read in conjunction with the High Yield Bond Fund financial
statements.
+ The redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
56
<PAGE> 61
[This page intentionally left blank.]
57
<PAGE> 62
NATIONS FUNDS
STATEMENTS OF OPERATIONS
For the period ended March 31, 2000
<TABLE>
SHORT-
SHORT-TERM INTERMEDIATE GOVERNMENT
INCOME GOVERNMENT SECURITIES
------------------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
INVESTMENT INCOME:
Interest.................................................... $ 26,711 $ 36,628 $ 14,331
Interest allocated from Portfolio+.......................... -- -- --
Dividends................................................... -- -- --
Dividends allocated from Portfolio+......................... -- -- --
Securities lending income................................... --* 302 52
Expenses allocated from Portfolio+.......................... -- -- --
Fees waived by investment advisor........................... -- -- --
-------------- -------------- --------------
Total investment income................................. 26,711 36,930 14,383
-------------- -------------- --------------
EXPENSES:
Investment advisory fee..................................... 1,419 2,033 1,050
Administration fee.......................................... 871 1,234 433
Transfer agent fees......................................... 173 250 90
Custodian fees.............................................. 31 44 40
Legal and audit fees........................................ 91 88 100
Registration and filing fees................................ 34 45 44
Trustees'/Directors' fees and expenses...................... 19 19 19
Interest expense............................................ -- -- --*
Other....................................................... -- 132 70
-------------- -------------- --------------
Subtotal................................................ 2,638 3,845 1,846
Shareholder servicing and distribution fees:
Primary B Shares.......................................... -- 1 --
Investor A Shares......................................... 35 129 151
Investor B Shares......................................... 38 95 303
Investor C Shares......................................... 12 9 4
Seafirst Shares........................................... -- -- --
-------------- -------------- --------------
Total expenses.......................................... 2,723 4,079 2,304
Fees waived by investment advisor, administrator and/or
distributor............................................... (546) (309) (245)
Fees reduced by credits allowed by the custodian............ (3) (3) (2)
-------------- -------------- --------------
Net expenses............................................ 2,174 3,767 2,057
-------------- -------------- --------------
NET INVESTMENT INCOME....................................... 24,537 33,163 12,326
-------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) from:
Security transactions..................................... (4,546) (13,788) (11,283)
Security transactions allocated from Portfolio+........... -- -- --
Futures contracts......................................... -- -- --
Foreign currency allocated from Portfolio+.................. -- -- --
-------------- -------------- --------------
Net realized and gain/(loss) on investments................. (4,546) (13,788) (11,283)
-------------- -------------- --------------
Change in unrealized appreciation/(depreciation) of:
Securities (Note 10)...................................... (7,482) (10,066) 527
Securities allocated from Portfolio+...................... -- -- --
Futures contracts......................................... -- 110 --
-------------- -------------- --------------
Net change in unrealized appreciation/(depreciation) of
investments............................................... (7,482) (9,956) 527
-------------- -------------- --------------
Net realized and unrealized gain/(loss) of investments...... (12,028) (23,744) (10,756)
-------------- -------------- --------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................ $ 12,509 $ 9,419 $ 1,570
============== ============== ==============
</TABLE>
---------------
* Amount represents less than $500.
+ Allocated from Intermediate Bond Master Portfolio and High Yield Bond Master
Portfolio, respectively.
(a) Represents financial information for the Pacific Horizon Intermediate Bond
Fund, which was reorganized into Intermediate Bond on May 21, 1999.
(b) High Yield Bond commenced operations on February 14, 2000.
SEE NOTES TO FINANCIAL STATEMENTS.
58
<PAGE> 63
NATIONS FUNDS
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
INTERMEDIATE BOND
-------------------------------
FOR THE PERIOD FOR THE PERIOD
U.S. MAY 15, 1999 MARCH 1, 1999 INVESTMENT
GOVERNMENT TO MARCH 31, TO MAY 14, GRADE STRATEGIC HIGH YIELD
BOND 2000 1999(a) BOND INCOME BOND(B)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,800 $ -- $ -- $ 122,527 $ 18,824 $ --
-- 5,344 1,190 -- -- 118
-- -- -- 768 -- --
-- -- -- -- -- 1
89 -- -- 87 13 --
-- (437) (75) -- -- (16)
-- -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- --------------
5,889 4,907 1,115 123,382 18,837 103
-------------- -------------- -------------- -------------- -------------- --------------
507 -- -- 7,645 1,294 --
201 135 30 3,718 502 3
44 46 8 718 109 13
15 -- 8 115 21 --
103 65 --* 77 88 26
28 91 28 37 42 74
19 19 -- 19 19 3
--* -- -- -- --* --
80 58 22 -- 163 28
-------------- -------------- -------------- -------------- -------------- --------------
997 414 96 12,329 2,238 147
-- -- -- -- -- --
6 103 32 70 81 --*
78 1 -- 60 641 2
13 1 1 11 15 --*
-- 64 17 -- -- --
-------------- -------------- -------------- -------------- -------------- --------------
1,094 583 146 12,470 2,975 149
(137) (223) (14) (229) (497) (149)
(4) -- -- (32) (3) --
-------------- -------------- -------------- -------------- -------------- --------------
953 360 132 12,209 2,475 --
-------------- -------------- -------------- -------------- -------------- --------------
4,936 4,547 983 111,173 16,362 103
-------------- -------------- -------------- -------------- -------------- --------------
(5,280) -- -- (24,412) (17,333) --
-- (1,524) (101) -- -- 36
-- -- -- (294) (33) --
-- -- -- -- -- --*
-------------- -------------- -------------- -------------- -------------- --------------
(5,280) (1,524) (101) (24,706) (17,366) 36
-------------- -------------- -------------- -------------- -------------- --------------
(890) -- -- (68,544) (2,358) --
-- (1,680) (230) -- -- (170)
-- -- -- (714) (112) --
-------------- -------------- -------------- -------------- -------------- --------------
(890) (1,680) (230) (69,258) (2,470) (170)
-------------- -------------- -------------- -------------- -------------- --------------
(6,170) (3,204) (331) (93,964) (19,836) (134)
-------------- -------------- -------------- -------------- -------------- --------------
$ (1,234) $ 1,343 $ 652 $ 17,209 $ (3,474) $ (31)
============== ============== ============== ============== ============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
59
<PAGE> 64
NATIONS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
SHORT-TERM INCOME SHORT-INTERMEDIATE GOVERNMENT
------------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
3/31/00 3/31/99 3/31/00 3/31/99
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Net investment income............................... $ 24,537 $ 24,445 $ 33,163 $ 36,822
Net realized gain/(loss) on investments............. (4,546) 647 (13,788) 674
Net realized gain/(loss) on investments allocated
from Portfolio+................................... -- -- -- --
Net change in unrealized appreciation/(depreciation)
of investments.................................... (7,482) 120 (9,956) (3,584)
Net change in unrealized appreciation/(depreciation)
of investments allocated from Portfolio+.......... -- -- -- --
-------------- -------------- -------------- --------------
Net increase/(decrease) in net assets resulting from
operations........................................ 12,509 25,212 9,419 33,912
Distributions to shareholders from net investment
income:
Primary A Shares.................................. (23,484) (23,117) (29,896) (33,806)
Primary B Shares.................................. -- -- (12) (14)
Investor A Shares................................. (793) (942) (2,765) (2,497)
Investor B Shares................................. (201) (318) (445) (451)
Investor C Shares................................. (57) (69) (45) (55)
Seafirst Shares................................... -- -- -- --
Distributions to shareholders from net realized gain
on investments:
Primary A Shares.................................. -- -- -- --
Primary B Shares.................................. -- -- -- --
Investor A Shares................................. -- -- -- --
Investor B Shares................................. -- -- -- --
Investor C Shares................................. -- -- -- --
Seafirst Shares................................... -- -- -- --
Net increase/(decrease) in net assets from Fund
share transactions................................ 6,690 65,679 (69,201) (77,344)
-------------- -------------- -------------- --------------
Net increase/(decrease) in net assets............... (5,336) 66,445 (92,945) (80,255)
NET ASSETS:
Beginning of period................................. 419,688 353,243 644,939 725,194
-------------- -------------- -------------- --------------
End of period....................................... $ 414,352 $ 419,688 $ 551,994 $ 644,939
============== ============== ============== ==============
Undistributed net investment income/(distributions
in excess of net investment income) at end of
period............................................ $ -- $ (3) $ -- $ --
============== ============== ============== ==============
</TABLE>
---------------
+ Allocated from Intermediate Bond Master Portfolio and High Yield Bond Master
Portfolio, respectively.
(a) Represents financial information for the Pacific Horizon Intermediate Bond
Fund, which was reorganized into Nations Intermediate Bond Fund on May 21,
1999.
(b) High Yield Bond commenced operations on February 14, 2000.
SEE NOTES TO FINANCIAL STATEMENTS.
60
<PAGE> 65
NATIONS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
GOVERNMENT SECURITIES U.S. GOVERNMENT BOND INTERMEDIATE BOND
--------------------------------- ------------------------------- ------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
3/31/00 3/31/99 3/31/00 3/31/99 3/31/00 5/14/99(a) 2/28/99(a)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 12,326 $ 9,231 $ 4,936 $ 8,835 $ 4,547 $ 983 $ 4,566
(11,283) 2,056 (5,280) 2,128 -- -- --
-- -- -- -- (1,524) (101) 1,017
527 (2,701) (890) 1,275 -- -- --
-- -- -- -- (1,680) (230) (1,825)
-------------- -------------- -------------- -------------- -------------- -------------- --------------
1,570 8,586 (1,234) 12,238 1,343 652 3,758
(7,131) (6,592) (4,431) (8,563) (700) -- --
-- -- -- -- -- --
(3,587) (1,111) (125) (105) (2,558) (541) (2,957)
(1,586) (1,513) (329) (142) (6) -- --
(21) (16) (50) (28) (4) (4) (23)
-- -- -- -- (1,365) (256) (1,622)
-- -- (92) (6,877) -- -- --
-- -- -- -- -- -- --
-- -- (3) (93) -- -- (772)
-- -- (10) (77) -- -- --
-- -- (1) (55) -- -- (5)
-- -- -- -- -- -- (353)
35,118 52,362 (34,407) (144,617) (509) (2,880) 21,773
-------------- -------------- -------------- -------------- -------------- -------------- --------------
24,363 51,716 (40,682) (148,319) (3,799) (3,029) 19,799
169,147 117,431 119,373 267,692 94,319 97,348 77,549
-------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 193,510 $ 169,147 $ 78,691 $ 119,373 $ 90,520 $ 94,319 $ 97,348
============== ============== ============== ============== ============== ============== ==============
$ (393) $ (388) $ 20 $ 23 $ 12 $ 96 $ (86)
============== ============== ============== ============== ============== ============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
61
<PAGE> 66
NATIONS FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
HIGH YIELD
INVESTMENT GRADE BOND STRATEGIC INCOME BOND
------------------------------- ------------------------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
3/31/00 3/31/99 3/31/00 3/31/99 3/31/00(b)
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Net investment income............... $ 111,173 $ 109,211 $ 16,362 $ 23,415 $ 103
Net realized gain/(loss) on
investments....................... (24,706) 16,587 (17,366) 2,481 --
Net realized gain/(loss) on
investments allocated from
Portfolio+........................ -- -- -- -- 36
Net change in unrealized
appreciation/ (depreciation) of
investments....................... (69,258) (23,298) (2,470) (8,154) --
Net change in unrealized
appreciation/ (depreciation) of
investments allocated from
Portfolio+........................ -- -- -- -- (170)
-------------- -------------- -------------- -------------- --------------
Net increase/(decrease) in net
assets resulting from
operations........................ 17,209 102,500 (3,474) 17,742 (31)
Distributions to shareholders from
net investment income:
Primary A Shares.................. (109,131) (107,116) (10,301) (18,940) (82)
Primary B Shares.................. -- -- -- -- --
Investor A Shares................. (1,671) (1,854) (2,161) (765) (2)
Investor B Shares................. (319) (180) (3,811) (3,613) (18)
Investor C Shares................. (53) (60) (88) (98) (1)
Seafirst Shares................... -- -- -- -- --
Distributions to shareholders from
net realized gain on investments:
Primary A Shares.................. (10,090) (10,814) (14) (2,686) --
Primary B Shares.................. -- -- -- -- --
Investor A Shares................. (170) (198) (3) (115) --
Investor B Shares................. (33) (20) (7) (603) --
Investor C Shares................. (6) (7) --* (16) --
Seafirst Shares................... -- -- -- -- --
Net increase/(decrease) in net
assets from Fund share
transactions...................... 91,317 142,950 (173,681) 65,986 13,284
-------------- -------------- -------------- -------------- --------------
Net increase/(decrease) in net
assets............................ (12,947) 125,201 (193,540) 56,892 13,150
NET ASSETS:
Beginning of period................. 1,836,851 1,711,650 400,016 343,124 100
-------------- -------------- -------------- -------------- --------------
End of period....................... $ 1,823,904 $ 1,836,851 $ 206,476 $ 400,016 $ 13,250
============== ============== ============== ============== ==============
Undistributed net investment income/
(distributions in excess of net
investment income) at end of
period............................ $ -- $ 1 $ 21 $ 13 $ --
============== ============== ============== ============== ==============
</TABLE>
---------------
+ Allocated from Nations Intermediate Bond Master Portfolio and Nations High
Yield Bond Master Portfolio, respectively.
(a) Represents financial information for the Pacific Horizon Intermediate Bond
Fund, which was reorganized into Nations Intermediate Bond Fund on May 21,
1999.
(b) High Yield Bond commenced operations on February 14, 2000.
SEE NOTES TO FINANCIAL STATEMENTS.
62
<PAGE> 67
NATIONS FUNDS
SCHEDULES OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
SHORT-TERM INCOME
YEAR ENDED YEAR ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------------- -------------------
SHARES DOLLARS SHARES DOLLARS
---------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 13,140 $ 126,328 9,560 $ 95,118
Issued in exchange for assets of Institutional Shares of
Emerald Short-Term Income Fund (Note 10)................ -- -- 9,960 97,328
Issued as reinvestment of dividends....................... 159 1,528 220 2,155
Redeemed.................................................. (12,003) (115,242) (13,100) (129,838)
------- --------- ------- --------
Net increase/(decrease)................................... 1,296 $ 12,614 6,640 $ 64,763
======= ========= ======= ========
INVESTOR A SHARES:
Sold...................................................... 2,074 $ 19,902 649 $ 6,379
Issued in exchange for Retail Shares of Emerald Short-Term
Income Fund (Note 10)................................... -- -- 394 3,850
Issued as reinvestment of dividends....................... 56 537 73 754
Redeemed.................................................. (2,384) (22,843) (1,019) (10,035)
------- --------- ------- --------
Net increase/(decrease)................................... (254) $ (2,404) 97 $ 948
======= ========= ======= ========
INVESTOR B SHARES:
Sold...................................................... 1 $ 12 338 $ 3,306
Issued as reinvestment of dividends....................... 16 156 28 276
Redeemed.................................................. (306) (2,965) (242) (2,369)
------- --------- ------- --------
Net increase/(decrease)................................... (289) $ (2,797) 124 $ 1,213
======= ========= ======= ========
INVESTOR C SHARES:
Sold...................................................... 29 $ 279 118 $ 1,168
Issued as reinvestment of dividends....................... 4 36 5 46
Redeemed.................................................. (107) (1,038) (251) (2,459)
------- --------- ------- --------
Net increase/(decrease)................................... (74) $ (723) (128) $ (1,245)
======= ========= ======= ========
Total net increase/(decrease)............................. 679 $ 6,690 6,733 $ 65,679
======= ========= ======= ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
63
<PAGE> 68
NATIONS FUNDS
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
SHORT-INTERMEDIATE GOVERNMENT
YEAR ENDED YEAR ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------------- --------------------
SHARES DOLLARS SHARES DOLLARS
----------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 52,376 $ 208,315 24,666 $ 103,136
Issued in exchange for assets of Common Trust Two-Year
Government Fund (Note 10)............................... -- -- 1,373 5,670
Issued as reinvestment of dividends....................... 112 451 241 1,013
Redeemed.................................................. (70,117) (279,179) (43,680) (181,917)
------- --------- ------- ---------
Net increase/(decrease)................................... (17,629) $ (70,413) (17,400) $ (72,098)
======= ========= ======= =========
PRIMARY B SHARES:
Sold...................................................... --* 1 -- $ --
Issued as reinvestment of dividends....................... 3 11 3 13
Redeemed.................................................. (19) (76) -- --
------- --------- ------- ---------
Net increase/(decrease)................................... (16) $ (64) 3 $ 13
======= ========= ======= =========
INVESTOR A SHARES:
Sold...................................................... 17,793 $ 71,487 1,415 $ 5,858
Issued in exchange for A Shares of Pacific Horizon
Short-Term Government Fund (Note 10).................... 4,739 19,247 -- --
Issued as reinvestment of dividends....................... 374 1,494 435 1,802
Redeemed.................................................. (22,335) (89,655) (2,930) (12,131)
------- --------- ------- ---------
Net increase/(decrease)................................... 571 $ 2,573 (1,080) $ (4,471)
======= ========= ======= =========
INVESTOR B SHARES:
Sold...................................................... 457 $ 1,853 628 $ 2,651
Issued as reinvestment of dividends....................... 70 277 69 286
Redeemed.................................................. (737) (2,951) (740) (3,109)
------- --------- ------- ---------
Net increase/(decrease)................................... (210) $ (821) (43) $ (172)
======= ========= ======= =========
INVESTOR C SHARES:
Sold...................................................... 26 $ 101 131 $ 539
Issued as reinvestment of dividends....................... 9 37 11 47
Redeemed.................................................. (158) (614) (290) (1,202)
------- --------- ------- ---------
Net increase/(decrease)................................... (123) $ (476) (148) $ (616)
======= ========= ======= =========
Total net increase/(decrease)............................. (17,407) $ (69,201) (18,668) $ (77,344)
======= ========= ======= =========
</TABLE>
---------------
* Amount represents less than 500 shares.
SEE NOTES TO FINANCIAL STATEMENTS.
64
<PAGE> 69
NATIONS FUNDS
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES
YEAR ENDED YEAR ENDED
MARCH 31, 2000 MARCH 31, 1999
------------------ ------------------
SHARES DOLLARS SHARES DOLLARS
------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 4,340 $ 42,982 2,562 $ 25,739
Issued in exchange for:
Institutional Shares of Emerald U.S. Government
Securities Fund (Note 10)............................. -- -- 4,567 45,329
Assets of Common Trust Government Bond Fund (Note 10)... -- -- 598 5,957
Issued as reinvestment of dividends....................... 38 365 43 420
Redeemed.................................................. (4,910) (48,145) (3,293) (33,049)
------ -------- ------ --------
Net increase/(decrease)................................... (532) $ (4,798) 4,477 $ 44,396
====== ======== ====== ========
INVESTOR A SHARES:
Sold...................................................... 1,552 $ 15,073 230 $ 2,311
Issued in exchange for:
A Shares of Pacific Horizon U.S. Government Fund (Note
10)................................................... 6,013 58,531 -- --
Retail Shares Emerald U.S. Government Securities Fund
(Note 10)............................................. -- -- 1,879 18,654
Issued as reinvestment of dividends....................... 242 2,281 59 597
Redeemed.................................................. (3,615) (34,510) (1,084) (10,876)
------ -------- ------ --------
Net increase/(decrease)................................... 4,192 $ 41,375 1,084 $ 10,686
====== ======== ====== ========
INVESTOR B SHARES:
Sold...................................................... 953 $ 9,561 430 $ 4,314
Issued as reinvestment of dividends....................... 106 1,005 94 952
Redeemed.................................................. (1,234) (12,084) (742) (7,449)
------ -------- ------ --------
Net increase/(decrease)................................... (175) $ (1,518) (218) $ (2,183)
====== ======== ====== ========
INVESTOR C SHARES:
Sold...................................................... 32 $ 305 --* $ 2
Issued in exchange for K Shares of Pacific Horizon U.S.
Government Fund (Note 10)............................... 152 1,478 -- --
Issued as reinvestment of dividends....................... 2 20 1 10
Redeemed.................................................. (182) (1,744) (54) (549)
------ -------- ------ --------
Net increase/(decrease)................................... 4 $ 59 (53) $ (537)
====== ======== ====== ========
Total net increase/(decrease)............................. 3,489 $ 35,118 5,290 $ 52,362
====== ======== ====== ========
</TABLE>
---------------
* Amount represents less than 500 shares.
SEE NOTES TO FINANCIAL STATEMENTS.
65
<PAGE> 70
NATIONS FUNDS
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
U.S. GOVERNMENT BOND
YEAR ENDED YEAR ENDED
MARCH 31, 2000 MARCH 31, 1999
------------------ --------------------
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 990 $ 10,405 1,191 $ 12,083
Issued as reinvestment of dividends....................... 16 154 517 5,293
Redeemed.................................................. (4,701) (46,244) (16,293) (168,334)
------ -------- ------- ---------
Net increase/(decrease)................................... (3,695) $(35,685) (14,585) $(150,958)
====== ======== ======= =========
INVESTOR A SHARES:
Sold...................................................... 198 $ 1,985 87 $ 882
Issued as reinvestment of dividends....................... 9 86 10 125
Redeemed.................................................. (212) (2,071) (54) (556)
------ -------- ------- ---------
Net increase/(decrease)................................... (5) $ -- 43 $ 451
====== ======== ======= =========
INVESTOR B SHARES:
Sold...................................................... 527 $ 5,190 615 $ 6,346
Issued as reinvestment of dividends....................... 29 276 20 206
Redeemed.................................................. (422) (4,112) (59) (711)
------ -------- ------- ---------
Net increase/(decrease)................................... 134 $ 1,354 576 $ 5,841
====== ======== ======= =========
INVESTOR C SHARES:
Sold...................................................... 28 $ 287 6 $ 80
Issued as reinvestment of dividends....................... 3 28 6 77
Redeemed.................................................. (40) (391) (15) (108)
------ -------- ------- ---------
Net increase/(decrease)................................... (9) $ (76) (3) $ 49
====== ======== ======= =========
Total net increase/(decrease)............................. (3,575) $(34,407) (13,969) $(144,617)
====== ======== ======= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
66
<PAGE> 71
NATIONS FUNDS
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
INTERMEDIATE BOND
PERIOD ENDED PERIOD ENDED YEAR ENDED
MARCH 31, 2000 MAY 14, 1999(a) FEBRUARY 28, 1999(a)
------------------ ----------------- --------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold.......................................... 3,748 $ 34,819 -- $ -- -- $ --
Issued as reinvestment of dividends........... 7 63 -- -- -- --
Redeemed...................................... (1,743) (15,997) -- -- -- --
------ -------- ---- ------- ------ --------
Net increase/(decrease)....................... 2,012 $ 18,885 -- $ -- -- $ --
====== ======== ==== ======= ====== ========
INVESTOR A SHARES:
Sold.......................................... 1,171 $ 10,870 229 $ 2,187 3,819 $ 37,589
Issued as reinvestment of dividends........... 47 434 14 135 108 1,049
Redeemed...................................... (2,743) (25,727) (437) (4,195) (1,588) (15,485)
------ -------- ---- ------- ------ --------
Net increase/(decrease)....................... (1,525) $(14,423) (194) $(1,873) 2,339 $ 23,153
====== ======== ==== ======= ====== ========
INVESTOR B SHARES:+
Sold.......................................... 27 $ 259 -- -- -- --
Issued as reinvestment of dividends........... 1 5 -- -- -- --
Redeemed...................................... --* (3) -- -- -- --
------ -------- ---- ------- ------ --------
Net increase/(decrease)....................... 28 $ 261 -- $ -- -- $ --
====== ======== ==== ======= ====== ========
INVESTOR C SHARES:
Sold.......................................... 3 $ 25 5 $ 44 25 $ 246
Issued as reinvestment of dividends........... --* 4 -- 4 3 28
Redeemed...................................... (50) (476) (8) (72) (29) (285)
------ -------- ---- ------- ------ --------
Net increase/(decrease)....................... (47) $ (447) (3) $ (24) (1) $ (11)
====== ======== ==== ======= ====== ========
SEAFIRST SHARES:
Sold.......................................... 124 $ 1,303 61 $ 666 469 $ 5,164
Issued as reinvestment of dividends........... 130 1,365 24 256 180 1,974
Redeemed...................................... (710) (7,453) (175) (1,905) (776) (8,507)
------ -------- ---- ------- ------ --------
Net increase/(decrease)....................... (456) $ (4,785) (90) $ (983) (127) $ (1,369)
====== ======== ==== ======= ====== ========
Total net increase/(decrease)................. 12 $ (509) (287) $(2,880) 2,211 $ 21,773
====== ======== ==== ======= ====== ========
</TABLE>
---------------
+ Intermediate Bond Investor B Shares commenced operations on October 20,
1999.
(a) Represents financial information for the Pacific Horizon Intermediate Bond
Fund, which was reorganized into Intermediate Bond on May 21, 1999.
* Amount represents less than 500 shares.
SEE NOTES TO FINANCIAL STATEMENTS.
67
<PAGE> 72
NATIONS FUNDS
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
INVESTMENT GRADE BOND
YEAR ENDED YEAR ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------------- --------------------
SHARES DOLLARS SHARES DOLLARS
----------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 67,780 $ 643,654 49,350 $ 494,694
Issued in exchange for:
Institutional Shares of Emerald Managed Bond Fund (Note
10)................................................... -- -- 7,464 74,663
Assets of Common Trust Bond Fund (Note 10).............. -- -- 6,909 69,407
Assets of Common Trust Intermediate Bond Fund (Note
10)................................................... -- -- 7,156 71,850
Issued as reinvestment of dividends....................... 730 7,023 1,534 16,762
Redeemed.................................................. (58,122) (552,784) (59,014) (593,850)
------- --------- ------- ---------
Net increase/(decrease)................................... 10,388 $ 97,893 13,399 $ 133,526
======= ========= ======= =========
INVESTOR A SHARES:
Sold...................................................... 1,151 $ 10,936 1,498 $ 14,738
Issued in exchange for Retail Shares of Emerald Managed
Bond Fund (Note 10)..................................... -- -- 258 2,583
Issued as reinvestment of dividends....................... 141 1,347 162 1,692
Redeemed.................................................. (2,027) (19,273) (1,281) (12,595)
------- --------- ------- ---------
Net increase/(decrease)................................... (735) $ (6,990) 637 $ 6,418
======= ========= ======= =========
INVESTOR B SHARES:
Sold...................................................... 271 $ 2,609 331 $ 3,313
Issued as reinvestment of dividends....................... 31 294 17 175
Redeemed.................................................. (248) (2,350) (65) (688)
------- --------- ------- ---------
Net increase/(decrease)................................... 54 $ 553 283 $ 2,800
======= ========= ======= =========
INVESTOR C SHARES:
Sold...................................................... 34 $ 331 74 $ 740
Issued as reinvestment of dividends....................... 5 43 5 51
Redeemed.................................................. (54) (513) (58) (585)
------- --------- ------- ---------
Net increase/(decrease)................................... (15) $ (139) 21 $ 206
======= ========= ======= =========
Total net increase/(decrease)............................. 9,692 $ 91,317 14,340 $ 142,950
======= ========= ======= =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
68
<PAGE> 73
NATIONS FUNDS
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
STRATEGIC INCOME
YEAR ENDED YEAR ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------------- ------------------
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:
Sold...................................................... 5,741 $ 56,944 8,342 $ 88,223
Issued as reinvestment of dividends....................... 258 2,637 1,269 13,365
Redeemed.................................................. (24,391) (247,365) (3,803) (40,256)
------- --------- ------ --------
Net increase/(decrease)................................... (18,392) $(187,784) 5,808 $ 61,332
======= ========= ====== ========
INVESTOR A SHARES:
Sold...................................................... 466 $ 4,560 394 $ 4,150
Issued in exchange for A Shares of Pacific Horizon
Flexible Income Fund (Note 10).......................... 3,474 35,581 -- --
Issued as reinvestment of dividends....................... 109 1,073 56 585
Redeemed.................................................. (2,062) (20,503) (326) (3,419)
------- --------- ------ --------
Net increase/(decrease)................................... 1,987 $ 20,711 124 $ 1,316
======= ========= ====== ========
INVESTOR B SHARES:
Sold...................................................... 1,441 $ 14,303 1,627 $ 17,162
Issued as reinvestment of dividends....................... 237 2,332 247 2,704
Redeemed.................................................. (2,364) (23,108) (1,502) (15,942)
------- --------- ------ --------
Net increase/(decrease)................................... (686) $ (6,473) 372 $ 3,924
======= ========= ====== ========
INVESTOR C SHARES:
Sold...................................................... 83 $ 823 66 $ 692
Issued in exchange for K Shares of Pacific Horizon
Flexible Income Fund (Note 10).......................... 54 555 -- --
Issued as reinvestment of dividends....................... 7 72 8 81
Redeemed.................................................. (161) (1,585) (129) (1,359)
------- --------- ------ --------
Net increase/(decrease)................................... (17) $ (135) (55) $ (586)
======= ========= ====== ========
Total net increase/(decrease)............................. (17,108) $(173,681) 6,249 $ 65,986
======= ========= ====== ========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
69
<PAGE> 74
NATIONS FUNDS
SCHEDULES OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD BOND
PERIOD ENDED
MARCH 31, 2000
-----------------
SHARES DOLLARS
-----------------
<S> <C> <C>
(IN THOUSANDS)
PRIMARY A SHARES:+
Sold...................................................... 1,131 $11,306
Issued as reinvestment of dividends....................... 8 79
Redeemed.................................................. (201) (2,000)
----- -------
Net increase/(decrease)................................... 938 $ 9,385
===== =======
INVESTOR A SHARES:+
Sold...................................................... 41 $ 403
Issued as reinvestment of dividends....................... --* 1
Redeemed.................................................. (3) (29)
----- -------
Net increase/(decrease)................................... 38 $ 375
===== =======
INVESTOR B SHARES:+
Sold...................................................... 355 $ 3,543
Issued as reinvestment of dividends....................... 1 12
Redeemed.................................................. (9) (92)
----- -------
Net increase/(decrease)................................... 347 $ 3,463
===== =======
INVESTOR C SHARES:++
Sold...................................................... 6 $ 61
Issued as reinvestment of dividends....................... -- --
Redeemed.................................................. -- --
===== =======
Net increase/(decrease)................................... 6 $ 61
===== =======
Total net increase/(decrease)............................. 1,329 $13,284
===== =======
</TABLE>
---------------
+ High Yield Bond Investor A, Investor B and Primary A Shares commenced
operations on February 14, 2000.
++ High Yield Bond Investor C Shares commenced operations on March 7, 2000.
* Amount represents less than 500 shares.
SEE NOTES TO FINANCIAL STATEMENTS.
70
<PAGE> 75
[This page intentionally left blank.]
71
<PAGE> 76
NATIONS FUNDS
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET NET ASSET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT VALUE
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME END OF PERIOD
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM INCOME
PRIMARY A SHARES
Year ended 3/31/2000...................... $9.79 $0.56 $(0.28) $0.28 $(0.56) $9.51
Year ended 3/31/1999...................... 9.77 0.56 0.02 0.58 (0.56) 9.79
Year ended 3/31/1998...................... 9.68 0.56 0.09 0.65 (0.56) 9.77
Year ended 3/31/1997#..................... 9.76 0.58 (0.08) 0.50 (0.58) 9.68
Period ended 3/31/1996(a)#................ 9.84 0.20 (0.08) 0.12 (0.20) 9.76
Year ended 11/30/1995#.................... 9.48 0.61 0.36 0.97 (0.61) 9.84
INVESTOR A SHARES
Year ended 3/31/2000...................... $9.79 $0.54 $(0.28) $0.26 $(0.54) $9.51
Year ended 3/31/1999...................... 9.77 0.54 0.02 0.56 (0.54) 9.79
Year ended 3/31/1998...................... 9.68 0.54 0.09 0.63 (0.54) 9.77
Year ended 3/31/1997#..................... 9.76 0.56 (0.08) 0.48 (0.56) 9.68
Period ended 3/31/1996(a)#................ 9.84 0.19 (0.08) 0.11 (0.19) 9.76
Year ended 11/30/1995#.................... 9.48 0.59 0.36 0.95 (0.59) 9.84
INVESTOR B SHARES
Year ended 3/31/2000...................... $9.79 $0.51 $(0.28) $0.23 $(0.51) $9.51
Year ended 3/31/1999...................... 9.77 0.52 0.02 0.54 (0.52) 9.79
Year ended 3/31/1998...................... 9.68 0.53 0.09 0.62 (0.53) 9.77
Year ended 3/31/1997#..................... 9.76 0.55 (0.08) 0.47 (0.55) 9.68
Period ended 3/31/1996(a)#................ 9.84 0.19 (0.08) 0.11 (0.19) 9.76
Year ended 11/30/1995#.................... 9.48 0.57 0.36 0.93 (0.57) 9.84
INVESTOR C SHARES
Year ended 3/31/2000...................... $9.79 $0.47 $(0.28) $0.19 $(0.47) $9.51
Year ended 3/31/1999...................... 9.77 0.52 0.02 0.54 (0.52) 9.79
Year ended 3/31/1998...................... 9.68 0.53 0.09 0.62 (0.53) 9.77
Year ended 3/31/1997#..................... 9.76 0.55 (0.08) 0.47 (0.55) 9.68
Period ended 3/31/1996(a)#................ 9.84 0.19 (0.08) 0.11 (0.19) 9.76
Year ended 11/30/1995#.................... 9.48 0.57 0.36 0.93 (0.57) 9.84
</TABLE>
---------------
+ Annualized.
++ Total return represents aggregate total return for the period indicated,
assumes reinvestment of all distributions, and does not reflect the
deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average shares method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) The effect of interest expense on the operating expense ratio was less than
0.01%.
(c) The effect of the custodial expense offset (Note 2) on the operating
expense ratio, with and without waivers and/or expense reimbursements, was
less than 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS.
72
<PAGE> 77
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
NET ASSETS OPERATING NET INVESTMENT OPERATING
END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE
RETURN++ (000) ASSETS ASSETS RATE NET ASSETS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3.00% $398,620 0.50%(c) 5.86% 62% 0.63%(c)
6.07 397,467 0.50(c) 5.70 64 0.80(c)
6.89 331,961 0.56(b)(c) 5.75 66 0.86(c)
5.25 181,455 0.55(b) 5.97 172 0.85
1.19 179,957 0.55+ 6.07+ 73 0.88+
10.48 169,291 0.56 6.32 224 0.86
2.76% $ 11,831 0.73%(c) 5.63% 62% 0.88%(c)
5.85 14,652 0.70(c) 5.50 64 1.05(c)
6.67 13,688 0.76(b)(c) 5.55 66 1.06(c)
5.04 6,169 0.75(b) 5.77 172 1.05
1.13 2,810 0.75+ 5.87+ 73 1.08+
10.29 2,969 0.76 6.12 224 1.06
2.40% $ 2,914 1.05%(c) 5.31% 62% 1.63%(c)
5.70 5,825 0.85(c) 5.35 64 1.80(c)
6.51 4,602 0.91(b)(c) 5.40 66 1.21(c)
4.89 5,536 0.90(b) 5.62 172 1.20
1.08 7,339 0.90+ 5.72+ 73 1.23+
10.10 8,873 0.91 5.97 224 1.21
1.97% $ 987 1.50%(c) 4.86% 62% 1.63%(c)
5.64 1,744 1.01(c) 5.19 64 1.80(c)
6.51 2,992 0.91(b)(c) 5.40 66 1.21(c)
4.89 4,063 0.90(b) 5.62 172 1.20
1.07 6,121 0.90+ 5.72+ 73 1.23+
10.08 6,056 0.91 5.97 224 1.21
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
73
<PAGE> 78
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET NET ASSET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT VALUE
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME END OF PERIOD
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-INTERMEDIATE GOVERNMENT
PRIMARY A SHARES
Year ended 3/31/2000...................... $4.10 $0.22 $(0.16) $0.06 $(0.22) $3.94
Year ended 3/31/1999...................... 4.12 0.22 (0.02) 0.20 (0.22) 4.10
Year ended 3/31/1998...................... 3.99 0.23 0.13 0.36 (0.23) 4.12
Year ended 3/31/1997#..................... 4.07 0.23 (0.08) 0.15 (0.23) 3.99
Period ended 3/31/1996(b)#................ 4.14 0.07 (0.07) 0.00 (0.07)(a) 4.07
Year ended 11/30/1995#.................... 3.93 0.24 0.21 0.45 (0.24)(a) 4.14
PRIMARY B SHARES
Year ended 3/31/2000...................... $4.10 $0.21 $(0.16) $0.05 $(0.21) $3.94
Year ended 3/31/1999#..................... 4.12 0.21 (0.02) 0.19 (0.21) 4.10
Year ended 3/31/1998...................... 3.99 0.21 0.13 0.34 (0.21) 4.12
Six months ended 3/31/1997*#.............. 4.02 0.16 (0.03) 0.13 (0.16) 3.99
INVESTOR A SHARES
Year ended 3/31/2000...................... $4.10 $0.22 $(0.16) $0.06 $(0.22) $3.94
Year ended 3/31/1999...................... 4.12 0.21 (0.02) 0.19 (0.21) 4.10
Year ended 3/31/1998...................... 3.99 0.22 0.13 0.35 (0.22) 4.12
Year ended 3/31/1997#..................... 4.07 0.22 (0.08) 0.14 (0.22) 3.99
Period ended 3/31/1996(b)#................ 4.14 0.07 (0.07) 0.00 (0.07)(a) 4.07
Year ended 11/30/1995#.................... 3.93 0.23 0.21 0.44 (0.23)(a) 4.14
INVESTOR B SHARES
Year ended 3/31/2000...................... $4.10 $0.19 $(0.16) $0.03 $(0.19) $3.94
Year ended 3/31/1999...................... 4.12 0.19 (0.02) 0.17 (0.19) 4.10
Year ended 3/31/1998...................... 3.99 0.20 0.13 0.33 (0.20) 4.12
Year ended 3/31/1997#..................... 4.07 0.20 (0.08) 0.12 (0.20) 3.99
Period ended 3/31/1996(b)#................ 4.14 0.07 (0.07) 0.00 (0.07)(a) 4.07
Year ended 11/30/1995#.................... 3.93 0.21 0.21 0.42 (0.21)(a) 4.14
INVESTOR C SHARES
Year ended 3/31/2000...................... $4.09 $0.19 $(0.16) $0.03 $(0.19) $3.93
Year ended 3/31/1999...................... 4.12 0.19 (0.03) 0.16 (0.19) 4.09
Year ended 3/31/1998...................... 3.99 0.20 0.13 0.33 (0.20) 4.12
Year ended 3/31/1997#..................... 4.07 0.21 (0.08) 0.13 (0.21) 3.99
Period ended 3/31/1996(b)#................ 4.14 0.07 (0.07) 0.00 (0.07)(a) 4.07
Year ended 11/30/1995#.................... 3.93 0.22 0.21 0.43 (0.22)(a) 4.14
</TABLE>
---------------
* Short-Intermediate Government Primary B Shares commenced operations on June
28, 1996.
+ Annualized.
++ Total return represents aggregate total return for the period indicated,
assumes reinvestment of all distributions, and does not reflect the
deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average shares method.
## Amount represents less than 0.01%.
(a) Includes distribution in excess of less than $0.01 per share.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) The effect of interest expense on the operating expense ratio was less than
0.01%.
(d) The effect of the custodial expense offset (Note 2) on the operating
expense ratio, with and without waivers and/or expense reimbursements, was
less than 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS.
74
<PAGE> 79
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
NET ASSETS OPERATING NET INVESTMENT OPERATING
END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE
RETURN++ (000) ASSETS ASSETS RATE NET ASSETS
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1.63% $497,392 0.60%(d) 5.59% 177% 0.65%(d)
4.97 589,092 0.58(d) 5.36 242 0.78(d)
9.11 663,833 0.61 5.53 538 0.81
3.72 371,118 0.63(c)(d) 5.73 529 0.83(d)
0.07 399,915 0.63+ 5.32+ 189 0.86+
11.70 425,200 0.60 5.88 328 0.80
1.23% $ 200 0.99%(d) 5.20% 177% 1.25%(d)
4.61 273 0.93(d) 5.01 242 1.38(d)
8.74 261 0.96 5.18 538 1.16
3.31 16,980 0.98+(c)(d) 5.38+ 529 1.18+(d)
1.43% $ 45,341 0.80%(d) 5.39% 177% 0.90%(d)
4.76 44,793 0.78(d) 5.16 242 1.03(d)
8.89 49,478 0.81 5.33 538 1.01
3.51 42,468 0.83(c)(d) 5.53 529 1.03(d)
0.00## 57,381 0.83+ 5.12+ 189 1.06+
11.48 64,848 0.80 5.68 328 1.00
0.70% $ 8,400 1.51%(d) 4.68% 177% 1.65%(d)
4.14 9,591 1.38(d) 4.56 242 1.78(d)
8.35 9,815 1.34 4.80 538 1.54
3.10 10,788 1.23(c)(d) 5.13 529 1.43(d)
(0.13) 13,789 1.23+ 4.72+ 189 1.46+
11.02 14,893 1.20 5.28 328 1.40
0.74% $ 661 1.54%(d) 4.65% 177% 1.65%(d)
4.05 1,190 1.34(d) 4.60 242 1.78(d)
8.45 1,808 1.31 4.83 538 1.51
3.21 8,334 1.13(c)(d) 5.23 529 1.33(d)
(0.10) 11,820 1.13+ 4.82+ 189 1.36+
11.15 13,206 1.10 5.38 328 1.30
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
75
<PAGE> 80
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
DISTRIBUTIONS
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS IN EXCESS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET OF NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT INVESTMENT
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME INCOME
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GOVERNMENT SECURITIES
PRIMARY A SHARES
Year ended 3/31/2000.............. $9.86 $0.58 $(0.48) $ 0.10 $(0.58) $ 0.00
Year ended 3/31/1999#............. 9.90 0.58 (0.05) 0.53 (0.57) --
Year ended 3/31/1998.............. 9.39 0.55 0.51 1.06 (0.55) --
Year ended 3/31/1997#............. 9.67 0.60 (0.30) 0.30 (0.58) --
Period ended 3/31/1996(a)#........ 9.86 0.52 (0.19) 0.33 (0.50) (0.02)
Year ended 5/31/1995#............. 9.80 0.64 0.06 0.70 (0.60) --
INVESTOR A SHARES
Year ended 3/31/2000.............. $9.86 $0.57 $(0.50) $ 0.07 $(0.56) $ 0.00
Year ended 3/31/1999#............. 9.90 0.56 (0.05) 0.51 (0.55) --
Year ended 3/31/1998.............. 9.39 0.52 0.51 1.03 (0.52) --
Year ended 3/31/1997#............. 9.67 0.58 (0.30) 0.28 (0.56) --
Period ended 3/31/1996(a)#........ 9.86 0.50 (0.19) 0.31 (0.48) (0.02)
Year ended 5/31/1995#............. 9.80 0.61 0.06 0.67 (0.57) --
INVESTOR B SHARES
Year ended 3/31/2000.............. $9.86 $0.49 $(0.48) $ 0.01 $(0.49) $ 0.00
Year ended 3/31/1999#............. 9.90 0.49 (0.04) 0.45 (0.49) --
Year ended 3/31/1998.............. 9.39 0.47 0.51 0.98 (0.47) --
Year ended 3/31/1997#............. 9.67 0.54 (0.30) 0.24 (0.52) --
Period ended 3/31/1996(a)#........ 9.86 0.47 (0.19) 0.28 (0.45) (0.02)
Year ended 5/31/1995#............. 9.80 0.58 0.06 0.64 (0.54) --
INVESTOR C SHARES
Year ended 3/31/2000.............. $9.86 $0.49 $(0.52) $(0.03) $(0.49) $ 0.00
Year ended 3/31/1999#............. 9.90 0.49 (0.04) 0.45 (0.49) --
Year ended 3/31/1998.............. 9.39 0.48 0.51 0.99 (0.48) --
Year ended 3/31/1997#............. 9.67 0.55 (0.30) 0.25 (0.53) --
Period ended 3/31/1996(a)#........ 9.86 0.47 (0.19) 0.28 (0.45) (0.02)
Year ended 5/31/1995#............. 9.80 0.57 0.06 0.63 (0.53) --
</TABLE>
---------------
* Government Securities Investor B Shares commenced operations on June 7,
1993.
+ Annualized.
++ Total return represents aggregate total return for the period indicated,
assumes reinvestment of all distributions, and does not reflect the
deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average shares method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
May 31.
(b) Amount represents less than $0.01.
(c) The effect of interest expense on the operating expense ratio was less than
0.01%.
(d) The effect of the custodial expense offset (Note 2) on the operating
expense ratio, with and without waivers and/or expense reimbursements, was
less than 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS.
76
<PAGE> 81
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING
DISTRIBUTIONS DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
FROM AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE
CAPITAL DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS ASSETS RATE NET ASSETS
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $(0.58) $9.38 1.12% $108,798 0.78%(c) 6.17% 348% 0.90%
-- (0.57) 9.86 5.41 119,659 0.73(d) 5.70 600 0.84(d)
-- (0.55) 9.90 11.65 75,796 0.85(c)(d) 5.63 303 0.99(d)
0.00(b) (0.58) 9.39 3.18 52,606 0.80 6.28 468 0.94
-- (0.52) 9.67 3.41 55,962 0.80+ 6.36+ 199 0.95+
(0.04) (0.64) 9.86 7.55 39,909 0.76 6.69 413 0.94
$ 0.00 $(0.56) $9.37 0.80% $ 57,485 1.03%(c) 5.92% 348% 1.15%
-- (0.55) 9.86 5.16 19,167 0.98(d) 5.45 600 1.09(d)
-- (0.52) 9.90 11.37 8,509 1.10(c)(d) 5.38 303 1.24(d)
0.00(b) (0.56) 9.39 2.92 9,852 1.05 6.03 468 1.19
-- (0.50) 9.67 3.20 11,662 1.05+ 6.11+ 199 1.20+
(0.04) (0.61) 9.86 7.29 10,928 1.01 6.44 413 1.19
$ 0.00 $(0.49) $9.38 0.22% $ 26,988 1.72%(c) 5.23% 348% 1.90%
-- (0.49) 9.86 4.53 30,109 1.58(d) 4.85 600 1.84(d)
-- (0.47) 9.90 10.78 32,391 1.63(c)(d) 4.85 303 1.77(d)
0.00(b) (0.52) 9.39 2.51 38,807 1.45 5.63 468 1.59
-- (0.47) 9.67 2.85 50,958 1.45+ 5.71+ 199 1.60+
(0.04) (0.58) 9.86 6.86 56,155 1.41 6.04 413 1.59
$ 0.00 $(0.49) $9.34 (0.22)% $ 238 1.78%(c) 5.17% 348% 1.90%
-- (0.49) 9.86 4.52 213 1.59(d) 4.84 600 1.84(d)
-- (0.48) 9.90 10.84 735 1.58(c)(d) 4.90 303 1.72(d)
0.00(b) (0.53) 9.39 2.67 1,835 1.30 5.78 468 1.44
-- (0.47) 9.67 2.83 2,558 1.48+ 5.68+ 199 1.63+
(0.04) (0.57) 9.86 6.76 2,945 1.51 5.94 413 1.69
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
77
<PAGE> 82
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME CAPITAL GAINS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT BOND
PRIMARY A SHARES
Year ended 3/31/2000.............. $10.08 $0.50 $(0.56) $(0.06) $(0.50) $(0.01)
Year ended 3/31/1999#............. 10.37 0.52 0.07 0.59 (0.52) (0.36)
Period ended 3/31/1998*........... 10.19 0.48 0.31 0.79 (0.48) (0.13)
Period ended 5/16/1997............ 10.53 0.41 0.17 0.58 (0.41) (0.51)
Year ended 8/31/1996.............. 11.20 0.61 (0.22) 0.39 (0.61) (0.45)
Six months ended 8/31/1995(b)..... 10.00 0.56 1.20 1.76 (0.56) --
INVESTOR A SHARES
Year ended 3/31/2000.............. $10.08 $0.47 $(0.56) $(0.09) $(0.47) $(0.01)
Year ended 3/31/1999#............. 10.37 0.50 0.07 0.57 (0.50) (0.36)
Period ended 3/31/1998*........... 10.20 0.46 0.30 0.76 (0.46) (0.13)
Period ended 5/16/1997............ 10.54 0.39 0.17 0.56 (0.39) (0.51)
Year ended 8/31/1996.............. 11.19 0.59 (0.20) 0.39 (0.59) (0.45)
Year ended 8/31/1995(b)........... 10.48 0.37 0.71 1.08 (0.37) --
INVESTOR B SHARES
Year ended 3/31/2000.............. $10.08 $0.41 $(0.56) $(0.15) $(0.41) $(0.01)
Year ended 3/31/1999#............. 10.37 0.44 0.07 0.51 (0.44) (0.36)
Period ended 3/31/1998*........... 10.19 0.41 0.31 0.72 (0.41) (0.13)
Period ended 5/16/1997............ 10.52 0.34 0.18 0.52 (0.34) (0.51)
Year ended 8/31/1996.............. 11.19 0.51 (0.22) 0.29 (0.51) (0.45)
Six months ended 8/31/1995(b)..... 10.05 0.46 1.14 1.60 (0.46) --
INVESTOR C SHARES
Year ended 3/31/2000.............. $10.08 $0.39 $(0.56) $(0.17) $(0.39) $(0.01)
Year ended 3/31/1999#............. 10.37 0.44 0.07 0.51 (0.44) (0.36)
Period ended 3/31/1998**.......... 10.41 0.25 0.09 0.34 (0.25) (0.13)
</TABLE>
---------------
* The financial information for the fiscal periods prior to May 23, 1997
reflects the financial information for the Pilot U.S. Government Securities
Fund Pilot, Class A and Class B Shares, which were reorganized into the U.S.
Government Bond Primary A, Investor A and Investor B Shares, respectively,
as of May 23, 1997.
** U.S. Government Bond Investor C Shares commenced operations on September 19,
1997.
+ Annualized.
++ Total return represents aggregate total return for the period indicated,
assumes reinvestment of all distributions, and does not reflect the
deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average shares method.
(a) The effect of the custodial expense offset (Note 2) on the operating
expense ratio, with and without waivers and/or expense reimbursements, was
less than 0.01%.
(b) The Pilot U.S. Government Securities Fund Pilot, Class A and Class B Shares
commenced operations on November 7, 1994, February 7, 1995 and November 10,
1994, respectively.
(c) The effect of interest expense on the operating expense ratio was less than
0.01%.
(d) Prior to February 14, 2000, the investment sub-adviser to U.S. Government
Bond was Boatmen's Capital Management, Inc. Effective February 14, 2000,
the investment sub-adviser to U.S. Government Bond became Banc of America
Capital Management, Inc.
SEE NOTES TO FINANCIAL STATEMENTS.
78
<PAGE> 83
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING
DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE
DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS ASSETS RATE NET ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.51) $ 9.51 (0.55)% $ 67,776 0.88%(a)(c) 5.12% 296% 1.02%(a)
(0.88) 10.08 5.83 109,028 0.59(a)(c) 5.06 270 0.87(a)
(0.61) 10.37 7.84 263,428 0.60+(a) 5.26+ 188 0.86+(a)
(0.92) 10.19 5.62 148,082 0.62+ 5.60+ 58 0.77+
(1.06) 10.53 3.46 145,066 0.65 5.61 87 0.82
(0.56) 11.20 18.03 137,261 0.62+ 6.45+ 132 0.87+
$(0.48) $ 9.51 (0.80)% $ 2,139 1.13%(a)(c) 4.89% 296% 1.27%(a)
(0.86) 10.08 5.57 2,311 0.84(a)(c) 4.81 270 1.12(a)
(0.59) 10.37 7.51 1,927 0.85+(a) 5.01+ 188 1.11+(a)
(0.90) 10.20 5.44 734 0.87+ 5.35+ 58 1.07+
(1.04) 10.54 3.44 632 0.85 5.44 87 1.07
(0.37) 11.19 10.41 87 0.82+ 5.76+ 132 1.12+
$(0.42) $ 9.51 (1.48)% $ 7,673 1.82%(a)(c) 4.18% 296% 2.02%(a)
(0.80) 10.08 4.93 6,779 1.44(a)(c) 4.21 270 1.87(a)
(0.54) 10.37 7.14 1,004 1.40+(a) 4.46+ 188 1.66+(a)
(0.85) 10.19 4.99 1,529 1.62+ 4.60+ 58 1.77+
(0.96) 10.52 2.43 1,237 1.65 4.60 87 1.82
(0.46) 11.19 16.19 146 1.62+ 5.19+ 132 1.87+
$(0.40) $ 9.51 (1.67)% $ 1,103 1.88%(a)(c) 4.12% 296% 2.02%(a)
(0.80) 10.08 5.13 1,255 1.34(a)(c) 4.31 270 1.87(a)
(0.38) 10.37 3.50 1,332 1.45+(a) 4.41+ 188 1.71+(a)
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
79
<PAGE> 84
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME CAPITAL GAINS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTERMEDIATE BOND
PRIMARY A SHARES
Period ended 3/31/2000***......... $ 9.52 $0.49 $(0.37) $ 0.12 $(0.51) $ 0.00
INVESTOR A SHARES*
Period ended 3/31/2000............ $ 9.50 $0.46 $(0.34) $ 0.12 $(0.47) $ 0.00
Period ended 5/14/1999............ 9.52 0.10 (0.04) 0.06 (0.08) --
Year ended 2/28/1999.............. 9.69 0.50 (0.03) 0.47 (0.53) (0.11)
Year ended 2/28/1998.............. 9.54 0.49 0.20 0.69 (0.51) (0.03)
Year ended 2/28/1997**............ 9.75 0.52 (0.15) 0.37 (0.52) (0.06)
Year ended 2/29/1996.............. 9.44 0.59 0.33 0.92 (0.59) (0.02)
INVESTOR B SHARES
Period ended 3/31/2000***......... $ 9.52 $0.22 $(0.36) $(0.14) $(0.25) $ 0.00
INVESTOR C SHARES*
Period ended 3/31/2000............ $ 9.56 $0.34 $(0.23) $ 0.11 $(0.35) $ 0.00
Period ended 5/14/1999............ 9.59 0.09 (0.04) 0.05 (0.08) --
Year ended 2/28/1999.............. 9.72 0.46 -- 0.46 (0.48) (0.11)
Year ended 2/28/1998.............. 9.54 0.44 0.19 0.63 (0.42) (0.03)
Period ended 2/28/1997***......... 9.53 0.31 0.07 0.38 (0.31) (0.06)
SEAFIRST SHARES*
Period ended 3/31/2000............ $10.75 $0.50 $(0.34) $ 0.16 $(0.49) $ 0.00
Period ended 5/14/1999............ 10.76 0.11 (0.04) 0.07 (0.08) --
Year ended 2/28/1999.............. 10.87 0.57 (0.05) 0.52 (0.52) (0.11)
Period ended 2/28/1998***......... 10.72 0.40 0.13 0.53 (0.38) --
</TABLE>
---------------
* The financial information for the fiscal periods through May 14, 1999
reflect the financial information for the Pacific Horizon Intermediate Bond
Fund A, K and SRF Shares, which were reorganized into the Investor A,
Investor C and Seafirst Shares, respectively, as of May 21, 1999. Prior to
May 21, 1999, the Fund's investment adviser was Bank of America National
Trust and Savings Association. Effective May 21, 1999, its investment
adviser became Banc of America Advisors, Inc. and its investment sub-
adviser became Banc of America Capital Management, Inc.
** As of July 22, 1996 the Fund designated the existing series of shares as "A"
shares.
*** Intermediate Bond Primary A, Investor B, Investor C and Seafirst Shares
commenced operations on May 21, 1999, October 20, 1999, November 20, 1996
and March 4, 1998, respectively.
+ Annualized.
++ Total return represents aggregate total return for the period indicated,
assumes reinvestment of all distributions, and does not reflect the
deduction of any applicable sales charges.
+++ Amount represents less than $500.
# Per share net investment income has been calculated using the monthly
average shares method.
SEE NOTES TO FINANCIAL STATEMENTS.
80
<PAGE> 85
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING
DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO EXPENSES TO
AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET AVERAGE
DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS ASSETS NET ASSETS
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$(0.51) $ 9.13 1.29% $18,365 0.81%+ 6.08%+ 1.05%+
$(0.47) $ 9.15 1.34% $45,207 1.06%+ 5.83%+ 1.30%+
(0.08) 9.50 0.66 61,412 1.09+ 4.90+ 1.12+
(0.64) 9.52 4.89 63,404 0.90 5.14 0.90
(0.54) 9.69 7.40 41,875 0.90 5.50 1.21
(0.58) 9.54 3.92 22,937 0.75 5.45 2.26
(0.61) 9.75 10.45 13,179 0.27 6.13 5.00
$(0.25) $ 9.13 1.33% $ 256 1.81%+ 5.08%+ 2.05%+
$(0.35) $ 9.32 1.18% $ 15 1.81%+ 5.08%+ 2.05%+
(0.08) 9.56 0.47 469 1.57+ 4.42+ 1.84+
(0.59) 9.59 4.76 495 1.39 4.67 1.65
(0.45) 9.72 6.80 513 1.39 4.99 1.73
(0.37) 9.54 3.73 332 1.43+ 5.41+ 2.71+
$(0.49) $10.42 1.50% $26,678 0.95%+ 5.94%+ 1.30%+
(0.08) 10.75 0.68 32,438 0.95+ 5.04+ 1.10+
(0.63) 10.76 4.88 33,449 0.90 5.16 0.90
(0.38) 10.87 4.86 35,161 0.95+ 5.45+ 1.07+
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
81
<PAGE> 86
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME CAPITAL GAINS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT GRADE BOND
PRIMARY A SHARES
Year ended 3/31/2000.............. $ 9.93 $0.59 $(0.52) $ 0.07 $(0.59) $(0.04)
Year ended 3/31/1999.............. 10.03 0.59 (0.04) 0.55 (0.59) (0.06)
Year ended 3/31/1998.............. 9.62 0.58 0.41 0.99 (0.58) --
Year ended 3/31/1997#............. 9.93 0.58 (0.20) 0.38 (0.58) (0.11)
Period ended 3/31/1996(a)......... 10.22 0.19 (0.29) (0.10) (0.19) --
Year ended 11/30/1995............. 9.32 0.59 0.90 1.49 (0.59) --
INVESTOR A SHARES
Year ended 3/31/2000.............. $ 9.93 $0.57 $(0.52) $ 0.05 $(0.57) $(0.04)
Year ended 3/31/1999.............. 10.03 0.57 (0.04) 0.53 (0.57) (0.06)
Year ended 3/31/1998.............. 9.62 0.56 0.41 0.97 (0.56) --
Year ended 3/31/1997#............. 9.93 0.56 (0.20) 0.36 (0.56) (0.11)
Period ended 3/31/1996(a)......... 10.22 0.18 (0.29) (0.11) (0.18) --
Year ended 11/30/1995............. 9.32 0.57 0.90 1.47 (0.57) --
INVESTOR B SHARES
Year ended 3/31/2000.............. $ 9.93 $0.50 $(0.52) $(0.02) $(0.50) $(0.04)
Year ended 3/31/1999.............. 10.03 0.51 (0.04) 0.47 (0.51) (0.06)
Year ended 3/31/1998.............. 9.62 0.51 0.41 0.92 (0.51) --
Year ended 3/31/1997#............. 9.93 0.52 (0.20) 0.32 (0.52) (0.11)
Period ended 3/31/1996(a)......... 10.22 0.16 (0.29) (0.13) (0.16) --
Year ended 11/30/1995............. 9.32 0.53 0.90 1.43 (0.53) --
INVESTOR C SHARES
Year ended 3/31/2000.............. $ 9.93 $0.48 $(0.52) $(0.04) $(0.48) $(0.04)
Year ended 3/31/1999.............. 10.03 0.51 (0.04) 0.47 (0.51) (0.06)
Year ended 3/31/1998.............. 9.62 0.52 0.41 0.93 (0.52) --
Year ended 3/31/1997#............. 9.93 0.53 (0.20) 0.33 (0.53) (0.11)
Period ended 3/31/1996(a)......... 10.22 0.17 (0.29) (0.12) (0.17) --
Year ended 11/30/1995............. 9.32 0.54 0.90 1.44 (0.54) --
</TABLE>
---------------
+ Annualized.
++ Total return represents aggregate total return for the period indicated,
assumes reinvestment of all distributions, and does not reflect the
deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average shares method.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(b) Amount represents less than $0.01.
(c) The effect of the custodial expense offset (Note 2) on the operating
expense ratio, with and without waivers and/or expense reimbursements, was
less than 0.01%.
(d) The effect of interest expense on the operating expense ratio was less than
0.01%.
SEE NOTES TO FINANCIAL STATEMENTS.
82
<PAGE> 87
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING
DISTRIBUTIONS DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
FROM AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER AVERAGE
CAPITAL DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS ASSETS RATE NET ASSETS
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $(0.63) $ 9.37 0.97% $1,793,913 0.67% 6.20% 63% 0.69%
-- (0.65) 9.93 5.61 1,798,155 0.68(c) 5.86 107 0.78(c)
-- (0.58) 10.03 10.53 1,681,990 0.72(c)(d) 5.86 244 0.83(d)
(0.00)(b) (0.69) 9.62 3.90 947,277 0.71(c) 5.98 368 0.81(d)
-- (0.19) 9.93 (1.04) 823,890 0.72+ 5.49+ 133 0.83+
-- (0.59) 10.22 16.45 823,098 0.71 6.05 228 0.81
$ 0.00 $(0.61) $ 9.37 0.74% $ 23,420 0.90% 5.97% 63% 0.94%
-- (0.63) 9.93 5.40 32,119 0.88(c) 5.66 107 1.03(c)
-- (0.56) 10.03 10.30 26,054 0.92(c)(d) 5.66 244 1.03(d)
(0.00)(b) (0.67) 9.62 3.70 6,345 0.91(c) 5.78 368 1.01(c)
-- (0.18) 9.93 (1.11) 6,440 0.92+ 5.29+ 133 1.03+
-- (0.57) 10.22 16.22 6,662 0.91 5.85 228 1.01
$ 0.00 $(0.54) $ 9.37 0.05% $ 5,637 1.59% 5.28% 63% 1.69%
-- (0.57) 9.93 4.76 5,440 1.48(c) 5.06 107 1.78(c)
-- (0.51) 10.03 9.73 2,662 1.47(c)(d) 5.11 244 1.58(d)
(0.00)(b) (0.63) 9.62 3.23 2,109 1.36(c) 5.33 368 1.46(c)
-- (0.16) 9.93 (1.26) 2,496 1.37+ 4.84+ 133 1.48+
-- (0.53) 10.22 15.70 2,578 1.36 5.40 228 1.46
$ 0.00 $(0.52) $ 9.37 (0.24)% $ 934 1.67% 5.20% 63% 1.69%
-- (0.57) 9.93 4.90 1,137 1.40(c) 5.14 107 1.78(c)
-- (0.52) 10.03 9.87 943 1.42(c)(d) 5.16 244 1.53(d)
(0.00)(b) (0.64) 9.62 3.38 1,068 1.21(c) 5.48 368 1.31(c)
-- (0.17) 9.93 (1.22) 299 1.22+ 4.99+ 133 1.33+
-- (0.54) 10.22 15.87 227 1.21 5.55 228 1.31
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
83
<PAGE> 88
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME CAPITAL GAINS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STRATEGIC INCOME
PRIMARY A SHARES
Year ended 3/31/2000.............. $10.31 $0.68 $(0.78) $(0.10) $(0.68) $ 0.00(a)
Year ended 3/31/1999#............. 10.55 0.66 (0.14) 0.52 (0.66) (0.10)
Year ended 3/31/1998.............. 10.11 0.65 0.44 1.09 (0.65) --
Year ended 3/31/1997#............. 10.42 0.69 (0.18) 0.51 (0.69) (0.13)
Period ended 3/31/1996(b)......... 10.82 0.23 (0.40) (0.17) (0.23) --
Year ended 11/30/1995............. 9.67 0.73 1.15 1.88 (0.73) --
INVESTOR A SHARES
Year ended 3/31/2000.............. $10.31 $0.65 $(0.79) $(0.14) $(0.65) $ 0.00(a)
Year ended 3/31/1999#............. 10.55.. 0.63 (0.14) 0.49 (0.63) (0.10)
Year ended 3/31/1998.............. 10.11 0.63 0.44 1.07 (0.63) --
Year ended 3/31/1997#............. 10.42 0.66 (0.18) 0.48 (0.66) (0.13)
Period ended 3/31/1996(b)......... 10.82 0.22 (0.40) (0.18) (0.22) --
Year ended 11/30/1995............. 9.67 0.71 1.15 1.86 (0.71) --
INVESTOR B SHARES
Year ended 3/31/2000.............. $10.31 $0.59 $(0.79) $(0.20) $(0.59) $ 0.00(a)
Year ended 3/31/1999#............. 10.55 0.57 (0.14) 0.43 (0.57) (0.10)
Year ended 3/31/1998.............. 10.11 0.57 0.44 1.01 (0.57) --
Year ended 3/31/1997#............. 10.42 0.61 (0.18) 0.43 (0.61) (0.13)
Period ended 3/31/1996(b)......... 10.82 0.21 (0.40) (0.19) (0.21) --
Year ended 11/30/1995............. 9.67 0.66 1.15 1.81 (0.66) --
INVESTOR C SHARES
Year ended 3/31/2000.............. $10.31 $0.58 $(0.79) $(0.21) $(0.58) $ 0.00(a)
Year ended 3/31/1999#............. 10.55 0.57 (0.14) 0.43 (0.57) (0.10)
Year ended 3/31/1998.............. 10.11 0.58 0.44 1.02 (0.58) --
Year ended 3/31/1997#............. 10.42 0.63 (0.18) 0.45 (0.63) (0.13)
Period ended 3/31/1996(b)......... 10.82 0.21 (0.40) (0.19) (0.21) --
Year ended 11/30/1995............. 9.67 0.66 1.15 1.81 (0.66) --
</TABLE>
---------------
+ Annualized.
++ Total return represents aggregate total return for the period indicated,
assumes reinvestment of all distributions, and does not reflect the
deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average shares method.
(a) Amount represents less than $0.01 per share.
(b) Fiscal year end changed to March 31. Prior to this, the fiscal year end was
November 30.
(c) The effect of the custodial expense offset (Note 2) on the operating
expenses ratio, with and without waivers and/or expense reimbursements, was
less than 0.01%.
(d) The effect of interest expense on the operating expense ratio was less than
0.01%.
SEE NOTES TO FINANCIAL STATEMENTS.
84
<PAGE> 89
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING
DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO EXPENSES TO
AND VALUE TOTAL PERIOD AVERAGE AVERAGE TURNOVER AVERAGE
DISTRIBUTIONS END OF PERIOD RETURN++ (000) NET ASSETS NET ASSETS RATE NET ASSETS
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(0.68) $ 9.53 (0.95)% $118,458 0.71%(c) 6.80% 107% 0.90%(c)
(0.76) 10.31 5.00 317,937 0.70(c) 6.27 94 0.80(c)
(0.65) 10.55 11.07 263,840 0.73(c) 6.27 203 0.83(c)
(0.82) 10.11 4.97 152,070 0.75(c) 6.73 278 0.85(c)
(0.23) 10.42 (1.59) 65,081 0.77+ 6.49+ 69 0.87+
(0.73) 10.82 20.11 64,800 0.80 7.03 96 0.93
$(0.65) $ 9.52 (1.30)% $ 30,870 0.96%(c) 6.55% 107% 1.15%(c)
(0.73) 10.31 4.74 12,954 0.95(c) 6.02 94 1.05(c)
(0.63) 10.55 10.80 11,946 0.98(c) 6.02 203 1.08(c)
(0.79) 10.11 4.71 11,662 1.00(c) 6.48 278 1.10(c)
(0.22) 10.42 (1.67) 13,332 1.02+ 6.24+ 69 1.12+
(0.71) 10.82 19.82 13,150 1.05 6.78 96 1.18
$(0.59) $ 9.52 (1.98)% $ 55,946 1.65%(c) 5.86% 107% 1.90%(c)
(0.67) 10.31 4.11 67,651 1.55(c) 5.42 94 1.80(c)
(0.57) 10.55 10.18 65,248 1.55(c) 5.45 203 1.65(c)
(0.74) 10.11 4.18 70,631 1.50(c) 5.98 278 1.60(c)
(0.21) 10.42 (1.83) 84,692 1.52+ 5.74+ 69 1.62+
(0.66) 10.82 19.22 90,887 1.55 6.28 96 1.68
$(0.58) $ 9.52 (2.04)% $ 1,202 1.71%(c) 5.80% 107% 1.90%(c)
(0.67) 10.31 4.09 1,474 1.56(c) 5.41 94 1.80(c)
(0.58) 10.55 10.27 2,090 1.46(c) 5.54 203 1.56(c)
(0.76) 10.11 4.44 3,343 1.25(c) 6.23 278 1.35(c)
(0.21) 10.42 (1.77) 3,454 1.33+ 5.93+ 69 1.43+
(0.66) 10.82 19.22 3,582 1.55 6.28 96 1.68
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
85
<PAGE> 90
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED
OF PERIOD INCOME INVESTMENTS FROM OPERATIONS INCOME CAPITAL GAINS
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HIGH YIELD BOND
PRIMARY A SHARES
Period ended 3/31/2000*#.......... $10.00 $0.09 $(0.11) $(0.02) $(0.08) $0.00
INVESTOR A SHARES
Period ended 3/31/2000*#.......... $10.00 $0.08 $(0.12) $(0.04) $(0.08) $0.00
INVESTOR B SHARES
Period ended 3/31/2000*#.......... $10.00 $0.07 $(0.12) $(0.05) $(0.07) $0.00
INVESTOR C SHARES
Period ended 3/31/2000**#......... $10.02 $0.04 $(0.12) $(0.08) $(0.07) $0.00
</TABLE>
---------------
* High Yield Bond Primary A, Investor A, and Investor B Shares commenced
operations on February 14, 2000.
** High Yield Bond Investor C Shares commenced operations on March 7, 2000.
+ Annualized.
++ Total return represents aggregate total return for the period indicated,
assumes reinvestment of all distributions, and does not reflect the
deduction of any applicable sales charges.
# Per share net investment income has been calculated using the monthly
average shares method.
SEE NOTES TO FINANCIAL STATEMENTS.
86
<PAGE> 91
NATIONS FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT OPERATING
DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO EXPENSES TO
AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE AVERAGE
DISTRIBUTIONS END OF PERIOD RETURN++ (000) ASSETS NET ASSETS NET ASSETS
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$(0.08) $9.90 (0.12)% $9,394 0.93%+ 7.03%+ 12.66%+
$(0.08) $9.88 (0.33)% $ 371 1.18%+ 6.78%+ 12.91%+
$(0.07) $9.88 (0.47)% $3,426 1.93%+ 6.03%+ 13.66%+
$(0.07) $9.87 (0.76)% $ 59 1.93%+ 6.03%+ 13.66%+
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
87
<PAGE> 92
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS
Nations Fund Trust (the "Trust"), Nations Fund, Inc. (the "Company"), Nations
Reserves ("Reserves") (formerly known as Nations Institutional Reserves) and
Nations Funds Trust ("Funds Trust") are each registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end investment
company. At March 31, 2000, the Trust offered thirty-six separate portfolios,
the Company offered seven separate portfolios, Reserves offered sixteen separate
portfolios and Funds Trust offered one portfolio. These financial statements
pertain only to the following U.S. government and corporate bond portfolios of
the Trust, the Company, Reserves and Funds Trust: Short-Term Income Fund,
Short-Intermediate Government Fund, Government Securities Fund, U.S. Government
Bond Fund, Intermediate Bond Fund, Investment Grade Bond Fund (formerly
Strategic Fixed Income Fund), Strategic Income Fund (formerly Diversified Income
Fund) and High Yield Bond Fund (each a "Fund" and collectively, the "Funds").
Financial statements for the other portfolios of the Trust, the Company and
Reserves are presented under separate cover. The Funds currently offer four
classes of shares: Primary A Shares, Investor A Shares, Investor B Shares and
Investor C Shares. In addition, Short-Intermediate Government Fund offers
Primary B Shares and Intermediate Bond Fund offers Seafirst Shares. Shareholders
of a Fund have equal voting rights on matters affecting all shareholders of the
Fund. In addition, each class of shares of a Fund has exclusive voting rights on
matters that relate solely to that class and separate voting rights on matters
in which the interests of one class differ from the interests of any other
class.
Intermediate Bond Fund and High Yield Bond Fund (the "Feeder Funds") seek to
achieve their investment objectives by investing substantially all of their
assets in Intermediate Bond Master Portfolio and High Yield Bond Master
Portfolio, respectively (the "Master Portfolios"), each a series of Nations
Master Investment Trust (the "Master Trust"), another open-end management
investment company in the Nations Funds family. The Master Portfolios each have
the same investment objective as that of its corresponding Feeder Fund. The
value of the Feeder Funds' investments in the respective Master Portfolios
included in the Statements of net assets reflects the Feeder Funds'
proportionate beneficial interest in the net assets of the respective Master
Portfolios (75.7% for Intermediate Bond Master Portfolio and 96.0% for High
Yield Bond Master Portfolio at March 31, 2000). The financial statements of the
Master Portfolios, including their schedules of investments, are included
elsewhere within this report and should be read in conjunction with the Feeder
Funds' financial statements. Other funds not registered under the 1940 Act
offered by the Nations Offshore Funds and managed by Banc of America Advisors,
Inc. ("BAAI"), whose financial statements are not presented here, also invest in
the Master Portfolios.
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Funds in the
preparation of their financial statements.
Securities valuation: Securities are generally valued using prices provided by
a pricing service or based upon broker-dealer quotations. Certain prices
provided by brokers-dealers or the pricing service may be based on a matrix
pricing system, which considers such factors as security prices, yields and
maturities. Securities for which market quotations are not readily available are
valued under procedures adopted by the Board of Trustees/ Directors. Short-term
investments that mature in 60 days or less are valued at amortized cost, which
approximates current market value.
The valuation of each Feeder Fund's investment in its corresponding Master
Portfolio is based on the reported net asset value of that Portfolio. The Master
Portfolios use valuation policies consistent with those described above.
Futures contracts: The Short-Term Income, Short-Intermediate Government,
Government Securities, U.S. Government Bond, Investment Grade Bond and Strategic
Income Funds may invest in futures contracts. Upon entering into a futures
contract, a Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a specified percentage of the contract amount. This is
known as the "initial margin." Subsequent payments ("variation margin") are made
or received by a Fund each day, depending on the daily fluctuation of the value
of the contract.
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking-to-market" on
a daily basis to reflect the market value of the contract. A Fund recognizes a
realized gain or loss when the contract is
88
<PAGE> 93
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
closed, equal to the difference between the proceeds from (or cost of) the
closing transaction and a Fund's basis in the contract.
Risks of investments in futures contracts include the possible movement of the
securities or indices underlying the contracts, the possibility that there may
not be a liquid secondary market for the contracts, that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities, or that the counterparty to a contract may default on its obligation
to perform.
Securities transactions and investment income: Securities transactions are
accounted for on trade date. Realized gains and losses are computed based on the
specific identification of securities sold. Interest income, adjusted for
accretion of discounts and amortization of premiums, is earned from settlement
date and recorded on an accrual basis. Dividend income is recorded on
ex-dividend date. Each Fund's investment income and realized and unrealized
gains and losses are allocated among its classes based upon the relative net
assets of each class of shares.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after trade date; interest income is not accrued until
settlement date. At the time a Fund enters into such transactions, it instructs
its custodian to segregate assets with a current value at least equal to the
amount of its when-issued or delayed-delivery purchase commitments.
Stripped mortgage-backed securities are derivative multi-class mortgage
securities structured so that one class receives most, if not all, of the
principal from the underlying mortgage assets, while the other class receives
most, if not all, of the interest and the remainder of the principal. If the
underlying mortgage assets experience greater than anticipated prepayments of
principal, a Fund may fail to fully recoup its initial investment in an
interest-only security. The fair market value of these securities is unusually
volatile in response to changes in interest rates.
The Feeder Funds record their share of the investment income and realized and
unrealized gains and losses reported by the Master Portfolios on a daily basis.
The investment income and realized and unrealized gains and losses are allocated
daily to investors in the Master Portfolios based upon the value of their
investments in the Master Portfolios.
Dividends and distributions to shareholders: It is the policy of each Fund
(except Intermediate Bond and High Yield Bond) to declare dividends from net
investment income daily and to pay such dividends monthly. Intermediate Bond and
High Yield Bond Funds declare and pay dividends monthly. Each Fund 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 Fund level are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles.
Certain reclassifications are made to each Fund'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 paydowns and each Fund's use of the
tax accounting practice known as equalization.
Reclassifications for the period ended March 31, 2000 were as follows:
<TABLE>
<CAPTION>
INCREASE/
(DECREASE) INCREASE/
INCREASE/ UNDISTRIBUTED (DECREASE)
(DECREASE) NET ACCUMULATED
PAID-IN INVESTMENT NET REALIZED
CAPITAL INCOME GAIN/(LOSS)
(000) (000) (000)
-----------------------------------------
<S> <C> <C> <C>
Short-Term Income........... (95) 2 93
Short-Intermediate
Government................ (2) -- 2
Government Securities....... -- (5) 5
U.S. Government Bond........ 5 (4) (1)
Intermediate Bond........... 12 2 (14)
Investment Grade Bond....... (25) -- 25
Strategic Income............ 17 7 (24)
High Yield Bond............. --* --* --*
</TABLE>
* Amount represents less than $500.
Federal income tax: Each Fund intends to continue to qualify as a regulated
investment company by complying with the applicable requirements of the Internal
Revenue Code of 1986, as amended, and by distributing substantially all of its
earnings to its shareholders. Therefore, no provision is made for Federal income
or excise taxes.
Expenses: General expenses of the Trust, the Company and Reserves are allocated
to the Funds based upon their relative net assets or other expense allocation
methodologies determined by the nature of the expense. Expenses directly
attributable to a Fund or class of shares are charged to such Fund or class. The
Feeder Funds record their share of the expenses reported by the Master
Portfolios on a daily basis. The expenses are allocated
89
<PAGE> 94
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
daily to investors in the Master Portfolios based upon the value of each Feeder
Fund's investment in its corresponding Master Portfolio.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS
Each of the Trust and the Company has entered into an investment advisory
agreement (the "Investment Advisory Agreements") with BAAI, a wholly-owned
subsidiary of Bank of America, N.A. ("Bank of America"), which in turn is a
wholly-owned banking subsidiary of Bank of America Corporation, a bank holding
company organized as a Delaware corporation, pursuant to which BAAI provides
investment advisory services to the Funds. Under the terms of the Investment
Advisory Agreements, BAAI is entitled to receive an advisory fee as set forth
below, calculated daily and payable monthly, based on the following annual rates
multiplied by the average daily net assets of each Fund. Effective May 14, 1999,
the maximum advisory fee payable by the Funds decreased. The following table
shows the current maximum annual rate and the maximum rate in effect prior to
that date.
<TABLE>
<CAPTION>
RATE IN EFFECT
CURRENT THROUGH
RATE 13-MAY-99
-------------------------
<S> <C> <C>
U.S. Government Bond, Strategic
Income.......................... 0.50% 0.60%
Investment Grade Bond............. 0.40% 0.60%
Short-Term Income, Short
Intermediate Government......... 0.30% 0.60%
</TABLE>
Effective May 14, 1999, BAAI is entitled to receive a maximum advisory fee,
calculated daily and payable monthly, based on the average daily net assets of
the Government Securities Fund as follows: at the annual rate of 0.50% of its
net assets up to $200 million, 0.45% of net assets in excess of $200 million and
up to $250 million and 0.40% of net assets in excess of $250 million. Prior to
May 14, 1999, the advisory fee was calculated daily and payable monthly, based
on the Fund's average daily net assets, as follows: at the annual rate of 0.65%
of net assets up to $100 million, 0.55% of net assets in excess of $100 million
and up to $250 million and 0.50% of net assets in excess of $250 million.
The Feeder Funds indirectly pay for investment advisory services through their
investments in the corresponding Master Portfolios (see Note 2 of Notes to
financial statements of the Master Portfolios).
Each of the Trust, the Company and Reserves has entered into a sub-advisory
agreement with BAAI and Banc of America Capital Management, Inc. ("BACAP")
(formerly known as TradeStreet Investment Associates, Inc.), a wholly-owned
subsidiary of Bank of America, pursuant to which BACAP is entitled to receive a
sub-advisory fee from BAAI at the maximum annual rate of 0.15% of each Fund's
average daily net assets.
Prior to February 14, 2000, the Company had, on behalf of the U.S. Government
Bond Fund, entered into a sub-advisory agreement with BAAI and Boatmen's Capital
Management, Inc. ("Boatmen's), a wholly-owned subsidiary of Bank of America,
pursuant to which Boatmen's was entitled to receive a sub-advisory fee from BAAI
at the maximum annual rate of 0.15% of the Fund's average daily net assets. On
February 14, 2000, BACAP became the sub-adviser to U.S. Government Bond Fund and
is entitled to receive the same sub-advisory fee.
Stephens Inc. ("Stephens") and BAAI serve as co-administrators of the Trust, the
Company and Reserves. Under the co-administration agreements, Stephens and BAAI
are entitled to receive a combined fee, computed daily and paid monthly, at the
maximum annual rate of 0.22% of the average daily net assets of all Funds except
for Intermediate Bond Fund, which pays a monthly fee at the maximum annual rate
of 0.17% of its average daily net assets, and High Yield Bond Fund, which pays a
monthly fee at the maximum annual rate of 0.18% of its average daily net assets.
Effective May 14, 1999, the combined co-administration fee payable by the Funds
(except for Intermediate Bond Fund and High Yield Bond Fund) to Stephens and
BAAI increased by 0.10% of the Fund's average daily net assets. The Bank of New
York ("BNY") serves as sub-administrator of the Trust, the Company and Reserves
pursuant to agreements with BAAI. For the period ended March 31, 2000, Stephens
and BAAI earned $1,927,522 and $3,301,369 net of waivers, respectively, from the
Funds for their co-administration services.
BAAI and/or the sub-advisers and Stephens may, from time to time, reduce their
fees payable by each Fund. Effective August 1, 1999, BAAI agreed to waive it's
advisory fees until July 31, 2000 in the following amounts for the Funds set
forth below:
<TABLE>
<CAPTION>
<S> <C>
Short-Term Income............... 0.10%
Government Securities........... 0.10%
U.S. Government Bond............ 0.10%
Strategic Income................ 0.10%
</TABLE>
90
<PAGE> 95
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Prior to August 1, 1999, BAAI and/or the sub-advisers had voluntarily agreed to
waive their advisory or sub-advisory fees.
In addition, effective August 1, 1999, BAAI and/or the sub-advisers and Stephens
agreed to reimburse expenses and/or waive their fees until May 2000 to the
extent total expenses (excluding shareholder servicing and distribution fees),
as a percentage of the respective Fund's average daily net assets, exceed the
following annual rates: 0.60% for the Short-Intermediate Government Fund, 0.85%
for the Government Securities Fund, 0.81% for the Intermediate Bond Fund and
0.72% for the Strategic Income Fund. Prior to August 1, 1999, BAAI and/or the
sub-advisers and Stephens voluntarily agreed to reimburse expenses and/or waive
their fees to maintain these total expense limits. BAAI and/or the sub-advisers
and Stephens voluntarily agreed to reimburse expenses and/or waive their fees to
the extent total expenses (excluding shareholder servicing and distribution
fees) exceed 0.93% of the average daily net assets of the High Yield Bond Fund.
BNY serves as the custodian of the Trust's, the Company's, Reserves' and Funds
Trust's assets. For the year ended March 31, 2000, expenses of the Funds were
reduced by $47,546 under expense offset arrangements with BNY. The Funds could
have invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if they had not entered into
such arrangements.
Effective December 1, 1999, First Data Investor Services Group, Inc. ("First
Data"), the transfer agent for the Funds' shares was acquired by PFPC Inc.
("PFPC"). PFPC provides the same services as the transfer agent for the Funds'
shares as were previously provided by First Data. Bank of America serves as the
sub-transfer agent for the Primary Shares of the Funds. For the period ended
March 31, 2000, Bank of America earned approximately $36,835 for providing such
services.
Stephens serves as distributor of the Funds' shares. For the period ended March
31, 2000, the Funds were informed that the distributor received $6,542,554 in
front end sales charges for sales of Investor A Shares and $350,149 in
contingent deferred sales charges from redemption of shares which were subject
to such charges. A substantial portion of these fees is paid to affiliates of
Bank of America.
The Trust's, the Company's, Reserves' and Funds Trust's eligible
Trustees/Directors may participate in non-qualified deferred compensation and
retirement plans which may be terminated at any time. All benefits provided
under these plans are unfunded and any payments to plan participants are paid
solely out of the Funds' assets. Income earned on each plan participant's
deferral account is tied to the rate of return of the eligible mutual funds
selected by the participants or, if no funds are selected, to the rate of return
of Nations Treasury Fund, a portfolio of the Company. The expense for the
deferred compensation and retirement plans is included in "Trustees'/ Directors'
fees and expenses" in the Statements of operations.
Certain Funds have made daily investments of cash balances in the Nations Cash
Reserves, a portfolio of Reserves, pursuant to an exemptive order received from
the Securities and Exchange Commission. For the period ended March 31, 2000, the
Funds earned $9,128,563 in the aggregate from such investments, which is
included in interest income.
A significant portion of each Fund's Primary A Shares represents investments by
fiduciary accounts over which Bank of America has either sole or joint
investment discretion.
3. SHAREHOLDER SERVICING AND DISTRIBUTION PLANS
The Trust, the Company, Reserves and Funds Trust have each adopted shareholder
servicing plans and distribution plans for the Investor B and Investor C Shares
of each Fund and a combined distribution and shareholder servicing plan for the
Investor A Shares of each Fund. In addition, the Trust has adopted a shareholder
administration plan for Primary B Shares of Short-Intermediate Government Fund
and Reserves has adopted a shareholder servicing plan for Seafirst Shares of the
Intermediate Bond Fund. The shareholder servicing plans permit the Funds to
compensate or reimburse servicing agents for shareholder services provided by
the servicing agents. The administration plan permits the Short-Intermediate
Government Fund to compensate institutions for shareholder administration
services provided to their customers that own Primary B Shares. The distribution
plans, adopted pursuant to Rule 12b-1 under the 1940 Act, permit the Funds to
compensate or reimburse the distributor (and for Investor A Shares, the
distributor and/or selling agents) for activities or expenses primarily intended
to result in the sale of the applicable classes' shares. Payments are made at an
annual rate, as a percentage of average daily net assets set from time to time
by the Board of Trustees/Directors, and are charged as expenses of each Fund
directly to the applicable class. A substantial portion of the expenses incurred
pursuant to
91
<PAGE> 96
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
these plans is paid to affiliates of Bank of America and BAAI.
At March 31, 2000, the rates in effect and plan limits, as a percentage of
average daily net assets, were as follows:
<TABLE>
<CAPTION>
CURRENT PLAN
RATE LIMIT
------------------
<S> <C> <C>
Primary B Shareholder Administration
Plan:
Short-Intermediate Government..... 0.50%* 0.60%
Investor A Combined Distribution and
Shareholder Servicing Plan:
Short-Intermediate Government..... 0.20 0.25
Other Income Funds(7)............. 0.25** 0.25
Investor B Distribution Plan:
Short-Term Income................. 0.75*** 0.75
Other Income Funds(7)............. 0.75**** 0.75
Investor C Distribution Plan........ 0.75 0.75
Investor B and Investor C
Shareholder Servicing Plans....... 0.25 0.25
Seafirst Shareholder Servicing
Plan.............................. 0.14 0.25
</TABLE>
---------------
* Reflects a rate change effective September 1, 1999 from 0.35%.
** Reflects a rate change effective September 1, 1999 from 0.20% for Short-Term
Income and Investment Grade Bond Funds. In addition, a separate shareholder
servicing plan has been adopted for Investor A Shares of the Short-Term
Income Fund.
*** Reflects rate changes commencing September 1, 1999 from 0.10%.
**** Reflects a rate change effective September 1, 1999 from 0.55% for
Short-Intermediate Government, Intermediate Bond and Investment Grade Bond
Funds and 0.60% for all other income funds (excluding High Yield Bond
Fund).
4. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
long-term U.S. government securities and short-term investments, for the period
ended March 31, 2000 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
---------------------
<S> <C> <C>
Short-Term Income............... $175,428 $204,902
Short-Intermediate Government... 7,348 4,425
Government Securities........... 28,107 18,959
U.S. Government Bond............ 2,883 2,862
Investment Grade Bond........... 440,166 524,874
Strategic Income................ 160,566 237,343
</TABLE>
The aggregate cost of purchases and proceeds from sales of long-term U.S.
government securities for the period ended March 31, 2000 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
(000) (000)
-----------------------
<S> <C> <C>
Short-Term Income............. $ 83,544 $ 45,116
Short-Intermediate
Government.................. 982,319 1,037,556
Government Securities......... 717,978 680,246
U.S. Government Bond.......... 276,598 302,296
Investment Grade Bond......... 687,087 552,500
Strategic Income.............. 103,926 199,971
</TABLE>
5. FUTURES CONTRACTS
At March 31, 2000, the following Funds had futures contracts open:
<TABLE>
<CAPTION>
UNREALIZED
VALUE OF CONTRACT MARKET VALUE OF APPRECIATION/
NUMBER OF WHEN OPENED CONTRACTS (DEPRECIATION)
DESCRIPTION CONTRACTS (000) (000) (000)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-INTERMEDIATE GOVERNMENT FUND:
US 5 year Treasury note (long position) expiring June
2000(a)....................................................
140 $13,680 $13,790 $ 110
INVESTMENT GRADE BOND FUND:
US 10 year Agency (long position) expiring June 2000(a)....
1,000 92,253 91,938 (315)
US 5 year Treasury note (short position) expiring June
2000(a)....................................................
333 32,441 32,801 (360)
US 10 year Treasury note (short position) expiring June
2000(a)....................................................
577 55,975 56,014 (39)
STRATEGIC INCOME FUND:
US 5 year Treasury note (short position) expiring June
2000(a)....................................................
130 12,685 12,805 (120)
US 2 year Treasury note (long position) expiring June
2000(a)....................................................
30 5,931 5,939 8
</TABLE>
---------------
(a) Securities have been segregated as collateral for the Short-Intermediate
Government, Investment Grade Bond and Strategic Income Funds for open
futures contracts.
92
<PAGE> 97
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. SHARES OF BENEFICIAL INTEREST/CAPITAL STOCK
As of March 31, 2000, an unlimited number of shares of beneficial interest
without par value were authorized for each of the Trust, Reserves and Funds
Trust and 480,000,000,000 shares of $.001 par value capital stock were
authorized for the Company. The Trust's, Reserves' and Funds Trust's
Declarations of Trust and the Company's Articles of Incorporation authorize the
Boards of Trustees/Directors to classify or reclassify any authorized, but
unissued shares into one or more additional classes or series of shares. See
Schedules of capital stock activity.
7. LINES OF CREDIT
The Trust, the Company, Reserves and Funds Trust each participate with other
Nations Funds in an uncommitted line of credit provided by BNY under a line of
credit agreement (the "Agreement"). Advances under the Agreement may be made for
temporary or emergency purposes, including the meeting of redemption requests
that otherwise might require the untimely disposition of securities. Interest on
borrowings is payable at a specified Federal Funds rate plus 0.50% on an
annualized basis. Each participating Fund maintains a ratio of no less than 4 to
1 net assets (not including amounts borrowed pursuant to the Agreement) to the
aggregate amount of indebtedness pursuant to the Agreement.
At March 31, 2000, there were no loans outstanding under this Agreement. For the
period ended March 31, 2000, borrowings by the Funds under the Agreement were as
follows:
<TABLE>
<CAPTION>
AVERAGE
AMOUNT AVERAGE
OUTSTANDING INTEREST
FUND (000) RATE
-----------------------------------------------------------
<S> <C> <C>
Government Securities............. $8 5.38%
U.S. Government Bond.............. 1 5.23
Strategic Income.................. 1 5.49
</TABLE>
The average amount outstanding was calculated based on daily balances in the
period.
The Trust, the Company and Reserves also participate with other Nations Funds in
a committed line of credit provided by BNY. Interest on borrowings under the
committed line is payable at a specified Federal Funds rate plus 0.50% on an
annualized basis. A facility fee of 0.09% per annum of the total amounts
available under the line of credit is charged, of which each Fund has agreed to
pay its pro rata share. This fee is paid quarterly in arrears. Each
participating Fund is required to maintain an asset coverage ratio of at least
300% under the terms of the arrangement. For the period ended March 31, 2000
there were no borrowings by the Funds under the committed line of credit.
8. SECURITIES LENDING
Under an agreement with BNY, the Funds can lend their securities to approved
brokers, dealers and other financial institutions. Loans are collateralized by
cash in an amount at least equal to the market value of the securities loaned.
The cash collateral received is invested in Nations Cash Reserves. A portion of
the income generated by the investment of the collateral, net of any rebates
paid by BNY to borrowers, is remitted to BNY as lending agent, and the remainder
is paid to the Fund. Generally, in the event of counterparty default, the Fund
has the right to use the collateral to offset losses incurred. There would be a
potential loss to the Fund in the event the Fund is delayed or prevented from
exercising its right to dispose of the collateral. The Fund bears the risk of
loss with respect to the investment of collateral.
At March 31, 2000, the following Funds had securities on loan:
<TABLE>
<CAPTION>
MARKET VALUE OF MARKET VALUE
LOANED SECURITIES OF COLLATERAL
FUND (000) (000)
----------------------------------------------------------------
<S> <C> <C>
Short-Intermediate
Government................ $ 8,598 $ 8,762
Government Securities....... 23,978 24,428
Investment Grade Bond....... 50,944 52,163
U.S. Government Bond........ 26,699 27,160
Strategic Income............ 12,853 13,379
</TABLE>
93
<PAGE> 98
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. CAPITAL LOSS CARRYFORWARD
At March 31, 2000, the following Funds had available for Federal income tax
purposes the following unused capital losses expiring March 31:
<TABLE>
<CAPTION>
2002 2003 2005 2007 2008
FUND (000) (000) (000) (000) (000)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Term Income........................... $4,900 $ 651 $ 122 -- $ 2,435
Short-Intermediate Government............... 974 -- 6,939 -- 13,389
Government Securities....................... 7,139 5,914 2,303 $ 86 9,296
U.S. Government Bond........................ -- -- -- -- 2,809
Intermediate Bond........................... -- -- -- 1,126 504
Investment Grade Bond....................... -- -- -- -- 10,756
Strategic Income............................ 849 -- -- -- 11,355
</TABLE>
The capital loss carryforward for the Government Securities Fund is subject to
certain limitations.
Under the current tax law, capital losses realized after October 31 may be
deferred and treated as occurring on the first day of the following fiscal year.
For the year ended March 31, 2000, the following Funds elected to defer losses
occurring between November 1, 1999 and March 31, 2000 under these rules:
<TABLE>
<CAPTION>
CAPITAL
LOSSES DEFERRED
FUND (000)
-----------------------------------------------------------------------------
<S> <C>
Short-Term Income........................................... $2,019
Short-Intermediate Income................................... 4,554
Government Securities....................................... 3,792
U.S. Government Bond........................................ 2,471
Intermediate Bond........................................... --
Investment Grade Bond....................................... 12,929
Strategic Income............................................ 6,113
</TABLE>
10. REORGANIZATIONS
ACQUISITION OF THE EMERALD FUNDS
On May 15, 1998, certain Funds, as listed below (each an "Acquiring Fund"),
acquired the assets and certain liabilities of The Emerald Funds, also listed
below (each an "Acquired Fund"), in a tax-free reorganization in exchange for
shares of the Acquiring Fund, pursuant to a plan of reorganization approved by
the Acquired Fund's shareholders. The number and value of shares issued by the
Acquiring Fund are presented in the Schedules of capital stock activity. Net
assets and unrealized appreciation as of the reorganization date were as
follows:
<TABLE>
<CAPTION>
TOTAL NET ASSETS
TOTAL NET ASSETS TOTAL NET ASSETS OF ACQUIRING FUND ACQUIRED FUND
OF ACQUIRED FUND OF ACQUIRING FUND AFTER ACQUISITION UNREALIZED APPRECIATION
ACQUIRING FUND ACQUIRED FUND (000) (000) (000) (000)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Term Emerald Short-Term
Income Fixed Income Fund $101,178 $ 355,256 $ 456,434 $525
Government Emerald U.S. Government
Securities Securities Fund 63,983 122,410 186,393 856
Strategic Fixed Emerald Managed
Income Bond Fund 77,246 1,848,855 1,926,101 9
</TABLE>
CONVERSION OF COMMON TRUST FUNDS
On April 17, 1998, certain Funds, as listed below (each an "Acquiring Fund"),
acquired the assets of certain common trust funds, managed by NationsBank, N.A.,
also listed below (each an "Acquired Fund"), in a tax-free exchange for
94
<PAGE> 99
NATIONS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
shares of the Acquiring Fund. The number and value of shares issued by the
Acquiring Fund are presented in the Schedules of capital stock activity. Net
assets and unrealized appreciation/(depreciation) as of the conversion date were
as follows:
<TABLE>
<CAPTION>
TOTAL NET ASSETS ACQUIRED FUND
TOTAL NET ASSETS TOTAL NET ASSETS OF ACQUIRING FUND UNREALIZED APPRECIATION
OF ACQUIRED FUND OF ACQUIRING FUND AFTER CONVERSION (DEPRECIATION)
ACQUIRING FUND ACQUIRED FUND (000) (000) (000) (000)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Government NationsBank
Securities Common Trust
Government Bond Fund $ 5,957 $ 117,450 $ 123,407 $ 70
Strategic Fixed NationsBank
Income Common Trust
Bond Fund 69,407 1,705,412 1,774,819 398
Strategic Fixed NationsBank
Income Common Trust
Intermediate
Bond Fund 71,850 1,774,819 1,846,669 (2)
Short- NationsBank
Intermediate Common Trust
Government Two-Year
Government Bond Fund 5,670 722,445 728,115 11
</TABLE>
ACQUISITION OF PACIFIC HORIZON FUNDS
On May 14, 1999, certain Funds, as listed below, (each an "Acquiring Fund"),
acquired the assets and liabilities of Pacific Horizon Funds, also listed below
(each an "Acquired Fund"), in a tax-free reorganization in exchange for shares
of the Acquiring Fund, pursuant to a plan of reorganization approved by the
Acquired Fund's shareholders. The number and value of shares issued by the
Acquiring Fund are presented in the Schedules of capital stock activity. Net
assets and unrealized appreciation as of the reorganization date were as
follows:
<TABLE>
<CAPTION>
TOTAL NET ASSETS ACQUIRED FUND
TOTAL NET ASSETS TOTAL NET ASSETS OF ACQUIRING FUND UNREALIZED APPRECIATION
OF ACQUIRED FUND OF ACQUIRING FUND AFTER ACQUISITION (DEPRECIATION)
ACQUIRING FUND ACQUIRED FUND (000) (000) (000) (000)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short- Pacific Horizon
Intermediate Short-Term
Government Government Fund $19,247 $625,358 $644,605 $ 1
Government Pacific Horizon
Securities U.S. Government 60,009 168,447 228,456 (273)
Diversified Pacific Horizon
Income Flexible Income Fund 36,136 228,362 264,498 (213)
</TABLE>
On May 21, 1999, Intermediate Bond Fund (the "Acquiring Fund"), a newly
established portfolio, acquired the assets and liabilities of the Pacific
Horizon Intermediate Bond Fund (the "Acquired Fund") pursuant to a plan of
reorganization approved by its shareholders. The acquisition was accomplished by
a tax-free exchange of shares of the Acquiring Fund in an amount equal to the
outstanding shares of the Acquired Fund. The financial statements of the
Acquiring Fund reflect the historical financial results of the Acquired Fund
prior to the reorganization.
<TABLE>
<CAPTION>
PACIFIC HORIZON FUND SHARE CLASS CORRESPONDING RESERVES SHARE CLASS
---------------------------------------------------------------------
<S> <C>
Intermediate Bond Nations Intermediate Bond
A Shares Investor A Shares
K Shares Investor C Shares
SRF Shares Seafirst Shares
</TABLE>
11. SUBSEQUENT EVENT
Effective June 23, 2000, Intermediate Bond Fund will no longer offer Seafirst
Shares.
95
<PAGE> 100
NATIONS FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS, DIRECTORS AND TRUSTEES OF NATIONS FUNDS
In our opinion, the accompanying statements of net assets, 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 Short-Term Income Fund, Nations Short-Intermediate Government Fund,
Nations Government Securities Fund, Nations U.S. Government Bond Fund, Nations
Intermediate Bond Fund, Nations Investment Grade Bond Fund (formerly, Strategic
Fixed Income Fund), Nations Strategic Income Fund (formerly, Nations Diversified
Income Fund) and Nations High Yield Bond Fund, (portfolios of Nations Fund
Trust, Nations Fund, Inc., Nations Reserves, or Nations Funds Trust, hereafter
referred to as the "Funds") at March 31, 2000, and the results of each of their
operations, the changes in each of their net assets and the financial highlights
for each of the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, 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,
2000 by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
May 19, 2000
96
<PAGE> 101
NATIONS FUNDS
TAX INFORMATION (UNAUDITED)
For the fiscal year ended March 31, 2000, the amount of long-term capital gains
designated by the Trust and/or the Company were as follows:
<TABLE>
<CAPTION>
FUND TOTAL
---- -----------
<S> <C>
Strategic Income............................................ $ 30,677
Investment Grade Bond....................................... 10,260,464
</TABLE>
97
<PAGE> 102
NATIONS MASTER INVESTMENT TRUST
Nations Intermediate Bond Master Portfolio and
Nations High Yield Bond Master Portfolio Annual Report
MARCH 31, 2000
The following pages should be read in conjunction with Nations Intermediate Bond
and Nations High Yield Bond Funds' Annual Report.
98
<PAGE> 103
NATIONS MASTER INVESTMENT TRUST
Nations Intermediate Bond Master Portfolio
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<C> <S> <C> <C>
ASSET-BACKED SECURITIES -- 7.5%
ASSET-BACKED -- AUTO LOANS -- 5.0%
$ 2,000 AESOP Funding II LLC, Series 1997-1A, Class A1,
6.220% 10/20/01@....................................... $ 1,998
2,000 Daimler-Benz Vehicle Trust, Series 1998-A, Class A4,
5.220% 12/22/03........................................ 1,942
2,050 World Omni Automobile Lease Securitization Trust, Series
1997-A, Class A4,
6.900% 06/25/03........................................ 2,051
--------
5,991
--------
ASSET-BACKED -- CREDIT CARD RECEIVABLES -- 2.0%
1,000 Circuit City Credit Card Master Trust, Series 1995-1,
Class A,
6.375% 08/15/05........................................ 999
1,340 First Chicago Master Trust II, Series 1995-0, Class A,
6.234%** 02/15/04...................................... 1,340
--------
2,339
--------
ASSET-BACKED -- HOME EQUITY LOANS -- 0.5%
608 Contimortgage Home Equity Loan Trust, Series 1997-3,
Class A5,
7.010% 08/15/13........................................ 606
4 The Money Store Home Equity Trust, Series 1996-B, Class
A6,
7.380% 03/15/17........................................ 4
--------
610
--------
TOTAL ASSET-BACKED SECURITIES
(Cost $9,031).......................................... 8,940
--------
CORPORATE BONDS AND NOTES -- 42.6%
AEROSPACE AND DEFENSE -- 1.0%
1,200 Raytheon Company,
7.900% 03/01/03........................................ 1,196
--------
AUTOMOBILE PARTS MANUFACTURERS -- 1.3%
1,600 Delphi Automotive Systems Corporation,
6.125% 05/01/04........................................ 1,508
--------
BANKING AND FINANCE -- 10.8%
1,280 Capital One Bank,
6.650% 03/15/04........................................ 1,228
1,600 Chase Manhattan Corporation,
5.750% 04/15/04........................................ 1,508
1,500 Crown Cork & Seal Financial plc,
6.750% 12/15/03........................................ 1,422
1,325 Finova Capital Corporation,
7.250% 11/08/04........................................ 1,262
1,500 Hanson Overseas B.V.,
7.375% 01/15/03........................................ 1,499
1,500 Heller Financial, Inc.,
6.000% 03/19/04........................................ 1,419
1,600 Lehman Brothers Holdings Inc.,
6.625% 04/01/04........................................ 1,540
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<C> <S> <C> <C>
BANKING AND FINANCE -- (CONTINUED)
$ 1,600 Newcourt Credit Group Inc.,
6.875% 02/16/05........................................ $ 1,554
1,500 Salomon Smith Barney Holdings, Inc.,
6.250% 05/15/03........................................ 1,453
--------
12,885
--------
BEVERAGES -- 1.1%
1,350 J. Seagram & Sons, Inc.,
6.625% 12/15/05........................................ 1,282
--------
CHEMICALS -- SPECIALTY -- 1.3%
1,600 Praxair, Inc.,
6.750% 03/01/03........................................ 1,557
--------
ELECTRIC POWER -- 1.1%
1,400 Consumers Energy Company,
6.200% 05/01/03........................................ 1,334
--------
FINANCIAL SERVICES -- 7.3%
1,500 Bear Stearns Companies Inc.,
7.625% 02/01/05........................................ 1,497
1,500 DaimlerChrysler NA Holdings,
6.900% 09/01/04........................................ 1,473
1,500 Ford Motor Credit Company,
7.500% 03/15/05........................................ 1,501
2,000 General Motors Acceptance Corporation,
6.150% 04/05/07........................................ 1,844
1,300 Sears Roebuck Acceptance Corporation,
6.000% 03/20/03........................................ 1,254
1,200 Washington Mutual, Inc.,
7.500% 08/15/06........................................ 1,181
--------
8,750
--------
GAS -- 2.1%
1,200 KN Energy, Inc.,
6.450% 03/01/03........................................ 1,166
1,500 Williams Companies, Inc.,
6.500% 08/01/06........................................ 1,403
--------
2,569
--------
INDUSTRIAL -- 2.3%
1,300 Case Credit Corporation,
6.125% 02/15/03........................................ 1,233
1,600 Tyco International Group SA,
6.375% 06/15/05........................................ 1,501
--------
2,734
--------
INSURANCE -- 0.8%
1,000 Hartford Life, Inc.,
6.900% 06/15/04........................................ 972
--------
MACHINERY AND EQUIPMENT -- 1.3%
1,600 Thermo Electron Corporation,
7.625% 10/30/08........................................ 1,511
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
99
<PAGE> 104
NATIONS MASTER INVESTMENT TRUST
Nations Intermediate Bond Master Portfolio
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<C> <S> <C> <C>
MEDIA -- 4.3%
$ 1,300 A.H. Belo Corporation,
6.875% 06/01/02........................................ $ 1,269
1,550 British Sky Broadcasting Group plc,
6.875% 02/23/09........................................ 1,388
1,300 Cox Radio, Inc.,
6.250% 05/15/03........................................ 1,252
1,345 USA Networks, Inc.,
6.750%, 11/15/05....................................... 1,289
--------
5,198
--------
OIL -- DOMESTIC -- 1.2%
1,500 Occidental Petroleum Corporation,
7.650% 02/15/06........................................ 1,475
--------
PROFESSIONAL SERVICES -- 0.6%
1,300 Service Corporation International,
6.300% 03/15/03........................................ 689
--------
RETAIL -- FOOD -- 1.4%
1,750 Nabisco Inc.,
6.125% 02/01/33........................................ 1,668
--------
TELECOMMUNICATIONS -- 3.6%
1,575 Cable & Wireless Communications plc,
6.375% 03/06/03........................................ 1,553
1,600 Sprint Capital Corporation,
5.875% 05/01/04........................................ 1,514
1,250 Vodafone AirTouch plc,
7.625% 02/15/05@....................................... 1,261
--------
4,328
--------
UTILITIES -- TELEPHONE -- 1.1%
1,400 MCI Worldcom, Inc.,
6.400% 08/15/05........................................ 1,344
--------
TOTAL CORPORATE BONDS AND NOTES
(Cost $53,311)......................................... 51,000
--------
FOREIGN BONDS AND NOTES -- 2.4%
1,385 Banco Latinoamericano,
7.200% 05/28/02@....................................... 1,355
1,570 Pemex Finance Ltd.,
5.720% 11/15/03........................................ 1,525
--------
TOTAL FOREIGN BONDS AND NOTES
(Cost $2,956).......................................... 2,880
--------
MORTGAGE-BACKED SECURITIES -- 40.2%
COMMERCIAL MORTGAGE-BACKED SECURITIES -- 21.4%
1,850 Commercial Mortgage Acceptance Corporation, Series
1998-C1, Class A2,
6.490% 07/15/31........................................ 1,733
1,590 Criimi Mae CMBS Corporation, Series 1998-1, Class A1,
5.697% 10/20/01@....................................... 1,503
2,250 CS First Boston Mortgage Securities Corporation, Series
1998-C1, Class A1B,
6.480% 05/17/08##...................................... 2,096
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- (CONTINUED)
$ 500 CS First Boston Mortgage Securities Corporation, Series
1998-C2, Class A2,
6.300% 11/15/08........................................ $ 462
1,500 DLJ Commercial Mortgage Corporation, Series 1998-CF2,
Class A1B,
6.240% 11/12/31##...................................... 1,375
1,300 DLJ Commercial Mortgage Corporation, Series 1998-CG1,
Class A1B,
6.410% 05/10/08##...................................... 1,213
1,900 General Growth Properties, Series 1997-1, Class A2,
6.602% 11/15/07##...................................... 1,790
2,300 GMAC Commercial Mortgage Securities Inc., Series 1997-C2,
Class A3,
6.566% 11/15/07##...................................... 2,153
8,653 JP Morgan Commercial Mortgage Finance Corporation, Series
1997-C4, Class X
Interest only,
1.255%** 12/26/28...................................... 472
2,100 Lehman Brothers Commercial Conduit Mortgage Trust, Series
1998-C1, Class A3,
6.480% 01/18/08##...................................... 1,957
1,000 Morgan Stanley Capital I, Series 1998-HF2, Class A2,
6.480% 11/15/30........................................ 936
2,950 Mortgage Capital Funding, Inc., Series 1998-MC1, Class
A2,
6.663% 01/18/08##...................................... 2,795
1,300 Mortgage Capital Funding, Inc., Series 1998-MC2, Class
A2,
6.423% 05/18/08........................................ 1,205
2,180 Nomura Asset Securities Corporation, Series 1998-D6,
Class A1B,
6.590% 03/17/28##...................................... 2,042
2,200 Prudential Securities Secured Financing Corporation,
Series 1998-C1, Class A1B,
6.506% 07/15/08##...................................... 2,057
55,513 Vendee Mortgage Trust, Series 1998-1, Class 2, IO,
.439%** 09/15/27....................................... 1,073
54,102 Vendee Mortgage Trust, Series 1998-3, Class 1, IO,
.304%** 03/15/29....................................... 744
--------
25,606
--------
FEDERAL HOME LOAN MORTGAGE CORPORATION
(FHLMC) CERTIFICATES -- 6.4%
7,850 5.500% 05/15/02.......................................... 7,627
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
(FNMA) CERTIFICATES -- 12.1%
3,188 6.500% 04/01/29.......................................... 2,990
11,264 7.000% 09/01/29-10/01/29................................. 10,831
621 7.305%** 08/01/36........................................ 642
--------
14,463
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
100
<PAGE> 105
NATIONS MASTER INVESTMENT TRUST
Nations Intermediate Bond Master Portfolio
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------
<C> <S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) CERTIFICATES -- 0.3%
$ 311 10.000% 07/15/16-08/15/17.............. $ 335
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $50,288)....................... 48,031
--------
U.S. TREASURY OBLIGATIONS -- 4.9%
U.S. TREASURY NOTES -- 4.2%
2,400 5.000% 04/30/01........................ 2,365
1,700 5.625% 05/15/01........................ 1,685
1,000 6.625% 04/30/02........................ 1,002
--------
5,052
--------
U.S. TREASURY STRIPS -- 0.7%
900 Interest only 02/15/02................. 801
--------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $5,861)........................ 5,853
--------
<CAPTION>
SHARES
(000)
---------
<C> <S> <C> <C>
INVESTMENT COMPANIES -- 6.1%
(Cost $7,249)
7,249 Nations Cash Reserves#................. 7,249
--------
TOTAL INVESTMENTS
(Cost $128,696*).............. 103.7% 123,953
--------
OTHER ASSETS AND
LIABILITIES (NET)............. (3.7)%
Interest receivable.................... 1,421
Variation margin/due to broker......... (5)
Investment advisory fee payable........ (41)
Administration fee payable............. (7)
Payable for investment securities (5,679)
purchased............................
Accrued Trustees'/Directors' fees and
expenses............................. (2)
Accrued expenses and other (139)
liabilities..........................
--------
TOTAL OTHER ASSETS AND
LIABILITIES (NET).................... (4,452)
--------
NET ASSETS...................... 100.0% $119,501
========
</TABLE>
---------------
* Federal Income Tax Information: Net unrealized depreciation of $4,783 on
investment securities was comprised of gross appreciation of $228 and gross
depreciation of $5,011 for Federal income tax purposes. At March 31, 2000,
the aggregate cost of securities for Federal income tax purposes was
$128,736.
** Variable rate note. The interest rate shown reflects the rate in effect at
March 31, 2000.
# Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and sub-advised by Banc of America Capital Management, Inc.
## All or a portion of security segregated as collateral for futures contracts.
@ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
SEE NOTES TO FINANCIAL STATEMENTS.
101
<PAGE> 106
NATIONS MASTER INVESTMENT TRUST
Nations High Yield Bond Master Portfolio
STATEMENT OF NET ASSETS MARCH 31, 2000
<TABLE>
<CAPTION>
VALUE
SHARES (000)
--------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS -- 0.7%
EDUCATION -- 0.2%
2,815 Abitibi-Consolidated Inc. .............. $ 27
-------
HEALTHCARE -- 0.1%
1,255 Apria Healthcare Group Inc. ............ 18
-------
RECREATION -- 0.4%
2,875 Harrah's Entertainment Inc.++........... 53
-------
TOTAL COMMON STOCKS
(Cost $95)............................ 98
-------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
---------
<C> <S> <C> <C>
CONVERTIBLE BONDS AND NOTES -- 3.4%
METALS AND MINING -- 1.5%
$ 125 Agnico-Eagle Mines Ltd.,
3.500% 01/27/04....................... 81
195 Battle Mountain Gold Company,
6.000% 01/04/05....................... 115
-------
196
-------
REAL ESTATE INVESTMENT TRUSTS
(REITs) -- 0.9%
160 Security Capital U.S. Realty,
2.000% 05/22/03@...................... 120
-------
TELECOMMUNICATIONS -- 1.0%
210 Premiere Technology, PTEK,
5.750% 07/01/04....................... 137
-------
TOTAL CONVERTIBLE BONDS AND NOTES
(Cost $469)........................... 453
-------
<CAPTION>
SHARES
---------
<C> <S> <C> <C>
CONVERTIBLE PREFERRED STOCK -- 0.2%
CHEMICALS -- DIVERSIFIED -- 0.2%
(Cost $33)
550 Hercules Trust II Inc. ................. 32
-------
<CAPTION>
PRINCIPAL
AMOUNT
(000)
---------
<C> <S> <C> <C>
CORPORATE BONDS AND NOTES -- 68.8%
BANKING AND FINANCE -- 0.6%
$ 85 Tembec Finance Corporation,
9.875% 09/30/05....................... 85
-------
BROKERAGE SERVICES -- 0.1%
20 LaBranche & Company Inc.,
12.000% 03/01/07@..................... 20
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------
<C> <S> <C> <C>
CHEMICALS -- SPECIALTY -- 2.2%
$ 115 Agricultural Minerals & Chemicals,
10.750% 09/30/03...................... $ 86
120 General Chemical Industrial Products,
10.625% 05/01/09...................... 104
105 Sovereign Specialty Chemicals, Inc.,
11.875% 03/15/10@..................... 105
-------
295
-------
COMPUTER RELATED -- 1.0%
140 Exodus Communications Inc.,
11.250% 07/01/08...................... 139
-------
CONSTRUCTION -- 1.7%
90 Amatek Industries PTY, Ltd.,
12.000% 02/15/08...................... 84
85 Iron Age Corporation,
9.875% 05/01/08....................... 62
90 Lennar Corporation,
7.625% 03/01/09....................... 78
-------
224
-------
ELECTRIC POWER -- 2.7%
170 Aes Eastern Energy LP,
9.000% 01/02/17@...................... 166
95 PSEG Energy Holdings Inc.,
10.000% 10/01/09@..................... 98
120 Western Resources, Inc.,
6.875% 08/01/04....................... 100
-------
364
-------
ENERGY -- 1.2%
165 CMS Energy Corporation,
10.875% 12/15/04@..................... 158
-------
ENTERTAINMENT -- 5.9%
210 Bally Total Fitness Holding Corporation,
Series D,
9.875% 10/15/07....................... 192
53 Hollywood Entertainment Corporation,
10.625% 08/15/04...................... 47
Loews Cineplex Entertainment
170 Corporation,
8.875% 08/01/08.......................
107
60 Mandalay Resort Group,
7.625% 07/15/13....................... 47
110 Penn National Gaming, Inc.,
10.625% 12/15/04...................... 111
185 Trump Atlantic City Associates,
11.250% 05/01/06...................... 123
100 Vail Resorts, Inc.,
8.750% 05/15/09....................... 91
90 Venetian Casino Resort LLC,
12.250% 11/15/04...................... 85
-------
803
-------
FINANCIAL SERVICES -- 0.8%
125 Esi Tractebel Acquisition Corporation,
7.990% 12/30/11....................... 107
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
102
<PAGE> 107
NATIONS MASTER INVESTMENT TRUST
Nations High Yield Bond Master Portfolio
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------
<C> <S> <C> <C>
HEALTHCARE -- 5.3%
$ 205 Apria Healthcare Group Inc.,
9.500% 11/01/02....................... $ 197
220 Columbi/HCA Healthcare Corporation,
7.500% 11/15/95....................... 167
145 Fountain View Inc., Series B,
11.250% 04/15/08...................... 102
447 Multicare Companies Inc.,
.000% 08/01/07........................ 22
285 Per-Se Technologies, Inc.,
9.500% 02/15/05....................... 221
-------
709
-------
INDUSTRIAL -- 0.8%
120 Great Central Mines Ltd.,
8.875% 04/01/08....................... 107
-------
INSURANCE -- 0.9%
165 Willis Corroon Corporation plc,
9.000% 02/01/09....................... 122
-------
MACHINERY AND EQUIPMENT -- 0.4%
65 Thermadyne Manufacturing LLC,
9.875% 06/01/08....................... 52
-------
MANUFACTURING -- 5.0%
95 American Tissue, Inc.,
12.500% 07/15/06...................... 94
110 Commonwealth Industries, Inc.,
10.750% 10/01/06...................... 109
140 Desa International Inc.,
9.875% 12/15/07....................... 101
80 Harnischfeger Industries, Inc.,
7.250% 12/15/25(a)(b)................. 34
100 Insilco Holding Company,
12.000% 08/15/07...................... 95
140 Integrated Circuit Systems, Inc.,
11.500% 05/15/09...................... 158
105 Knowles Electronics Inc.
13.125% 10/15/09@..................... 90
-------
681
-------
MEDIA -- 11.3%
230 Adelphia Communications Corporation,
9.875% 03/01/07....................... 224
100 Cablevision SA,
13.750% 04/30/07@..................... 99
240 Charter Communications Holdings LLC,
8.625% 04/01/09....................... 212
375 Charter Communications Holdings LLC,
11.680%*** 04/01/11................... 208
395 Diamond Cable Communication Company,
13.250% 09/30/04...................... 420
130 Sirius Satellite Radio Inc.,
14.500% 05/15/09...................... 120
260 UIH Australia/Pacific Inc.,
11.260%*** 05/15/06................... 239
-------
1,522
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------
<C> <S> <C> <C>
MEDICAL SERVICES -- 0.2%
$ 40 Bergen Brunswig Corporation,
7.375% 01/15/03....................... $ 33
-------
PROFESSIONAL SERVICES -- 3.9%
120 Building One Services Corporation,
10.500% 05/01/09...................... 110
130 CB Richard Ellis Services Inc.,
8.875% 06/01/06....................... 113
65 Marsulex Inc.,
9.625% 07/01/08....................... 59
115 Standard Commercial Corporation,
8.875% 08/01/05....................... 85
210 Young America Corporation,
11.625% 02/15/06...................... 159
-------
526
-------
PUBLISHING -- 2.5%
130 Garden State Newspapers, Inc.,
8.750% 10/01/09....................... 115
35 Garden State Newspapers, Inc.,
8.625% 07/01/11....................... 31
115 Official Information Company,
10.375% 11/01/07...................... 108
90 Phoenix Color Corporation,
10.375% 02/01/09...................... 81
-------
335
-------
REAL ESTATE INVESTMENT TRUSTS
(REITs) -- 1.7%
100 BF Saul,
9.750% 04/01/08....................... 87
170 Crescent Real Estate Equities L.P.,
7.500% 09/15/07....................... 143
-------
230
-------
RESTAURANTS AND LODGING -- 1.7%
210 Advantica Restaurant Group, Inc.,
11.250% 01/15/08...................... 141
115 ITT Corporation,
7.375% 11/15/15....................... 96
-------
237
-------
RETAIL -- FOOD -- 0.7%
100 Dominos Inc.,
10.375% 01/15/09...................... 92
-------
RETAIL -- GENERAL -- 1.7%
145 Jafra Cosmetics International, Inc.,
11.750% 05/01/08...................... 138
105 Musicland Group Inc.,
9.000% 06/15/03....................... 92
-------
230
-------
TELECOMMUNICATIONS -- 15.3%
170 Call-Net Enterprises, Inc.,
14.900%*** 08/15/08................... 77
105 Call-Net Enterprises, Inc.,
9.375% 05/15/09....................... 79
85 COLO.com,
13.875% 03/15/10@..................... 87
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
103
<PAGE> 108
NATIONS MASTER INVESTMENT TRUST
Nations High Yield Bond Master Portfolio
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) (000)
--------------------------------------------------------------
<C> <S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
$ 375 COLT Telocom Group plc,
9.830%*** 12/15/06.................... $ 329
105 HighwayMaster Communications, Inc.,
Series B,
13.750% 09/15/05...................... 65
290 ICG Services, Inc.,
14.050%*** 05/01/08................... 154
110 ICO Global Communications (Holdings)
Limited,
15.000% 08/01/05(a)(b)................ 65
45 Level 3 Communications, Inc.,
10.750% 03/15/08@..................... 42
45 Loral Space & Communications Ltd.,
9.500% 01/15/06....................... 29
220 Microcell Telecommunicationsnc., Class
B, 10.700%*** 06/01/06................ 194
190 Millicom International Cellular SA,
13.150%*** 06/01/06................... 160
130 Nextel International Inc.,
13.350%*** 04/15/08................... 79
160 Orion Network Systems, Inc.,
20.960%*** 01/15/07................... 74
145 Orius Capital Corporation,
12.750% 02/01/10@..................... 146
60 Pagemart Nationwide,
15.000% 02/01/05...................... 63
95 PSINet, Inc.,
11.500% 11/01/08...................... 95
170 RCN Corporation, Series B,
12.810%*** 02/15/08................... 99
110 United Pan-Europe Communications NV,
11.250% 02/01/10@..................... 106
205 United Pan-Europe Communications NV,
13.380%*** 02/01/10@.................. 103
-------
2,046
-------
TRANSPORTATION -- 0.4%
60 Valujet Inc.,
10.250% 04/15/01...................... 53
-------
UTILITIES -- TELEPHONE -- 0.8%
120 Hermes Europe Railtel BV,
11.500% 08/15/07...................... 113
-------
TOTAL CORPORATE BONDS AND NOTES
(Cost $9,435)......................... 9,283
-------
FOREIGN BONDS AND NOTES -- 3.3%
130 Octel Developments plc,
10.000% 05/01/06...................... 126
160 Rogers Communications, Inc.,
8.875% 07/15/07....................... 155
180 Versatel Telecom International NV,
11.250% 03/30/10@..................... 168
-------
TOTAL FOREIGN BONDS AND NOTES
(Cost $464)........................... 449
-------
VALUE
SHARES (000)
--------------------------------------------------------------
<C> <S> <C> <C>
PREFERRED STOCK -- 2.8%
MEDIA -- 1.3%
1,650 Paxson Communications Corporation(c).... $ 170
-------
TELECOMMUNICATIONS -- 1.5%
1,850 Nextel Communications, Inc.(c).......... 197
-------
TOTAL PREFERRED STOCK
(Cost $369)........................... 367
-------
PRINCIPAL
AMOUNT
-------
SHORT TERM INVESTMENTS -- 22.7%
COMMERCIAL PAPER -- 22.7%
$ 345 American Express Credit Corporation
5.90% 04/27/00........................ 344
400 General Electric Capital Corporation
5.95% 04/04/00........................ 400
260 Merrill Lynch and Company
6.05% 04/12/00........................ 260
550 Prudential Funding Company
5.91% 04/04/00........................ 549
550 Salomon Smith Barney Holdings Inc.
5.92% 04/07/00........................ 549
500 UBS Finance (Delaware) Inc.
6.06% 04/03/00........................ 500
470 Xerox Credit Corporation
6.07% 04/18/00........................ 469
-------
TOTAL SHORT TERM INVESTMENTS
(Cost $3,071)......................... 3,071
-------
SHARES
(000)
-------
<C> <S> <C> <C>
INVESTMENT COMPANIES -- 0.0%+
(Cost $3)
3 Nations Cash Reserves#.................. 3
-------
TOTAL INVESTMENTS
(Cost $13,939*)................ 101.9% 13,756
-------
OTHER ASSETS AND
LIABILITIES (NET).............. (1.9)%
Cash.................................... 150
Unrealized appreciation on forward
foreign exchange contracts............ 4
Receivable for investment securities
sold.................................. 96
Dividends receivable.................... 4
Interest receivable..................... 245
Investment advisory fee payable......... (4)
Administration fee payable.............. (1)
Payable for investment securities
purchased............................. (704)
Accrued Trustees'/Directors' fees and
expenses.............................. (4)
Accrued expenses and other
liabilities........................... (42)
-------
TOTAL OTHER ASSETS AND
LIABILITIES (NET)..................... (256)
-------
NET ASSETS....................... 100.0% $13,500
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
104
<PAGE> 109
NATIONS MASTER INVESTMENT TRUST
Nations High Yield Bond Master Portfolio
STATEMENT OF NET ASSETS (CONTINUED) MARCH 31, 2000
---------------
* Federal Income Tax Information: Net unrealized depreciation of $183 on
investment securities was comprised of gross appreciation of $66 and gross
depreciation of $249 for Federal income tax purposes. At March 31, 2000, the
aggregate cost of securities for Federal income tax purposes was $13,939.
*** Zero coupon security. The rate shown reflects the yield to maturity.
@ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
++ Non-income producing security.
+ Amount represents less than 0.1%.
(a) Issue in default.
(b) Issuer in bankruptcy.
(c) PIK ("Payment in kind"). Interest or dividend payment is made with
additional securities.
# Money market mutual fund registered under the Investment Company Act of 1940,
as amended, and sub-advised by Banc of America Capital Management, Inc.
SEE NOTES TO FINANCIAL STATEMENTS.
105
<PAGE> 110
NATIONS MASTER INVESTMENT TRUST
STATEMENTS OF OPERATIONS
<TABLE>
HIGH YIELD BOND
INTERMEDIATE BOND MASTER PORTFOLIO
MASTER PORTFOLIO
------------------
------------------------------------- FOR THE PERIOD
FOR THE PERIOD FOR THE PERIOD FEBRUARY 14, 2000
MAY 15, 1999 TO MARCH 1, 1999 TO TO
MARCH 31, 2000 MAY 14, 1999(a) MARCH 31, 2000(b)
-----------------------------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
INVESTMENT INCOME:
Interest................................................. $ 8,026 $ 1,950 $ 121
Dividends................................................ -- -- 1
----------------- ----------------- -------------------
EXPENSES:
Investment advisory fee.................................. 479 97 8
Administration fee....................................... 61 16 1
Fund accounting fees and expenses........................ -- 18 --
Custodian fees........................................... 11 4 4
Legal and audit fees..................................... 46 -- 24
Directors' fees and expenses............................. 14 -- 4
Other.................................................... 54 2 3
----------------- ----------------- -------------------
Total expenses....................................... 665 137 44
Fees reduced by credits allowed by the custodian......... (10) (14) (1)
----------------- ----------------- -------------------
Net expenses......................................... 655 123 43
----------------- ----------------- -------------------
NET INVESTMENT INCOME.................................... 7,371 1,827 79
----------------- ----------------- -------------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Net realized gain/(loss) from:
Security transactions.................................. (2,483) (143) 38
Forward foreign exchange contracts, foreign currencies
and other net assets................................. -- -- --*
----------------- ----------------- -------------------
Net realized gain/(loss) on investments.................. (2,483) (143) 38
----------------- ----------------- -------------------
Change in unrealized appreciation/(depreciation) of:
Securities............................................. (2,694) (433) (183)
Futures................................................ (32) -- --
Forward foreign exchange contracts, foreign currencies
and other net assets................................. -- -- 4
----------------- ----------------- -------------------
Net change in unrealized appreciation/(depreciation) of
investments............................................ (2,726) (433) (179)
----------------- ----------------- -------------------
Net realized and unrealized gain/(loss) on investments... (5,209) (576) (141)
----------------- ----------------- -------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $ 2,162 $ 1,251 $ (62)
================= ================= ===================
</TABLE>
---------------
* Amount represents less than $500.
(a) Represents financial information for the Pacific Horizon Intermediate Bond
Master Portfolio, which was reorganized into Intermediate Bond Master
Portfolio on May 21, 1999.
(b) High Yield Bond Master Portfolio commenced operations on February 14, 2000.
SEE NOTES TO FINANCIAL STATEMENTS.
106
<PAGE> 111
NATIONS MASTER INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
INTERMEDIATE BOND HIGH YIELD BOND
MASTER PORTFOLIO MASTER PORTFOLIO
----------------------------------------------- ---------------
PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
3/31/00 5/14/1999(a) 2/28/1999(a) 3/31/00(b)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Net investment income.............................. $ 7,371 $ 1,827 $ 8,140 $ 79
Net realized gain/(loss) on investments............ (2,483) (143) 1,863 38
Net change in unrealized
appreciation/(depreciation) of investments....... (2,726) (433) (3,025) (179)
-------------- -------------- -------------- ----------------
Net increase/(decrease) in net assets resulting
from operations.................................. 2,162 1,251 6,978 (62)
Contributions...................................... 33,625 9,177 62,766 15,796
Withdrawals........................................ (72,179) (11,824) (38,022) (2,234)
-------------- -------------- -------------- ----------------
Net increase/(decrease) in net assets.............. (36,392) (1,396) 31,722 13,500
NET ASSETS:
Beginning of period................................ 155,893 157,289 125,567 --
-------------- -------------- -------------- ----------------
End of period...................................... $ 119,501 $ 155,893 $ 157,289 $ 13,500
============== ============== ============== ================
</TABLE>
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
WITHOUT WAIVERS
AND/OR EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF NET RATIO OF
OPERATING INVESTMENT OPERATING
EXPENSES INCOME/(LOSS) PORTFOLIO EXPENSES TO
TO AVERAGE TO AVERAGE TURNOVER AVERAGE
NET ASSETS NET ASSETS RATE NET ASSETS
------------------------------------------------------------
<S> <C> <C> <C> <C>
INTERMEDIATE BOND MASTER PORTFOLIO:
Period ended 3/31/2000...................................... 0.54%+ 6.10%+ 90% 0.55%+
Period ended 5/14/1999(a)................................... 0.38+ 5.61+ 19 0.42+
Year ended 2/28/1999(a)..................................... 0.35 5.69 137 0.45
Year ended 2/28/1998(a)..................................... 0.35 5.99 127 0.55
Year ended 2/28/1997(a)..................................... 0.35 5.86 83 0.65
Year ended 2/29/1996(a)..................................... 0.18 6.47 172 0.68
Year ended 2/28/1995(a)..................................... 0.25 6.22 240 0.75
HIGH YIELD BOND MASTER PORTFOLIO:
Period ended 3/31/2000(b)................................... 2.82%+ 5.16%+ 26% 2.86%+
</TABLE>
---------------
+ Annualized.
(a) Represents financial information for the Pacific Horizon Intermediate Bond
Master Portfolio, which was reorganized into Intermediate Bond Master
Portfolio on May 21, 1999.
(b) High Yield Bond Master Portfolio commenced operations on February 14, 2000.
SEE NOTES TO FINANCIAL STATEMENTS.
107
<PAGE> 112
NATIONS MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
Nations Master Investment Trust (the "Master Trust") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. At March 31, 2000, the Master Trust offered seven
separate series or Master Portfolios. These financial statements pertain only to
the Intermediate Bond Master Portfolio and the High Yield Bond Master Portfolio
(the "Master Portfolio" and collectively, the "Master Portfolios"). Financial
statements for the other portfolios of the Master Trust are presented under
separate cover.
The following investors were invested in the Master Portfolios at March 31,
2000:
<TABLE>
<S> <C>
Intermediate Bond Master Portfolio:
Nations Intermediate Bond Fund.............. 75.4%
Nations Intermediate Bond Fund (Offshore)
(formerly World Horizon U.S. Bond Fund)... 24.6%
High Yield Bond Master Portfolio:
Nations High Yield Bond Fund................ 94.0%
Nations High Yield Bond Fund (Offshore)..... 6.0%
</TABLE>
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make certain 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 Master Portfolios in
the preparation of their financial statements.
Securities valuation: Securities are generally valued using prices provided by
a pricing service or based upon broker-dealer quotations. Certain prices
provided by broker-dealers or the pricing service may be based on a matrix
pricing system, which considers such factors as security prices, yields and
maturities. Securities for which market quotations are not readily available are
valued under procedures adopted by the Board of Trustees. Short-term investments
that mature in 60 days or less are valued at amortized cost, which approximates
current market value.
Futures contracts: The Intermediate Bond Master Portfolio and High Yield Bond
Master Portfolio may invest in futures contracts. Upon entering into a futures
contract, a Master Portfolio is required to deposit with the broker an amount of
cash or cash equivalents equal to a specified percentage of the contract amount.
This is known as the "initial margin." Subsequent payments ("variation margin")
are made or received by a Master Portfolio each day, depending on the daily
fluctuation of the value of the contract.
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking-to-market" on
a daily basis to reflect the market value of the contract. A Master Portfolio
recognizes a realized gain or loss when the contract is closed, equal to the
difference between the proceeds from (or cost of) the closing transaction and a
Master Portfolio's basis in the contract.
Risks of investments in futures contracts include the possible movement of the
securities or indices underlying the contracts, the possibility that there may
not be a liquid secondary market for the contracts, that a change in the value
of the contract may not correlate with changes in the value of the underlying
securities, or that the counterparty to a contract may default on its obligation
to perform.
Forward Foreign Currency Transactions: Generally, a Master Portfolio may enter
into forward currency exchange contracts only under two circumstances: (i) when
a Master Portfolio enters into a contract for the purchase or sale of a security
denominated in a foreign currency, to "lock" in the U.S. exchange rate of the
transaction, with such period being a short-dated contract covering the period
between transaction date and settlement date; and (ii) when the investment
adviser or sub-adviser believes that the currency of a particular foreign
country may experience a substantial movement against the U.S. dollar. Forward
foreign currency contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded by a Master
Portfolio as an unrealized gain or loss. When the contract is closed or offset
with the same counterparty, a Master Portfolio records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value at the time it was closed or offset.
Forward foreign currency contracts will be used primarily to protect the Master
Portfolios from adverse currency movements and will generally not be entered
into for terms greater than one year. The use of forward foreign currency
contracts does not eliminate fluctuations in the underlying prices of the Master
Portfolio's investment securities; however, it does establish a rate of exchange
that can be achieved in the future. The use of forward contracts involves the
risk that anticipated currency movements will not be accurately predicted. A
forward contract would limit the risk of loss due to a decline in
108
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NATIONS MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the value of a particular currency; however, it also would limit any potential
gain that might result should the value of the currency increase instead of
decrease. These contracts may involve market risk in excess of the unrealized
gain or loss reflected in the Statements of net assets. In addition, the Master
Portfolios could be exposed to risks if counterparties to the contracts are
unable to meet the terms of their contracts. The counterparty risk exposure is,
therefore, closely monitored and contracts are only executed with high credit
quality financial institutions.
Securities transactions and investment income: Securities transactions are
accounted for on trade date. Realized gains and losses are computed based on the
specific identification of securities sold. Interest income, adjusted for
accretion of discounts and amortization of premiums, is earned from settlement
date and recorded on an accrual basis. Dividend income is recorded on
ex-dividend date.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after trade date; interest income is not accrued until
settlement date. At the time the Master Portfolio enters into such transactions,
it instructs the custodian to segregate assets with a current value at least
equal to the amount of its when-issued or delayed delivery purchase commitments.
Expenses: General expenses of the Trust are allocated to the Master Portfolios
based upon their relative net assets or other expense allocation methodology
determined by the nature of the expense. Expenses directly attributable to a
Master Portfolio are charged to such Portfolio.
Federal income taxes: The Master Portfolios are treated as partnerships for
Federal income tax purposes and therefore is not subject to Federal income tax.
Each investor in the Master Portfolios will be taxed on its share of the Master
Portfolio's ordinary income and capital gains.
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS
The Master Trust has entered into an investment advisory agreement (the
"Investment Advisory Agreement") with Banc of America Advisors, Inc. ("BAAI"), a
wholly-owned subsidiary of Bank of America, N.A. ("Bank of America"), which in
turn is a wholly-owned banking subsidiary of Bank of America Corporation, a bank
holding company organized as a Delaware corporation, pursuant to which BAAI
provides investment advisory services to the Portfolios. Under the terms of the
Investment Advisory Agreement, BAAI is entitled to receive an advisory fee,
calculated daily and payable monthly, at the maximum annual rate of 0.40% of the
Intermediate Bond Portfolio's average daily net assets and 0.55% of the High
Yield Bond Portfolio's average daily net assets.
The Master Trust, on behalf of the Intermediate Bond Master Portfolio, has
entered into a sub-advisory agreement with BAAI and Banc of America Capital
Management, Inc. ("BACAP") (formerly known as TradeStreet Investment Associates,
Inc.), a wholly-owned subsidiary of Bank of America, pursuant to which BACAP is
entitled to receive a sub-advisory fee from BAAI at the maximum annual rate of
0.15% of the Portfolio's average daily net assets.
The Master Trust, on behalf of the High Yield Bond Master Portfolio, has entered
into a sub-advisory agreement with BAAI and MacKay Shields LLC ("MacKay
Shields") pursuant to which MacKay Shields is entitled to receive a sub-advisory
fee from BAAI at the maximum annual rate of 0.40% of the Portfolio's average
daily net assets up to and including $100 million; 0.375% over $100 million and
up to and including $200 million and 0.35% over $200 million.
Stephens Inc. ("Stephens") and BAAI serve as co-administrators of the Master
Trust. Under the co-administration agreements, Stephens and BAAI are entitled to
receive a combined fee, computed daily and paid monthly, at the annual rate of
0.05% of each Portfolios' average daily net assets. The Bank of New York ("BNY")
serves as sub-administrator of the Master Trust pursuant to an agreement with
BAAI. For the period ended March 31, 2000, BAAI earned $61,188 from the
Portfolios for its co-administration services.
BNY serves as the custodian of the Master Trust's assets. For the period ended
March 31, 2000, expenses of the Master Portfolios were reduced by $10,734 under
expense offset arrangements with BNY. The Master Portfolios could have invested
a portion of the assets utilized in connection with the expense offset
arrangements in an income producing asset if they had not entered into such
arrangements.
No officer, director or employee of Bank of America, BAAI or BACAP, or any
affiliate thereof, receives any compensation from the Master Trust for serving
as a Trustee or Officer of the Master Trust.
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NATIONS MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Master Trust's eligible Trustees may participate in non-qualified deferred
compensation and retirement plans which may be terminated at any time. All
benefits provided under these plans are unfunded and any payments to plan
participants are paid solely out of the Master Portfolios' assets. Income earned
on each plan participant's deferral account is tied to the rate of return of the
eligible mutual funds selected by the participants or, if no funds are selected,
to the rate of return of Nations Treasury Fund, a portfolio of Nations Fund,
Inc., another registered investment company in the Nations Funds family. The
expense for the deferred compensation and retirement plans is included in
"Trustees' fees and expenses" in the Statements of operations.
Certain Master Portfolios have made daily investments of cash balances in the
Nations Cash Reserves, a portfolio of Reserves, pursuant to an exemptive order
received from the Securities and Exchange Commission. For the period ended March
31, 2000, the Master Portfolios earned $195,526 in the aggregate from such
investments, which is included in interest income.
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
long-term U.S. government securities and short-term investments, for the period
ended March 31, 2000 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
PORTFOLIO (000) (000)
--------------------------------------------------------
<S> <C> <C>
Intermediate Bond Master
Portfolio....................... $21,512 $22,203
High Yield Bond Master
Portfolio....................... 11,768 959
</TABLE>
The aggregate cost of purchases and proceeds from sales of long-term U.S.
government securities for the period ended March 31, 2000 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
PORTFOLIO (000) (000)
--------------------------------------------------------
<S> <C> <C>
Intermediate Bond Master
Portfolio...................... $85,079 $115,315
</TABLE>
4. FUTURES CONTRACTS
At March 31, 2000, the following Master Portfolio had futures contracts open:
<TABLE>
<CAPTION>
VALUE OF CONTRACT MARKET VALUE OF UNREALIZED
NUMBER OF WHEN OPENED CONTRACTS (DEPRECIATION)
DESCRIPTION CONTRACTS (000) (000) (000)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTERMEDIATE BOND MASTER PORTFOLIO:
US 5 year Treasury note (short position) expiring June
2000(a)................................................... 45 $4,391 $4,433 $42
US 2 year Treasury note (long position) expiring June
2000(a)................................................... 35 6,919 6,929 10
</TABLE>
---------------
(a) Securities have been segregated as collateral for the Intermediate Bond
Master Portfolio for open futures contracts.
5. LINES OF CREDIT
The Master Trust participates with other Nations Funds in an uncommitted line of
credit provided by BNY under a line of credit agreement (the "Agreement").
Advances under the Agreement may be made for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require the
untimely disposition of securities. Interest on borrowings is payable at a
specified Federal Funds rate plus 0.50% on an annualized basis. Each
participating Master Portfolio maintains a ratio of no less than 4 to 1 net
assets (not including amounts borrowed pursuant to the Agreement) to the
aggregate amount of indebtedness pursuant to the Agreement.
At March 31, 2000, there were no loans outstanding under this Agreement. For the
period ended March 31, 2000, there were no borrowings by the Master Portfolios
under the Agreement.
The Master Trust also participates with other Nations Funds in a committed line
of credit provided by BNY. Interest on borrowings under the committed line is
payable at a specified Federal Funds rate plus 0.50% on an annualized basis. A
facility fee of 0.09% per annum of the total amounts available under the line of
credit is charged, of which each Master Portfolio has agreed to pay its pro rata
share. This fee is paid quarterly in arrears. Each participating Master
Portfolio is required to maintain an asset coverage ratio of at least 300% under
the terms of the arrangement. For the period ended March 31, 2000 there were no
borrowings by the Master Portfolios under the committed line of credit.
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NATIONS MASTER INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. SECURITIES LENDING
Under an agreement with BNY, the Master Portfolios can lend their securities to
approved brokers, dealers and other financial institutions. Loans are
collateralized by cash in an amount at least equal to the market value of the
securities loaned. The cash collateral received is invested in Nations Cash
Reserves. A portion of the income generated by the investment of the collateral,
net of any rebates paid by BNY to borrowers, is remitted to BNY as lending
agent, and the remainder is paid to the Master Portfolio. Generally, in the
event of counterparty default, the Master Portfolio has the right to use the
collateral to offset losses incurred. There would be a potential loss to the
Master Portfolio in the event the Master Portfolio is delayed or prevented from
exercising its right to dispose of the collateral. The Master Portfolio bears
the risk of loss with respect to the investment of collateral.
At March 31, 2000, the Master Portfolios were not involved in securities
lending.
7. REORGANIZATION OF MASTER INVESTMENT TRUST, SERIES I
On May 21, 1999, Intermediate Bond Master Portfolio, a newly established
portfolio, acquired the assets and liabilities of Intermediate Bond Master
Portfolio ("Acquired Portfolio"), a series of Master Investment Trust, Series I,
pursuant to a plan of reorganization approved by its interest holders. The
acquisition was accomplished by a tax-free exchange of shares of Intermediate
Bond Master Portfolio in an amount equal to the outstanding interests of the
Acquired Portfolio. The financial statements of the Intermediate Bond Master
Portfolio reflect the historical financial results of the Acquired Portfolio
prior to the reorganization. Additionally, the fiscal year end of the
Intermediate Bond Master Portfolio for financial reporting purposes was changed
to coincide with that of the Master Trust.
8. OPEN FORWARD CURRENCY CONTRACTS
At March 31, 2000, High Yield Master Portfolio had the following open forward
currency contracts:
<TABLE>
<CAPTION>
NET UNREALIZED
CONTRACT VALUE COST VALUE APPRECIATION/
EXPIRATION TO LOCAL US$ US$ (DEPRECIATION)
DATE DELIVER CURRENCY (000) (000) (000)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Contracts to Buy:
06/08/00 Euro 19,600 19 19 --
Contracts to Sell:
06/08/00 Euro 65,000 64 63 $1
06/08/00 Euro 177,300 174 171 3
--
4
--
Net unrealized appreciation on forward currency
contracts............................................. $4
==
</TABLE>
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NATIONS MASTER INVESTMENT TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE INVESTORS AND TRUSTEES OF NATIONS MASTER INVESTMENT TRUST
In our opinion, the accompanying statements of net assets, and the related
statements of operations and of changes in net assets and the supplementary data
present fairly, in all material respects, the financial position of Nations
Intermediate Bond Master Portfolio and Nations High Yield Bond Master Portfolio,
(portfolios of Nations Master Investment Trust, hereafter referred to as the
"Portfolios") at March 31, 2000, and the results of each of their operations,
the changes in each of their net assets and the supplementary data for each of
the periods indicated, in conformity with accounting principles generally
accepted in the United States. These financial statements and supplementary data
(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 auditing standards generally accepted in
the United States, 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, 2000 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
New York, New York
May 19, 2000
112
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P.O. Box 34602
Charlotte, NC 28254-4602
Toll free 1.800.321.7854
NATIONS FUNDS
FIXEDAR (3/00)
