As filed with the Securities and Exchange Commission
on July 30, 1999
Registration No. 33-33144; 811-6030
-----------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Post-Effective Amendment No. 29 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 30 |X|
(Check appropriate box or boxes)
------------------------
THE CAPITOL MUTUAL FUNDS
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
--------------------------
Registrant's Telephone Number, including Area Code: (800) 321-7854
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With copies to:
Robert M. Kurucza, Esq. Carl Frischling, Esq.
Marco E. Adelfio, Esq. Kramer, Levin, Naftalis
Morrison & Foerster LLP & Frankel
2000 Pennsylvania Ave., N.W., Suite 5500 919 Third Avenue
Washington, D.C. 20006 New York, New York 10022
It is proposed that this filing will become effective (check appropriate box):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
|X| Immediately upon filing pursuant to Rule 485(b); or |_| on (date) pursuant to Rule 485(b), or
|_| 60 days after filing pursuant to Rule 485(a), or |_| on (date) pursuant to Rule 485(a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2) |_| on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a previously filed post-effective amendment.
</TABLE>
<PAGE>
EXPLANATORY NOTE
The Registrant is filing this Post-Effective Amendment No. 29 to
the Trust's Registration Statement for the purpose of including updated
financial information and other non-material changes.
<PAGE>
[GRAPHIC]
MONEY MARKET FUNDS
PROSPECTUS -- LIQUIDITY CLASS SHARES
AUGUST 1, 1999
MONEY MARKET FUNDS
NATIONS CASH RESERVES
NATIONS MONEY MARKET RESERVES
NATIONS TREASURY RESERVES
NATIONS GOVERNMENT RESERVES
NATIONS MUNICIPAL RESERVES
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
THE SECURITIES AND
EXCHANGE COMMISSION
(SEC) HAS NOT APPROVED OR
DISAPPROVED THESE
SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
NOT FDIC
INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
[NATIONS FUNDS LOGO APPEARS HERE]
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN
TERMS USED IN THIS PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 38.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about some of the
Nations Funds Money Market Funds. Please read it carefully, because it
contains information that's designed to help you make informed investment
decisions.
This prospectus offers Liquidity Class Shares of the Funds. This class of
shares is designed primarily for financial institutions and intermediaries for
their own accounts, and for certain of their client accounts. Please turn to
page 27 for more information about who is eligible to buy this class of
shares.
ABOUT THE FUNDS
The Money Market Funds seek to provide income while protecting your original
investment by investing in MONEY MARKET INSTRUMENTS.
Money market instruments include short-term DEBT SECURITIES that are U.S.
government issued or guaranteed or have relatively low risk. Your original
investment and your return aren't guaranteed, however, and returns will vary
as short-term interest rates change. Over time, the return on money market
funds may be lower than the return on other kinds of mutual funds or
investments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Money Market Funds may be suitable for you if:
o you're looking for a relatively low risk investment with stability of
principal
o you have short-term income needs
They may not be suitable for you if:
o you're looking for higher returns
o you're more comfortable with bank deposits that are FDIC-insured
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 4.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.626.2275 if
you're an institutional investor, or 1.800.321.7854 if you're an individual
investor. You can also contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
2
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER
TO EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED A SUB-
ADVISER -- TRADESTREET INVESTMENT ASSOCIATES, INC. (TRADESTREET),
WHICH IS RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT DECISIONS FOR
EACH OF THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAAI AND TRADESTREET
STARTING ON PAGE 25.
* BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC ADVISORS,
INC. ON OR ABOUT SEPTEMBER 1, 1999.
<TABLE>
<S> <C>
[GRAPHIC] ABOUT THE MONEY MARKET FUNDS
NATIONS CASH RESERVES 4
Sub-adviser: TradeStreet
- ---------------------------------------------
NATIONS MONEY MARKET RESERVES 7
Sub-adviser: TradeStreet
- ---------------------------------------------
NATIONS TREASURY RESERVES 10
Sub-adviser: TradeStreet
- ---------------------------------------------
NATIONS GOVERNMENT RESERVES 13
Sub-adviser: TradeStreet
- ---------------------------------------------
NATIONS MUNICIPAL RESERVES 16
Sub-adviser: TradeStreet
- ---------------------------------------------
NATIONS CALIFORNIA TAX-EXEMPT RESERVES 20
Sub-adviser: TradeStreet
- ---------------------------------------------
OTHER IMPORTANT INFORMATION 23
- ---------------------------------------------
HOW THE FUNDS ARE MANAGED 25
[GRAPHIC] ABOUT YOUR INVESTMENT
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 27
How selling and servicing agents are paid 31
Distributions and taxes 32
- ---------------------------------------------
FINANCIAL HIGHLIGHTS 34
- ---------------------------------------------
TERMS USED IN THIS PROSPECTUS 38
- ---------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
3
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS CASH RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment
and for other reasons.
4
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Cash Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Liquidity
Class Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------
5.63%* 3.45% 2.78% 3.83% 5.86% 5.29% 5.46% 5.42%
* Return is from Inception (1-9-91) to 12-31-91.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.37%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1991: 1.44%
Worst: 2nd, 3rd, 4th quarter 1993, 1st quarter 1994: 0.68%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Liquidity Class Shares 5.42% 5.17% 4.73%
</TABLE>
5
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Liquidity Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.85%
Other expenses 0.13%
------
Total annual Fund operating expenses 1.13%
Fee waivers and/or reimbursements (0.78)%
------
Total net expenses(2) 0.35%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Liquidity Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Liquidity Class Shares $36 $282 $547 $1,305
</TABLE>
6
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS MONEY MARKET RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund's investment objective is to provide a high level of current
income consistent with liquidity, the preservation of capital and a
stable net asset value.
PRINCIPAL INVESTMENT STRATEGIES
[GRAPHIC OMITTED]
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio management
team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any one
type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for some other reasons.
7
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Money Market Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
A LOOK AT THE FUND'S PERFORMANCE
[GRAPHIC]
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ----------------------------------------------------------------------------
9.36% 8.25% 6.36% 4.02% 3.07% 4.02% 5.78% 5.28% 5.62% 5.55%
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.42%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1989: 2.40%
Worst: 2nd quarter 1993: 0.75%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Capital Class Shares 5.55% 5.25% 5.72%
</TABLE>
8
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Liquidity Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.85%
Other expenses 0.16%
------
Total annual Fund operating expenses 1.16%
Fee waivers and/or reimbursements (0.81)%
------
Total net expenses(2) 0.35%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Liquidity Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Liquidity Class Shares $36 $288 $560 $1,337
</TABLE>
9
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' LIST OF APPROVED MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS TREASURY RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o U.S. TREASURY OBLIGATIONS
o REPURCHASE AGREEMENTS and REVERSE REPURCHASE AGREEMENTS secured by U.S.
Treasury obligations
o obligations whose principal and interest are backed by the U.S.
government
The Fund may invest in other money market funds that invest in these
instruments, consistent with its investment objective and strategies.
The Fund normally invests at least 65% of its assets in U.S. Treasury
obligations, and repurchase agreements secured by U.S. Treasury obligations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
10
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Treasury Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Liquidity
Class Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------
5.17%* 3.31% 2.61% 9.77% 5.70% 5.17% 5.32% 5.23%
*Return is from inception (1-11-91) to 12-31-91.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.24%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 1.44%
Worst: 2nd quarter 1993: 0.63%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Liquidity Class Shares 5.23% 5.04% 4.55%
</TABLE>
11
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Liquidity Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.90%
Other expenses 0.15%
------
Total annual Fund operating expenses 1.20%
Fee waivers and/or reimbursements (0.85)%
------
Total net expenses(2) 0.35%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Liquidity Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Liquidity Class Shares $36 $297 $578 $1,379
</TABLE>
12
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS GOVERNMENT RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These money market instruments
include primarily U.S. GOVERNMENT OBLIGATIONS and U.S. TREASURY OBLIGATIONS.
The Fund may invest in other money market funds that invest in these
instruments, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any one
type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
13
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Government Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Liquidity
Class Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------
5.27%* 3.42% 2.64% 3.67% 5.66% 5.19% 5.34% 5.27%
*Return is from inception (1-14-91) to 12-31-91.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.27%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 1.42%
Worst: 2nd quarter 1993: 0.64%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Liquidity Class Shares 5.27% 5.02% 4.58%
</TABLE>
14
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Liquidity Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.85%
Other expenses 0.14%
------
Total annual Fund operating expenses 1.14%
Fee waivers and/or reimbursements (0.79)%
------
Total net expenses(2) 0.35%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Liquidity Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Liquidity Class Shares $36 $284 $551 $1,315
</TABLE>
15
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS MUNICIPAL RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income exempt from federal income
taxes.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. The Fund normally invests at
least 80% of its assets in MUNICIPAL SECURITIES, which pay interest that is
free from federal income and alternative minimum taxes. The Fund invests in
municipal securities that, at the time of investment, are considered by the
portfolio management team to have minimal credit risk and to be of HIGH
QUALITY.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE
ACTIVITY BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
16
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
o Security analysis includes evaluating the credit quality of an
instrument, and structural analysis, which includes evaluating the
arrangements between the municipality and others involved in the issue
of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Municipal Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax, but may be subject to state and local tax. Any
portion of a distribution that comes from income paid on other kinds of
securities or from realized CAPITAL GAINS is generally subject to
federal, state and local taxes. Distributions paid to you from the
Fund's interest on private activity bonds may be subject to the federal
alternative minimum tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
17
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Liquidity
Class Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1990 1991 1992 1993 1994 1995 1996 1997 1998
- ------------------------------------------------------------
3.17%* 4.04% 2.53% 1.95% 5.52% 3.64% 3.27% 3.42% 3.24%
*Return is from inception (6-1-90) to 13-31-90.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.40%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1990: 1.38%
Worst: 1st quarter 1994: 0.44%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Liquidity Class Shares 3.24% 3.22% 3.24%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Liquidity Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.85%
Other expenses 0.18%
------
Total annual Fund operating expenses 1.18%
Fee waivers and/or reimbursements (0.83)%
------
Total net expenses(2) 0.35%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
18
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Liquidity Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Liquidity Class Shares $36 $292 $569 $1,358
</TABLE>
19
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN TAX
LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT INFORMATION.
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks current income exempt from federal income tax and
California state personal income tax, a stable share price, and daily
LIQUIDITY.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a portfolio of
high quality MONEY MARKET INSTRUMENTS that, at the time of investment,
are considered to have remaining maturities of 397 days or less.
The Fund normally invests at least 80% of its assets in securities that pay
interest that is free from federal income tax and California state personal
income tax. These securities are issued by or on behalf of the State of
California, its political subdivisions, agencies, instrumentalities and
authorities, and other qualified issuers.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE
ACTIVITY BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating local, national and global
economic conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an
instrument, and structural analysis, which includes evaluating the
arrangements between the municipality and others involved in the issue
of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
20
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations California Tax-Exempt Reserves has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of
$1.00, an investment in the Fund could lose money. AN INVESTMENT IN
THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax and California state personal income tax, but may be
subject to other state and local taxes and the federal alternative
minimum tax. Any portion of a distribution that comes from income paid
on other kinds of securities or from realized CAPITAL GAINS is
generally subject to federal, state and local taxes.
[GRAPHIC]A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Adviser Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
- --------------------------------------------
1.70%* 2.37% 3.40% 2.96% 3.14% 2.82%
*Return is from inception (3-1-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.02%
21
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 0.88%
Worst: 1st quarter 1994: 0.44%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Adviser Class Shares 2.82% 2.94% 2.81%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Liquidity Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.85%
Other expenses 0.13%
------
Total annual Fund operating expenses 1.13%
Fee waivers and/or reimbursements (0.78)%
------
Total net expenses(2) 0.35%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Liquidity Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year o the Fund's operating
expenses remain the same as shown in the table above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Liquidity Class Shares $36 $282 $547 $1,305
</TABLE>
22
<PAGE>
[GRAPHIC] OTHER IMPORTANT INFORMATION
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 4. The following are
some other risks and information you should consider before you invest:
o SPECIAL RULES FOR MONEY MARKET FUNDS - Money market funds must comply
with Rule 2a-7 under the Investment Company Act of 1940 (1940 Act).
Rule 2a-7 sets out certain limits on investments, which are designed to
help protect investors from risk of loss. These limits apply at the
time an investment is made. The Funds, like all money market funds:
o may only invest in securities with a remaining maturity of 397 days or
less, or that have maturities longer than 397 days but have demand,
interest rate reset features or guarantees that are 397 days or less
o must maintain an AVERAGE DOLLAR-WEIGHTED MATURITY of 90 days or less
o may normally invest no more than 5% of their assets in a single
security, other than U.S. government securities; however, they may
invest up to 25% of their assets in a FIRST-TIER SECURITY for up to
three business days (except for Nations California Tax-Exempt Reserves)
o may generally only invest in U.S. dollar denominated instruments that
are determined to have minimal credit risk and are first-tier
securities, except for Nations California Tax-Exempt Reserves, which
also may invest in SECOND-TIER SECURITIES
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund cannot be changed without
shareholder approval (except for Nations California Tax-Exempt
Reserves).
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments
that aren't part of their principal investment strategies. Please refer
to the SAI for more information. The portfolio managers or management
team can also choose not to invest in specific securities described in
this prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that
are not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn or
because of political or other conditions. A Fund may not achieve its
investment objective while it is investing defensively. Any cash a Fund
holds for defensive or other reasons does not earn income.
23
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer systems
that cannot read a four-digit year may not be able to calculate and
process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and
that they expect them to be adapted in time. There is no guarantee,
however, that their computer systems will be ready by the year 2000.
If their computer systems are not ready in time, there could be a
negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer systems
of foreign issuers, governments or other entities may not be ready for
the year 2000.
24
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] HOW THE FUNDS ARE MANAGED
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in Nations
Funds, including the Money Market Funds described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation.
Nations Funds pays BAAI an annual fee for its investment advisory services.
The fee is calculated daily based on the average net assets of each Fund and
is paid monthly. BAAI uses part of this money to pay investment sub-advisers
for the services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee(1) fiscal year
<S> <C> <C>
Nations Cash Reserves 0.15% 0.15%
Nations Money Market Reserves 0.15% 0.12%
Nations Treasury Reserves 0.15% 0.13%
Nations Government Reserves 0.15% 0.14%
Nations Municipal Reserves 0.15% 0.10%
Nations California Tax-Exempt Reserves 0.15% 0.15%
</TABLE>
(1)These fees are the current contract levels, which have been reduced from the
contract levels in effect during the last fiscal year.
25
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in
Nations Funds. TradeStreet takes a team approach to investment management.
Each team has access to the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Cash Reserves Taxable Money Market Management Team
Nations Money Market Reserves Taxable Money Market Management Team
Nations Treasury Reserves Taxable Money Market Management Team
Nations Government Reserves Taxable Money Market Management Team
Nations Municipal Reserves Tax-Exempt Money Market Management Team
Nations California Tax-Exempt Reserves Tax-Exempt Money Market Management Team
</TABLE>
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay distribution (12b-1) and shareholder servicing
fees and/or other compensation to companies for selling shares and providing
services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.10% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
26
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC]
WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
A BUSINESS DAY IS ANY DAY THAT THE FEDERAL RESERVE BANK OF NEW
YORK IS OPEN.
THE FEDERAL RESERVE BANK OF NEW YORK IS CLOSED ON WEEKENDS AND ON
THE FOLLOWING NATIONAL HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER
KING, JR. DAY, PRESIDENTS' DAY, MEMORIAL DAY, INDEPENDENCE DAY,
LABOR DAY, COLUMBUS DAY, VETERANS DAY, THANKSGIVING DAY AND
CHRISTMAS DAY.
[GRAPHIC] BUYING, SELLING AND EXCHANGING SHARES
This prospectus offers Liquidity Class Shares of the Funds. Here are some
general rules about this class of shares:
o Liquidity Class Shares are available on a direct basis or through
certain financial institutions and intermediaries for their own
accounts, and for certain client accounts for which they may provide
automated cash management or other services. These include:
o Bank of America and certain of its affiliates
o certain other financial institutions and intermediaries
o The minimum initial investment is $500,000. Financial institutions or
intermediaries can total the investments they make on behalf of their
clients to meet the minimum initial investment amount.
o There is no minimum for additional investments.
o There are no sales charges for buying, selling or exchanging these
shares.
You'll find more information about buying, selling and exchanging Liquidity
Class Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related services and programs.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. If you have questions about
buying, selling or exchanging, or you need help placing an order, please call
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor. You can also contact your investment
professional.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share at the following
times:
o 5:00 p.m. Eastern time each business day for each share class of
Nations Cash Reserves, Nations Money Market Reserves and Nations
Treasury Reserves
o 12:00 noon Eastern time each business day for each share class of
Nations Government Reserves and Nations Municipal Reserves
o 10:30 a.m. Eastern time each business day for each share class of
Nations California Tax-Exempt Reserves
First, we calculate the net asset value for each class of a Fund by
determining the value of the Fund's assets in the class and then subtracting
its liabilities. Next, we divide this amount by the number of shares that
investors are holding in the class.
27
<PAGE>
Although we try to maintain a net asset value per share of $1.00 for the
Funds, we can't guarantee that we will be able to do so.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. We use the amortized cost method, which approximates
market value, to value the assets in the Money Market Funds.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents by the following times on a
business day will receive that day's net asset value per share:
o 5:00 p.m. Eastern time for Nations Cash Reserves, Nations Money Market
Reserves and Nations Treasury Reserves
o 12:00 noon Eastern time for Nations Government Reserves and Nations
Municipal Reserves
o 10:30 a.m. Eastern time for Nations California Tax-Exempt Reserves
Investors are encouraged to place orders to sell as early in the day as
possible. Orders received after these times will receive the next business
day's net asset value per share. The business day that applies to an order is
also called the TRADE DATE. We may refuse any order to buy or exchange shares.
If this happens, we'll return any money we've received.
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Liquidity Class Shares at net asset value per share.
o We must receive payment by the following times on the business day
Stephens, First Data or their agents receive the order:
o 5:30 p.m. Eastern time for Nations Cash Reserves, Nations Money
Market Reserves and Nations Treasury Reserves
o 4:00 p.m. Eastern time for Nations Governments Reserves, Nations
Municipal Reserves and Nations California Tax-Exempt Reserves
If we receive payment after these times, we'll refuse the order. We'll
return any payment received for orders that we refuse. We can change
these times under certain circumstances, for example, when there's more
wiring activity than normal.
o Financial institutions and intermediaries are responsible for sending
us orders for their clients and for ensuring that we receive payment on
time.
o Shares purchased are recorded on the books of the Fund. We generally
don't issue certificates.
28
<PAGE>
[GRAPHIC]
YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire on the same
business day that Stephens, First Data or their agents receive the
order.
o We may take up to three business days to send the sale proceeds if we
believe that an earlier payment could adversely effect the Fund.
o If shares were paid for with a check that wasn't certified, we'll hold
the sale proceeds when those shares are sold for at least 15 days after
the trade date of the purchase, or until the check has cleared.
o Financial institutions and intermediaries are responsible for sending
us orders for their clients and for depositing the sale proceeds to
their accounts on time.
o Shares that are held in certificate form must be signed (or accompanied
by a signed stock power) and sent to First Data. The investor's
signature must be guaranteed, unless other arrangements have been made
with us. We may ask for any other information we need to prove that the
order is properly authorized.
o Under certain circumstances allowed under the 1940 Act, we can pay
investors in securities or other property when they sell shares, or
delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions please contact your retirement
plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll provide
30 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the shares
for a client under arrangements it has made with its clients
o under certain other circumstances allowed under the 1940 Act
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another Nations
Fund. This is called an exchange, and may be appropriate if investment
goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Liquidity Class Shares of a Fund for
Liquidity Class Shares of any other Fund.
o Investors must exchange at least $500,000 at a time.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
29
<PAGE>
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
o Shares that are held in certificate form cannot be exchanged until
First Data has received the certificate and deposited the shares
to the investor's account.
30
<PAGE>
[GRAPHIC]
THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE BECAUSE
IT'S PAID THROUGH A PLAN APPROVED UNDER RULE 12B-1 OF THE 1940
ACT.
THE SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
[GRAPHIC] HOW SELLING AND SERVICING AGENTS ARE PAID
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES
Stephens and selling and servicing agents are compensated for selling shares
and providing services to investors under distribution and shareholder
servicing plans.
Stephens may be reimbursed for distribution-related expenses up to an annual
maximum of 0.30% of the average daily net assets of Liquidity Class Shares of
the Funds, some or all of which may be paid to selling agents. Stephens may
not carry forward any of these expenses for reimbursement in future years.
Stephens may also receive a maximum annual distribution (12b-1) fee of 0.30%
of the average daily net assets of Liquidity Class Shares of the Funds (up to
0.35% of Liquidity Class Shares of Nations Treasury Reserves). Stephens may
use this fee to compensate certain financial institutions that provide
administrative or distribution services.
Servicing agents may receive a maximum annual shareholder servicing fee of
0.25% of the average daily net assets of Liquidity Class Shares of the Funds.
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Funds' assets on an ongoing basis, over time they will increase the
cost of your investment, and may cost you more than any sales charges you may
pay.
The Funds pay these fees to eligible selling and servicing agents for as long
as the plans continue. We may reduce or discontinue payments at any time.
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale,
promotion and marketing of the Funds
o non-cash compensation like trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings
and gift certificates for meals or merchandise
This compensation, which is not paid by the Funds, is discretionary and may be
available only to selected selling and servicing agents. For example, Stephens
sometimes sponsors promotions involving Banc of America Investments, Inc., an
affiliate of BAAI, and certain other selling or servicing agents. Selected
selling and servicing agents may also receive compensation for opening a
minimum number of accounts. Stephens may cancel any compensation program at
any time.
BAAI also may pay amounts from its own assets to Stephens or to selling or
servicing agents for services they provide.
31
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] DISTRIBUTIONS AND TAXES
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends
paid on COMMON STOCKS.
o A fund can also have CAPITAL GAINS if the value of its investments
increases. If a fund sells an investment at a gain, the gain is
realized. If a fund continues to hold the investment, any gain is
unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gains to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gains to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
Although the Funds do not expect to realize any capital gains, any capital
gains realized by a Fund will be distributed at least once a year.
The Funds declare distributions of net investment income each business day and
pay for them on the first business day of each month.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor.
32
<PAGE>
[GRAPHIC]
THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUND. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION
ABOUT TAXES, PLEASE SEE
THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions of net investment income and any excess of net short-term
capital gains over net long-term capital losses generally are taxable to you
as ordinary income.
Although the Funds do not expect to realize any capital gains, any
distributions of net capital gains (generally the excess of net long-term
capital gains over net short-term capital losses) generally are taxable to you
as net capital gains.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
NATIONS MUNICIPAL RESERVES, NATIONS CALIFORNIA TAX-EXEMPT RESERVES
Distributions that come from Nations Municipal Reserves' tax-exempt interest
income are generally free from federal income tax, but may be subject to state
or local tax.
Distributions that come from Nations California Tax-Exempt Reserves' tax-exempt
interest income are generally free from federal income tax and California
state personal income tax, but may be subject to other state and local taxes.
Any distributions that come from taxable income or realized capital gains are
generally subject to tax.
A portion of the distributions from these Funds may also be subject to the
federal alternative minimum tax.
U.S. GOVERNMENT OBLIGATIONS
If you invest in U.S. government obligations directly, interest on those
obligations is free from state and local and personal income taxes.
Distributions you receive that come from interest the Fund earns from U.S.
government obligations may not be exempt from these taxes. Please consult with
your tax advisor.
33
<PAGE>
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed
on your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
As long as a Fund continually maintains a $1.00 net asset value per share, you
ordinarily will not recognize a taxable gain or loss on the redemption or
exchange of your shares of the Fund.
[GRAPHIC] FINANCIAL HIGHLIGHTS
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. The total investment return line
indicates how much an investment in the Fund would have earned, assuming all
dividends and distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The auditor's
report and Nations Funds financial statements are incorporated by reference
into the SAI. Financial highlights for Liquidity Class Shares of Nations
California Tax-Exempt Fund are not provided because this class of shares had
not yet commenced operations during the period indicated. Please see the back
cover to find out how you can get a copy.
34
<PAGE>
NATIONS CASH RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Period ended Year ended
Liquidity Class 3/31/99(a) 04/30/98
<S> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00
Net investment income 0.0470 0.0539
Dividends from net investment income (0.0470) (0.0539)
Net asset value, end of year $ 1.00 $ 1.00
TOTAL RETURN++ 4.80 % 5.53 %
================================================ ========= =========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $1,423,382 $1,107,869
Ratio of operating expenses to average net
assets 0.35 %+(b) 0.35%**
Ratio of net investment income to average net
assets 5.09 %+ 5.39 %
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.28 %+(b) 1.29 %
<CAPTION>
Year ended Year ended Year ended Year ended
Liquidity Class 04/30/97 04/30/96 04/30/95 04/30/94
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0516 0.0555 0.0471 0.0273
Dividends from net investment income (0.0516) (0.0555) (0.0471) (0.0273)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 5.28 % 5.70 % 4.81 % 2.77 %
================================================ ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $419,851 $35,477 $ 2 $69,786
Ratio of operating expenses to average net
assets 0.35 % 0.35 % 0.38 % 0.55 %
Ratio of net investment income to average net
assets 5.17 % 5.38 % 4.87 % 2.74 %
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.60 % 0.66 % 0.61 % 0.65 %
</TABLE>
** The effect of interest expense on the operating
expense ratio was less than 0.01%.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
NATIONS TREASURY RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Period ended Year ended
Liquidity Class 3/31/99(a) 04/30/98
<S> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0448 0.0526
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0448) (0.0526)
Net asset value, end of year $ 1.00 $ 1.00
TOTAL RETURN++ 4.58 % 5.38 %
================================================ ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $304,387 $743,410
Ratio of operating expenses to average net
assets 0.35 %+(b) 0.35 %
Ratio of net investment income to average net
assets 4.84 %+ 5.26 %
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.35 %+(b) 1.35 %
<CAPTION>
Year ended Year ended Year ended Year ended
Liquidity Class 04/30/97 04/30/96 04/30/95 04/30/94
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0504 0.0541 0.0462 0.0263
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0504) (0.0541) (0.0462) (0.0263)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 5.15 % 5.57 % 4.71 % 2.67 %
================================================ ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $81,575 $11,804 $ 674 $14,227
Ratio of operating expenses to average net
assets 0.35 % 0.35 % 0.49 % 0.55 %
Ratio of net investment income to average net
assets 5.05 % 5.35 % 4.50 % 2.67 %
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.61 % 0.66 % 0.79 % 0.87 %
</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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
35
<PAGE>
NATIONS MONEY MARKET RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Period ended
Liquidity Class 3/31/99*(a)
<S> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0281
LESS DISTRIBUTIONS:
Dividends from net investment income (0.0281)
Net asset value, end of period $ 1.00
TOTAL RETURN++ 2.87 %
================================================ =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 1,078
Ratio of operating expenses to average net
assets 0.35 %+(b)
Ratio of net investment income to average net
assets 4.72 %+
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.31 %+(b)
</TABLE>
* Nations Money Market Reserves Liquidity Class
commenced operations on August 7, 1998.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
NATIONS GOVERNMENT RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Period ended Year ended
Liquidity Class 3/31/99(a) 04/30/98
<S> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0454 0.0528
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0454) (0.0528)
Net asset value, end of year $ 1.00 $ 1.00
TOTAL RETURN++ 4.63 % 5.40 %
================================================ ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $59,551 $32,773
Ratio of operating expenses to average net
assets 0.35 %+(b) 0.35 %
Ratio of net investment income to average net
assets 4.90 %+ 5.28 %
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.29 %+(b) 1.30 %
<CAPTION>
Year ended Year ended Year ended Year ended
Liquidity Class 04/30/97 04/30/96 04/30/95 04/30/94
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0505 0.0537 0.0453 0.0268
LESS: DISTRIBUTIONS
Dividends from net investment income (0.0505) (0.0537) (0.0453) (0.0268)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 5.19 % 5.51 % 4.59 % 2.71 %
================================================ ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $ 6,482 $ 129 $ 2 $259,836
Ratio of operating expenses to average net
assets 0.35 %(b) 0.35 % 0.40 % 0.55 %
Ratio of net investment income to average net
assets 5.07 % 5.33 % 4.27 % 2.68 %
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.64 %(b) 0.68 % 0.62 % 0.61 %
</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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
36
<PAGE>
NATIONS MUNICIPAL RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Period ended Year ended
Liquidity Class 3/31/99(a) 04/30/98
<S> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00
Net investment income 0.0278 0.0341
Dividends from net investment income (0.0278) (0.0341)
Net asset value, end of year $ 1.00 $ 1.00
TOTAL RETURN++ 2.81 % 3.43 %
================================================ ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $68,393 $53,074
Ratio of operating expenses to average net
assets 0.35 %+ 0.35%**
Ratio of net investment income to average net
assets 2.95 %+ 3.38 %
Ratio of operating expenses to average net
assets without waivers and/or expenses
reimbursements 1.33 %+ 1.33 %
<CAPTION>
Year ended Year ended Year ended Year ended
Liquidity Class 04/30/97 04/30/96 04/30/95 04/30/94
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0323 0.0347 0.0304 0.0188
Dividends from net investment income (0.0323) (0.0347) (0.0304) (0.0188)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 3.29 % 3.52 % 3.09 % 1.90 %
================================================ ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $54,677 $ 6,734 $ 2,591 $13,805
Ratio of operating expenses to average net
assets 0.35 % 0.35 % 0.33 % 0.55 %
Ratio of net investment income to average net
assets 3.23 % 3.46 % 3.26 % 1.86 %
Ratio of operating expenses to average net
assets without waivers and/or expenses
reimbursements 0.67 % 0.73 % 0.69 % 0.67 %
</TABLE>
** The effect of interest expense on the operating
expense ratio was 0.02%.
+ Annualized.
++Total return represents aggregate total return for
the periods indicated, assumes reinvestment of all
distributions, and does not reflect the deduction of
any applicable sales charges.
(a) Fiscal year changed to March 31. Prior to this,
the fiscal year end was April 30.
37
<PAGE>
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
EQUITY SECURITY - an investment that gives you part ownership in a company.
Equity securities (or "equities") include common and preferred stock, rights
and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
38
<PAGE>
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
39
<PAGE>
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
40
<PAGE>
[GRAPHIC] WHERE TO FIND MORE INFORMATION
You'll find more information about the Money Market Funds in the following
documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.626.2275 (Institutional Investors)
1.800.321.7854 (Individual Investors)
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
[NATIONS FUNDS LOGO APPEARS HERE]
SEC file number --
Nations Reserves, 811-6030;
NF-LIQUIDITY-8/99
<PAGE>
MONEY MARKET FUNDS
PROSPECTUS -- MARKET CLASS SHARES
AUGUST 1, 1999
Money Market Funds
NATIONS CASH RESERVES
NATIONS MONEY MARKET RESERVES
NATIONS TREASURY RESERVES
NATIONS GOVERNMENT RESERVES
NATIONS MUNICIPAL RESERVES
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------
NOT FDIC
INSURED
- -------------------
MAY LOSE VALUE
- -------------------
NO BANK GUARANTEE
- -------------------
NATIONS FUNDS
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 38.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about some of the
Nations Funds Money Market Funds. Please read it carefully, because it
contains information that's designed to help you make informed investment
decisions.
This prospectus offers Market Class Shares of the Funds. This class of shares
is designed primarily for financial institutions and intermediaries for their
own accounts, and for certain of their institutional client accounts. Please
turn to page 27 for more information about who is eligible to buy this class
of shares.
ABOUT THE FUNDS
The Money Market Funds seek to provide income while protecting your original
investment by investing in MONEY MARKET INSTRUMENTS.
Money market instruments include short-term DEBT SECURITIES that are U.S.
government issued or guaranteed or have relatively low risk. Your original
investment and your return aren't guaranteed, however, and returns will vary
as short-term interest rates change. Over time, the return on money market
funds may be lower than the return on other kinds of mutual funds or
investments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Money Market Funds may be suitable for you if:
o you're looking for a relatively low risk investment with stability of
principal
o you have short-term income needs
They may not be suitable for you if:
o you're looking for higher returns
o you're more comfortable with bank deposits that are FDIC-insured
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 4.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.626.2275 if
you're an institutional investor, or 1.800.321.7854 if you're an individual
investor. You can also contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
2
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER
TO EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED A SUB-
ADVISER -- TRADESTREET INVESTMENT ASSOCIATES, INC. (TRADESTREET),
WHICH IS RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT DECISIONS FOR
EACH OF THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAAI AND TRADESTREET
STARTING ON PAGE 25.
*BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC ADVISORS,
INC. ON OR ABOUT SEPTEMBER 1, 1999.
<TABLE>
<S> <C>
[GRAPHIC] About the Money Market Funds
NATIONS CASH RESERVES 4
Sub-adviser: TradeStreet
- ---------------------------------------------
NATIONS MONEY MARKET RESERVES 7
Sub-adviser: TradeStreet
- ---------------------------------------------
NATIONS TREASURY RESERVES 10
Sub-adviser: TradeStreet
- ---------------------------------------------
NATIONS GOVERNMENT RESERVES 13
Sub-adviser: TradeStreet
- ---------------------------------------------
NATIONS MUNICIPAL RESERVES 16
Sub-adviser: TradeStreet
- ---------------------------------------------
NATIONS CALIFORNIA TAX-EXEMPT RESERVES 19
Sub-adviser: TradeStreet
- ---------------------------------------------
OTHER IMPORTANT INFORMATION 23
- ---------------------------------------------
HOW THE FUNDS ARE MANAGED 25
[GRAPHIC] About your investment
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 27
How selling and servicing agents are paid 31
Distributions and taxes 32
- ---------------------------------------------
FINANCIAL HIGHLIGHTS 34
- ---------------------------------------------
TERMS USED IN THIS PROSPECTUS 38
- ---------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
3
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Cash Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by, the
securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
4
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Cash Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the Fund
holds. The Fund may not be able to pay distributions, or could lose
money, if the issuer of a security is unable to pay interest or repay
principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEAR HERE]
1996 1997 1998
3.34%* 5.25% 5.19%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.22%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 3rd & 4th quarter 1997: 1.32%
Worst: 4th quarter 1998: 1.20%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 5.19% 5.18%
</TABLE>
5
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Market Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.45%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.73%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses2 0.65%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Market Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Market Class Shares $66 $225 $398 $899
</TABLE>
6
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Money Market Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund's investment objective is to provide a high level of current
income consistent with liquidity, the preservation of capital and a
stable net asset value.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days
or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by, the
securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
7
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Money Market Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the Fund
holds. The Fund may not be able to pay distributions, or could lose
money, if the issuer of a security is unable to pay interest or repay
principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
9.36% 8.25% 6.36% 4.02% 3.07% 4.02% 5.78% 5.28% 5.62% 5.55%
</TABLE>
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.42%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1999: 2.40%
Worst: 2nd quarter 1993: 0.75%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Capital Class Shares 5.55% 5.25% 5.72%
</TABLE>
8
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Market Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.45%
Other expenses 0.16%
------
Total annual Fund operating expenses 0.76%
Fee waivers and/or reimbursements (0.11)%
------
Total net expenses(2) 0.65%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Market Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Market Class Shares $66 $232 $412 $932
</TABLE>
9
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' LIST OF APPROVED MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Treasury Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days
or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o U.S. TREASURY OBLIGATIONS
o REPURCHASE AGREEMENTS and REVERSE REPURCHASE AGREEMENTS secured by U.S.
Treasury obligations
o obligations whose principal and interest are backed by the U.S. government
The Fund may invest in other money market funds that invest in these
instruments, consistent with its investment objective and strategies.
The Fund normally invests at least 65% of its assets in U.S. Treasury
obligations, and repurchase agreements secured by U.S. Treasury obligations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
10
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Treasury Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the Fund
holds. The Fund may not be able to pay distributions, or could lose
money, if the issuer of a security is unable to pay interest or repay
principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEAR HERE]
1996 1997 1998
3/265* 5/11% 4.97%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.09%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1997: 1.29%
Worst: 4th quarter 1998: 1.08%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 4.97% 5.01%
</TABLE>
11
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Market Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.45%
Other expenses 0.15%
------
Total annual Fund operating expenses 0.75%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses(2) 0.65%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Market Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Market Class Shares $66 $230 $407 $921
</TABLE>
12
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Government Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days
or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily U.S. GOVERNMENT OBLIGATIONS and U.S. TREASURY OBLIGATIONS. The Fund
may invest in other money market funds that invest in these instruments,
consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
13
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Government Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the Fund
holds. The Fund may not be able to pay distributions, or could lose
money, if the issuer of a security is unable to pay interest or repay
principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEAR HERE]
1996 1997 1998
3.26%* 5.13% 5.03%
* Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.12%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1997: 1.29%
Worst: 4th quarter 1998: 1.13%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 5.03% 5.04%
</TABLE>
14
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Market Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.45%
Other expenses 0.14%
------
Total annual Fund operating expenses 0.74%
Fee waivers and/or reimbursements (0.09)%
------
Total net expenses(2) 0.65%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Market Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Market Class Shares $66 $227 $403 $910
</TABLE>
15
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Municipal Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income exempt from federal income
taxes.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days
or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. The Fund normally invests at
least 80% of its assets in MUNICIPAL SECURITIES, which pay interest that is
free from federal income and alternative minimum taxes. The Fund invests in
municipal securities that, at the time of investment, are considered by the
portfolio management team to have minimal credit risk and to be of HIGH
QUALITY.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE ACTIVITY
BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument,
and structural analysis, which includes evaluating the arrangements
between the municipality and others involved in the issue of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
16
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Municipal Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the Fund
holds. The Fund may not be able to pay distributions, or could lose
money, if the issuer of a security is unable to pay interest or repay
principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come from
interest on municipal securities, which is generally free from federal
income tax, but may be subject to state and local taxes. Any portion of a
distribution that comes from income paid on other kinds of securities or
from realized CAPITAL GAINS is generally subject to federal, state and
local taxes. Distributions paid to you from the Fund's interest on
private activity bonds may be subject to the federal alternative minimum
tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
1996 1997 1998
2.05%* 3.24% 3.00%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.25%
17
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1997: 0.86%
Worst: 4th quarter 1998: 0.68%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 3.00% 3.11%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Market Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.45%
Other expenses 0.18%
------
Total annual Fund operating expenses 0.78%
Fee waivers and/or reimbursements (0.13)%
------
Total net expenses(2) 0.65%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Market Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Market Class Shares $66 $236 $420 $954
</TABLE>
18
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
Nations California Tax-Exempt Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks current income exempt from federal income tax and
California state personal income tax, a stable share price, and daily
LIQUIDITY.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a portfolio of
high quality MONEY MARKET INSTRUMENTS that, at the time of investment,
are considered to have remaining maturities of 397 days or less.
The Fund normally invests at least 80% of its assets in securities that pay
interest that is free from federal income tax and California state personal
income tax. These securities are issued by or on behalf of the State of
California, its political subdivisions, agencies, instrumentalities and
authorities, and other qualified issuers.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE ACTIVITY
BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating local, national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument,
and structural analysis, which includes evaluating the arrangements between
the municipality and others involved in the issue of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
19
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations California Tax-Exempt Reserves has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT IN
THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of the
securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security is
unable to pay interest or repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax and California state personal income tax, but may
be subject to other state and local taxes and the federal alternative
minimum tax. Any portion of a distribution that comes from income paid
on other kinds of securities or from realized CAPITAL GAINS is
generally subject to federal, state and local taxes. Distributions
paid to you from the Fund's interest on private activity bonds may be
subject to the federal alternative minimum tax.
20
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Investor
Class Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
0.38%* 5.20% 3.975 2.01% 1.87% 2.30% 3.32% 2.88% 3.07% 2.74%
</TABLE>
* Return is from inception (12-6-89) to 12-31-89.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 0.98%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1990: 1.34%
Worst: 1st quarter 1992: 0.23%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years Since inception
<S> <C> <C> <C>
Investor Class Shares 2.74% 2.86% 3.06%
</TABLE>
21
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Market Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.45%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.73%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses(2) 0.65%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Market Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Market Class Shares $66 $225 $398 $899
</TABLE>
22
<PAGE>
[GRAPHIC] Other important information
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 4. The following are
some other risks and information you should consider before you invest:
o SPECIAL RULES FOR MONEY MARKET FUNDS - Money market funds must comply
with Rule 2a-7 under the Investment Company Act of 1940 (1940 Act). Rule
2a-7 sets out certain limits on investments, which are designed to help
protect investors from risk of loss. These limits apply at the time an
investment is made. The Funds, like all money market funds:
o may only invest in securities with a remaining maturity of 397 days or
less, or that have maturities longer than 397 days but have demand,
interest rate reset features or guarantees that are 397 days or less
o must maintain an AVERAGE DOLLAR-WEIGHTED MATURITY of 90 days or less
o may normally invest no more than 5% of their assets in a single security,
other than U.S. government securities; however, they may invest up to 25%
of their assets in a FIRST-TIER SECURITY for up to three business days
(except for Nations California Tax-Exempt Reserves)
o may generally only invest in U.S. dollar denominated instruments that are
determined to have minimal credit risk and are first-tier securities,
except for Nations California Tax-Exempt Reserves, which also may invest
in SECOND-TIER SECURITIES
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund cannot be changed without
shareholder approval (except for Nations California Tax-Exempt Reserves).
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments that
aren't part of their principal investment strategies. Please refer to the
SAI for more information. The portfolio managers or management team can
also choose not to invest in specific securities described in this
prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn or
because of political or other conditions. A Fund may not achieve its
investment objective while it is investing defensively. Any cash a Fund
holds for defensive or other reasons does not earn income.
23
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer systems
that cannot read a four-digit year may not be able to calculate and
process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they have
been working to make the necessary changes to their systems, and that
they expect them to be adapted in time. There is no guarantee, however,
that their computer systems will be ready by the year 2000. If their
computer systems are not ready in time, there could be a negative effect
on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer systems of
foreign issuers, governments or other entities may not be ready for the
year 2000.
24
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] How the Funds are managed
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in Nations
Funds, including the Money Market Funds described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation.
Nations Funds pays BAAI an annual fee for its investment advisory services.
The fee is calculated daily based on the average net assets of each Fund and
is paid monthly. BAAI uses part of this money to pay investment sub-advisers
for the services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee1 fiscal year
<S> <C> <C>
Nations Cash Reserves 0.15% 0.15%
Nations Money Market Reserves 0.15% 0.12%
Nations Treasury Reserves 0.15% 0.13%
Nations Government Reserves 0.15% 0.14%
Nations Municipal Reserves 0.15% 0.10%
Nations California Tax-Exempt Reserves 0.15% 0.15%
</TABLE>
1These fees are the current contract levels, which have been reduced from the
contract levels in effect during the last fiscal year.
25
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in
Nations Funds. TradeStreet takes a team approach to investment management.
Each team has access to the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Cash Reserves Taxable Money Market Management Team
Nations Money Market Reserves Taxable Money Market Management Team
Nations Treasury Reserves Taxable Money Market Management Team
Nations Government Reserves Taxable Money Market Management Team
Nations Municipal Reserves Tax-Exempt Money Market Management Team
Nations California Tax-Exempt Reserves Tax-Exempt Money Market Management Team
</TABLE>
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay distribution (12b-1) and shareholder servicing
fees to companies for selling shares and providing services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.10% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
26
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] A BUSINESS DAY IS ANY DAY THAT THE FEDERAL RESERVE BANK OF NEW
YORK IS OPEN.
THE FEDERAL RESERVE BANK OF NEW YORK IS CLOSED ON WEEKENDS AND ON
THE FOLLOWING NATIONAL HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER
KING, JR. DAY, PRESIDENTS' DAY, MEMORIAL DAY, INDEPENDENCE DAY,
LABOR DAY, COLUMBUS DAY, VETERANS DAY, THANKSGIVING DAY AND
CHRISTMAS DAY.
[GRAPHIC] Buying, selling and exchanging shares
This prospectus offers Market Class Shares of the Funds. Here are some general
rules about this class of shares:
o Market Class Shares are available to financial institutions and
intermediaries for their own accounts, and for certain institutional
client accounts for which they may provide automated cash management or
other services. These include:
o Bank of America and certain of its affiliates
o certain other financial institutions and intermediaries
o The minimum initial investment is $250,000. Financial institutions or
intermediaries can total the investments they make on behalf of their
clients to meet the minimum initial investment amount.
o There is no minimum for additional investments.
o There are no sales charges for buying, selling or exchanging these shares.
You'll find more information about buying, selling and exchanging Market Class
Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related services and programs.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. If you have questions about
buying, selling or exchanging, or you need help placing an order, please call
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor. You can also contact your investment
professional.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share at the following
times:
o 5:00 p.m. Eastern time each business day for each share class of Nations
Cash Reserves, Nations Money Market Reserves and Nations Treasury
Reserves
o 12:00 noon Eastern time each business day for each share class of Nations
Government Reserves and Nations Municipal Reserves
o 10:30 a.m. Eastern time each business day for each share class of Nations
California Tax-Exempt Reserves
First, we calculate the net asset value for each class of a Fund by
determining the value of the Fund's assets in the class and then subtracting
its liabilities. Next, we divide this amount by the number of shares that
investors are holding in the class.
Although we try to maintain a net asset value per share of $1.00 for the
Funds, we can't guarantee that we will be able to do so.
27
<PAGE>
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. We use the amortized cost method, which approximates
market value, to value the assets in the Money Market Funds.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents by the following times on a
business day will receive that day's net asset value per share:
o 3:00 p.m. Eastern time for Nations Cash Reserves, Nations Money Market
Reserves and Nations Treasury Reserves
o 12:00 noon Eastern time for Nations Government Reserves and Nations
Municipal Reserves
o 10:30 a.m. Eastern time for Nations California Tax-Exempt Reserves
Investors are encouraged to place orders to sell as early in the day as
possible. Orders received after these times will receive the next business
day's net asset value per share. The business day that applies to an order is
also called the TRADE DATE. We may refuse any order to buy or exchange shares.
If this happens, we'll return any money we've received.
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone if you complete the
telephone authorization section of our account application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account, you
must have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be
responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions are
genuine. For example, we require proof of your identification before
we will act on instructions received by telephone and may record
telephone conversations. If we and our service providers don't take
these steps, we may be liable for any losses from unauthorized or
fraudulent instructions.
o Telephone orders may be difficult to complete during periods of
significant economic or market change.
28
<PAGE>
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Market Class Shares at net asset value per share.
o If we don't receive payment by 4:00 p.m. Eastern time on the
business day Stephens, First Data or their agents receive the order,
we'll refuse the order. We'll return any payment received for orders
that we refuse. We can change this time under certain circumstances,
for example, when there's more wiring activity than normal.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we receive
payment on time.
o Shares purchased are recorded on the books of the Fund. We generally
don't issue certificates.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire on the same
business day that Stephens, First Data or their agents receive the
order.
o We may take up to three business days to send the sale proceeds if
we believe that an earlier payment could adversely affect the Fund.
o Investors that qualify for telephone orders can sell up to $50,000
in shares by telephone.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold for at least 15
days after the trade date of the purchase, or until the check has
cleared.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
o Shares that are held in certificate form must be signed (or
accompanied by a signed stock power) and sent to First Data. The
investor's signature must be guaranteed, unless other arrangements
have been made with us. We may ask for any other information we need
to prove that the order is properly authorized.
o Under certain circumstances allowed under the 1940 Act, we can pay
investors in securities or other property when they sell shares, or
delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions please contact your retirement
plan administrator.
29
<PAGE>
[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 30 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its
clients
o under certain other circumstances allowed under the 1940 Act
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another Nations
Fund. This is called an exchange, and may be appropriate if investment
goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Market Class Shares of a Fund for Market
Class Shares of any other Nations Reserves Money Market Fund.
o Investors must exchange at least $250,000 at a time.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
o Shares that are held in certificate form cannot be exchanged until
First Data has received the certificate and deposited the shares
to the investor's account.
30
<PAGE>
[GRAPHIC] THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE BECAUSE
IT'S PAID THROUGH A PLAN APPROVED UNDER RULE 12B-1 OF THE 1940
ACT.
THE SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
[GRAPHIC] How selling and servicing agents are paid
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES
Stephens and selling and servicing agents are compensated for selling shares
and providing services to investors under distribution and shareholder
servicing plans.
Stephens may be compensated or reimbursed for distribution-related expenses up
to an annual maximum of 0.20% of the average daily net assets of Market Class
Shares of the Funds, some or all of which may be paid to selling agents.
Servicing agents may receive a maximum annual shareholder servicing fee of
0.25% of the average daily net assets of Market Class Shares of the Funds.
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Funds' assets on an ongoing basis, over time they will increase the
cost of your investment, and may cost you more than any sales charges you may
pay.
The Funds pay these fees to eligible selling and servicing agents for as long
as the plans continue. We may reduce or discontinue payments at any time.
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale, promotion
and marketing of the Funds
o non-cash compensation like trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift
certificates for meals or merchandise
This compensation, which is not paid by the Fund, is discretionary and may be
available only to selected selling and servicing agents. For example, Stephens
sometimes sponsors promotions involving Banc of America Investments, Inc., an
affiliate of BAAI, and certain other selling or servicing agents. Selected
selling and servicing agents may also receive compensation for opening a
minimum number of accounts. Stephens may cancel any compensation program at
any time.
BAAI also may pay amounts from its own assets to Stephens or to selling or
servicing agents for services they provide.
31
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] Distributions and taxes
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends paid
on COMMON STOCKS.
o A fund can also have CAPITAL GAINS if the value of its investments
increases. If a fund sells an investment at a gain, the gain is realized.
If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gains to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gains to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
Although the Funds do not expect to realize any capital gains, any capital
gains realized by a Fund will be distributed at least once a year.
The Funds declare distributions of net investment income each business day,
and pay them on the first business day of each month.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor.
32
<PAGE>
[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions of net investment income and any excess of net short-term
capital gains over net long-term capital losses generally are taxable to you
as ordinary income.
Although the Funds do not expect to realize any capital gains, any
distributions of net capital gains (generally the excess of net long-term
capital gains over net short-term capital losses) generally are taxable to you
as net capital gains.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
NATIONS MUNICIPAL RESERVES, NATIONS CALIFORNIA TAX-EXEMPT RESERVES
Distributions that come from Nations Municipal Reserves' tax-exempt interest
income are generally free from federal income tax, but may be subject to state
or local tax.
Distributions that come from Nations California Tax-Exempt Reserves' tax-exempt
interest income are generally free from federal income tax and California
state personal income tax, but may be subject to other state and local taxes.
Any distributions that come from taxable income or realized capital gains are
generally subject to tax.
A portion of the distributions from these Funds may also be subject to the
federal alternative minimum tax.
U.S. GOVERNMENT OBLIGATIONS
If you invest in U.S. government obligations directly, interest on those
obligations is free from state and local and personal income taxes.
Distributions you receive that come from interest the Fund earns from U.S.
government obligations may not be exempt from these taxes. Please consult with
your tax advisor.
33
<PAGE>
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
As long as a Fund continually maintains a $1.00 net asset value per share, you
ordinarily will not recognize a taxable gain or loss on the redemption or
exchange of your shares of the Fund.
[GRAPHIC] Financial highlights
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. The total investment return line
indicates how much an investment in the Fund would have earned, assuming all
dividends and distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The auditor's
report and Nations Funds financial statements are incorporated by reference
into the SAI. Financial Highlights for Market Class Shares of Nations
California Tax-Exempt Fund are not provided because this class of shares had
not yet commenced operations during the period indicated. Please see the back
cover to find out how you can get a copy.
34
<PAGE>
NATIONS CASH RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Market Class Period ended Year ended Period ended
3/31/99(a) 04/30/98 04/30/97*
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0447 0.0519 0.0493
Dividends from net investment income (0.0447) (0.0519) (0.0493)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 4.56 % 5.33 % 5.04 %
================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) $1,486,502 $649,503 $333,000
Ratio of operating expenses to average net
assets 0.61 %+(b) 0.55%** 0.55 %+
Ratio of net investment income to average
net assets 4.83 %+ 5.19 % 4.97 %+
Ratio of operating expenses to average net
assets without waivers 0.88 %+(b) 0.89 % 0.80 %+
</TABLE>
* Nations Cash Reserves Market Class Shares
commenced operations on May 3, 1996.
** The effect of interest expense on the operating
expense ratio was less than 0.01%.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
NATIONS TREASURY RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Market Class Period ended Year ended Period ended
3/31/99(a) 04/30/98 04/30/97*
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0423 0.0505 0.0481
Dividends from net investment income (0.0423) (0.0505) (0.0481)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 4.31 % 5.18 % 4.92 %
================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) $1,169,932 $265,495 $123,396
Ratio of operating expenses to average net
assets 0.62 %+(b) 0.55 % 0.55 %+
Ratio of net investment income to average
net assets 4.57 %+ 5.06 % 4.85 %+
Ratio of operating expenses to average net
assets without waivers 0.90 %+(b) 0.90 % 0.81 %+
</TABLE>
* Nations Treasury Reserves Market Class Shares
commenced operations on May 3, 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
35
<PAGE>
NATIONS GOVERNMENT RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Market Class Period ended Year ended Period ended
3/31/99(a) 04/30/98 04/30/97*
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0431 0.0508 0.0482
Dividends from net investment income (0.0431) (0.0508) (0.0482)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 4.39 % 5.20 % 4.93 %
================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) $334,000 $274,499 $218,499
Ratio of operating expenses to average net
assets 0.61 %+(b) 0.55 % 0.55 %+
Ratio of net investment income to average
net assets 4.64 %+ 5.08 % 4.87 %+
Ratio of operating expenses to average net
assets without waivers 0.89 %+(b) 0.90 % 0.84 %+
</TABLE>
* Nations Government Reserves Market Class Shares
commenced operations on May 3, 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
NATIONS MUNICIPAL RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Market Class Period ended Year ended Period ended
3/31/99(a) 04/30/98 04/30/97*
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0254 0.0318 0.0301
Dividends from net investment income (0.0254) (0.0318) (0.0301)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 2.57 % 3.24 % 3.06 %
=============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) $146,999 $92,000 $78,300
Ratio of operating expenses to average net
assets 0.61 %+ 0.55%** 0.55 %+
Ratio of net investment income to average
net assets 2.69 %+ 3.18 % 3.03 %+
Ratio of operating expenses to average net
assets without waivers 0.93 %+ 0.93 % 0.87 %+
</TABLE>
* Nations Municipal Reserves Market Class Shares
commenced operations on May 3, 1996.
** The effect of interest expense on the operating
expense ratio was 0.02%.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
36
<PAGE>
NATIONS MONEY MARKET RESERVES FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Market Class Period ended
3/31/99*(a)
<S> <C>
Net asset value, beginning of period $ 1.00
Net investment income 0.0214
Dividends from net investment income (0.0214)
Net asset value, end of period $ 1.00
TOTAL RETURN++ 2.14 %
===========================================================
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $873,993
Ratio of operating expenses to average net
assets 0.65 %+(b)
Ratio of net investment income to average
net assets 4.42 %+
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.91 %+(b)
</TABLE>
* Nations Money Market Reserves Market Class
commenced operations on October 9, 1998.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
37
<PAGE>
[GRAPHIC] Terms used in this prospectus
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
EQUITY SECURITY - an investment that gives you part ownership in a company.
Equity securities (or "equities") include common and preferred stock, rights
and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
38
<PAGE>
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
39
<PAGE>
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - The date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
40
<PAGE>
[outside back cover]
[GRAPHIC] Where to find more information
You'll find more information about the Money Market Funds in the following
documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.626.2275 (Institutional Investors)
1.800.321.7854 (Individual Investors)
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file number:
Nations Reserves, 811-6030
NF-MARKET-8/99
<PAGE>
<PAGE>
[GRAPHIC]
MONEY MARKET FUNDS
PROSPECTUS -- INVESTOR CLASS SHARES
AUGUST 1, 1999
Money Market Funds
NATIONS CASH RESERVES
NATIONS MONEY MARKET RESERVES
NATIONS TREASURY RESERVES
NATIONS GOVERNMENT RESERVES
NATIONS MUNICIPAL RESERVES
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------
NOT FDIC
INSURED
- ------------------
May Lose Value
- ------------------
No Bank Guarantee
- ------------------
[NATIONS FUNDS LOGO APPEARS HERE]
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 39.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about some of the
Nations Funds Money Market Funds. Please read it carefully, because it
contains information that's designed to help you make informed investment
decisions.
This prospectus offers Investor Class Shares of the Funds. This class of
shares is designed primarily for financial institutions and intermediaries for
their own accounts, and for certain of their client accounts. Please turn to
page 28 for more information about who is eligible to buy this class of
shares.
ABOUT THE FUNDS
The Money Market Funds seek to provide income while protecting your original
investment by investing in MONEY MARKET INSTRUMENTS.
Money market instruments include short-term DEBT SECURITIES that are U.S.
government issued or guaranteed or have relatively low risk. Your original
investment and your return aren't guaranteed, however, and returns will vary
as short-term interest rates change. Over time, the return on money market
funds may be lower than the return on other kinds of mutual funds or
investments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Money Market Funds may be suitable for you if:
o you're looking for a relatively low risk investment with stability of
principal
o you have short-term income needs
They may not be suitable for you if:
o you're looking for higher returns
o you're more comfortable with bank deposits that are FDIC-insured
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 4.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.626.2275 if
you're an institutional investor, or 1.800.321.7854 if you're an individual
investor. You can also contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
2
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER
TO EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED A SUB-
ADVISER -- TRADESTREET INVESTMENT ASSOCIATES, INC. (TRADESTREET),
WHICH IS RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT DECISIONS FOR
EACH OF THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAAI AND TRADESTREET
STARTING ON PAGE 26.
*BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC ADVISORS,
INC. ON OR ABOUT SEPTEMBER 1, 1999.
[GRAPHIC] About the Money Market Funds
NATIONS CASH RESERVES 4
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS MONEY MARKET RESERVES 7
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS TREASURY RESERVES 10
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS GOVERNMENT RESERVES 13
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS MUNICIPAL RESERVES 16
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS CALIFORNIA TAX-EXEMPT RESERVES 20
Sub-adviser: TradeStreet
- ----------------------------------------------------------
OTHER IMPORTANT INFORMATION 24
- ----------------------------------------------------------
HOW THE FUNDS ARE MANAGED 26
[GRAPHIC] About your investment
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 28
How selling and servicing agents are paid 34
Distributions and taxes 35
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS 37
- ----------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 39
- ----------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
3
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 27.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Cash Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
4
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 24 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Cash Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
3.34%* 5.25% 5.19%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.22%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 3rd and 4th quarter 1997: 1.32%
Worst: 4th quarter 1998: 1.20%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
Since
1 year inception
Market Class Shares 5.19% 5.18%
5
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Investor Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.35%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.63%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses2 0.55%
======
</TABLE>
(1) The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor Class Shares $56 $194 $343 $779
6
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 27.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Money Market Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund's investment objective is to provide a high level of current
income consistent with liquidity, the preservation of capital and a
stable net asset value.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
7
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 24 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Money Market Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditwothiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
9.36% 8.25% 6.36% 4.02% 3.07% 4.02% 5.78% 5.28% 5.62% 5.55%
[GRAPHIC] YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.42%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1989: 2.40%
Worst: 2nd quarter 1993: 0.75%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
1 year 5 years 10 years
Capital Class Shares 5.55% 5.25% 5.72%
8
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Investor Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.35%
Other expenses 0.16%
------
Total annual Fund operating expenses 0.66%
Fee waivers and/or reimbursements (0.11)%
------
Total net expenses2 0.55%
======
</TABLE>
(1) The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor Class Shares $56 $200 $357 $813
9
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 27.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' LIST OF APPROVED MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Treasury Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o U.S. TREASURY OBLIGATIONS
o REPURCHASE AGREEMENTS and REVERSE REPURCHASE AGREEMENTS secured by U.S.
Treasury obligations
o obligations whose principal and interest are backed by the U.S. government
The Fund may invest in other money market funds that invest in these
instruments, consistent with its investment objective and strategies.
The Fund normally invests at least 65% of its assets in U.S. Treasury
obligations, and repurchase agreements secured by U.S. Treasury obligations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as the direction of interest rates.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
10
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 24 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Treasury Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
3.26%* 5.11% 4.97%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.09%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 4th quarter 1997: 1.29%
Worst: 4th quarter 1998: 1.08%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
Since
1 year inception
Market Class Shares 4.97% 5.01%
11
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Investor Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.35%
Other expenses 0.15%
------
Total annual Fund operating expenses 0.65%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses2 0.55%
======
</TABLE>
(1) The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor Class Shares $56 $198 $352 $801
12
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 27.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Government Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily U.S. GOVERNMENT OBLIGATIONS and U.S. TREASURY OBLIGATIONS. The Fund
may invest in other money market funds that invest in these instruments,
consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
13
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 24 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Government Reserves has the following general risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
3.26%* 5.13% 5.03%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.12%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 4th quarter 1997: 1.29%
Worst: 4th quarter 1998: 1.13%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
Since
1 year inception
Market Class Shares 5.03% 5.04%
14
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
(Fees paid directly from your investment) Investor Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.35%
Other expenses 0.14%
-----
Total annual Fund operating expenses 0.64%
Fee waivers and/or reimbursements (0.09)%
-----
Total net expenses2 0.55%
=====
</TABLE>
(1) The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor Class Shares $56 $196 $348 $790
15
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 27.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Municipal Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income exempt from federal income
taxes.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. The Fund normally invests at
least 80% of its assets in MUNICIPAL SECURITIES, which pay interest that is
free from federal income and alternative minimum taxes. The Fund invests in
municipal securities that, at the time of investment, are considered by the
portfolio management team to have minimal credit risk and to be of HIGH
QUALITY.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE ACTIVITY
BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument,
and structural analysis, which includes evaluating the arrangements
between the municipality and others involved in the issue of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
16
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND ON PAGE 24
AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Municipal Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax, but may be subject to state and local taxes. Any
portion of a distribution that comes from income paid on other kinds
of securities or from realized CAPITAL GAINS is generally subject to
federal, state and local taxes. Distributions paid to you from the
Fund's interest on private activity bonds may be subject to the
federal alternative minimum tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
2.05%* 3.24% 3.00%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.25%
17
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1997: 0.86%
Worst: 4th quarter 1998: 0.68%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
Since
1 year inception
Market Class Shares 3.00% 3.11%
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Investor Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.35%
Other expenses 0.18%
------
Total annual Fund operating expenses 0.68%
Fee waivers and/or reimbursements (0.13)%
------
Total net expenses2 0.55%
======
</TABLE>
(1) The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
18
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor Class Shares $56 $204 $366 $834
19
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 27.
[GRAPHIC] THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
Nations California Tax-Exempt Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks current income exempt from federal income tax and
California state personal income tax, a stable share price, and daily
LIQUIDITY.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a portfolio of
high quality MONEY MARKET INSTRUMENTS that, at the time of investment,
are considered to have remaining maturities of 397 days or less.
The Fund normally invests at least 80% of its assets in securities that pay
interest that is free from federal income tax and California state personal
income tax. These securities are issued by or on behalf of the State of
California, its political subdivisions, agencies, instrumentalities and
authorities, and other qualified issuers.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE ACTIVITY
BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating local, national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument,
and structural analysis, which includes evaluating the arrangements
between the municipality and others involved in the issue of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
20
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 24 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations California Tax-Exempt Reserves has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax and California state personal income tax, but may
be subject to other state and local taxes and the federal
alternative minimum tax. Any portion of a distribution that comes
from income paid on other kinds of securities or from realized
CAPITAL GAINS is generally subject to federal, state and local
taxes. Distributions paid to you from the Fund's interest on private
activity bonds may be subject to the federal alternative minimum
tax.
21
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Investor
Class Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
0.38%* 5.20% 3.97% 2.01% 1.87% 2.30% 3.32% 2.88% 3.07% 2.74%
*Return is from inception (12-6-89) to 12-31-89.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 0.98%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1990: 1.34%
Worst: 1st quarter 1992: 0.23%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
Since
1 year 5 years inception
Investor Class Shares 2.74% 2.86% 3.06%
22
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Investor Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.35%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.63%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses2 0.55%
======
</TABLE>
(1) The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor Class Shares $56 $194 $343 $779
23
<PAGE>
[GRAPHIC] Other important information
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 4. The following are
some other risks and information you should consider before you invest:
o SPECIAL RULES FOR MONEY MARKET FUNDS - Money market funds must comply
with Rule 2a-7 under the Investment Company Act of 1940 (1940 Act).
Rule 2a-7 sets out certain limits on investments, which are designed
to help protect investors from risk of loss. These limits apply at
the time an investment is made. The Funds, like all money market
funds:
o may only invest in securities with a remaining maturity of 397 days or
less, or that have maturities longer than 397 days but have
demand, interest rate reset features or guarantees that are 397
days or less
o must maintain an AVERAGE DOLLAR-WEIGHTED MATURITY of 90 days or less
o may normally invest no more than 5% of their assets in a single
security, other than U.S. government securities; however, they may
invest up to 25% of their assets in a FIRST-TIER SECURITY for up
to three business days (except for Nations California Tax-Exempt
Reserves)
o may generally only invest in U.S. dollar denominated instruments that
are determined to have minimal credit risk and are first-tier
securities except for Nations California Tax-Exempt Reserves,
which also may invest in SECOND-TIER SECURITIES
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund cannot be changed
without shareholder approval (except for Nations California
Tax-Exempt Reserves).
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments that
aren't part of their principal investment strategies. Please refer
to the SAI for more information. The portfolio managers or
management team can also choose not to invest in specific securities
described in this prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn
or because of political or other conditions. A Fund may not achieve
its investment objective while it is investing defensively. Any cash
a Fund holds for defensive or other reasons does not earn income.
24
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and
that they expect them to be adapted in time. There is no guarantee,
however, that their computer systems will be ready by the year 2000.
If their computer systems are not ready in time, there could be a
negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
25
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] How the Funds are managed
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in Nations
Funds, including the Money Market Funds described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation.
Nations Funds pays BAAI an annual fee for its investment advisory services.
The fee is calculated daily based on the average net assets of each Fund and
is paid monthly. BAAI uses part of this money to pay investment sub-advisers
for the services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee(1) fiscal year
<S> <C> <C>
Nations Cash Reserves 0.15% 0.15%
Nations Money Market Reserves 0.15% 0.12%
Nations Treasury Reserves 0.15% 0.13%
Nations Government Reserves 0.15% 0.14%
Nations Municipal Reserves 0.15% 0.10%
Nations California Tax-Exempt Reserves 0.15% 0.15%
</TABLE>
(1)These fees are the current contract levels, which have been reduced from the
contract levels in effect during the last fiscal year.
26
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in
Nations Funds. TradeStreet takes a team approach to investment management.
Each team has access to the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Cash Reserves Taxable Money Market Management Team
Nations Money Market Reserves Taxable Money Market Management Team
Nations Treasury Reserves Taxable Money Market Management Team
Nations Government Reserves Taxable Money Market Management Team
Nations Municipal Reserves Tax-Exempt Money Market Management Team
Nations California Tax-Exempt Reserves Tax-Exempt Money Market Management Team
</TABLE>
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay distribution (12b-1) and shareholder servicing
fees and/or other compensation to companies for selling shares and providing
services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.10% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
27
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] Buying, selling and exchanging shares
This prospectus offers Investor Class Shares of the Funds. Here are some
general rules about this class of shares:
o Investor Class Shares are available on a direct basis or through certain
financial institutions and intermediaries for their own accounts, and for
certain client accounts for which they may provide automated cash
management or other services. These include:
o Bank of America and certain of its affiliates
o certain other financial institutions and intermediaries
o The minimum initial investment is $25,000. Financial institutions or
intermediaries can total the investments they make on behalf of their
clients to come up with the minimum initial investment.
o There is no minimum for additional investments.
o The minimum initial investment is $10,000 using the Systematic Investment
Plan. The minimum for additional investments under this plan is $1,000.
o There are no sales charges for buying, selling or exchanging these
shares.
You'll find more information about buying, selling and exchanging Investor
Class Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related services and programs.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. If you have questions about
buying, selling or exchanging, or you need help placing an order, please call
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor. You can also contact your investment
professional.
28
<PAGE>
<TABLE>
<CAPTION>
Ways to
buy, sell or How much you can buy,
exchange sell or exchange Other things to know
----------------- -------------------------------------- ----------------------------------------------------
<S> <C> <C> <C>
Buying shares In a lump sum minimum initial investment: There is no limit to the amount you can invest
o $25,000 in Investor Class Shares.
minimum additional investment:
o none
Using our minimum initial investment: You can buy shares monthly, twice a month or
Systematic o $10,000 quarterly, using automatic transfers from your
Investment Plan minimum additional investment: bank account.
o $1,000
- ------------------------------------------------------------------------------------------------------------------------------------
Selling shares In a lump sum o you can sell up to $50,000 of your We usually send you the sale proceeds on the
shares by telephone, otherwise same day that we receive your order.
there are no limits to the amount you If you paid for your shares with a check that
can sell wasn't certified, we'll hold the sale proceeds
o other restrictions may apply to when you sell those shares for at least 15 days
withdrawals from retirement plan after the trade date of the purchase, or until the
accounts check has cleared.
Using our free o minimum $250 per check You can write checks for free. You can only use
checkwriting checks to make partial withdrawals from a
service Fund. You can't use a check to make a full
withdrawal from a Fund.
Using our o minimum $25 per withdrawal Your account balance must be at least $10,000
Automatic to set up the plan. You can make withdrawals
Withdrawal Plan monthly, twice a month or quarterly. We'll send
your money by check or deposit it directly to
your bank account.
- ------------------------------------------------------------------------------------------------------------------------------------
Exchanging shares In a lump sum o minimum $25,000 per exchange You can exchange Investor Class shares of a
Fund for Investor Class Shares of any other
Nations Reserves Money Market Fund.
</TABLE>
29
<PAGE>
[GRAPHIC] A BUSINESS DAY IS ANY DAY THAT THE FEDERAL RESERVE BANK OF NEW
YORK IS OPEN.
THE FEDERAL RESERVE BANK OF NEW YORK IS CLOSED ON WEEKENDS AND ON
THE FOLLOWING NATIONAL HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER
KING, JR. DAY, PRESIDENTS' DAY, MEMORIAL DAY, INDEPENDENCE DAY,
LABOR DAY, COLUMBUS DAY, VETERANS DAY, THANKSGIVING DAY AND
CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share at the following
times:
o 5:00 p.m. Eastern time each business day for each share class of Nations
Cash Reserves, Nations Money Market Reserves and Nations Treasury
Reserves
o 12:00 noon Eastern time each business day for each share class of Nations
Government Reserves and Nations Municipal Reserves
o 10:30 a.m. Eastern time each business day for each share class of Nations
California Tax-Exempt Reserves
First, we calculate the net asset value for each class of a Fund by
determining the value of the Fund's assets in the class and then subtracting
its liabilities. Next, we divide this amount by the number of shares that
investors are holding in the class.
Although we try to maintain a net asset value per share of $1.00 for the
Funds, we can't guarantee that we will be able to do so.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. We use the amortized cost method, which approximates
market value, to value the assets in the Money Market Funds.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents by the following times on a
business day will receive that day's net asset value per share:
o 3:00 p.m. Eastern time for Nations Cash Reserves, Nations Money Market
Reserves and Nations Treasury Reserves
o 12:00 noon Eastern time for Nations Government Reserves and Nations
Municipal Reserves
o 10:30 a.m. Eastern time for Nations California Tax-Exempt Reserves
Investors are encouraged to place orders to sell as early in the day as
possible. Orders received after these times will receive the next business
day's net asset value per share. The business day that applies to an order is
also called the TRADE DATE. We may refuse any order to buy or exchange shares.
If this happens, we'll return any money we've received.
30
<PAGE>
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone if you complete the
telephone authorization section of our account application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account, you
must have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be
responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions are
genuine. For example, we require proof of your identification before we
will act on instructions received by telephone and may record telephone
conversations. If we and our service providers don't take these steps,
we may be liable for any losses from unauthorized or fraudulent
instructions.
o Telephone orders may be difficult to complete during periods of
significant economic or market change.
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Investor Class Shares at net asset value per share.
o If we don't receive payment by 4:00 p.m. Eastern time on the
business day Stephens, First Data or their agents receive the order,
we'll refuse the order. We'll return any payment received for orders
that we refuse. We can change this time under certain circumstances,
for example, when there's more wiring activity than normal.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we receive
payment on time.
o Shares purchased are recorded on the books of the Fund. We generally
don't issue certificates.
SYSTEMATIC INVESTMENT PLAN
You can make regular purchases of $1,000 or more using automatic transfers
from your bank account to the Funds you choose. You can contact your financial
adviser or us to set up the plan.
Here's how the plan works:
o You can buy shares twice a month, monthly or quarterly.
o You can choose to have us transfer your money on or about the 15th or the
last day of the month.
o Some exceptions may apply to employees of Bank of America and its
affiliates, and to plans set up before August 1, 1997. For details,
please contact your financial adviser.
31
<PAGE>
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire on the same
business day that Stephens, First Data or their agents receive the
order.
o We may take up to three business days to send the sale proceeds if
we believe that an earlier payment could adversely affect the Fund.
o Investors that qualify for telephone orders can sell up to $50,000
in shares by telephone.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold for at least 15
days after the trade date of the purchase, or until the check has
cleared.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
o Under certain circumstances allowed under the 1940 Act, we can pay
investors in securities or other property when they sell shares, or
delay payment of the sale proceeds for up to seven days.
o other restrictions may apply to retirement plan accounts. For more
information about these restrictions please contact your retirement
plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 30 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its clients
o under certain other circumstances allowed under the 1940 Act
CHECKWRITING SERVICE
You can withdraw money from the Funds using our free checkwriting service. You
can contact your financial adviser or us to set up the service.
Here's how the service works:
o Each check you write must be for $250 or more.
o You can only use checks to make partial withdrawals. You can't use a
check to make a full withdrawal of the shares you hold in a Fund.
o Shares you sell by writing a check are eligible to receive distributions
up to the day our custodian receives the check for payment.
o We can change or cancel the service by giving you 30 days notice in
writing.
32
<PAGE>
[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan lets you withdraw $25 or more every month, every
quarter or every year. You can contact your financial adviser or us to set up
the plan.
Here's how the plan works:
o Your account balance must be at least $10,000 to set up the plan.
o If you set up the plan after you've opened your account, your signature
must be guaranteed.
o You can choose to have us transfer your money on or about the 15th or the
25th of the month.
o We'll send you a check or deposit the money directly to your bank
account.
o You can cancel the plan by giving your financial adviser or us 30 days
notice in writing.
It's important to remember that if you withdraw more than your investment in
the Fund is earning, you'll eventually use up your original investment.
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another Nations
Fund. This is called an exchange, and may be appropriate if investment
goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Investor Class Shares of a Fund for Investor
Class Shares of any other Nations Reserves Money Market Fund.
o Investors must exchange at least $25,000 at a time.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
33
<PAGE>
[GRAPHIC] THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE
BECAUSE IT'S PAID THROUGH A PLAN
APPROVED UNDER RULE 12B-1 OF THE
1940 ACT.
THE SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
[GRAPHIC] How selling and servicing agents are paid
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES
Stephens and selling and servicing agents are compensated for selling shares
and providing services to investors under distribution and shareholder
servicing plans.
Stephens may be reimbursed for distribution-related expenses up to an annual
maximum of 0.10% of the average daily net assets of Investor Class Shares of
the Funds, some or all of which may be paid to selling agents.
Servicing agents may receive a maximum annual shareholder servicing fee of
0.25% of the average daily net assets of Investor Class Shares of the Funds.
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Funds' assets on an ongoing basis, over time they will increase the
cost of your investment, and may cost you more than any sales charges you may
pay.
The Funds pay these fees to eligible selling and servicing agents for as long
as the plans continue. We may reduce or discontinue payments at any time.
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale, promotion and
marketing of the Funds
o non-cash compensation like trips to sales seminars or vacation destinations,
tickets to sporting events, theater or other entertainment, opportunities to
participate in golf or other outings and gift certificates for meals or
merchandise
This compensation, which is not paid by the Funds, is discretionary and may be
available only to selected selling and servicing agents. For example, Stephens
sometimes sponsors promotions involving Banc of America Investments, Inc., an
affiliate of BAAI, and certain other selling or servicing agents. Selected
selling and servicing agents may also receive compensation for opening a
minimum number of accounts. Stephens may cancel any compensation program at
any time.
BAAI also may pay amounts from its own assets to Stephens or to selling or
servicing agents for services they provide.
34
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE
ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] Distributions and taxes
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends paid
on COMMON STOCKS.
o A fund can also have CAPITAL GAINS if the value of its investments
increases. If a fund sells an investment at a gain, the gain is realized. If
a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gains to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gains to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
Although the Funds do not expect to realize any capital gains, any capital
gains realized by a Fund will be distributed at least once a year.
The Funds declare distributions of net investment income each business day and
pay them on the first business day of each month.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor.
35
<PAGE>
[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions of net investment income and any excess of net short-term
capital gains over net long-term capital losses generally are taxable to you
as ordinary income.
Although the Funds do not expect to realize any capital gains any
distributions of net capital gains (generally the excess of net long-term
capital gains over net short-term capital losses) generally are taxable to you
as net capital gains.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
NATIONS MUNICIPAL RESERVES, NATIONS CALIFORNIA TAX-EXEMPT RESERVES
Distributions that come from Nations Municipal Reserves' tax-exempt interest
income are generally free from federal income tax, but may be subject to state
or local tax.
Distributions that come from Nations California Tax-Exempt Reserves' tax-exempt
interest income are generally free from federal income tax and California
state personal income tax, but may be subject to other state and local taxes.
Any distributions that come from taxable income or realized capital gains are
generally subject to tax.
A portion of the distributions from these Funds may also be subject to the
federal alternative minimum tax.
U.S. GOVERNMENT OBLIGATIONS
If you invest in U.S. government obligations directly, interest on those
obligations is free from state and local and personal income taxes.
Distributions you receive that come from interest the Fund earns from U.S.
government obligations may not be exempt from these taxes. Please consult with
your tax advisor.
36
<PAGE>
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
As long as a Fund continually maintains a $1.00 net asset value per share, you
ordinarily will not recognize a taxable gain or loss on the redemption or
exchange of your shares of the Fund.
[GRAPHIC] Financial highlights
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. The total investment return line
indicates how much an investment in the Fund would have earned, assuming all
dividends and distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The auditor's
report and Nations Funds financial statements are incorporated by reference
into the SAI. Financial Highlights for the Nations Funds (excluding Nations
California Tax-Exempt Fund) are not provided because there were no
shareholders of Investor Class Shares during the period indicated. Please see
the back cover to find out how you can get a copy.
37
<PAGE>
NATIONS CALIFORNIA TAX-EXEMPT
RESERVES (SUCCESSOR TO THE PACIFIC FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD
HORIZON CALIFORNIA TAX-EXEMPT
FUND)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
INVESTOR CLASS* 5/14/99 2/28/99(A)
<S> <C> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .0100 .0261
Net realized gains/(losses) on investment
transactions -- --
Total income from investment operations .0100 .0261
Less dividends to shareholders from net
investment income ( .0100) ( .0261)
Net change in net asset value per share -- --
Net asset value per share, end of period $ 1.00 $ 1.00
TOTAL RETURN 0.50%(e) 2.64%
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 503 $ 539
Ratio of expenses to average net assets 0.58 %(d) 0.56 %
Ratio of net investment income to average net
assets 2.43 %(d) 2.61 %
Ratio of expenses to average net assets** 0.62 %(d) 0.59 %(c)
Ratio of net investment income to average net
assets** 2.39 %(d) 2.58 %(c)
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR CLASS* 2/28/98 2/28/97 2/29/96 2/28/95
<S> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0302 0.0284 0.0324 0.0249
Net realized gains/(losses) on investment
transactions -- -- (0.0001) (0.0001)
Total income from investment operations 0.0302 0.0284 0.0323 0.0248
Less dividends to shareholders from net
investment income (0.0302) (0.0284) (0.0324) (0.0249)
Net change in net asset value per share -- -- (0.0001) (0.0001)
Net asset value per share, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 3.06 % 2.88 % 3.29 % 2.52 %
================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 598 $ 493 $ 528 $ 187
Ratio of expenses to average net assets 0.57 % 0.57 % 0.62 % 0.62 %
Ratio of net investment income to average net
assets 3.01 % 2.83 % 3.35 % 2.48 %
Ratio of expenses to average net assets** 0.60 %(c) 0.60%*** 0.63%*** (b)
Ratio of net investment income to average net
assets** 2.98 %(c) 2.80 % (c) (b)
</TABLE>
*Investor Class Shares of Nations California
Tax-Exempt Reserves were formerly Pacific Horizon
Shares of the Pacific Horizon California Tax-Exempt
Money Market Fund.
**During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
***During the years ended February 28, 1997 and
February 29, 1996, the Portfolio received credits
from its custodian for interest earned on uninvested
cash balances which were used to offset custodian
fees and expenses. If such credits had not occurred,
the expense ratio would have been as indicated. The
ratio of net investment income was not affected.
(a) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationsBank Corporation.
(b) There were no fee waivers or expense
reimbursements during the year.
(c) Fees paid by third parties had no effect on the
ratios.
(d) Annualized.
(e) Not annualized.
38
<PAGE>
[GRAPHIC] Terms used in this prospectus
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
EQUITY SECURITY - an investment that gives you part ownership in a company.
Equity securities (or "equities") include common and preferred stock, rights
and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
39
<PAGE>
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
40
<PAGE>
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - The date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
41
<PAGE>
[GRAPHIC] Where to find more information
You'll find more information about the Money Market Funds in the following
documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.626.2275 (Institutional Investors)
1.800.321.7854 (Individual Investors)
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file number:
Nations Reserves, 811-6030
NF-INVESTOR-8/99
[GRAPHIC] MONEY MARKET FUNDS
PROSPECTUS -- ADVISER CLASS SHARES
AUGUST 1, 1999
MONEY MARKET FUNDS
NATIONS CASH RESERVES
NATIONS MONEY MARKET RESERVES
NATIONS TREASURY RESERVES
NATIONS GOVERNMENT RESERVES
NATIONS MUNICIPAL RESERVES
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ---------------------
NOT FDIC
INSURED
- ---------------------
MAY LOSE VALUE
- ---------------------
NO BANK GUARANTEE
- ---------------------
[NATIONS FUNDS LOGO APPEARS HERE]
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 38.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about some of the
Nations Funds Money Market Funds. Please read it carefully, because it
contains information that's designed to help you make informed investment
decisions.
This prospectus offers Adviser Class Shares of the Funds. This class of shares
is designed primarily for financial institutions and intermediaries for their
own accounts, and for certain of their client accounts. Please turn to page 26
for more information about who is eligible to buy this class of shares.
ABOUT THE FUNDS
The Money Market Funds seek to provide income while protecting your original
investment by investing in MONEY MARKET INSTRUMENTS.
Money market instruments include short-term DEBT SECURITIES that are U.S.
government issued or guaranteed or have relatively low risk. Your original
investment and your return aren't guaranteed, however, and returns will vary
as short-term interest rates change. Over time, the return on money market
funds may be lower than the return on other kinds of mutual funds or
investments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Money Market Funds may be suitable for you if:
o you're looking for a relatively low risk investment with stability of
principal
o you have short-term income needs
They may not be suitable for you if:
o you're looking for higher returns
o you're more comfortable with bank deposits that are FDIC-insured
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 4.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.626.2275 if
you're an institutional investor, or 1.800.321.7854 if you're an individual
investor. You can also contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
2
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC., (BAAI)* IS THE INVESTMENT ADVISER
TO EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED A SUB-ADVISER --
TRADESTREET INVESTMENT ASSOCIATES, INC. (TRADESTREET), WHICH IS
RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT DECISIONS FOR EACH OF THE
FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAAI AND TRADESTREET
STARTING ON PAGE 24.
*BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC ADVISORS,
INC. ON OR ABOUT SEPTEMBER 1, 1999.
<TABLE>
<S> <C>
[GRAPHIC] ABOUT THE MONEY MARKET FUNDS
NATIONS CASH RESERVES 4
Sub-adviser: TradeStreet
- -----------------------------------------------------------
NATIONS MONEY MARKET RESERVES 7
Sub-adviser: TradeStreet
- -----------------------------------------------------------
NATIONS TREASURY RESERVES 10
Sub-adviser: TradeStreet
- -----------------------------------------------------------
NATIONS GOVERNMENT RESERVES 13
Sub-adviser: TradeStreet
- -----------------------------------------------------------
NATIONS MUNICIPAL RESERVES 16
Sub-adviser: TradeStreet
- -----------------------------------------------------------
NATIONS CALIFORNIA TAX-EXEMPT RESERVES 19
Sub-adviser: TradeStreet
- -----------------------------------------------------------
OTHER IMPORTANT INFORMATION 22
- -----------------------------------------------------------
HOW THE FUNDS ARE MANAGED 24
[GRAPHIC] ABOUT YOUR INVESTMENT
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 26
How selling and servicing agents are paid 30
Distributions and taxes 31
- -----------------------------------------------------------
FINANCIAL HIGHLIGHTS 33
- -----------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 38
- -----------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
3
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT
TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS CASH RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
4
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Cash Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Adviser Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
1.32%* 5.76% 5.19% 5.36% 5.32%
*Return is from inception (9-22-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.32%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1995: 1.46%
Worst: 4th quarter 1994: 1.20%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
Since
1 year inception
Adviser Class Shares 5.32% 5.37%
5
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Adviser Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder servicing fees 0.25%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.53%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses(2) 0.45%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Adviser Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
Adviser Class Shares $46 $162 $288 $657
</TABLE>
6
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT
TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS MONEY MARKET RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund's investment objective is to provide a high level of current
income consistent with liquidity, the preservation of capital and a
stable net asset value.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
o other INVESTMENT COMPANY SECURITIES
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
7
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Money Market Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
9.36% 8.25% 6.36% 4.02% 3.07% 4.02% 5.78% 5.28% 5.62% 5.55%
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.42%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1989: 2.40%
Worst: 2nd quarter 1993: 0.75%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
1 year 5 years 10 years
Capital Class Shares 5.55% 5.25% 5.72%
8
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Adviser Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder servicing fees 0.25%
Other expenses 0.16%
------
Total annual Fund operating expenses 0.56%
Fee waivers and/or reimbursements (0.11)%
------
Total net expenses(1) 0.45%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Adviser Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Adviser Class Shares $46 $168 $302 $692
9
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' LIST OF APPROVED MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS TREASURY RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o U.S. TREASURY OBLIGATIONS
o REPURCHASE AGREEMENTS and REVERSE REPURCHASE AGREEMENTS secured by U.S.
Treasury obligations
o obligations whose principal and interest are backed by the U.S. government
The Fund may invest in other money market funds that invest in these
instruments, consistent with its investment objective and strategies.
The Fund normally invests at least 65% of its assets in U.S. Treasury
obligations, and repurchase agreements secured by U.S. Treasury obligations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
10
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Treasury Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Adviser Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
1.29%* 5.60% 5.07% 5.22% 5.12%
*Return is from inception (9-22-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.19%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1995: 1.41%
Worst: 4th quarter 1998: 1.16%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
Since
1 year inception
Adviser Class Shares 5.12% 5.22%
11
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Adviser Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder servicing fees 0.25%
Other expenses 0.15%
------
Total annual Fund operating expenses 0.55%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses(2) 0.45%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Adviser Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Adviser Class Shares $46 $166 $297 $680
12
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS GOVERNMENT RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily U.S. GOVERNMENT OBLIGATIONS and U.S. TREASURY OBLIGATIONS. The Fund
may invest in other money market funds that invest in these instruments,
consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
13
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON PAGE 22
AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Government Reserves has the following general risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Adviser Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
1.22%* 5.55% 5.06% 5.24% 5.16%
*Return is from inception (9-22-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.22%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1995: 1.39%
Worst: 4th quarter 1994: 1.11%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
Since
1 year inception
Adviser Class Shares 5.16% 5.21%
14
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Adviser Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder servicing fees 0.25%
Other expenses 0.14%
------
Total annual Fund operating expenses 0.54%
Fee waivers and/or reimbursements (0.09)%
------
Total net expenses(2) 0.45%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Adviser Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Adviser Class Shares $46 $164 $293 $668
15
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT
TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS MUNICIPAL RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income exempt from federal income
taxes.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. The Fund normally invests at
least 80% of its assets in MUNICIPAL SECURITIES, which pay interest that is
free from federal income and alternative minimum taxes. The Fund invests in
municipal securities that, at the time of investment, are considered by the
portfolio management team to have minimal credit risk and to be of HIGH
QUALITY.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE ACTIVITY
BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument,
and structural analysis, which includes evaluating the arrangements
between the municipality and others involved in the issue of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
16
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Municipal Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax, but may be subject to state and local taxes. Any
portion of a distribution that comes from income paid on other kinds
of securities or from realized CAPITAL GAINS is generally subject to
federal, state and local taxes. Distributions paid to you from the
Fund's interest on private activity bonds may be subject to the
federal alternative minimum tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Adviser Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
0.88%* 3.55% 3.18% 3.34% 3.15%
*Return is from inception (9-22-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.35%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1995: 0.93%
Worst: 4th quarter 1998: 0.73%
17
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
Since
1 year inception
Adviser Class Shares 3.15% 3.30%
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Adviser Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder servicing fees 0.25%
Other expenses 0.18%
------
Total annual Fund operating expenses 0.58%
Fee waivers and/or reimbursements (0.13)%
------
Total net expenses(2) 0.45%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Adviser Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Adviser Class Shares $46 $173 $311 $713
18
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks current income exempt from federal income tax and
California state personal income tax, a stable share price, and daily
LIQUIDITY.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a portfolio of
high quality MONEY MARKET INSTRUMENTS that, at the time of investment,
are considered to have remaining maturities of 397 days or less.
The Fund normally invests at least 80% of its assets in securities that pay
interest that is free from federal income tax and California state personal
income tax. These securities are issued by or on behalf of the State of
California, its political subdivisions, agencies, instrumentalities and
authorities, and other qualified issuers.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE ACTIVITY
BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating local, national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument,
and structural analysis, which includes evaluating the arrangements
between the municipality and others involved in the issue of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
19
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations California Tax-Exempt Reserves has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax and California state personal income tax, but may
be subject to other state and local taxes and the federal
alternative minimum tax. Any portion of a distribution that comes
from income paid on other kinds of securities or from realized
CAPITAL GAINS is generally subject to federal, state and local
taxes. Distributions paid to you from the Fund's interest on private
activity bonds may be subject to the federal alternative minimum
tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Adviser Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
1.70%* 2.37% 3.40% 2.96% 3.14% 2.82%
*Return is from inception (3-1-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.02%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1995: 0.88%
Worst: 1st quarter 1994: 0.44%
20
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
Since
1 year 5 years inception
Adviser Class Shares 2.82% 2.94% 2.81%
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Adviser Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder servicing fees 0.25%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.53%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses(2) 0.45%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Adviser Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Adviser Class Shares $46 $162 $288 $657
21
<PAGE>
[GRAPHIC] OTHER IMPORTANT INFORMATION
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 4. The following are
some other risks and information you should consider before you invest:
o SPECIAL RULES FOR MONEY MARKET FUNDS - Money market funds must comply
with Rule 2a-7 under the Investment Company Act of 1940 (1940 Act).
Rule 2a-7 sets out certain limits on investments, which are designed
to help protect investors from risk of loss. These limits apply at
the time an investment is made. The Funds, like all money market
funds:
o may only invest in securities with a remaining maturity of 397 days or
less, or that have maturities longer than 397 days but have
demand, interest rate reset features or guarantees that are 397
days or less
o must maintain an AVERAGE DOLLAR-WEIGHTED MATURITY of 90 days or less
o may normally invest no more than 5% of their assets in a single
security, other than U.S. government securities; however, they may
invest up to 25% of their assets in a FIRST-TIER SECURITY for up
to three business days (except for Nations California Tax-Exempt
Reserves)
o may generally only invest in U.S. dollar denominated instruments that
are determined to have minimal credit risk and are first-tier
securities, except for Nations California Tax-Exempt Reserves,
which also may invest in SECOND-TIER SECURITIES
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund cannot be changed
without shareholder approval (except for Nations California
Tax-Exempt Reserves).
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments that
aren't part of their principal investment strategies. Please refer
to the SAI for more information. The portfolio managers or
management team can also choose not to invest in specific securities
described in this prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn
or because of political or other conditions. A Fund may not achieve
its investment objective while it is investing defensively. Any cash
a Fund holds for defensive or other reasons does not earn income.
22
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and
that they expect them to be adapted in time. There is no guarantee,
however, that their computer systems will be ready by the year 2000.
If their computer systems are not ready in time, there could be a
negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
23
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] HOW THE FUNDS ARE MANAGED
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in Nations
Funds, including the Money Market Funds described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation.
Nations Funds pays BAAI an annual fee for its investment advisory services.
The fee is calculated daily based on the average net assets of each Fund and
is paid monthly. BAAI uses part of this money to pay investment sub-advisers
for the services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
Maximum Actual fee
advisory paid last
fee(1) fiscal year
Nations Cash Reserves 0.15% 0.15%
Nations Money Market Reserves 0.15% 0.12%
Nations Treasury Reserves 0.15% 0.13%
Nations Government Reserves 0.15% 0.14%
Nations Municipal Reserves 0.15% 0.10%
Nations California Tax-Exempt Reserves 0.15% 0.15%
(1)These fees are the current contract levels, which have been reduced from the
contract levels in effect during the last fiscal year.
24
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in
Nations Funds. TradeStreet takes a team approach to investment management.
Each team has access to the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Cash Reserves Taxable Money Market Management Team
Nations Money Market Reserves Taxable Money Market Management Team
Nations Treasury Reserves Taxable Money Market Management Team
Nations Government Reserves Taxable Money Market Management Team
Nations Municipal Reserves Tax-Exempt Money Market Management Team
Nations California Tax-Exempt Reserves Tax-Exempt Money Market Management Team
</TABLE>
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay shareholder servicing fees and/or other
compensation to companies for providing services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.10% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
25
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] BUYING, SELLING AND EXCHANGING SHARES
This prospectus offers Adviser Class Shares of the Funds. Here are some
general rules about this class of shares:
o Adviser Class Shares are available on a direct basis or through financial
institutions and intermediaries for their own accounts, and for certain
client accounts for which they may provide specific services. These
include:
o Bank of America and certain of its affiliates
o certain other financial institutions
o The minimum initial investment is $100,000. Financial institutions or
intermediaries can total the investments they make on behalf of their
clients to meet the minimum initial investment amount.
o There is no minimum for additional investments.
o There are no sales charges for buying, selling or exchanging these
shares.
You'll find more information about buying, selling and exchanging Adviser
Class Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related services and programs.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. If you have questions about
buying, selling or exchanging, or you need help placing an order, please call
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor. You can also contact your investment
professional.
26
<PAGE>
A BUSINESS DAY IS ANY DAY THAT THE FEDERAL RESERVE BANK OF NEW
YORK IS OPEN.
THE FEDERAL RESERVE BANK OF NEW YORK IS CLOSED ON WEEKENDS AND ON
THE FOLLOWING NATIONAL HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER
KING, JR. DAY, PRESIDENTS' DAY, MEMORIAL DAY, INDEPENDENCE DAY,
LABOR DAY, COLUMBUS DAY, VETERANS DAY, THANKSGIVING DAY AND
CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share at the following
times:
o 5:00 p.m. Eastern time each business day for each share class of Nations
Cash Reserves, Nations Money Market Reserves and Nations Treasury
Reserves
o 12:00 noon Eastern time each business day for each share class of Nations
Government Reserves and Nations Municipal Reserves
o 10:30 a.m. Eastern time each business day for each share class of Nations
California Tax-Exempt Reserves
First, we calculate the net asset value for each class of a Fund by
determining the value of the Fund's assets in the class and then subtracting
its liabilities. Next, we divide this amount by the number of shares that
investors are holding in the class.
Although we try to maintain a net asset value per share of $1.00 for the
Funds, we can't guarantee that we will be able to do so.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. We use the amortized cost method, which approximates
market value, to value the assets in the Money Market Funds.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents by the following times on a
business day will receive that day's net asset value per share:
o 5:00 p.m. Eastern time for Nations Cash Reserves, Nations Money Market
Reserves and Nations Treasury Reserves
o 12:00 noon Eastern time for Nations Government Reserves and Nations
Municipal Reserves
o 10:30 a.m. Eastern time for Nations California Tax-Exempt Reserves
Investors are encouraged to place orders to sell as early in the day as
possible. Orders received after these times will receive the next business
day's net asset value per share. The business day that applies to an order is
also called the TRADE DATE. We may refuse any order to buy or exchange shares.
If this happens, we'll return any money we've received.
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone if you complete the
telephone authorization section of our account application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account, you
must have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be
responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions are
genuine. For example, we require proof of your identification before
we will act on instructions received by telephone and may record
telephone conversations. If we and our service providers don't take
these steps, we may be liable for any losses from unauthorized or
fraudulent instructions.
o Telephone orders may be difficult to complete during periods of
significant economic or market change.
27
<PAGE>
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Adviser Class Shares at net asset value per share.
o We must receive payment by the following times on the business day
Stephens, First Data or their agents receive the order:
o 5:30 p.m. Eastern time for Nations Cash Reserves, Nations Money
Market Reserves and Nations Treasury Reserves
o 4:00 p.m. Eastern time for Nations Governments Reserves,
Nations Municipal Reserves and Nations California Tax-Exempt
Reserves
If we receive payment after these times, we'll refuse the order.
We'll return any payment received for orders that we refuse. We
can change these times under certain circumstances, for example,
when there's more wiring activity than normal.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we
receive payment on time.
o Shares purchased are recorded on the books of the Fund. We
generally don't issue certificates.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire on the
same business day that Stephens, First Data or their agents
receive the order.
o We may take up to three business days to send the sale proceeds if
we believe that an earlier payment could adversely affect the
Fund.
o Investors that qualify for telephone orders can sell up to $50,000
in shares by telephone.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold for at least 15
days after the trade date of the purchase, or until the check has
cleared.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
o Shares that are held in certificate form must be signed (or
accompanied by a signed stock power) and sent to First Data. The
investor's signature must be guaranteed, unless other
arrangements have been made with us. We may ask for any other
information we need to prove that the order is properly
authorized.
28
<PAGE>
[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
o Under certain circumstances allowed under the 1940 Act, we can pay
investors in securities or other property when they sell shares,
or delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions please contact your
retirement plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 30 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its
clients
o under certain other circumstances allowed under the 1940 Act
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another Nations
Fund. This is called an exchange, and may be appropriate if investment
goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Adviser Class Shares of a Fund for Adviser
Class Shares of any other Nations Reserves Money Market Fund.
o Investors must exchange at least $100,000 at a time.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
o Shares that are held in certificate form cannot be exchanged until
First Data has received the certificate and deposited the shares
to the investor's account.
29
<PAGE>
[GRAPHIC] HOW SELLING AND SERVICING AGENTS ARE PAID
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
SHAREHOLDER SERVICING FEES
Servicing agents are compensated for providing services to investors under a
shareholder servicing plan.
Servicing agents may receive a maximum annual shareholder servicing fee of
0.25% of the average daily net assets of Adviser Class Shares of the Funds.
Fees are calculated daily and deducted monthly. Over time, these fees will
increase the cost of your investment. Because these fees are paid out of the
Funds' assets on an ongoing basis, over time they will increase the cost of
your investment, and may cost you more than any sales charges you may pay.
The Funds pay these fees to eligible servicing agents for as long as the plan
continues. We may reduce or discontinue payments at any time.
OTHER COMPENSATION
Servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale, promotion
and marketing of the Funds
o non-cash compensation like trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift
certificates for meals or merchandise
This compensation, which is not paid by the Funds, is discretionary and may be
available only to selected servicing agents. For example, Stephens sometimes
sponsors promotions involving Banc of America Investments, Inc., an affiliate
of BAAI, and certain other servicing agents. Selected servicing agents may
also receive compensation for opening a minimum number of accounts. Stephens
may cancel any compensation program at any time.
BAAI also may pay amounts from its own assets to Stephens or to servicing
agents for services they provide.
30
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] DISTRIBUTIONS AND TAXES
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends paid
on COMMON STOCKS.
o A fund can also have CAPITAL GAINS if the value of its investments
increases. If a fund sells an investment at a gain, the gain is realized.
If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gains to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gains to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
Although the Funds do not expect to realize any capital gains, any capital
gains realized by a Fund will be distributed at least once a year.
The Funds declare distributions of net investment income each business day,
and pay them on the first business day of each month.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor.
31
<PAGE>
[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions of net investment income and any excess of net short-term
capital gains over net long-term capital losses generally are taxable to you
as ordinary income.
Although the Funds do not expect to realize any capital gains any
distributions of net capital gains (generally the excess of net long-term
capital gains over net short-term capital losses) generally are taxable to you
as net capital gains.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
NATIONS MUNICIPAL RESERVES, NATIONS CALIFORNIA TAX-EXEMPT RESERVES
Distributions that come from Nations Municipal Reserves' tax-exempt interest
income are generally free from federal income tax, but may be subject to state
or local tax.
Distributions that come from Nations California Tax-Exempt Reserves' tax-exempt
interest income are generally free from federal income tax and California
state personal income tax, but may be subject to other state and local taxes.
Any distributions that come from taxable income or realized capital gains are
generally subject to tax.
A portion of the distributions from these Funds may also be subject to the
federal alternative minimum tax.
U.S. GOVERNMENT OBLIGATIONS
If you invest in U.S. government obligations directly, interest on those
obligations is free from state and local and personal income taxes.
Distributions you receive that come from interest the Fund earns from U.S.
government obligations may not be exempt from these taxes. Please consult with
your tax advisor.
32
<PAGE>
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
As long as a Fund continually maintains a $1.00 net asset value per share, you
ordinarily will not recognize a taxable gain or loss on the redemption or
exchange of your shares of the Fund.
[GRAPHIC] FINANCIAL HIGHLIGHTS
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. The total investment return line
indicates how much an investment in the Fund would have earned, assuming all
dividends and distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The auditor's
report and Nations Funds financial statements are incorporated by reference
into the SAI. Please see the back cover to find out how you can get a copy.
33
<PAGE>
NATIONS CASH RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Adviser Class Shares Period ended Year ended Year ended Year ended Period ended
3/31/99(a) 04/30/98 04/30/97 04/30/96 04/30/95*
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0461 0.0529 0.0506 0.0545 0.0316
Dividends from net investment income (0.0461) (0.0529) (0.0506) (0.0545) (0.0316)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 4.71 % 5.43 % 5.19 % 5.58 % 3.20 %
============================================ ======= ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) $870,170 $672,417 $247,551 $397,809 $47,682
Ratio of operating expenses to average net
assets 0.45 %+(b) 0.45%** 0.45 % 0.45 % 0.54 %+
Ratio of net investment income to average
net assets 4.99 %+ 5.29 % 5.07 % 5.28 % 4.71 %+
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.68 %+(b) 0.69 % 0.70 % 0.76 % 0.77 %+
</TABLE>
* Nations Cash Reserves Adviser Class Shares
commenced operations on September 22, 1994.
** The effect of interest expense on the operating
expense ratio was less than 0.01%.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
NATIONS TREASURY RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Adviser Class Shares Period ended Year ended Year ended Year ended Period ended
3/31/99(a) 04/30/98 04/30/97 04/30/96 04/30/95*
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0439 0.0516 0.0494 0.0531 0.0308
Dividends from net investment income (0.0439) (0.0516) (0.0494) (0.0531) (0.0308)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 4.48 % 5.28 % 5.06 % 5.45 % 3.11 %
============================================ ======= ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) $344,906 $222,760 $154,256 $175,691 $55,762
Ratio of operating expenses to average net
assets 0.45 %+(b) 0.45 % 0.45 % 0.45 % 0.45 %+
Ratio of net investment income to average
net assets 4.74 %+ 5.16 % 4.95 % 5.25 % 4.54 %+
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.70 %+(b) 0.70 % 0.71 % 0.76 % 0.75 %+
</TABLE>
* Nations Treasury Reserves Adviser Class Shares
commenced operations on September 22, 1994.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
34
<PAGE>
NATIONS GOVERNMENT RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Adviser Class Shares Period ended Year ended
3/31/99(a) 04/30/98
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0445 0.0518
Dividends from net investment income (0.0445) (0.0518)
Net asset value, end of period $ 1.00 $ 1.00
TOTAL RETURN++ 4.54 % 5.30 %
============================================ ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) $88,836 $70,164
Ratio of operating expenses to average net
assets 0.45 %+(b) 0.45 %
Ratio of net investment income to average
net assets 4.80 %+ 5.18 %
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.69 %+(b) 0.70 %
<CAPTION>
Year ended Year ended Period ended
Adviser Class Shares 04/30/97 04/30/96 04/30/95*
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0495 0.0527 0.0299
Dividends from net investment income (0.0495) (0.0527) (0.0299)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 5.07 % 5.39 % 3.04 %
============================================ ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) $24,845 $108,168 $99,246
Ratio of operating expenses to average net
assets 0.45 %(b) 0.45 % 0.57 %+
Ratio of net investment income to average
net assets 4.97 % 5.23 % 4.10 %+
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.74 %(b) 0.78 % 0.79 %+
</TABLE>
* Nations Government Reserves Adviser Class Shares
commenced operations on September 22, 1994.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
NATIONS MUNICIPAL RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Adviser Class Shares Period ended Year ended Year ended Year ended Period ended
3/31/99(a) 04/30/98 04/30/97 04/30/96 04/30/95*
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0270 0.0332 0.0313 0.0337 0.0199
Dividends from net investment income (0.0270) (0.0332) (0.0313) (0.0337) (0.0199)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 2.73 % 3.34 % 3.19 % 3.43 % 2.02 %
============================================ ======== ======= ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) $55,434 $29,936 $ 7,296 $55,511 $64,123
Ratio of operating expenses to average net
assets 0.45 %+ 0.45%** 0.45 % 0.45 % 0.48 %+
Ratio of net investment income to average
net assets 2.85 %+ 3.28 % 3.13 % 3.36 % 3.11 %+
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.73 %+ 0.73 % 0.77 % 0.83 % 0.84 %+
</TABLE>
* Nations Municipal Reserves Adviser Class Shares
commenced operations on September 22, 1994.
** The effect of interest expense on the operating
expense ratio was 0.02%.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
35
<PAGE>
NATIONS CALIFORNIA TAX-EXEMPT
RESERVES (SUCCESSOR TO THE PACIFIC FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD HORIZON CALIFORNIA TAX EXEMPT
FUND)
<TABLE>
<CAPTION>
Adviser Class Shares* Period ended Year ended
5/14/99 2/28/99(a)
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
Net investment income 0.0100 0.0268
Net realized gain/(loss) on investment
transactions -- --
Total income from investment operations 0.0100 0.0268
Less dividends from net investment income (0.0100) (0.0268)
Net change in net asset value per share -- --
Net asset value, end of period $ 1.00 $ 1.00
TOTAL RETURN 0.52 %(e) 2.71 %
============================================ ========= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 636 $ 709
Ratio of expenses to average net assets 0.50 %(d) 0.49 %
Ratio of net investment income to average
net assets 2.49 %(d) 2.65 %
Ratio of expenses to average net assets** 0.52 %(d) (b)(c)
Ratio of net investment income to average
net assets** 2.47 %(d) (b)(c)
<CAPTION>
Year ended Year ended Year ended Year ended
Adviser Class Shares* 02/28/98 02/28/97 02/29/96 02/28/95
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income 0.0309 0.0291 0.0331 0.0256
Net realized gain/(loss) on investment
transactions -- -- 0.0001 (0.0001)
Total income from investment operations 0.0309 0.0291 0.0332 0.0255
Less dividends from net investment income (0.0309) (0.0291) (0.0331) (0.0256)
Net change in net asset value per share -- -- 0.0001 (0.0001)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 3.13 % 2.95 % 3.36 % 2.59 %
============================================ ======== ======== ======= ========
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 671 $ 472 $ 203 $ 88
Ratio of expenses to average net assets 0.50 % 0.50 % 0.55 % 0.55 %
Ratio of net investment income to average
net assets 3.06 % 2.92 % 3.43 % 2.50 %
Ratio of expenses to average net assets** (b)(c) (b)(c) 0.55%*** (b)
Ratio of net investment income to average
net assets** (b)(c) (b)(c) 3.42 % (b)
</TABLE>
* Adviser Class Shares of Nations California
Tax-Exempt Reserves were formerly Horizon Service
Shares of the Pacific Horizon California Tax-Exempt
Money Market Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
*** During the year ended February 29, 1996 the
Portfolio received credits from its custodian for
interest earned on uninvested cash balances which
were used to offset custodian fees and expenses. If
such credits had not occurred, the expense ratio
would have been as indicated. The ratio of net
investment income was not affected.
(a) On October 1, 1998, BankAmerica Corp., the
parent of the Fund's Advisor, merged with
NationsBank Corporation.
(b) There were no fee waivers or expense
reimbursements during the year.
(c) Fees paid by third parties had no effect on the
ratios.
(d) Annualized.
(e) Not annualized.
36
<PAGE>
NATIONS MONEY MARKET RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Adviser Class Shares Period ended
3/31/99*(a)
<S> <C>
Net asset value, beginning of period $ 1.00
Net investment income 0.0344
Dividends from net investment income (0.0344)
Net asset value, end of period $ 1.00
TOTAL RETURN++ 3.46 %
============================================ =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL
DATA:
Net assets, end of period (in 000's) $ 6,377
Ratio of operating expenses to average net
assets 0.45 %+(b)
Ratio of net investment income to average
net assets 4.62 %+
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.71 %+(b)
</TABLE>
* Nations Money Market Reserves Adviser Class
commenced operations on July 2, 1998.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
37
<PAGE>
[GRAPHIC] Terms used in this prospectus
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
EQUITY SECURITY - an investment that gives you part ownership in a company.
Equity securities (or "equities") include common and preferred stock, rights
and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
38
<PAGE>
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
39
<PAGE>
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
40
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
SEC file number:
Nations Reserves, 811-6030
NF-ADVISER-8/99
[GRAPHIC] Where to find more information
You'll find more information about the Money Market Funds in the following
documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.626.2275 (Institutional Investors)
1.800.321.7854 (Individual Investors)
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
[NATIONS FUNDS LOGO APPEARS HERE]
<PAGE>
[GRAPHIC]
MONEY MARKET FUNDS
PROSPECTUS -- DAILY CLASS SHARES
AUGUST 1, 1999
Money Market Funds
NATIONS CASH RESERVES
NATIONS MONEY MARKET RESERVES
NATIONS TREASURY RESERVES
NATIONS GOVERNMENT RESERVES
NATIONS MUNICIPAL RESERVES
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -----------------------
NOT FDIC
INSURED
- -----------------------
MAY LOSE VALUE
- -----------------------
NO BANK GUARANTEE
- -----------------------
NATIONS FUNDS
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE
NATIONS FUNDS FAMILY (NATIONS FUNDS). SOME OTHER
IMPORTANT TERMS WE'VE USED MAY BE NEW TO YOU.
THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS
USED IN THIS PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 37.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK
DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK
OF AMERICA, N.A. (BANK OF AMERICA), THE FEDERAL
DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE
SERVICES THEY PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about some of the
Nations Funds Money Market Funds. Please read it carefully, because it
contains information that's designed to help you make informed investment
decisions.
This prospectus offers Daily Class Shares of the Funds. This class of shares
is designed primarily for financial institutions and intermediaries for their
own accounts, and for certain of their client accounts. Please turn to page 26
for more information about who is eligible to buy this class of shares.
ABOUT THE FUNDS
The Money Market Funds seek to provide income while protecting your original
investment by investing in MONEY MARKET INSTRUMENTS.
Money market instruments include short-term DEBT SECURITIES that are U.S.
government issued or guaranteed or have relatively low risk. Your original
investment and your return aren't guaranteed, however, and returns will vary
as short-term interest rates change. Over time, the return on money market
funds may be lower than the return on other kinds of mutual funds or
investments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Money Market Funds may be suitable for you if:
o you're looking for a relatively low risk investment with stability of
principal
o you have short-term income needs
They may not be suitable for you if:
o you're looking for higher returns
o you're more comfortable with bank deposits that are FDIC-insured
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 4.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.626.2275 if
you're an institutional investor, or 1.800.321.7854 if you're an individual
investor. You can also contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
2
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISERS, INC. (BAAI)* IS THE
INVESTMENT ADVISER TO EACH OF THE FUNDS. BAAI IS
RESPONSIBLE FOR THE OVERALL MANAGEMENT AND
SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED A SUB-
ADVISER -- TRADESTREET INVESTMENT ASSOCIATES, INC.
(TRADESTREET), WHICH IS RESPONSIBLE FOR THE
DAY-TO-DAY INVESTMENT DECISIONS FOR EACH OF THE
FUNDS.
YOU'LL FIND MORE ABOUT BAAI AND TRADESTREET
STARTING ON PAGE 24.
* BAAI'S NAME IS EXPECTED TO BE CHANGED FROM
NATIONSBANC ADVISORS, INC. ON OR ABOUT SEPTEMBER
1, 1999.
<TABLE>
<S> <C>
[GRAPHIC] About the Money Market Funds
NATIONS CASH RESERVES 4
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS MONEY MARKET RESERVES 7
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS TREASURY RESERVES 10
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS GOVERNMENT RESERVES 13
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS MUNICIPAL RESERVES 16
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS CALIFORNIA TAX-EXEMPT RESERVES 19
Sub-adviser: TradeStreet
- ----------------------------------------------------------
OTHER IMPORTANT INFORMATION 22
- ----------------------------------------------------------
HOW THE FUNDS ARE MANAGED 24
[GRAPHIC] About your investment
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 26
How selling and servicing agents are paid 32
Distributions and taxes 33
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS 35
- ----------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 37
- ----------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
3
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER.
TRADESTREET'S TAXABLE MONEY MARKET MANAGEMENT TEAM
MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FUND.
YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT
TO CERTAIN INVESTMENT LIMITATIONS. THESE ARE
DESCRIBED IN OTHER IMPORTANT INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF
INSURANCE COMMISSIONERS' APPROVED LIST OF CLASS 1
MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT
SECURITY THAT'S AN ELIGIBLE INVESTMENT FOR MONEY
MARKET FUNDS. IT'S "FIRST-TIER" BECAUSE IT'S BEEN
GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS
CONSIDERED TO BE OF COMPARABLE QUALITY.
Nations Cash Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days
or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
4
<PAGE>
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING
MARKET CONDITIONS, THE COMPOSITION OF THE FUND'S
HOLDINGS, AND FUND EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN
THIS PROSPECTUS THAT HAS SIMILAR ANNUAL RETURNS
BECAUSE THE SHARES ARE INVESTED IN THE SAME
PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER
ONLY TO THE EXTENT THAT THE CLASSES DO NOT HAVE
THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US
AT 1.800.626.2275 IF YOU'RE AN INSTITUTIONAL
INVESTOR, OR 1.800.321.7854 IF YOU'RE AN
INDIVIDUAL INVESTOR. YOU CAN ALSO CONTACT YOUR
INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Cash Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
3.34%* 5.25% 5.19%
* Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.22%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 3rd and 4th quarter 1997: 1.32%
Worst: 4th quarter 1998: 1.20%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 5.19% 5.18%
</TABLE>
5
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU
PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE
FUND AFTER WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD
BE HIGHER OR LOWER, DEPENDING ON THE AMOUNT YOU
INVEST, AND ON THE FUND'S ACTUAL EXPENSES AND
PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) DAILY CLASS SHARES
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.60%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.88%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses2 0.80%
======
</TABLE>
1The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
2The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Daily Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Daily Class Shares $82 $273 $480 $1,077
</TABLE>
6
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER.
TRADESTREET'S TAXABLE MONEY MARKET MANAGEMENT TEAM
MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FUND.
YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT
TO CERTAIN INVESTMENT LIMITATIONS. THESE ARE
DESCRIBED IN OTHER IMPORTANT INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF
INSURANCE COMMISSIONERS' APPROVED LIST OF CLASS 1
MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT
SECURITY THAT'S AN ELIGIBLE INVESTMENT FOR MONEY
MARKET FUNDS. IT'S "FIRST-TIER" BECAUSE IT'S BEEN
GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS
CONSIDERED TO BE OF COMPARABLE QUALITY.
Nations Money Market Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund's investment objective is to provide a high level of current
income consistent with liquidity, the preservation of capital and a
stable net asset value.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days
or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
7
<PAGE>
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING
MARKET CONDITIONS, THE COMPOSITION OF THE FUND'S
HOLDINGS, AND FUND EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN
THIS PROSPECTUS THAT HAS SIMILAR ANNUAL RETURNS
BECAUSE THE SHARES ARE INVESTED IN THE SAME
PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER
ONLY TO THE EXTENT THAT THE CLASSES DO NOT HAVE
THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US
AT 1.800.626.2275 IF YOU'RE AN INSTITUTIONAL
INVESTOR, OR 1.800.321.7854 IF YOU'RE AN
INDIVIDUAL INVESTOR. YOU CAN ALSO CONTACT YOUR
INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Money Market Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
<TABLE>
<CAPTION>
[BAR CHART APPEARS HERE]
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
9.36% 8.25% 6.36% 4.02% 3.07% 4.02% 5.78% 5.28% 5.62% 5.55%
</TABLE>
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.42%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1989: 2.40%
Worst: 2nd quarter 1993: 0.75%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Capital Class Shares 5.55% 5.25% 5.72%
</TABLE>
8
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU
PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE
FUND AFTER WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD
BE HIGHER OR LOWER, DEPENDING ON THE AMOUNT YOU
INVEST, AND ON THE FUND'S ACTUAL EXPENSES AND
PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) DAILY CLASS SHARES
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.60%
Other expenses 0.16%
------
Total annual Fund operating expenses 0.91%
Fee waivers and/or reimbursements (0.11)%
------
Total net expenses2 0.80%
======
</TABLE>
1The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
2The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Daily Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Daily Class Shares $82 $279 $493 $1,109
</TABLE>
9
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER.
TRADESTREET'S TAXABLE MONEY MARKET MANAGEMENT TEAM
MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FUND.
YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT
TO CERTAIN INVESTMENT LIMITATIONS. THESE ARE
DESCRIBED IN OTHER IMPORTANT INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF
INSURANCE COMMISSIONERS' LIST OF APPROVED MUTUAL
FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Treasury Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days
or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o U.S. TREASURY OBLIGATIONS
o REPURCHASE AGREEMENTS and REVERSE REPURCHASE AGREEMENTS secured by U.S.
Treasury obligations
o obligations whose principal and interest are backed by the U.S. government
The Fund may invest in other money market funds that invest in these
instruments, consistent with its investment objective and strategies.
The Fund normally invests at least 65% of its assets in U.S. Treasury
obligations, and repurchase agreements secured by U.S. Treasury obligations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
10
<PAGE>
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING
MARKET CONDITIONS, THE COMPOSITION OF THE FUND'S
HOLDINGS, AND FUND EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN
THIS PROSPECTUS THAT HAS SIMILAR ANNUAL RETURNS
BECAUSE THE SHARES ARE INVESTED IN THE SAME
PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER
ONLY TO THE EXTENT THAT THE CLASSES DO NOT HAVE
THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US
AT 1.800.626.2275 IF YOU'RE AN INSTITUTIONAL
INVESTOR, OR 1.800.321.7854 IF YOU'RE AN
INDIVIDUAL INVESTOR. YOU CAN ALSO CONTACT YOUR
INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Treasury Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
3.25% 5.11% 4.97%
* Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.09%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1997: 1.29%
Worst: 4th quarter 1998: 1.08%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 4.97% 5.01%
</TABLE>
11
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU
PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE
FUND AFTER WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD
BE HIGHER OR LOWER, DEPENDING ON THE AMOUNT YOU
INVEST, AND ON THE FUND'S ACTUAL EXPENSES AND
PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) DAILY CLASS SHARES
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.60%
Other expenses 0.15%
------
Total annual Fund operating expenses 0.90%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses2 0.80%
======
</TABLE>
1The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
2The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Daily Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Daily Class Shares $82 $277 $489 $1,099
</TABLE>
12
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER.
TRADESTREET'S TAXABLE MONEY MARKET MANAGEMENT TEAM
MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FUND.
YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT
TO CERTAIN INVESTMENT LIMITATIONS. THESE ARE
DESCRIBED IN OTHER IMPORTANT INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Government Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days
or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily U.S. GOVERNMENT OBLIGATIONS and U.S. TREASURY OBLIGATIONS. The Fund
may invest in other money market funds that invest in these instruments,
consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
13
<PAGE>
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING
MARKET CONDITIONS, THE COMPOSITION OF THE FUND'S
HOLDINGS, AND FUND EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN
THIS PROSPECTUS THAT HAS SIMILAR ANNUAL RETURNS
BECAUSE THE SHARES ARE INVESTED IN THE SAME
PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER
ONLY TO THE EXTENT THAT THE CLASSES DO NOT HAVE
THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US
AT 1.800.626.2275 IF YOU'RE AN INSTITUTIONAL
INVESTOR, OR 1.800.321.7854 IF YOU'RE AN
INDIVIDUAL INVESTOR. YOU CAN ALSO CONTACT YOUR
INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Government Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEAR HERE]
1996 1997 1998
3.26% 5.13% 5.03%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.12%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1997: 1.29%
Worst: 4th quarter 1998: 1.13%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 5.03% 5.04%
</TABLE>
14
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU
PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE
FUND AFTER WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD
BE HIGHER OR LOWER, DEPENDING ON THE AMOUNT YOU
INVEST, AND ON THE FUND'S ACTUAL EXPENSES AND
PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) DAILY CLASS SHARES
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.60%
Other expenses 0.14%
------
Total annual Fund operating expenses 0.89%
Fee waivers and/or reimbursements (0.09)%
------
Total net expenses2 0.80%
======
</TABLE>
1The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
2The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Daily Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Daily Class Shares $82 $275 $484 $1,088
</TABLE>
15
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER.
TRADESTREET'S TAX-EXEMPT MONEY MARKET MANAGEMENT
TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR
THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT
TO CERTAIN INVESTMENT LIMITATIONS. THESE ARE
DESCRIBED IN OTHER IMPORTANT INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT
SECURITY THAT'S AN ELIGIBLE INVESTMENT FOR MONEY
MARKET FUNDS. IT'S "FIRST-TIER" BECAUSE IT'S BEEN
GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS
CONSIDERED TO BE OF COMPARABLE QUALITY.
Nations Municipal Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income exempt from federal income
taxes.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days
or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. The Fund normally invests at
least 80% of its assets in MUNICIPAL SECURITIES, which pay interest that is
free from federal income and alternative minimum taxes. The Fund invests in
municipal securities that, at the time of investment, are considered by the
portfolio management team to have minimal credit risk and to be of HIGH
QUALITY.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE ACTIVITY
BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument,
and structural analysis, which includes evaluating the arrangements
between the municipality and others involved in the issue of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
16
<PAGE>
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING
MARKET CONDITIONS, THE COMPOSITION OF THE FUND'S
HOLDINGS, AND FUND EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN
THIS PROSPECTUS THAT HAS SIMILAR ANNUAL RETURNS
BECAUSE THE SHARES ARE INVESTED IN THE SAME
PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER
ONLY TO THE EXTENT THAT THE CLASSES DO NOT HAVE
THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US
AT 1.800.626.2275 IF YOU'RE AN INSTITUTIONAL
INVESTOR, OR 1.800.321.7854 IF YOU'RE AN
INDIVIDUAL INVESTOR. YOU CAN ALSO CONTACT YOUR
INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Municipal Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax but may be subject to state and local taxes. Any
portion of a distribution that comes from income paid on other kinds
of securities or from realized CAPITAL GAINS is generally subject to
federal, state and local taxes. Distributions paid to you from the
Fund's interest on private activity bonds may be subject to the
federal alternative minimum tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
2.05% 3.24% 3.00%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.25%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1997: 0.86%
Worst: 4th quarter 1998: 0.68%
</TABLE>
17
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU
PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE
FUND AFTER WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD
BE HIGHER OR LOWER, DEPENDING ON THE AMOUNT YOU
INVEST, AND ON THE FUND'S ACTUAL EXPENSES AND
PERFORMANCE.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 3.00% 3.11%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) DAILY CLASS SHARES
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.60%
Other expenses 0.18%
------
Total annual Fund operating expenses 0.93%
Fee waivers and/or reimbursements (0.13)%
------
Total net expenses2 0.80%
======
</TABLE>
1The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
2The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Daily Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Daily Class Shares $82 $283 $502 $1,131
</TABLE>
18
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER.
TRADESTREET'S TAX-EXEMPT MONEY MARKET MANAGEMENT
TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR
THE FUND.
YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT
TO CERTAIN INVESTMENT LIMITATIONS. THESE ARE
DESCRIBED IN OTHER IMPORTANT INFORMATION.
Nations California Tax-Exempt Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks current income exempt from federal income tax and
California state personal income tax, a stable share price, and daily
LIQUIDITY.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a portfolio of
high quality MONEY MARKET INSTRUMENTS that, at the time of investment,
are considered to have remaining maturities of 397 days or less.
The Fund normally invests at least 80% of its assets in securities that pay
interest that is free from federal income tax and California state personal
income tax. These securities are issued by or on behalf of the State of
California, its political subdivisions, agencies, instrumentalities and
authorities, and other qualified issuers.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE ACTIVITY
BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating local, national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument,
and structural analysis, which includes evaluating the arrangements
between the municipality and others involved in the issue of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
19
<PAGE>
YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 22 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING
MARKET CONDITIONS, THE COMPOSITION OF THE FUND'S
HOLDINGS, AND FUND EXPENSES.
CALL US AT 1.800.626.2275 OR CONTACT YOUR
FINANCIAL ADVISER FOR THE FUND'S CURRENT 7-DAY
YIELD.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US
AT 1.800.626.2275 IF YOU'RE AN INSTITUTIONAL
INVESTOR, OR 1.800.321.7854 IF YOU'RE AN
INDIVIDUAL INVESTOR. YOU CAN ALSO CONTACT YOUR
INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations California Tax-Exempt Reserves has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected
by the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax and California state personal income tax, but may
be subject to other state and local taxes and the federal
alternative minimum tax. Any portion of a distribution that comes
from income paid on other kinds of securities or from realized
CAPITAL GAINS is generally subject to federal, state and local
taxes. Distributions paid to you from the Fund's interest on private
activity bonds may be subject to the federal alternative minimum
tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Daily Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
0.69% 2.84% 2.51%
*Return is from inception (10-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 0.89%
20
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU
PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE
FUND AFTER WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD
BE HIGHER OR LOWER, DEPENDING ON THE AMOUNT YOU
INVEST, AND ON THE FUND'S ACTUAL EXPENSES AND
PERFORMANCE.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1997: 0.75%
Worst: 4th quarter 1998: 0.57%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Daily Class Shares 2.51% 2.69%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Daily Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.60%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.88%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses2 0.80%
======
</TABLE>
1The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
2The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Daily Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Daily Class Shares $82 $273 $480 $1,077
</TABLE>
21
<PAGE>
[GRAPHIC] Other important information
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 4. The following are
some other risks and information you should consider before you invest:
o SPECIAL RULES FOR MONEY MARKET FUNDS - Money market funds must comply
with Rule 2a-7 under the Investment Company Act of 1940 (1940 Act).
Rule 2a-7 sets out certain limits on investments, which are designed
to help protect investors from risk of loss. These limits apply at
the time an investment is made. The Funds, like all money market
funds:
o may only invest in securities with a remaining maturity of 397 days or
less, or that have maturities longer than 397 days but have
demand, interest rate reset features or guarantees that are 397
days or less
o must maintain an AVERAGE DOLLAR-WEIGHTED MATURITY of 90 days or less
o may normally invest no more than 5% of their assets in a single
security, other than U.S. government securities; however, they may
invest up to 25% of their assets in a FIRST-TIER SECURITY for up
to three business days (except for Nations California Tax-Exempt
Reserves)
o may generally only invest in U.S. dollar denominated instruments that
are determined to have minimal credit risk and are first-tier
securities, except for Nations California Tax-Exempt Reserves,
which also may invest in SECOND-TIER SECURITIES
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund cannot be changed
without shareholder approval (except for Nations California
Tax-Exempt Reserves).
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments that
aren't part of their principal investment strategies. Please refer
to the SAI for more information. The portfolio managers or
management team can also choose not to invest in specific securities
described in this prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn
or because of political or other conditions. A Fund may not achieve
its investment objective while it is investing defensively. Any cash
a Fund holds for defensive or other reasons does not earn income.
22
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and
that they expect them to be adapted in time. There is no guarantee,
however, that their computer systems will be ready by the year 2000.
If their computer systems are not ready in time, there could be a
negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
23
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] How the Funds are managed
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in Nations
Funds, including the Money Market Funds described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation.
Nations Funds pays BAAI an annual fee for its investment advisory services.
The fee is calculated daily based on the average net assets of each Fund and
is paid monthly. BAAI uses part of this money to pay investment sub-advisers
for the services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee1 fiscal year
<S> <C> <C>
Nations Cash Reserves 0.15% 0.15%
Nations Money Market Reserves 0.15% 0.12%
Nations Treasury Reserves 0.15% 0.13%
Nations Government Reserves 0.15% 0.14%
Nations Municipal Reserves 0.15% 0.10%
Nations California Tax-Exempt Reserves 0.15% 0.15%
</TABLE>
1These fees are the current contract levels, which have been reduced from the
contract levels in effect during the last fiscal year.
24
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in
Nations Funds. TradeStreet takes a team approach to investment management.
Each team has access to the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Cash Reserves Taxable Money Market Management Team
Nations Money Market Reserves Taxable Money Market Management Team
Nations Treasury Reserves Taxable Money Market Management Team
Nations Government Reserves Taxable Money Market Management Team
Nations Municipal Reserves Tax-Exempt Money Market Management Team
Nations California Tax-Exempt Reserves Tax-Exempt Money Market Management Team
</TABLE>
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay distribution (12b-1) and shareholder servicing
fees and/or other compensation to companies for selling shares and providing
services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.10% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
25
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC]
WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS
EFFECTIVELY "BUYING" THEM BACK FROM YOU. THIS IS
CALLED A REDEMPTION.
[GRAPHIC] Buying, selling and exchanging shares
This prospectus offers Daily Class Shares of the Funds. Here are some general
rules about this class of shares:
o Daily Class Shares are available on a direct basis or through financial
institutions and intermediaries for their own accounts, and for certain
client accounts for which they may provide automated cash management or
other services. These include:
o Bank of America and certain of its affiliates
o certain other financial institutions and intermediaries
o The minimum initial investment is $1,000. There is no minimum for
additional investments.
o The minimum initial investment is $100 using the Systematic Investment
Plan. The minimum for additional investments under this plan is $100.
o There are no sales charges for buying, selling or exchanging these shares.
You'll find more information about buying, selling and exchanging Daily Class
Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related services and programs.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. If you have questions about
buying, selling or exchanging, or you need help placing an order, please call
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor. You can also contact your investment
professional.
26
<PAGE>
<TABLE>
<CAPTION>
Ways to
buy, sell or How much you can buy,
exchange sell or exchange Other things to know
----------------- -------------------------------------- ---------------------------------------------------
<S> <C> <C> <C>
Buying shares In a lump sum minimum initial investment: There is no limit to the amount you can invest
o $1,000 in Daily Class Shares.
minimum additional investment:
o none
Using our minimum initial investment: You can buy shares monthly, twice a month or
Systematic o $100 quarterly, using automatic transfers from your
Investment Plan minimum additional investment: bank account.
o $100
- ---------------------------------------------------------------------------------------------------------------------------------
Selling shares In a lump sum o you can sell up to $50,000 of your We usually send you the sale proceeds on the
shares by telephone, otherwise there same day that we receive your order.
are no limits to the amount you can
sell
o other restrictions may apply to If you paid for your shares with a check that
withdrawals from retirement plan wasn't certified, we'll hold the sale proceeds
accounts when you sell those shares for at least 15 days
after the trade date of the purchase, or until the
check has cleared.
Using our free o minimum $250 per check You can write checks for free. You can only use
checkwriting checks to make partial withdrawals from a
service Fund. You can't use a check to make a full
withdrawal from a Fund.
Using our o minimum $25 per withdrawal Your account balance must be at least $10,000
Automatic to set up the plan. You can make withdrawals
Withdrawal Plan monthly, twice a month or quarterly. We'll send
your money by check or deposit it directly to
your bank account.
---------------------------------------------------------------------------------------------------------------------------------
Exchanging shares In a lump sum o minimum $1,000 per exchange You can exchange Daily Class shares of a Fund
for Daily Class Shares of any other Nations
Reserves Money Market Fund.
</TABLE>
27
<PAGE>
[GRAPHIC]
A BUSINESS DAY IS ANY DAY THAT THE FEDERAL RESERVE
BANK OF NEW YORK IS OPEN.
THE FEDERAL RESERVE BANK OF NEW YORK IS CLOSED ON
WEEKENDS AND ON THE FOLLOWING NATIONAL HOLIDAYS:
NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY,
PRESIDENTS' DAY, MEMORIAL DAY, INDEPENDENCE DAY,
LABOR DAY, COLUMBUS DAY, VETERANS DAY,
THANKSGIVING DAY AND CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share at the following
times:
o 5:00 p.m. Eastern time each business day for each share class of Nations
Cash Reserves, Nations Money Market Reserves and Nations Treasury
Reserves
o 12:00 noon Eastern time each business day for each share class of Nations
Government Reserves and Nations Municipal Reserves
o 10:30 a.m. Eastern time each business day for each share class of Nations
California Tax-Exempt Reserves
First, we calculate the net asset value for each class of a Fund by
determining the value of the Fund's assets in the class and then subtracting
its liabilities. Next, we divide this amount by the number of shares that
investors are holding in the class.
Although we try to maintain a net asset value per share of $1.00 for the
Funds, we can't guarantee that we will be able to do so.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. We use the amortized cost method, which approximates
market value, to value the assets in the Money Market Funds.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents by the following times on a
business day will receive that day's net asset value per share:
o 3:00 p.m. Eastern time for Nations Cash Reserves, Nations Money Market
Reserves and Nations Treasury Reserves
o 12:00 noon Eastern time for Nations Government Reserves and Nations
Municipal Reserves
o 10:30 a.m. Eastern time for Nations California Tax-Exempt Reserves
Investors are encouraged to place orders to sell as early in the day as
possible. Orders received after these times will receive the next business
day's net asset value per share. The business day that applies to an order is
also called the TRADE DATE. We may refuse any order to buy or exchange shares.
If this happens, we'll return any money we've received.
28
<PAGE>
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone if you complete the
telephone authorization section of our account application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account, you
must have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be
responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions are
genuine. For example, we require proof of your identification before
we will act on instructions received by telephone and may record
telephone conversations. If we and our service providers don't take
these steps, we may be liable for any losses from unauthorized or
fraudulent instructions.
o Telephone orders may be difficult to complete during periods of
significant economic or market change.
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Daily Class Shares at net asset value per share.
o If we don't receive payment by 4:00 p.m. Eastern time on the business
day Stephens, First Data or their agents receive the order, we'll
refuse the order. We'll return any payment received for orders
that we refuse. We can change this time under certain
circumstances, for example, when there's more wiring activity than
normal.
o Financial institutions and intermediaries are responsible for sending
us orders for their clients and for ensuring that we receive
payment on time.
o Shares purchased are recorded on the books of the Fund. We generally
don't issue certificates.
SYSTEMATIC INVESTMENT PLAN
You can make regular purchases of $100 or more using automatic transfers from
your bank account to the Funds you choose. You can contact your financial
adviser or us to set up the plan.
Here's how the plan works:
o You can buy shares twice a month, monthly or quarterly.
o You can choose to have us transfer your money on or about the 15th or
the last day of the month.
o Some exceptions may apply to employees of Bank of America and its
affiliates, and to plans set up before August 1, 1997. For details,
please contact your financial adviser.
29
<PAGE>
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire on the same
business day that Stephens, First Data or their agents receive the
order.
o We may take up to three business days to send the sale proceeds if we
believe that an earlier payment could adversely affect the Fund.
o Investors that qualify for telephone orders can sell up to $50,000 in
shares by telephone.
o If shares were paid for with a check that wasn't certified, we'll hold
the sale proceeds when those shares are sold for at least 15 days
after the trade date of the purchase, or until the check has
cleared.
o Financial institutions and intermediaries are responsible for sending
us orders for their clients and for depositing the sale proceeds
to their accounts on time.
o Shares that are held in certificate form must be signed (or accompanied
by a signed stock power) and sent to First Data. The investor's
signature must be guaranteed, unless other arrangements have been
made with us. We may ask for any other information we need to
prove that the order is properly authorized.
o Under certain circumstances allowed under the 1940 Act, we can pay
investors in securities or other property when they sell shares,
or delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions please contact your
retirement plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll provide
30 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the shares
for a client under arrangements it has made with its clients
o under certain other circumstances allowed under the 1940 Act
CHECKWRITING SERVICE
You can withdraw money from the Funds using our free checkwriting service. You
can contact your financial adviser or us to set up the service.
Here's how the service works:
o Each check you write must be for $250 or more.
o You can only use checks to make partial withdrawals. You can't use a
check to make a full withdrawal of the shares you hold in a Fund.
o Shares you sell by writing a check are eligible to receive distributions
up to the day our custodian receives the check for payment.
o We can change or cancel the service by giving you 30 days notice in
writing.
30
<PAGE>
[GRAPHIC]
YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT
OBJECTIVES AND POLICIES OF THE FUND YOU'RE
EXCHANGING INTO. PLEASE READ ITS PROSPECTUS
CAREFULLY.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan lets you withdraw $25 or more every month, every
quarter or every year. You can contact your financial adviser or us to set up
the plan.
Here's how the plan works:
o Your account balance must be at least $10,000 to set up the plan.
o If you set up the plan after you've opened your account, your signature
must be guaranteed.
o You can choose to have us transfer your money on or about the
15th or the 25th of the month.
o We'll send you a check or deposit the money directly to your
bank account.
o You can cancel the plan by giving your financial adviser or us 30
days notice in writing.
It's important to remember that if you withdraw more than your investment in
the Fund is earning, you'll eventually use up your original investment.
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another Nations
Fund. This is called an exchange, and may be appropriate if investment
goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Daily Class Shares of a Fund for Daily Class
Shares of any other Nations Reserves Money Market Fund.
o Investors must exchange at least $1,000 at a time.
o The rules for buying shares of a Fund, including any minimum investment
requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
o Shares that are held in certificate form cannot be exchanged until
First Data has received the certificate and deposited the shares
to the investor's account.
31
<PAGE>
[GRAPHIC]
THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT
BUYS SHARES FOR YOU IS ALSO SOMETIMES REFERRED TO
AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A
"12B-1" FEE BECAUSE IT'S PAID THROUGH A PLAN
APPROVED UNDER RULE 12B-1 OF THE 1940 ACT.
THE SELLING AGENT MAY CHARGE OTHER FEES FOR
SERVICES PROVIDED TO YOUR ACCOUNT.
[GRAPHIC] How selling and servicing agents are paid
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES
Stephens and selling and servicing agents are compensated for selling shares
and providing services to investors under distribution and shareholder
servicing plans.
Stephens may be reimbursed for distribution-related expenses up to an annual
maximum of 0.35% of the average daily net assets of Daily Class Shares of the
Funds, some or all of which may be paid to selling agents.
Servicing agents may receive a maximum annual shareholder servicing fee of
0.25% of the average daily net assets of Daily Class Shares of the Funds.
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Funds' assets on an ongoing basis, over time they will increase the
cost of your investment, and may cost you more than any sales charges you may
pay.
The Funds pay these fees to eligible selling and servicing agents for as long
as the plans continue. We may reduce or discontinue payments at any time.
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale, promotion
and marketing of the Funds
o an additional amount of up to 0.50% of the net asset value per share on all
sales of Daily Class Shares to retirement plans
o non-cash compensation like trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift
certificates for meals or merchandise
This compensation which is not paid by the Funds, is discretionary and may be
available only to selected selling and servicing agents. For example, Stephens
sometimes sponsors promotions involving Banc of America Investments, Inc., an
affiliate of BAAI, and certain other selling or servicing agents. Selected
selling and servicing agents may also receive compensation for opening a
minimum number of accounts. Stephens may cancel any compensation program at
any time.
BAAI also may pay amounts from its own assets to Stephens or to selling or
servicing agents for services they provide.
32
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE
SHARES OF A FUND -- WHICH LETS YOU TAKE ADVANTAGE
OF THE POTENTIAL FOR COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR
INVESTMENT MEANS IT, IN TURN, MAY EARN EVEN MORE
MONEY. OVER TIME, THE POWER OF COMPOUNDING HAS THE
POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE OF
YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER,
THAT YOU'LL EARN MORE MONEY IF YOU REINVEST YOUR
DISTRIBUTIONS.
[GRAPHIC] Distributions and taxes
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends paid
on COMMON STOCKS.
o A fund can also have CAPITAL GAINS if the value of its investments
increases. If a fund sells an investment at a gain, the gain is realized.
If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gains to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gains to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
Although the Funds do not expect to realize any capital gains, any capital
gains realized by a Fund will be distributed at least once a year.
The Funds declare distributions of net investment income each business day and
pay them on the first business day of each month.
A distribution is paid based on the number of shares you hold on the record
date which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor.
33
<PAGE>
[GRAPHIC]
THIS INFORMATION IS A SUMMARY OF HOW FEDERAL
INCOME TAXES MAY AFFECT YOUR INVESTMENT IN THE
FUNDS. IT IS NOT INTENDED AS A SUBSTITUTE FOR
CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING
ANY FOREIGN, STATE AND LOCAL TAXES THAT MAY APPLY.
FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE
SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions of net investment income and any excess of net short-term
capital gains over net long-term capital losses generally are taxable to you
as ordinary income.
Although the Funds do not expect to realize any capital gains, any
distributions of net capital gains (generally the excess of net long-term
capital gains over net short-term capital losses) generally are taxable to you
as net capital gains.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
NATIONS MUNICIPAL RESERVES, NATIONS CALIFORNIA TAX-EXEMPT RESERVES
Distributions that come from Nations Municipal Reserves' tax-exempt interest
income are generally free from federal income tax, but may be subject to state
or local tax.
Distributions that come from Nations California Tax-Exempt Reserves' tax-exempt
interest income are generally free from federal income tax and California
state personal income tax, but may be subject to other state and local taxes.
Any distributions that come from taxable income or realized capital gains are
generally subject to tax.
A portion of the distributions from these Funds may also be subject to the
federal alternative minimum tax.
U.S. GOVERNMENT OBLIGATIONS
If you invest in U.S. government obligations directly, interest on those
obligations is free from state and local and personal income taxes.
Distributions you receive that come from interest the Fund earns from U.S.
government obligations may not be exempt from these taxes. Please consult with
your tax advisor.
34
<PAGE>
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
As long as a Fund continually maintains a $1.00 net asset value per share, you
ordinarily will not recognize a taxable gain or loss on the redemption or
exchange of your shares of the Fund.
[GRAPHIC] Financial highlights
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. The total investment return line
indicates how much an investment in the Fund would have earned, assuming all
dividends and distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The auditor's
report and Nations Funds financial statements are incorporated by reference
into the SAI. Financial highlights for the Nations Funds (excluding Nations
California Tax-Exempt Fund) are not provided because there were no
shareholders of Daily Class Shares during the period indicated. Please see the
back cover to find out how you can get a copy.
35
<PAGE>
NATIONS CALIFORNIA TAX-EXEMPT
RESERVES (SUCCESSOR TO THE PACIFIC FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD
HORIZON CALIFORNIA TAX-EXEMPT
FUND)
<TABLE>
<CAPTION>
DAILY CLASS* PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
05/14/99 02/28/99(B) 02/28/98 02/28/97(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income --(f) 0.0238 0.0279 0.0107
Less dividends to shareholders from net investment
income -- (0.0238) (0.0279) (0.0107)
Net change in net asset value per share -- -- -- --
Net asset value per share, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 0.45%(e) 2.41 % 2.83 % 1.09 %(e)
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 37 $ 37 $ 31 $ 29
Ratio of expenses to average net assets 0.80%(d) 0.79 % 0.80 % 0.80 %(d)
Ratio of net investment income to average net
assets 2.21%(d) 2.35 % 2.80 % 2.66 %(d)
Ratio of expenses to average net assets** 0.82%(d) (c) (c) (c)
Ratio of net investment income to average net
assets** 2.19%(d) (c) (c) (c)
</TABLE>
* Daily Class Shares of Nations California
Tax-Exempt Reserves were formerly X Shares of the
Pacific Horizon California Tax-Exempt Money Market
Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from October 2, 1996 (inception date) to
February 28, 1997.
(b) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationsBank Corporation.
(c) Fees paid by third parties had no effect on the
ratios.
(d) Annualized.
(e) Not annualized.
(f) Amount represents less than a penny per share.
36
[GRAPHIC] Terms used in this prospectus
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
EQUITY SECURITY - an investment that gives you part ownership in a company.
Equity securities (or "equities") include common and preferred stock, rights
and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
37
<PAGE>
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
38
<PAGE>
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
39
<PAGE>
[GRAPHIC] Where to find more information
You'll find more information about the Money Market Funds in the following
documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.626.2275 (Institutional Investors)
1.800.321.7854 (Individual Investors)
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file number:
[GRAPHIC]
Nations Reserves, 811-6030
NF-DAILY-8/99
[GRAPHIC OMITTED]
MONEY MARKET FUNDS
PROSPECTUS - CAPITAL CLASS SHARES
AUGUST 1, 1999
Money Market Funds
NATIONS CASH RESERVES
NATIONS MONEY MARKET RESERVES
NATIONS TREASURY RESERVES
NATIONS GOVERNMENT RESERVES
NATIONS MUNICIPAL RESERVES
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -----------------
NOT FDIC
INSURED
- -----------------
MAY LOSE VALUE
- -----------------
NO BANK GUARANTEE
- -----------------
NATIONS FUNDS
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED
MAY BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY
FIRST APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN
THIS PROSPECTUS.
[GRAPHIC]
YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 37.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF
AMERICA), THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR
ANY OTHER GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about some of the
Nations Funds Money Market Funds. Please read it carefully, because it
contains information that's designed to help you make informed investment
decisions.
This prospectus offers Capital Class Shares of the Funds. This class of shares
is designed primarily for eligible institutional and individual investors on a
direct basis or through certain financial institutions or intermediaries.
Please turn to page 27 for more information about who is eligible to buy this
class of shares.
ABOUT THE FUNDS
The Money Market Funds seek to provide income while protecting your original
investment by investing in MONEY MARKET INSTRUMENTS.
Money market instruments include short-term DEBT SECURITIES that are U.S.
government issued or guaranteed or have relatively low risk. Your original
investment and your return aren't guaranteed, however, and returns will vary
as short-term interest rates change. Over time, the return on money market
funds may be lower than the return on other kinds of mutual funds or
investments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Money Market Funds may be suitable for you if:
o you're looking for a relatively low risk investment with stability of
principal
o you have short-term income needs
They may not be suitable for you if:
o you're looking for higher returns
o you're more comfortable with bank deposits that are FDIC-insured
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 4.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.626.2275 if
you're an institutional investor, or 1.800.321.7854 if you're an individual
investor. You can also contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
2
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT
ADVISER TO EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE
OVERALL MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT
OF EACH FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED A SUB-
ADVISER -- TRADESTREET INVESTMENT ASSOCIATES, INC.
(TRADESTREET), WHICH IS RESPONSIBLE FOR THE DAY-TO-DAY
INVESTMENT DECISIONS FOR EACH OF THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT BAAI AND TRADESTREET STARTING ON PAGE 25.
* BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC
ADVISORS, INC. ON OR ABOUT SEPTEMBER 1, 1999.
<TABLE>
<S> <C>
[GRAPHIC] ABOUT THE MONEY MARKET FUNDS
NATIONS CASH RESERVES 4
Sub-adviser: TradeStreet
- -----------------------------------------
NATIONS MONEY MARKET RESERVES 7
Sub-adviser: TradeStreet
- -----------------------------------------
NATIONS TREASURY RESERVES 10
Sub-adviser: TradeStreet
- -----------------------------------------
NATIONS GOVERNMENT RESERVES 13
Sub-adviser: TradeStreet
- -----------------------------------------
NATIONS MUNICIPAL RESERVES 16
Sub-adviser: TradeStreet
- -----------------------------------------
NATIONS CALIFORNIA TAX-EXEMPT RESERVES 19
Sub-adviser: TradeStreet
- -----------------------------------------
OTHER IMPORTANT INFORMATION 23
- -----------------------------------------
HOW THE FUNDS ARE MANAGED 25
[GRAPHIC] ABOUT YOUR INVESTMENT
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 27
Distributions and taxes 31
- -----------------------------------------
FINANCIAL HIGHLIGHTS 33
- -----------------------------------------
TERMS USED IN THIS PROSPECTUS 37
- -----------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
3
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL
FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS
CONSIDERED TO BE OF COMPARABLE QUALITY.
NATIONS CASH RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
4
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Cash Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ----
1.88%* 5.91% 3.55% 2.89% 3.90% 6.02% 5.44% 5.62% 5.58%
*Return is from inception (10-9-90) to 12-31-90.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.45%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1991: 1.68%
Worst: 4th quarter 1993: 0.70%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years Since inception
<S> <C> <C> <C>
Capital Class Shares 5.58% 5.31% 4.96%
</TABLE>
5
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Capital Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Other expenses 0.13%
-----
Total annual Fund operating expenses 0.28%
Fee waivers and/or reimbursements (0.08)%
-----
Total net expenses(2) 0.20%
=====
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Capital Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Capital Class Shares $20 $82 $149 $348
</TABLE>
6
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL
FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS
CONSIDERED TO BE OF COMPARABLE QUALITY.
NATIONS MONEY MARKET RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund's investment objective is to provide a high level of current
income consistent with liquidity, the preservation of capital and a
stable net asset value.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
7
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Money Market Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
9.36% 8.25% 6.36% 4.02% 3.07% 4.02% 5.78% 5.28% 5.62% 5.55%
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.42%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1989: 2.40%
Worst: 2nd quarter 1993: 0.75%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Capital Class Shares 5.55% 5.25% 5.72%
</TABLE>
8
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Capital Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Other expenses 0.16%
-----
Total annual Fund operating expenses 0.31%
Fee waivers and/or reimbursements (0.11)%
-----
Total net expenses(2) 0.20%
=====
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Capital Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Capital Class Shares $20 $89 $163 $383
</TABLE>
9
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' LIST OF APPROVED MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS
CONSIDERED TO BE OF COMPARABLE QUALITY.
NATIONS TREASURY RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o U.S. TREASURY OBLIGATIONS
o REPURCHASE AGREEMENTS and REVERSE REPURCHASE AGREEMENTS secured by U.S.
Treasury obligations
o obligations whose principal and interest are backed by the U.S. government
The Fund may invest in other money market funds that invest in these
instruments, consistent with its investment objective and strategies.
The Fund normally invests at least 65% of its assets in U.S. Treasury
obligations, and repurchase agreements secured by U.S. Treasury obligations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
10
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON PAGE 23 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Treasury Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ----- ---- ---- ---- ----
5.33%* 3.67% 2.98% 4.03% 5.87% 5.33% 5.47% 5.39%
*Return is from inception (1-11-91) to 12-31-91.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.32%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 1.47%
Worst: 2nd quarter 1993: 0.72%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years Since inception
<S> <C> <C> <C>
Capital Class Shares 5.39% 5.22% 4.77%
</TABLE>
11
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Capital Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Other expenses 0.15%
-----
Total annual Fund operating expenses 0.30%
Fee waivers and/or reimbursements (0.10)%
-----
Total net expenses(2) 0.20%
=====
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Capital Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Capital Class Shares $20 $86 $159 $371
</TABLE>
12
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS
CONSIDERED TO BE OF COMPARABLE QUALITY.
NATIONS GOVERNMENT RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily U.S. GOVERNMENT OBLIGATIONS and U.S. TREASURY OBLIGATIONS. The Fund
may invest in other money market funds that invest in these instruments,
consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
13
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON PAGE 23 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Government Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ----
4.13%* 3.53% 2.74% 3.74% 5.89% 5.33% 5.50% 5.42%
*Return is from inception (1-17-91) to 12-31-91.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.35%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 1.48%
Worst: 3rd quarter 1991: 0.37%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years Since inception
<S> <C> <C> <C>
Capital Class Shares 5.42% 5.17% 4.56%
</TABLE>
14
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Capital Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Other expenses 0.14%
-----
Total annual Fund operating expenses 0.29%
Fee waivers and/or reimbursements (0.09)%
-----
Total net expenses(2) 0.20%
=====
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Capital Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Capital Class Shares $20 $84 $154 $359
</TABLE>
15
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A
NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS
CONSIDERED TO BE OF COMPARABLE QUALITY.
NATIONS MUNICIPAL RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income exempt from federal income
taxes.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. The Fund normally invests at
least 80% of its assets in MUNICIPAL SECURITIES, which pay interest that is
free from federal income and alternative minimum taxes. The Fund invests in
municipal securities that, at the time of investment, are considered by the
portfolio management team to have minimal credit risk and to be of HIGH
QUALITY.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE ACTIVITY
BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument,
and structural analysis, which includes evaluating the arrangements
between the municipality and others involved in the issue of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
16
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON PAGE 23 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Municipal Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax, but may be subject to state and local taxes. Any
portion of a distribution that comes from income paid on other kinds
of securities or from realized CAPITAL GAINS is generally subject to
federal, state and local taxes. Distributions paid to you from the
Fund's interest on private activity bonds may be subject to the
federal alternative minimum tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1990 1991 1992 1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ---- ---- ---- ----
1.07%* 4.17% 2.61% 2.02% 2.59% 3.80% 3.44% 3.60% 3.39%
*Return is from inception (10-23-90) to 12-31-90.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.48%
17
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1991: 1.10%
Worst: 1st quarter 1994: 0.45%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years Since inception
<S> <C> <C> <C>
Capital Class Shares 3.39% 3.36% 3.26%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Capital Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Other expenses 0.18%
-----
Total annual Fund operating expenses 0.33%
Fee waivers and/or reimbursements (0.13)%
-----
Total net expenses(2) 0.20%
=====
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Capital Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Capital Class Shares $20 $93 $172 $405
</TABLE>
18
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks current income exempt from federal income tax and
California state personal income tax, a stable share price, and daily
LIQUIDITY.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a portfolio of
high quality MONEY MARKET INSTRUMENTS that, at the time of investment,
are considered to have remaining maturities of 397 days or less.
The Fund normally invests at least 80% of its assets in securities that pay
interest that is free from federal income tax and California state personal
income tax. These securities are issued by or on behalf of the State of
California, its political subdivisions, agencies, instrumentalities and
authorities, and other qualified issuers.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE ACTIVITY
BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating local, national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument,
and structural analysis, which includes evaluating the arrangements
between the municipality and others involved in the issue of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
19
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 23 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations California Tax-Exempt Reserves has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, which is generally free from
federal income tax and California state personal income tax, but may
be subject to other state and local taxes and the federal
alternative minimum tax. Any portion of a distribution that comes
from income paid on other kinds of securities or from realized
CAPITAL GAINS is generally subject to federal, state and local
taxes. Distributions paid to you from the Fund's interest on private
activity bonds may be subject to the federal alternative minimum
tax.
20
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS
PROSPECTUS THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES
ARE INVESTED IN THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL
RETURNS DIFFER ONLY TO THE EXTENT THAT THE CLASSES DO NOT HAVE
THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A
FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Adviser Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
- ---- ---- ---- ---- ---- ----
1.70%* 2.37% 3.40% 2.96% 3.14% 2.82%
*Return is from inception (3-1-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.02%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 0.88%
Worst: 1st quarter 1994: 0.44%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years Since inception
<S> <C> <C> <C>
Adviser Class Shares 2.82% 2.94% 2.81%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) CAPITAL CLASS SHARES
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Other expenses 0.13%
-----
Total annual Fund operating expenses 0.28%
Fee waivers and/or reimbursements (0.08)%
-----
Total net expenses(2) 0.20%
=====
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
21
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Capital Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Capital Class Shares $20 $82 $149 $348
</TABLE>
22
<PAGE>
[GRAPHIC] OTHER IMPORTANT INFORMATION
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 4. The following are
some other risks and information you should consider before you invest:
o SPECIAL RULES FOR MONEY MARKET FUNDS - Money market funds must comply
with Rule 2a-7 under the Investment Company Act of 1940 (1940 Act).
Rule 2a-7 sets out certain limits on investments, which are designed
to help protect investors from risk of loss. These limits apply at
the time an investment is made. The Funds, like all money market
funds:
o may only invest in securities with a remaining maturity of 397 days or
less, or that have maturities longer than 397 days but have
demand, interest rate reset features or guarantees that are 397
days or less
o must maintain an AVERAGE DOLLAR-WEIGHTED MATURITY of 90 days or less
o may normally invest no more than 5% of their assets in a single
security, other than U.S. government securities; however, they may
invest up to 25% of their assets in a FIRST-TIER SECURITY for up
to three business days (except for Nations California Tax-Exempt
Reserves)
o may generally only invest in U.S. dollar denominated instruments that
are determined to have minimal credit risk and are first-tier
securities, except for Nations California Tax-Exempt Reserves,
which also may invest in SECOND-TIER SECURITIES
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund cannot be changed
without shareholder approval (except for Nations California
Tax-Exempt Reserves).
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments that
aren't part of their principal investment strategies. Please refer
to the SAI for more information. The portfolio managers or
management team can also choose not to invest in specific securities
described in this prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn
or because of political or other conditions. A Fund may not achieve
its investment objective while it is investing defensively. Any cash
a Fund holds for defensive or other reasons does not earn income.
23
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and
that they expect them to be adapted in time. There is no guarantee,
however, that their computer systems will be ready by the year 2000.
If their computer systems are not ready in time, there could be a
negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
24
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] HOW THE FUNDS ARE MANAGED
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in Nations
Funds, including the Money Market Funds described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation.
Nations Funds pays BAAI an annual fee for its investment advisory services.
The fee is calculated daily based on the average net assets of each Fund and
is paid monthly. BAAI uses part of this money to pay investment sub-advisers
for the services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee(1) fiscal year
<S> <C> <C>
Nations Cash Reserves 0.15% 0.15%
Nations Money Market Reserves 0.15% 0.12%
Nations Treasury Reserves 0.15% 0.13%
Nations Government Reserves 0.15% 0.14%
Nations Municipal Reserves 0.15% 0.10%
Nations California Tax-Exempt Reserves 0.15% 0.15%
</TABLE>
(1)These fees are the current contract levels, which have been reduced from the
contract levels in effect during the last fiscal year.
25
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR SERVICES GROUP, INC.
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in
Nations Funds. TradeStreet takes a team approach to investment management.
Each team has access to the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
<TABLE>
<CAPTION>
Fund TradeStreet team
<S> <C>
Nations Cash Reserves Taxable Money Market Management Team
Nations Money Market Reserves Taxable Money Market Management Team
Nations Treasury Reserves Taxable Money Market Management Team
Nations Government Reserves Taxable Money Market Management Team
Nations Municipal Reserves Tax-Exempt Money Market Management Team
Nations California Tax-Exempt Reserves Tax-Exempt Money Market Management Team
</TABLE>
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.10% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
26
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC]
WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC]
A BUSINESS DAY IS ANY DAY THAT THE FEDERAL RESERVE BANK OF NEW
YORK IS OPEN.
THE FEDERAL RESERVE BANK OF NEW YORK IS CLOSED ON WEEKENDS AND
ON THE FOLLOWING NATIONAL HOLIDAYS: NEW YEAR'S DAY, MARTIN
LUTHER KING, JR. DAY, PRESIDENTS' DAY, MEMORIAL DAY,
INDEPENDENCE DAY, LABOR DAY, COLUMBUS DAY, VETERANS DAY,
THANKSGIVING DAY AND CHRISTMAS DAY.
[GRAPHIC] BUYING, SELLING AND EXCHANGING SHARES
This prospectus offers Capital Class Shares of the Funds. Here are some
general rules about this class of shares:
o Capital Class Shares are available to eligible institutions and individuals
on a direct basis or through certain financial institutions or
intermediaries.
o The minimum initial investment is $1,000,000.
o There is no minimum for additional investments.
o There are no sales charges for buying, selling or exchanging these shares.
You'll find more information about buying, selling and exchanging Capital
Class Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related programs and services.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. If you have questions about
buying, selling or exchanging, or you need help placing an order, please call
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor. You can also contact your investment
professional.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share at the following
times:
o 5:00 p.m. Eastern time each business day for each share class of Nations
Cash Reserves, Nations Money Market Reserves and Nations Treasury
Reserves
o 12:00 noon Eastern time each business day for each share class of Nations
Government Reserves and Nations Municipal Reserves
o 10:30 a.m. Eastern time each business day for each share class of Nations
California Tax-Exempt Reserves
First, we calculate the net asset value for each class of a Fund by
determining the value of the Fund's assets in the class and then subtracting
its liabilities. Next, we divide this amount by the number of shares that
investors are holding in the class.
Although we try to maintain a net asset value per share of $1.00 for the
Funds, we can't guarantee that we will be able to do so.
27
<PAGE>
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. We use the amortized cost method, which approximates
market value, to value the assets in the Money Market Funds.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents by the following times on a
business day will receive that day's net asset value per share:
o 5:00 p.m. Eastern time for Nations Cash Reserves, Nations Money Market
Reserves and Nations Treasury Reserves
o 12:00 noon Eastern time for Nations Government Reserves and Nations
Municipal Reserves
o 10:30 a.m. Eastern time for Nations California Tax-Exempt Reserves
Investors are encouraged to place orders to sell as early in the day as
possible. Orders received after these times will receive the next business
day's net asset value per share. The business day that applies to an order is
also called the TRADE DATE. We may refuse any order to buy or exchange shares.
If this happens, we'll return any money we've received.
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone if you complete the
telephone authorization section of our account application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account, you
must have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be
responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions are
genuine. For example, we require proof of your identification before
we will act on instructions received by telephone and may record
telephone conversations. If we and our service providers don't take
these steps, we may be liable for any losses from unauthorized or
fraudulent instructions.
o Telephone orders may be difficult to complete during periods of
significant economic or market change.
28
<PAGE>
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Capital Class Shares at net asset value per share.
o We must receive payment by the following times on the business day
Stephens, First Data or their agents receive the order:
o 5:30 p.m. Eastern time for Nations Cash Reserves, Nations Money
Market Reserves and Nations Treasury Reserves
o 4:00 p.m. Eastern time for Nations Governments Reserves, Nations
Municipal Reserves and Nations California Tax-Exempt Reserves
If we receive payment after these times, we'll refuse the order. We'll
return any payment received for orders that we refuse. We can change
these times under certain circumstances, for example, when there's more
wiring activity than normal.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we
receive payment on time.
o Shares purchased are recorded on the books of the Fund. We
generally don't issue certificates.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire on the
same business day that Stephens, First Data or their agents
receive the order.
o We may take up to three business days to send the sale proceeds if
we believe that an earlier payment could adversely affect the
Fund.
o Investors that qualify for telephone orders can sell up to $50,000
in shares by telephone.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold for at least 15
days after the trade date of the purchase, or until the check has
cleared.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
o Shares that are held in certificate form must be signed (or
accompanied by a signed stock power) and sent to First Data. The
investor's signature must be guaranteed, unless other
arrangements have been made with us. We may ask for any other
information we need to prove that the order is properly
authorized.
o Under certain circumstances allowed under the 1940 Act, we can pay
investors in securities or other property when they sell shares,
or delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions please contact your
retirement plan administrator.
29
<PAGE>
[GRAPHIC]
YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES
AND POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ
ITS PROSPECTUS CAREFULLY.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 30 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its
clients
o under certain other circumstances allowed under the 1940 Act
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another Nations
Fund. This is called an exchange, and may be appropriate if investment
goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Capital Class Shares of a Fund for Capital
Class Shares of any other Fund.
o Investors must exchange at least $1,000,000 at a time.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
o Shares that are held in certificate form cannot be exchanged until
First Data has received the certificate and deposited the shares
to the investor's account.
30
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT,
IN TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE
VALUE OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT
YOU'LL EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] DISTRIBUTIONS AND TAXES
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends paid
on COMMON STOCKS.
o A fund can also have CAPITAL GAINS if the value of its investments
increases. If a fund sells an investment at a gain, the gain is realized.
If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gains to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gains to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
Although the Funds do not expect to realize any capital gains, any capital
gains realized by a Fund will be distributed at least once a year.
The Funds declare distributions of net investment income each business day,
and pay for them on the first business day of each month.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor.
31
<PAGE>
[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH
YOUR OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY
FOREIGN, STATE AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions of net investment income and any excess of net short-term
capital gains over net long-term capital losses generally are taxable to you
as ordinary income.
Although the Funds do not expect to realize any capital gains, any
distributions of net capital gains (generally the excess of net long-term
capital gains over net short-term capital losses) generally are taxable to you
as net capital gains.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
NATIONS MUNICIPAL RESERVES, NATIONS CALIFORNIA TAX-EXEMPT RESERVES
Distributions that come from Nations Municipal Reserves' tax-exempt interest
income are generally free from federal income tax, but may be subject to state
or local tax.
Distributions that come from Nations California Tax-Exempt Reserves' tax-exempt
interest income are generally free from federal income tax and California
state personal income tax, but may be subject to other state and local taxes.
Any distributions that come from taxable income or realized capital gains are
generally subject to tax.
A portion of the distributions from these Funds may also be subject to the
federal alternative minimum tax.
U.S. GOVERNMENT OBLIGATIONS
If you invest in U.S. government obligations directly, interest on those
obligations is free from state and local and personal income taxes.
Distributions you receive that come from interest the Fund earns from U.S.
government obligations may not be exempt from these taxes. Please consult with
your tax advisor.
32
<PAGE>
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
As long as a Fund continually maintains a $1.00 net asset value per share, you
ordinarily will not recognize a taxable gain or loss on the redemption or
exchange of your shares of the Fund.
[GRAPHIC] FINANCIAL HIGHLIGHTS
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. The total investment return line
indicates how much an investment in the Fund would have earned, assuming all
dividends and distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. Certain
information for the Capital Class Shares of Nations Money Market Reserves has
been derived from the audited financial statements of the Emerald Prime
Advantage Institutional Fund (the predecessor portfolio). KPMG LLP were the
independent auditors for the Emerald Prime Advantage Institutional Fund for
the fiscal period from December 1, 1997 through May 15, 1998 and for the
fiscal year ended November 30, 1997. The auditor's report and Nations Funds
financial statements are incorporated by reference into the SAI. Financial
Highlights for Capital Class Shares of Nations California Tax-Exempt Fund are
not provided because this class of shares had not yet commenced operations
during the period indicated. Please see the back cover to find out how you can
get a copy.
33
<PAGE>
NATIONS CASH RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Period ended Year ended
Capital Class Shares 3/31/99(a) 04/30/98
<S> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0484 0.0554
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.0484) (0.0554)
Net asset value, end of year $ 1.00 $ 1.00
TOTAL RETURN++ 4.95 % 5.70 %
================================================ ========= =========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $4,379,430 $3,051,559
Ratio of operating expenses to average net
assets 0.20 %+(b) 0.20%**
Ratio of net investment income to average net
assets 5.24 %+ 5.54 %
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.43 %+(b) 0.44 %
<CAPTION>
Year ended Year ended Year ended Year ended
Capital Class Shares 04/30/97 04/30/96 04/30/95 04/30/94
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0531 0.0570 0.0480 0.0283
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.0531) (0.0570) (0.0480) (0.0283)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 5.44 % 5.84 % 4.91 % 2.87 %
================================================ ========== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $1,684,233 $607,643 $134,064 $109,852
Ratio of operating expenses to average net
assets 0.20 % 0.20 % 0.29 % 0.45 %
Ratio of net investment income to average net
assets 5.32 % 5.53 % 4.96 % 2.83 %
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.45 % 0.51 % 0.52 % 0.56 %
</TABLE>
** The effect of interest expense on the operating
expense ratio was less than 0.01%.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
NATIONS MONEY MARKET RESERVES* FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Period ended Period ended
Capital Class Shares 3/31/99(a) 05/15/98**
<S> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0438 0.0252
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0. 0438) (0.0252)
Net asset value, end of period $ 1.00 $ 1.00
TOTAL RETURN++ 4.47 % 2.55 %
============================================== ======== =========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period in (000's) $595,482 $118,880
Ratio of operating expenses to average net
assets 0.20 %+(b) 0.20 %+
Ratio of net investment income to average net
assets 4.87 %+ 5.54 %+
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.46 %+(b) 0.27 %+
<CAPTION>
Year ended Year ended Year ended Year ended
Capital Class Shares 11/30/97 11/30/96 11/30/95 11/30/94
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0545 0.0516 0.0561 0.0377
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.0545) (0.0516) (0.0561) (0.0377)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 5.58 % 5.29 % 5.76 % 3.83 %
============================================== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period in (000's) $177,908 $133,044 $131,089 $131,758
Ratio of operating expenses to average net
assets 0.20 % 0.35 % 0.40 % 0.40 %
Ratio of net investment income to average net
assets 5.45 % 5.16 % 5.60 % 3.80 %
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.28 % 0.35 % 0.46 % 0.44 %
</TABLE>
* Capital Class Shares of Nations Money Market
Reserves were formerly shares of Emerald Prime
Advantage Institutional Fund, a predecessor
portfolio.
** For the period from December 1, 1997 through
May 15, 1998.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
34
<PAGE>
NATIONS TREASURY RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Period ended Year ended
Capital Class Shares 3/31/99(a) 04/30/98
<S> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0462 0.0541
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.0462) (0.0541)
Net asset value, end of year $ 1.00 $ 1.00
TOTAL RETURN++ 4.72 % 5.55 %
================================================ ========= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $1,382,688 $246,058
Ratio of operating expenses to average net
assets 0.20 %+(b) 0.20 %
Ratio of net investment income to average net
assets 4.99 %+ 5.41 %
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.45 %+(b) 0.45 %
<CAPTION>
Year ended Year ended Year ended Year ended
Capital Class Shares 04/30/97 04/30/96 04/30/95 04/30/94
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0519 0.0556 0.0480 0.0298
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.0519) (0.0556) (0.0480) (0.0298)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 5.30 % 5.71 % 4.91 % 3.02 %
================================================ ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $468,975 $304,342 $251,694 $388,504
Ratio of operating expenses to average net
assets 0.20 % 0.20 % 0.20 % 0.20 %
Ratio of net investment income to average net
assets 5.20 % 5.50 % 4.79 % 2.99 %
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.46 % 0.51 % 0.50 % 0.52 %
</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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
NATIONS GOVERNMENT RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Period ended Year ended
Capital Class Shares 3/31/99(a) 04/30/98
<S> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0468 0.0543
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.0468) (0.0543)
Net asset value, end of year $ 1.00 $ 1.00
TOTAL RETURN++ 4.78 % 5.57 %
================================================ ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $229,561 $190,607
Ratio of operating expenses to average net
assets 0.20 %+(b) 0.20 %
Ratio of net investment income to average net
assets 5.05 %+ 5.43 %
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.44 %+(b) 0.45 %
<CAPTION>
Year ended Year ended Year ended Year ended
Capital Class Shares 04/30/97 04/30/96 04/30/95 04/30/94
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0520 0.0556 0.0463 0.0278
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.0520) (0.0556) (0.0463) (0.0278)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 5.33 % 5.71 % 4.72 % 2.82 %
================================================ ========= ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $125,377 $58,121 $ 2 $10,819
Ratio of operating expenses to average net
assets 0.20 %(b) 0.20 % 0.32 % 0.45 %
Ratio of net investment income to average net
assets 5.22 % 5.48 % 4.35 % 2.78 %
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.49 %(b) 0.53 % 0.54 % 0.51 %
</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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
(b) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
35
<PAGE>
NATIONS MUNICIPAL RESERVES FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Period ended Year ended
Capital Class Shares 3/31/99(a) 04/30/98
<S> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0292 0.0353
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.0292) (0.0353)
Net asset value, end of year $ 1.00 $ 1.00
TOTAL RETURN++ 2.96 % 3.61 %
================================================ ========= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $134,268 $74,251
Ratio of operating expenses to average net
assets 0.20 %+ 0.20%**
Ratio of net investment income to average net
assets 3.10 %+ 3.53 %
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.48 %+ 0.48 %
<CAPTION>
Year ended Year ended Year ended Year ended
Capital Class Shares 04/30/97 04/30/96 04/30/95 04/30/94
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.0337 0.0362 0.0313 0.0198
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends from net investment income (0.0337) (0.0362) (0.0313) (0.0198)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN++ 3.44 % 3.70 % 3.19 % 2.00 %
================================================ ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (000's) $59,701 $48,482 $32,353 $35,698
Ratio of operating expenses to average net
assets 0.20 % 0.20 % 0.23 % 0.45 %
Ratio of net investment income to average net
assets 3.38 % 3.61 % 3.36 % 1.98 %
Ratio of operating expenses to average net
assets without waivers and/or
reimbursements 0.52 % 0.58 % 0.59 % 0.58 %
</TABLE>
** The effect of interest expense on the operating
expense ratio was 0.02%.
+ 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.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was April 30.
36
<PAGE>
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
EQUITY SECURITY - an investment that gives you part ownership in a company.
Equity securities (or "equities") include common and preferred stock, rights
and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
37
<PAGE>
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
38
<PAGE>
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
39
<PAGE>
[GRAPHIC] WHERE TO FIND MORE INFORMATION
You'll find more information about the Money Market Funds in the following
documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.626.2275 (Institutional Investors)
1.800.321.7854 (Individual Investors)
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
NATIONS FUNDS
SEC file number:
Nations Reserves, 811-6030
NF-CAPITAL-8/99
[GRAPHIC]
MONEY MARKET FUNDS
PROSPECTUS -- SERVICE CLASS SHARES
AUGUST 1, 1999
MONEY MARKET FUNDS
NATIONS CASH RESERVES
NATIONS MONEY MARKET RESERVES
NATIONS TREASURY RESERVES
NATIONS GOVERNMENT RESERVES
NATIONS MUNICIPAL RESERVES
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -----------------
NOT FDIC
INSURED
- -----------------
MAY LOSE VALUE
- -----------------
NO BANK GUARANTEE
- -----------------
NATIONS FUNDS
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 37.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about some of the
Nations Funds Money Market Funds. Please read it carefully, because it
contains information that's designed to help you make informed investment
decisions.
This prospectus offers Service Class Shares of the Funds. This class of shares
is designed primarily for financial institutions and intermediaries for their
own accounts, and for certain of their client accounts. Please turn to page 27
for more information about who is eligible to buy this class of shares.
ABOUT THE FUNDS
The Money Market Funds seek to provide income while protecting your original
investment by investing in MONEY MARKET INSTRUMENTS.
Money market instruments include short-term DEBT SECURITIES that are U.S.
government issued or guaranteed or have relatively low risk. Your original
investment and your return aren't guaranteed, however, and returns will vary
as short-term interest rates change. Over time, the return on money market
funds may be lower than the return on other kinds of mutual funds or
investments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Money Market Funds may be suitable for you if:
o you're looking for a relatively low risk investment with stability of
principal
o you have short-term income needs
They may not be suitable for you if:
o you're looking for higher returns
o you're more comfortable with bank deposits that are FDIC-insured
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 4.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.626.2275 if
you're an institutional investor, or 1.800.321.7854 if you're an individual
investor. You can also contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
2
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER TO
EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL MANAGEMENT
AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH FUND. BAAI AND
NATIONS FUNDS HAVE ENGAGED A SUB- ADVISER -- TRADESTREET INVESTMENT
ASSOCIATES, INC. (TRADESTREET), WHICH IS RESPONSIBLE FOR THE
DAY-TO-DAY INVESTMENT DECISIONS FOR EACH OF THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAAI AND TRADESTREET
STARTING ON PAGE 25.
*BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC ADVISORS,
INC. ON OR ABOUT SEPTEMBER 1, 1999.
<TABLE>
<S> <C>
[GRAPHIC] ABOUT THE MONEY MARKET FUNDS
NATIONS CASH RESERVES 4
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS MONEY MARKET RESERVES 7
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS TREASURY RESERVES 10
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS GOVERNMENT RESERVES 13
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS MUNICIPAL RESERVES 16
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS CALIFORNIA TAX-EXEMPT RESERVES 19
Sub-adviser: TradeStreet
- ----------------------------------------------------------
OTHER IMPORTANT INFORMATION 23
- ----------------------------------------------------------
HOW THE FUNDS ARE MANAGED 25
[GRAPHIC] ABOUT YOUR INVESTMENT
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 27
How selling and servicing agents are paid 33
Distributions and taxes 34
- ----------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 37
- ----------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
3
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS CASH RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by, the
securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
4
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Cash Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money.
AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
3.34%* 5.25% 5.19%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.22%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 3rd & 4th quarter 1997: 1.32%
Worst: 4th quarter 1998: 1.20%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 5.19% 5.18%
</TABLE>
5
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Service Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 1.00%
Other expenses 0.13%
-----
Total annual Fund operating expenses 1.28%
Fee waivers and/or reimbursements (0.08)%
-----
Total net expenses(2) 1.20%
=====
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Service Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Service Class Shares $122 $398 $695 $1,538
</TABLE>
6
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS MONEY MARKET RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund's investment objective is to provide a high level of
current income consistent with liquidity, the preservation of
capital and a stable net asset value.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain
trusts, partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
7
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN THIS FUND
STARTING ON PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Money Market Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money.
AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
9.36% 8.25% 6.36% 4.02% 3.07% 4.02% 5.78% 5.28% 5.62% 5.55%
</TABLE>
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.42%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1989: 2.40%
Worst: 2nd quarter 1993: 0.75%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Capital Class Shares 5.55% 5.25% 5.72%
</TABLE>
8
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Service Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 1.00%
Other expenses 0.16%
-----
Total annual Fund operating expenses 1.31%
Fee waivers and/or reimbursements (0.11)%
-----
Total net expenses(2) 1.20%
=====
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing
in this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Service Class Shares of the Fund for the
time periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Service Class Shares $122 $404 $708 $1,569
</TABLE>
9
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' LIST OF APPROVED MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS TREASURY RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o U.S. TREASURY OBLIGATIONS
o REPURCHASE AGREEMENTS and REVERSE REPURCHASE AGREEMENTS secured by U.S.
Treasury obligations
o obligations whose principal and interest are backed by the U.S.
government
The Fund may invest in other money market funds that invest in these
instruments, consistent with its investment objective and strategies.
The Fund normally invests at least 65% of its assets in U.S. Treasury
obligations, and repurchase agreements secured by U.S. Treasury obligations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
10
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Treasury Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money.
AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
3.26%* 5.11% 4.97%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.09%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1997: 1.29%
Worst: 4th quarter 1998: 1.08%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 4.97% 5.01%
</TABLE>
11
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Service Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 1.00%
Other expenses 0.15%
-----
Total annual Fund operating expenses 1.30%
Fee waivers and/or reimbursements (0.10)%
-----
Total net expenses(2) 1.20%
=====
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing
in this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Service Class Shares of the Fund for the
time periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Service Class Shares $122 $402 $703 $1,559
</TABLE>
12
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS GOVERNMENT RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily U.S. GOVERNMENT OBLIGATIONS and U.S. TREASURY OBLIGATIONS. The Fund
may invest in other money market funds that invest in these instruments,
consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
13
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Government Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money.
AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
3.26%* 5.13% 5.03%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.12%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1997: 1.29%
Worst: 4th quarter 1998: 1.13%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 5.03% 5.04%
</TABLE>
14
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Service Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 1.00%
Other expenses 0.14%
-----
Total annual Fund operating expenses 1.29%
Fee waivers and/or reimbursements (0.09)%
-----
Total net expenses(2) 1.20%
=====
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Service Class Shares of the Fund for the
time periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Service Class Shares $122 $400 $699 $1,549
</TABLE>
15
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS MUNICIPAL RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income exempt from
federal income taxes.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. The Fund normally invests at
least 80% of its assets in MUNICIPAL SECURITIES, which pay interest that is
free from federal income and alternative minimum taxes. The Fund invests in
municipal securities that, at the time of investment, are considered by the
portfolio management team to have minimal credit risk and to be of HIGH
QUALITY.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE
ACTIVITY BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an
instrument, and structural analysis, which includes evaluating the
arrangements between the municipality and others involved in the issue of
an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
16
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Municipal Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money.
AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make
an investment, as a temporary defensive strategy, or if the
portfolio management team believes that attractive tax-exempt
investments are not available. Any uninvested cash the Fund holds
does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund
come from interest on municipal securities, which is generally
free from federal income tax, but may be subject to state and
local taxes. Any portion of a distribution that comes from income
paid on other kinds of securities or from realized CAPITAL GAINS
is generally subject to federal, state and local taxes.
Distributions paid to you from the Fund's interest on private
activity bonds may be subject to the federal alternative minimum
tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
2.05%* 3.24% 3.00%
*Return is from inception (5-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.25%
17
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1997: 0.86%
Worst: 4th quarter 1998: 0.68%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 3.00% 3.11%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Service Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 1.00%
Other expenses 0.18%
-----
Total annual Fund operating expenses 1.33%
Fee waivers and/or reimbursements (0.13)%
-----
Total net expenses(2) 1.20%
=====
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing
in this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Service Class Shares of the Fund for the
time periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Service Class Shares $122 $409 $716 $1,590
</TABLE>
18
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 26.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks current income exempt from federal income tax and
California state personal income tax, a stable share price, and
daily LIQUIDITY.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the
time of investment, are considered to have remaining maturities of
397 days or less.
The Fund normally invests at least 80% of its assets in securities that pay
interest that is free from federal income and alternative minimum taxes and
California state personal income tax. These securities are issued by or on
behalf of the State of California, its political subdivisions, agencies,
instrumentalities and authorities, and other qualified issuers.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE
ACTIVITY BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or debt instruments backed by, the securities
and other assets owned by these issuers. The Fund may invest in other money
market funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating local, national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an
instrument, and structural analysis, which includes evaluating the
arrangements between the municipality and others involved in the issue of
an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
19
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 23 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations California Tax-Exempt Reserves has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities
that pay interest that is free from income tax in one state. The
value of the Fund and the amount of interest it pays could also
be affected by the financial conditions of the state, its public
authorities and local governments. Although the Fund tries to
maintain a share price of $1.00, an investment in the Fund could
lose money. AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND
IS NOT INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY
OTHER GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make
an investment, as a temporary defensive strategy, or if the
portfolio management team believes that attractive tax-exempt
investments are not available. Any uninvested cash the Fund holds
does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund
come from interest on municipal securities, which is generally
free from federal income tax and California state personal income
tax, but may be subject to other state and local taxes and the
federal alternative minimum tax. Any portion of a distribution
that comes from income paid on other kinds of securities or from
realized CAPITAL GAINS is generally subject to federal, state and
local taxes. Distributions paid to you from the Fund's interest
on private activity bonds may be subject to the federal
alternative minimum tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Daily
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
0.69%* 2.84% 2.51%
*Return is from inception (10-2-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 0.89%
20
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1997: 0.75%
Worst: 4th quarter 1998: 0.57%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Daily Class Shares 2.51% 2.69%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(Fees paid directly from your investment) Service Class Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 1.00%
Other expenses 0.13%
-----
Total annual Fund operating expenses 1.28%
Fee waivers and/or reimbursements (0.08)%
-----
Total net expenses(2) 1.20%
=====
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
21
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing
in this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Service Class Shares of the Fund for the
time periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Service Class Shares $122 $398 $695 $1,538
</TABLE>
22
<PAGE>
[GRAPHIC] Other important information
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 4. The following are
some other risks and information you should consider before you invest:
o SPECIAL RULES FOR MONEY MARKET FUNDS - Money market funds must comply
with Rule 2a-7 under the Investment Company Act of 1940 (1940 Act). Rule
2a-7 sets out certain limits on investments, which are designed to help
protect investors from risk of loss. These limits apply at the time an
investment is made. The Funds, like all money market funds:
o may only invest in securities with a remaining maturity of 397 days or
less, or that have maturities longer than 397 days but have demand,
interest rate reset features or guarantees that are 397 days or less
o must maintain an AVERAGE DOLLAR-WEIGHTED MATURITY of 90 days or less
o may normally invest no more than 5% of their assets in a single
security, other than U.S. government securities; however, they may
invest up to 25% of their assets in a FIRST-TIER SECURITY for up to
three business days (except for Nations California Tax-Exempt Reserves)
o may generally only invest in U.S. dollar denominated instruments that
are determined to have minimal credit risk and are first-tier
securities, except for Nations California Tax-Exempt Reserves, which
also may invest in SECOND-TIER SECURITIES.
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund cannot be changed without
shareholder approval (except for Nations California Tax-Exempt Reserves).
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments that
aren't part of their principal investment strategies. Please refer to the
SAI for more information. The portfolio managers or management team can
also choose not to invest in specific securities described in this
prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn or
because of political or other conditions. A Fund may not achieve its
investment objective while it is investing defensively. Any cash a Fund
holds for defensive or other reasons does not earn income.
23
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer systems
that cannot read a four-digit year may not be able to calculate and
process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they have
been working to make the necessary changes to their systems, and that
they expect them to be adapted in time. There is no guarantee, however,
that their computer systems will be ready by the year 2000. If their
computer systems are not ready in time, there could be a negative effect
on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer systems of
foreign issuers, governments or other entities may not be ready for the
year 2000.
24
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] HOW THE FUNDS ARE MANAGED
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in Nations
Funds including the Money Market Funds described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation.
Nations Funds pays BAAI an annual fee for its investment advisory services.
The fee is calculated daily based on the average net assets of each Fund and
is paid monthly. BAAI uses part of this money to pay investment sub-advisers
for the services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee(1) fiscal year
<S> <C> <C>
Nations Cash Reserves 0.15% 0.15%
Nations Money Market Reserves 0.15% 0.12%
Nations Treasury Reserves 0.15% 0.13%
Nations Government Reserves 0.15% 0.14%
Nations Municipal Reserves 0.15% 0.10%
Nations California Tax-Exempt Reserves 0.15% 0.15%
</TABLE>
(1) These fees are the current contract levels, which have been reduced from
the contract levels in effect during the last fiscal year.
25
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in
Nations Funds. TradeStreet takes a team approach to investment management.
Each team has access to the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Cash Reserves Taxable Money Market Management Team
Nations Money Market Reserves Taxable Money Market Management Team
Nations Treasury Reserves Taxable Money Market Management Team
Nations Government Reserves Taxable Money Market Management Team
Nations Municipal Reserves Tax-Exempt Money Market Management Team
Nations California Tax-Exempt Reserves Tax-Exempt Money Market Management Team
</TABLE>
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay distribution (12b-1) and shareholder servicing
fees and/or other compensation to companies for selling shares and providing
services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.10% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
26
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] BUYING, SELLING AND EXCHANGING SHARES
This prospectus offers Service Class Shares of the Funds. Here are some
general rules about this class of shares:
o Service Class Shares are available to certain financial institutions and
intermediaries for their own accounts, and for certain client accounts
for which they may provide automated cash management or other services.
These include:
o Bank of America and certain of its affiliates
o certain other financial institutions
o The minimum initial investment is $1,000. There is no minimum for
additional investments.
o The minimum initial investment is $100 using the Systematic Investment
Plan. The minimum for additional investments under this plan is $100.
o There are no sales charges for buying, selling or exchanging these
shares.
You'll find more information about buying, selling and exchanging Service
Class Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related services and programs.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. If you have questions about
buying, selling or exchanging, or you need help placing an order, please call
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor. You can also contact your investment
professional.
27
<PAGE>
<TABLE>
<CAPTION>
Ways to
buy, sell or How much you can buy,
exchange sell or exchange Other things to know
----------------- -------------------------------------- ---------------------------------------------------
<S> <C> <C> <C>
Buying shares In a lump sum minimum initial investment: There is no limit to the amount you can invest
o $1,000 in Service Class Shares.
minimum additional investment:
o none
-------------------------------------------------------------------------------------------------------------
Using our minimum initial investment: You can buy shares monthly, twice a month or
Systematic o $100 quarterly, using automatic transfers from your
Investment Plan minimum additional investment: bank account.
o $100
- ----------------------------------------------------------------------------------------------------------------------------------
Selling shares In a lump sum o you can sell up to $50,000 of your We usually send you the sale proceeds on the
shares by telephone, otherwise there same day that we receive your order.
are no limits to the amount you can
sell
o other restrictions may apply to If you paid for your shares with a check that
withdrawals from retirement plan wasn't certified, we'll hold the sale proceeds
accounts when you sell those shares for at least 15 days
after the trade date of the purchase, or until the
check has cleared.
-------------------------------------------------------------------------------------------------------------
Using our free o minimum $250 per check You can write checks for free. You can only use
checkwriting checks to make partial withdrawals from a
service Fund. You can't use a check to make a full
withdrawal from a Fund.
-------------------------------------------------------------------------------------------------------------
Using our o minimum $25 per withdrawal Your account balance must be at least $10,000
Automatic to set up the plan. You can make withdrawals
Withdrawal Plan monthly, twice a month or quarterly. We'll send
your money by check or deposit it directly to
your bank account.
- ----------------------------------------------------------------------------------------------------------------------------------
Exchanging shares In a lump sum o minimum $1,000 per exchange You can exchange Service Class shares of a
Fund for Service Class Shares of any other
Nations Reserves Money Market Fund.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
[GRAPHIC] A BUSINESS DAY IS ANY DAY THAT THE FEDERAL RESERVE BANK OF NEW
YORK IS OPEN.
THE FEDERAL RESERVE BANK OF NEW YORK IS CLOSED ON WEEKENDS AND ON
THE FOLLOWING NATIONAL HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER
KING, JR. DAY, PRESIDENTS' DAY, MEMORIAL DAY, INDEPENDENCE DAY,
LABOR DAY, COLUMBUS DAY, VETERANS DAY, THANKSGIVING DAY AND
CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share at the following
times:
o 5:00 p.m. Eastern time each business day for each share class of Nations
Cash Reserves, Nations Money Market Reserves and Nations Treasury Reserves
o 12:00 noon Eastern time each business day for each share class of Nations
Government Reserves and Nations Municipal Reserves
o 10:30 a.m. Eastern time each business day for each share class of Nations
California Tax-Exempt Reserves
First, we calculate the net asset value for each class of a Fund by
determining the value of the Fund's assets in the class and then subtracting
its liabilities. Next, we divide this amount by the number of shares that
investors are holding in the class.
Although we try to maintain a net asset value per share of $1.00 for the
Funds, we can't guarantee that we will be able to do so.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. We use the amortized cost method, which approximates
market value, to value the assets in the Money Market Funds.
HOW ORDERS ARE PROCESSED0
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents by the following times on a
business day will receive that day's net asset value per share:
o 3:00 p.m. Eastern time for Nations Cash Reserves, Nations Money Market
Reserves and Nations Treasury Reserves
o 12:00 noon Eastern time for Nations Government Reserves and Nations
Municipal Reserves
o 10:30 a.m. Eastern time for Nations California Tax-Exempt Reserves
Investors are encouraged to place orders to sell as early in the day as
possible. Orders received after these times will receive the next business
day's net asset value per share. The business day that applies to an order is
also called the TRADE DATE. We may refuse any order to buy or exchange shares.
If this happens, we'll return any money we've received.
29
<PAGE>
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone if you complete the
telephone authorization section of our account application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account, you must
have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be
responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions are
genuine. For example, we require proof of your identification before we
will act on instructions received by telephone and may record telephone
conversations. If we and our service providers don't take these steps, we
may be liable for any losses from unauthorized or fraudulent
instructions.
o Telephone orders may be difficult to complete during periods of
significant economic or market change.
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Service Class Shares at net asset value per share.
o If we don't receive payment by 4:00 p.m. Eastern time on the
business day Stephens, First Data or their agents receive the
order, we'll refuse the order. We'll return any payment received
for orders that we refuse. We can change this time under certain
circumstances, for example, when there's more wiring activity
than normal.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we
receive payment on time.
o Shares purchased are recorded on the books of the Fund. We
generally don't issue certificates.
SYSTEMATIC INVESTMENT PLAN
You can make regular purchases of $100 or more using automatic transfers from
your bank account to the Funds you choose. You can contact your financial
adviser or us to set up the plan.
Here's how the plan works:
o You can buy shares twice a month, monthly or quarterly.
o You can choose to have us transfer your money on or about the 15th or the
last day of the month.
o Some exceptions may apply to employees of Bank of America and its
affiliates, and to plans set up before August 1, 1997. For details,
please contact your financial adviser.
30
<PAGE>
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire on the
same business day that Stephens, First Data or their agents
receive the order.
o We may take up to three business days to send the sale proceeds
if we believe that an earlier payment could adversely affect
the Fund.
o Investors that qualify for telephone orders can sell up to
$50,000 in shares by telephone.
o If shares were paid for with a check that wasn't certified,
we'll hold the sale proceeds when those shares are sold for at
least 15 days after the trade date of the purchase, or until
the check has cleared.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
o Under certain circumstances allowed under the 1940 Act, we can
pay investors in securities or other property when they sell
shares, or delay payment of the sale proceeds for up to seven
days.
o Other restrictions may apply to retirement plan accounts. For
more information about these restrictions please contact your
retirement plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 30 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its
clients
o under certain other circumstances allowed under the 1940 Act
CHECKWRITING SERVICE
You can withdraw money from the Funds using our free checkwriting service. You
can contact your financial adviser or us to set up the service.
Here's how the service works:
o Each check you write must be for $250 or more.
o You can only use checks to make partial withdrawals. You can't use a
check to make a full withdrawal of the shares you hold in a Fund.
o Shares you sell by writing a check are eligible to receive distributions
up to the day our custodian receives the check for payment.
o We can change or cancel the service by giving you 30 days notice in
writing.
31
<PAGE>
[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan lets you withdraw $25 or more every month, every
quarter or every year. You can contact your financial adviser or us to set up
the plan.
Here's how the plan works:
o Your account balance must be at least $10,000 to set up the plan.
o If you set up the plan after you've opened your account, your signature
must be guaranteed.
o You can choose to have us transfer your money on or about the 15th or the
25th of the month.
o We'll send you a check or deposit the money directly to your bank
account.
o You can cancel the plan by giving your financial adviser or us 30 days
notice in writing.
It's important to remember that if you withdraw more than your investment in
the Fund is earning, you'll eventually use up your original investment.
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another
Nations Fund. This is called an exchange, and may be appropriate if
investment goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Service Class Shares of a Fund for
Service Class Shares of any other Nations Reserves Money Market
Fund.
o Investors must exchange at least $1,000 at a time.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in
the investor's state of residence.
o Exchanges can generally only be made into a Fund that is
accepting investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving
the amount of notice required by regulatory authorities
(generally 60 days for a material change or cancellation).
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[GRAPHIC] THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE BECAUSE
IT'S PAID THROUGH A PLAN APPROVED UNDER RULE 12B-1 OF THE 1940
ACT.
THE SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
[GRAPHIC] HOW SELLING AND SERVICING AGENTS ARE PAID
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES
Stephens and selling and servicing agents are compensated for selling shares
and providing services to investors under distribution and shareholder
servicing plans.
Stephens may be reimbursed for distribution-related expenses up to an annual
maximum of 0.75% of the average daily net assets of Service Class Shares of
the Funds, some or all of which may be paid to selling agents.
Servicing agents may receive a maximum annual shareholder servicing fee of
0.25% of the average daily net assets of Service Class Shares of the Funds.
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Funds' assets on an ongoing basis, over time they will increase the
cost of your investment, and may cost you more than any sales charges you may
pay.
The Funds pay these fees to eligible selling and servicing agents for as long
as the plans continue. We may reduce or discontinue payments at any time.
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale, promotion
and marketing of the Funds
o an additional amount of up to 0.75% of the net asset value per share on
all sales of Service Class Shares
o non-cash compensation like trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift
certificates for meals or merchandise
This compensation, which is not paid by the Funds, is discretionary and may be
available only to selected selling and servicing agents. For example, Stephens
sometimes sponsors promotions involving Banc of America Investments, Inc., an
affiliate of BAAI, and certain other selling or servicing agents. Selected
selling and servicing agents may also receive compensation for opening a
minimum number of accounts. Stephens may cancel any compensation program at
any time.
BAAI also may pay amounts from its own assets to Stephens or to selling or
servicing agents for services they provide.
33
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] DISTRIBUTIONS AND TAXES
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends
paid on COMMON STOCKS.
o A fund can also have CAPITAL GAINS if the value of its investments
increases. If a fund sells an investment at a gain, the gain is realized.
If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gains to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gains to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
Although the Funds do not expect to realize any capital gains, any capital
gains realized by a Fund will be distributed at least once a year.
The Funds declare distributions of net investment income each business day,
and pay them on the first business day of each month.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor.
34
<PAGE>
[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions of net investment income and any excess of net short-term
capital gains over net long-term capital losses generally are taxable to you
as ordinary income.
Although the Funds do not expect to realize any capital gains, any
distributions of net capital gains (generally the excess of net long-term
capital gains over net short-term capital losses) generally are taxable to you
as net capital gains.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
NATIONS MUNICIPAL RESERVES, NATIONS CALIFORNIA TAX-EXEMPT RESERVES
Distributions that come from Nations Municipal Reserves' tax-exempt interest
income are generally free from federal income tax, but may be subject to state
or local tax.
Distributions that come from Nations California Tax-Exempt Reserves' tax-exempt
interest income are generally free from federal income tax and California
state personal income tax, but may be subject to other state and local taxes.
Any distributions that come from taxable income or realized capital gains are
generally subject to tax.
A portion of the distributions from these Funds may also be subject to the
federal alternative minimum tax.
U.S. GOVERNMENT OBLIGATIONS
If you invest in U.S. government obligations directly, interest on those
obligations is free from state and local and personal income taxes.
Distributions you receive that come from interest the Fund earns from U.S.
government obligations may not be exempt from these taxes. Please consult with
your tax advisor.
35
<PAGE>
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
As long as a Fund continually maintains a $1.00 net asset value per share, you
ordinarily will not recognize a taxable gain or loss on the redemption or
exchange of your shares of the Fund.
36
<PAGE>
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
EQUITY SECURITY - an investment that gives you part ownership in a company.
Equity securities (or "equities") include common and preferred stock, rights
and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
37
<PAGE>
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
38
<PAGE>
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
39
<PAGE>
[GRAPHIC] WHERE TO FIND MORE INFORMATION
You'll find more information about the Money Market Funds in the following
documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the
auditor's reports.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's
incorporated by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.626.2275 (Institutional Investors)
1.800.321.7854 (Individual Investors)
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and
ask them to mail you copies of these documents. They'll charge you
a fee for this service. You can also download them from the SEC's
website or visit the Public Reference Section and copy the
documents while you're there. Please call the SEC for more
information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file number:
Nations Reserves, 811-6030
NF-SERVICE-8/99
NATIONS FUNDS
<PAGE>
[GRAPHIC]
MONEY MARKET FUNDS
PROSPECTUS -- TRUST CLASS SHARES
AUGUST 1, 1999
MONEY MARKET FUNDS
NATIONS CASH RESERVES
NATIONS MONEY MARKET RESERVES
NATIONS TREASURY RESERVES
NATIONS GOVERNMENT RESERVES
NATIONS MUNICIPAL RESERVES
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------
NOT FDIC
INSURED
- ----------------------------
MAY LOSE VALUE
- ----------------------------
NO BANK GUARANTEE
- ----------------------------
NATIONS FUNDS [LOGO}
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 34.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about some of the
Nations Funds Money Market Funds. Please read it carefully, because it
contains information that's designed to help you make informed investment
decisions.
This prospectus offers Trust Class Shares of the Funds. This class of shares
is designed primarily for financial institutions and intermediaries for their
own accounts, and for certain of their client accounts for which they act as
fiduciary, agent or custodian. Please turn to page 26 for more information
about who is eligible to buy this class of shares.
ABOUT THE FUNDS
The Money Market Funds seek to provide income while protecting your original
investment by investing in MONEY MARKET INSTRUMENTS.
Money market instruments include short-term DEBT SECURITIES that are U.S.
government issued or guaranteed or have relatively low risk. Your original
investment and your return aren't guaranteed, however, and returns will vary
as short-term interest rates change. Over time, the return on these money
market funds may be lower than the return on other kinds of mutual funds or
investments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Money Market Funds may be suitable for you if:
o you're looking for a relatively low risk investment with stability of
principal
o you have short-term income needs
They may not be suitable for you if:
o you're looking for higher returns
o you're more comfortable with bank deposits that are FDIC-insured
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 4.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.626.2275 if
you're an institutional investor, or 1.800.321.7854 if you're an individual
investor. You can also contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
2
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC]
BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER TO
EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL MANAGEMENT
AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH FUND. BAAI AND
NATIONS FUNDS HAVE ENGAGED A SUB-ADVISER -- TRADESTREET INVESTMENT
ASSOCIATES, INC. (TRADESTREET), WHICH IS RESPONSIBLE FOR THE
DAY-TO-DAY INVESTMENT DECISIONS FOR EACH OF THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAAI AND TRADESTREET
STARTING ON PAGE 24.
*BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC ADVISORS,
INC. ON OR ABOUT SEPTEMBER 1, 1999.
[GRAPHIC] About the Money Market Funds
NATIONS CASH RESERVES 4
Sub-adviser: TradeStreet
- --------------------------------------------------------
NATIONS MONEY MARKET RESERVES 7
Sub-adviser: TradeStreet
- --------------------------------------------------------
NATIONS TREASURY RESERVES 10
Sub-adviser: TradeStreet
- --------------------------------------------------------
NATIONS GOVERNMENT RESERVES 13
Sub-adviser: TradeStreet
- --------------------------------------------------------
NATIONS MUNICIPAL RESERVES 16
Sub-adviser: TradeStreet
- --------------------------------------------------------
NATIONS CALIFORNIA TAX-EXEMPT RESERVES 19
Sub-adviser: TradeStreet
- --------------------------------------------------------
OTHER IMPORTANT INFORMATION 22
- --------------------------------------------------------
HOW THE FUNDS ARE MANAGED 24
[GRAPHIC] About your investment
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 26
Shareholder administration fees 30
Distributions and taxes 31
- --------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 34
- --------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
3
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS CASH RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high degree
of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a diversified
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the time of
investment, are considered to have remaining maturities of 397 days or
less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by, the
securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
4
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Cash Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money.
AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Liquidity
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
5.63% 3.45% 2.78% 3.83% 5.86% 5.29% 5.46% 5.42%
*Return is from inception (1-9-91) to 12-31-91.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.37%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1991: 1.44%
Worst: 2nd, 3rd, 4th quarter 1993,
1st quarter 1994: 0.68%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Liquidity Class Shares 5.42% 5.17% 4.73%
</TABLE>
5
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Trust Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferrred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder administration fees 0.10%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.38%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses(2) 0.30%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Trust Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Trust Class Shares $31 $114 $205 $473
</TABLE>
6
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS MONEY MARKET RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund's investment objective is to provide a high level of
current income consistent with liquidity, the preservation of
capital and a stable net asset value.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities
include primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by
certain trusts, partnerships or other SPECIAL PURPOSE ISSUERS,
like PASS-THROUGH CERTIFICATES representing PARTICIPATIONS in, or
instruments backed by, the securities and other assets owned by
these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S.
GOVERNMENT OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global
economic conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money
market instruments that offer the highest yields and assessing
the market for potential investments.
o Security analysis includes evaluating the credit quality of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
7
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Money Market Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money.
AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Capital Class
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.36% 8.25% 6.36% 4.02% 3.07% 4.02% 5.78% 5.28% 5.62% 5.55%
</TABLE>
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.42%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1989: 2.40%
Worst: 2nd quarter 1993: 0.75%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Capital Class Shares 5.55% 5.25% 5.72%
</TABLE>
8
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Trust Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferrred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder administration fees 0.10%
Other expenses 0.16%
------
Total annual Fund operating expenses 0.41%
Fee waivers and/or reimbursements (0.11)%
------
Total net expenses(2) 0.30%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Trust Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Trust Class Shares $31 $121 $219 $507
</TABLE>
9
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' LIST OF APPROVED MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS TREASURY RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o U.S. TREASURY OBLIGATIONS
o REPURCHASE AGREEMENTS and REVERSE REPURCHASE AGREEMENTS secured by
U.S. Treasury obligations
o obligations whose principal and interest are backed by the U.S.
government
The Fund may invest in other money market funds that invest in these
instruments, consistent with its investment objective and strategies.
The Fund normally invests at least 65% of its assets in U.S. Treasury
obligations, and repurchase agreements secured by U.S. Treasury obligations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market
for potential investments.
o Security analysis includes evaluating the credit quality of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
10
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
RISKS AND OTHER THINGS TO CONSIDER
Nations Treasury Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money.
AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Liquidity
Class Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
5.17%* 3.31% 2.61% 3.77% 5.70% 5.17% 5.32% 5.23%
*Return is from inception (1-9-91) to 12-31-91.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.24%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 1.44%
Worst: 2nd quarter 1993: 0.63%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Liquidity Class Shares 5.23% 5.04% 4.55%
</TABLE>
11
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Trust Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferrred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder administration fees 0.10%
Other expenses 0.15%
------
Total annual Fund operating expenses 0.40%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses(2) 0.30%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Trust Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Trust Class Shares $31 $118 $214 $495
</TABLE>
12
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS GOVERNMENT RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily U.S. GOVERNMENT OBLIGATIONS and U.S. TREASURY OBLIGATIONS. The Fund
may invest in other money market funds that invest in these instruments,
consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market
for potential investments.
o Security analysis includes evaluating the credit quality of an
instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
13
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Government Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money.
AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Liquidity
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
5.27% 3.42% 2.64% 3.67% 5.66% 5.19% 5.34% 5.27%
*Return is from inception (1-14-91) to 12-31-91.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.27%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 1.42%
Worst: 2nd quarter 1993: 0.64%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Liquidity Class Shares 5.27% 5.02% 4.58%
</TABLE>
14
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Trust Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferrred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder administration fees 0.10%
Other expenses 0.14%
------
Total annual Fund operating expenses 0.39%
Fee waivers and/or reimbursements (0.09)%
------
Total net expenses(2) 0.30%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Trust Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Trust Class Shares $31 $116 $210 $484
</TABLE>
15
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS MUNICIPAL RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income exempt from
federal income taxes.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. The Fund normally invests at
least 80% of its assets in MUNICIPAL SECURITIES, which pay interest that is
free from federal income and alternative minimum taxes. The Fund invests in
municipal securities that, at the time of investment, are considered by the
portfolio management team to have minimal credit risk and to be of HIGH
QUALITY.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE
ACTIVITY BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or instruments backed by, the securities and
other assets owned by these issuers. The Fund may invest in other money market
funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market
for potential investments.
o Security analysis includes evaluating the credit quality of an
instrument, and structural analysis, which includes evaluating the
arrangements between the municipality and others involved in the
issue of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
16
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Municipal Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of the
securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security is
unable to pay interest or repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund
come from interest on municipal securities, which is generally free
from federal income tax, but may be subject to state and local
taxes. Any portion of a distribution that comes from income paid on
other kinds of securities or from realized CAPITAL GAINS is
generally subject to federal, state and local taxes. Distributions
paid to you from the Fund's interest on private activity bonds may
be subject to the federal alternative minimum tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Liquidity
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3.17% 4.04% 2.53% 1.95% 2.52% 3.64% 3.27% 3.42% 3.24%
</TABLE>
*Return is from inception (6-1-90) to 12-31-90.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.40%
17
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1990: 1.38%
Worst: 1st quarter 1994: 0.44%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Liquidity Class Shares 3.24% 3.22% 3.24%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Trust Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferrred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder administration fees 0.10%
Other expenses 0.18%
------
Total annual Fund operating expenses 0.43%
Fee waivers and/or reimbursements (0.13)%
------
Total net expenses(2) 0.30%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Trust Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Trust Class Shares $31 $125 $228 $530
</TABLE>
18
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAX-EXEMPT
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 25.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks current income exempt from federal income tax and
California state personal income tax, a stable share price, and
daily LIQUIDITY.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund pursues its objective by generally investing in a
portfolio of high quality MONEY MARKET INSTRUMENTS that, at the
time of investment, are considered to have remaining maturities of
397 days or less.
The Fund normally invests at least 80% of its assets in securities that pay
interest that is free from federal income and alternative minimum taxes and
California state personal income tax. These securities are issued by or on
behalf of the State of California, its political subdivisions, agencies,
instrumentalities and authorities, and other qualified issuers.
The Fund may invest up to 20% of its assets in:
o municipal securities that finance private projects, called PRIVATE
ACTIVITY BONDS
o money market instruments, including REPURCHASE AGREEMENTS
The Fund may also invest in instruments issued by certain trusts, partnerships
or other SPECIAL PURPOSE ISSUERS, including PASS-THROUGH CERTIFICATES
representing PARTICIPATIONS in, or instruments backed by, the securities and
other assets owned by these issuers. The Fund may invest in other money market
funds, consistent with its investment objective and strategies.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating local, national and global
economic conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market
for potential investments.
o Security analysis includes evaluating the credit quality of an
instrument, and structural analysis, which includes evaluating the
arrangements between the municipality and others involved in the
issue of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
19
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 22 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT
1.800.626.2275 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR
1.800.321.7854 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO
CONTACT YOUR INVESTMENT PROFESSIONAL.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations California Tax-Exempt Reserves has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities
that pay interest that is free from income tax in one state. The
value of the Fund and the amount of interest it pays could also be
affected by the financial conditions of the state, its public
authorities and local governments. Although the Fund tries to
maintain a share price of $1.00, an investment in the Fund could
lose money. AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS
NOT INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of the
securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security is
unable to pay interest or repay principal when it's due.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund
come from interest on municipal securities, which is generally free
from federal income tax and California state personal income tax,
but may be subject to other state and local taxes and the federal
alternative minimum tax. Any portion of a distribution that comes
from income paid on other kinds of securities or from realized
CAPITAL GAINS is generally subject to federal, state and local
taxes. Distributions paid to you from the Fund's interest on
private activity bonds may be subject to the federal alternative
minimum tax.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Adviser
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
1.70% 2.37% 3.40% 2.96% 3.14% 2.82%
*Return is from inception (3-1-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.02%
20
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 0.88%
Worst: 1st quarter 1994: 0.44%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Adviser Class Shares 2.82% 2.94% 2.81%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Trust Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferrred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Shareholder administration fees 0.10%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.38%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses(2) 0.30%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Trust Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Trust Class Shares $31 $114 $205 $473
</TABLE>
21
<PAGE>
[GRAPHIC] OTHER IMPORTANT INFORMATION
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 4. The following are
some other risks and information you should consider before you invest:
o SPECIAL RULES FOR MONEY MARKET FUNDS - Money market funds must
comply with Rule 2a-7 under the Investment Company Act of 1940
(1940 Act). Rule 2a-7 sets out certain limits on investments, which
are designed to help protect investors from risk of loss. These
limits apply at the time an investment is made. The Funds, like all
money market funds:
o may only invest in securities with a remaining maturity of 397 days
or less, or that have maturities longer than 397 days but have
demand, interest rate reset features or guarantees that are 397
days or less
o must maintain an AVERAGE DOLLAR-WEIGHTED MATURITY of 90 days or
less
o may normally invest no more than 5% of their assets in a single
security, other than U.S. government securities; however, they may
invest up to 25% of their assets in a FIRST-TIER SECURITY for up to
three business days (except for Nations California Tax-Exempt
Reserves)
o may generally only invest in U.S. dollar denominated instruments
that are determined to have minimal credit risk and are first-tier
securities, except for Nations California Tax-Exempt Reserves,
which also may invest in SECOND-TIER SECURITIES.
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment
objective and certain investment policies of any Fund cannot be
changed without shareholder approval (except for Nations California
Tax-Exempt Reserves).
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments
that aren't part of their principal investment strategies. Please
refer to the SAI for more information. The portfolio managers or
management team can also choose not to invest in specific
securities described in this prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments
that are not part of its investment objective or its principal
investment strategies to try to protect it during a market or
economic downturn or because of political or other conditions. A
Fund may not achieve its investment objective while it is investing
defensively. Any cash a Fund holds for defensive or other reasons
does not earn income.
22
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and
that they expect them to be adapted in time. There is no guarantee,
however, that their computer systems will be ready by the year 2000.
If their computer systems are not ready in time, there could be a
negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
23
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] How the Funds are managed
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in Nations
Funds, including the Money Market Funds described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation.
Nations Funds pays BAAI an annual fee for its investment advisory services.
The fee is calculated daily based on the average net assets of each Fund and
is paid monthly. BAAI uses part of this money to pay investment sub-advisers
for the services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee(1) fiscal year
<S> <C> <C>
Nations Cash Reserves 0.15% 0.15%
Nations Money Market Reserves 0.15% 0.12%
Nations Treasury Reserves 0.15% 0.13%
Nations Government Reserves 0.15% 0.14%
Nations Municipal Reserves 0.15% 0.10%
Nations California Tax-Exempt Reserves 0.15% 0.15%
</TABLE>
(1) These fees are the current contract levels, which have been reduced from the
contract levels in effect during the last fiscal year.
24
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in
Nations Funds. TradeStreet takes a team approach to investment management.
Each team has access to the latest technology and analytical resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Cash Reserves Taxable Money Market Management Team
Nations Money Market Reserves Taxable Money Market Management Team
Nations Treasury Reserves Taxable Money Market Management Team
Nations Government Reserves Taxable Money Market Management Team
Nations Municipal Reserves Tax-Exempt Money Market Management Team
Nations California Tax-Exempt Reserves Tax-Exempt Money Market Management Team
</TABLE>
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.10% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly. The Funds also pay shareholder
administration fees to BAAI or financial institutions for providing services
to investors.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
25
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] BUYING, SELLING AND EXCHANGING SHARES
This prospectus offers Trust Class Shares of the Funds. Here are some general
rules about this class of shares:
o Trust Class Shares are available to certain financial institutions
and intermediaries for their own accounts, and for certain client
accounts for which they act as a fiduciary, agent or custodian.
These include:
o Bank of America and certain of its affiliates
o certain other financial institutions and intermediaries,
including financial planners and investment advisers
o institutional investors
o charitable foundations
o endowments
o other funds in the Nations Funds Family
o The minimum initial investment is $250,000. Financial institutions
or intermediaries can total the investments they make on behalf of
their clients to meet the minimum initial investment amount.
o There is no minimum amount for additional investments.
o There are no sales charges for buying, selling or exchanging these
shares.
You'll find more information about buying, selling and exchanging Trust Class
Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related services and programs.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. If you have questions about
buying, selling or exchanging, or you need help placing an order, please call
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor. You can also contact your investment
professional.
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A BUSINESS DAY IS ANY DAY THAT THE FEDERAL RESERVE BANK OF NEW
YORK IS OPEN.
THE FEDERAL RESERVE BANK OF NEW YORK IS CLOSED ON WEEKENDS AND ON
THE FOLLOWING NATIONAL HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER
KING, JR. DAY, PRESIDENTS' DAY, MEMORIAL DAY, INDEPENDENCE DAY,
LABOR DAY, COLUMBUS DAY, VETERANS DAY, THANKSGIVING DAY AND
CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share at the following
times:
o 5:00 p.m. Eastern time each business day for each share class of
Nations Cash Reserves, Nations Money Market Reserves and Nations
Treasury Reserves
o 12:00 noon Eastern time each business day for each share class of
Nations Government Reserves and Nations Municipal Reserves
o 10:30 a.m. Eastern time each business day for each share class of
Nations California Tax-Exempt Reserves
First, we calculate the net asset value for each class of a Fund by
determining the value of the Fund's assets in the class and then subtracting
its liabilities. Next, we divide this amount by the number of shares that
investors are holding in the class.
Although we try to maintain a net asset value per share of $1.00 for the
Funds, we can't guarantee that we will be able to do so.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. We use the amortized cost method, which approximates
market value, to value the assets in the Money Market Funds.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents by the following times on a
business day will receive that day's net asset value per share:
o 3:00 p.m. Eastern time for Nations Cash Reserves, Nations Money
Market Reserves and Nations Treasury Reserves
o 12:00 noon Eastern time for Nations Government Reserves and Nations
Municipal Reserves
o 10:30 a.m. Eastern time for Nations California Tax-Exempt Reserves
Investors are encouraged to place orders to sell as early in the day as
possible. Orders received after these times will receive the next business
day's net asset value per share. The business day that applies to an order is
also called the TRADE DATE. We may refuse any order to buy or exchange shares.
If this happens, we'll return any money we've received.
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Trust Class Shares at net asset value per share.
o If we don't receive payment by 4:00 p.m. Eastern time on the
business day Stephens, First Data or their agents receive the
order, we'll refuse the order. We'll return any payment received
for orders that we refuse. We can change this time under certain
circumstances, for example, when there's more wiring activity than
normal.
27
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[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we
receive payment on time.
o Shares purchased are recorded on the books of the Fund. We
generally don't issue certificates.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire on the
same business day that Stephens, First Data or their agents receive
the order.
o We may take up to three business days to send the sale proceeds if
we believe that an earlier payment could adversely affect the Fund.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold for at least 15
days after the trade date of the purchase, or until the check has
cleared.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
o Under certain circumstances allowed under the 1940 Act, we can pay
investors in securities or other property when they sell shares, or
delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions please contact your retirement
plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 30 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its client
o under certain other circumstances allowed under the 1940 Act
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another
Nations Fund. This is called an exchange, and may be appropriate if
investment goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Trust Class Shares of a Fund for:
o Primary A shares of all other Nations Funds, except Nations
Funds Money Market Funds
o Trust Class Shares of Nations Reserves Money Market Funds.
o Investors must exchange at least $250,000 at a time.
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<PAGE>
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
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<PAGE>
[GRAPHIC] FINANCIAL INSTITUTIONS AND INTERMEDIARIES MAY CHARGE OTHER FEES
FOR SERVICES PROVIDED TO YOUR ACCOUNT.
[GRAPHIC] SHAREHOLDER ADMINISTRATION FEES
BAAI, its affiliates and/or other financial institutions and intermediaries
may receive a maximum annual shareholder administration fee of 0.10% of the
average daily net assets of Trust Class Shares of the Funds under a
shareholder administration plan.
Fees are calculated daily and deducted monthly. Over time, these fees will
increase the cost of your investment.
The Funds pay these fees to eligible financial institutions and intermediaries
for as long as the plan continues. We may reduce or discontinue payments at
any time.
BAAI may pay amounts from its own assets to financial institutions and
intermediaries for administrative services they provide.
30
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] DISTRIBUTIONS AND TAXES
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and
dividends paid on COMMON STOCKS.
o A fund can also have CAPITAL GAINS if the value of its investments
increases. If a fund sells an investment at a gain, the gain is
realized. If a fund continues to hold the investment, any gain is
unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gains to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gains to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
Although the Funds do not expect to realize any capital gains, any capital
gains realized by a Fund will be distributed at least once a year.
The Funds declare distributions of net investment income each business day,
and pay them on the first business day of each month.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.626.2275 if you're an institutional investor, or 1.800.321.7854 if
you're an individual investor.
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[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions of net investment income and any excess of net short-term
capital gains over net long-term capital losses generally are taxable to you
as ordinary income.
Although the Funds do not expect to realize any capital gains, any
distributions of net capital gains (generally the excess of net long-term
capital gains over net short-term capital losses) generally are taxable to you
as net capital gains.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
NATIONS MUNICIPAL RESERVES, NATIONS CALIFORNIA TAX-EXEMPT RESERVES
Distributions that come from Nations Municipal Reserves' tax-exempt interest
income are generally free from federal income tax, but may be subject to state
or local tax.
Distributions that come from Nations California Tax-Exempt Reserves' tax-exempt
interest income are generally free from federal income tax and California
state personal income tax, but may be subject to other state and
local taxes.
Any distributions that come from taxable income or realized capital gains are
generally subject to tax.
A portion of the distributions from these Funds may also be subject to the
federal alternative minimum tax.
U.S. GOVERNMENT OBLIGATIONS
If you invest in U.S. government obligations directly, interest on those
obligations is free from state and local and personal income taxes.
Distributions you receive that come from interest the Fund earns from U.S.
government obligations may not be exempt from these taxes. Please consult with
your tax advisor.
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WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN)
and haven't certified that the TIN is correct and withholding
doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN
listed on your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup
withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
As long as a Fund continually maintains a $1.00 net asset value per share, you
ordinarily will not recognize a taxable gain or loss on the redemption or
exchange of your shares of the Fund.
33
<PAGE>
[GRAPHIC] Terms used in this prospectus
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
EQUITY SECURITY - an investment that gives you part ownership in a company.
Equity securities (or "equities") include common and preferred stock, rights
and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
34
<PAGE>
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
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REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
36
<PAGE>
[GRAPHIC] WHERE TO FIND MORE INFORMATION
You'll find more information about the Money Market Funds in the
following documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the
auditor's reports.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.626.2275 (Institutional Investors)
1.800.321.7854 (Individual Investors)
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file number:
Nations Reserves, 811-6030
NF-TRUST-8/99 Nations Funds [LOGO]
[GRAPHIC]
MONEY MARKET FUNDS
PROSPECTUS -- INVESTOR CLASS SHARES
AUGUST 1, 1999
MONEY MARKET FUNDS
NATIONS CASH RESERVES
NATIONS TREASURY RESERVES
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN THIS PROSPECTUS ON PAGE 23.
YOUR INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE (FDIC) CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUND.
This booklet, which is called a prospectus, tells you about two of the Nations
Funds Money Market Funds. Please read it carefully, because it contains
information that's designed to help you make informed investment decisions.
This prospectus offers Investor Class Shares of the Funds. This class of
shares is designed primarily for financial institutions and intermediaries for
their own accounts, and for their client accounts. Please turn to page 14 for
more about who is eligible to buy this class of shares.
ABOUT THE FUNDS
These Funds seek to provide while protecting your original investment by
investing in MONEY MARKET INSTRUMENTS.
Money market instruments include short-term DEBT SECURITIES that are U.S.
government issued or guaranteed, or have relatively low risk. Your original
investment and your return aren't guaranteed, however, and returns will vary
as short-term interest rates change. Over time, the return on money market
funds may be lower than the return on other kinds of mutual funds or
investments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Money Market Funds may be suitable for you if:
o you're looking for a relatively low risk investment with stability of
principal
o you have short-term income needs
They may not be suitable for you if:
o you're looking for higher returns
o you're more comfortable with bank deposits that are FDIC-insured
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that starts on page 4.
FOR MORE INFORMATION
If you have any questions about the Fund, please call us at 1.800.742.2845 or
contact your financial adviser.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
2
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER
TO THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL MANAGEMENT AND
SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH FUND. BAAI AND
NATIONS FUNDS HAVE ENGAGED A SUB-ADVISER -- TRADESTREET INVESTMENT
ASSOCIATES, INC. (TRADESTREET), WHICH IS RESPONSIBLE FOR THE
DAY-TO-DAY INVESTMENT DECISIONS FOR EACH FUND.
[GRAPHIC]
YOU'LL FIND MORE ABOUT BAAI AND TRADESTREET STARTING ON PAGE 12.
*BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC
ADVISORS, INC. ON OR ABOUT SEPTEMBER 1, 1999.
<TABLE>
<S> <C>
[GRAPHIC] ABOUT THE MONEY MARKET FUNDS
NATIONS CASH RESERVES 4
Sub-adviser: TradeStreet
- ----------------------------------------------------------
NATIONS TREASURY RESERVES
Sub-adviser: TradeStreet 7
- ----------------------------------------------------------
OTHER IMPORTANT INFORMATION 10
- ----------------------------------------------------------
HOW THE FUNDS ARE MANAGED 12
[GRAPHIC] ABOUT YOUR INVESTMENT
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 14
How selling and servicing agents are paid 20
Distributions and taxes 21
- ----------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 23
- ----------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
3
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ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 12.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' APPROVED LIST OF CLASS 1 MONEY MARKET MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
Nations Cash Reserves
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o COMMERCIAL PAPER
o BANK OBLIGATIONS
o short-term DEBT SECURITIES, including instruments issued by certain trusts,
partnerships or other SPECIAL PURPOSE ISSUERS, like PASS-THROUGH
CERTIFICATES representing PARTICIPATIONS in, or instruments backed by,
the securities and other assets owned by these issuers
o short-term taxable MUNICIPAL SECURITIES
o REPURCHASE AGREEMENTS secured by first-tier securities or U.S. GOVERNMENT
OBLIGATIONS
The Fund may also invest in other money market funds, consistent with its
investment objective and strategies. The Fund may invest more than 25% of its
assets in U.S. dollar denominated obligations of U.S. banks, foreign branches
of U.S. banks and U.S. branches of foreign banks, when the portfolio
management team believes market conditions warrant it.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as interest rate movements.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
4
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN THIS FUND
STARTING ON PAGE 10 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
CALL US AT 1.800.742.2845 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT 7-DAY YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Cash Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a share
price of $1.00, an investment in the Fund may lose money. AN
INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT
AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay distributions
depends on the creditworthiness of the issuers of the securities the
Fund holds. The Fund may not be able to pay distributions, or could
lose money, if the issuer of a security is unable to pay interest or
repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
1996 1997 1998
3.34%* 5.25% 5.19%
*Return is from inception (5-2-96) to 12-31-96.
[GRAPHIC] YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.22%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 3rd and 4th quarter 1997: 1.32%
Worst: 4th quarter 1998: 1.20%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
1 year Since inception
<S> <C> <C>
Market Class Shares 5.19% 5.18%
</TABLE>
5
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Investor Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.35%
Other expenses 0.13%
------
Total annual Fund operating expenses 0.63%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses(2) 0.55%
======
</TABLE>
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor Class Shares $56 $194 $343 $779
</TABLE>
6
<PAGE>
ABOUT THE MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S TAXABLE
MONEY MARKET MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 12.
THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN
INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT
INFORMATION.
THE FUND IS LISTED ON THE NATIONAL ASSOCIATION OF INSURANCE
COMMISSIONERS' LIST OF APPROVED MUTUAL FUNDS.
[GRAPHIC] FIRST-TIER SECURITIES
A FIRST-TIER SECURITY IS A SHORT-TERM DEBT SECURITY THAT'S AN
ELIGIBLE INVESTMENT FOR MONEY MARKET FUNDS. IT'S "FIRST-TIER"
BECAUSE IT'S BEEN GIVEN THE HIGHEST CREDIT RATING BY A NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION OR IS CONSIDERED TO BE
OF COMPARABLE QUALITY.
NATIONS TREASURY RESERVES
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to preserve principal value and maintain a high
degree of liquidity while providing current income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund pursues its objective by generally investing in a
diversified portfolio of high quality MONEY MARKET INSTRUMENTS
that, at the time of investment, are considered to have remaining
maturities of 397 days or less.
THE FUND WILL ONLY BUY FIRST-TIER SECURITIES. These securities include
primarily:
o U.S. TREASURY OBLIGATIONS
o REPURCHASE AGREEMENTS and REVERSE REPURCHASE AGREEMENTS secured by U.S.
Treasury obligations
o obligations whose principal and interest are backed by the U.S. government
The Fund may invest in other money market funds that invest in these
instruments, consistent with its investment objective and strategies.
The Fund normally invests at least 65% of its assets in U.S. Treasury
obligations, and repurchase agreements secured by U.S. Treasury obligations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team tries to maintain a constant net asset value of
$1.00 per share for the Fund. The team uses extensive research, including
economic, technical and security analysis to select individual investments.
o Economic analysis includes evaluating national and global economic
conditions, as well as the direction of interest rates.
o Technical analysis includes identifying categories of money market
instruments that offer the highest yields and assessing the market for
potential investments.
o Security analysis includes evaluating the credit quality of an instrument.
Securities are normally held to maturity, but the team may sell a security
before it matures to meet cash flow needs, to manage the portfolio's maturity,
if the team determines that the security is no longer a suitable investment,
and for other reasons.
7
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON PAGE 10 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
THE RETURNS SHOWN ARE FOR A CLASS NOT OFFERED IN THIS PROSPECTUS
THAT HAS SIMILAR ANNUAL RETURNS BECAUSE THE SHARES ARE INVESTED IN
THE SAME PORTFOLIO OF SECURITIES. THE ANNUAL RETURNS DIFFER ONLY
TO THE EXTENT THAT THE CLASSES DO NOT HAVE THE SAME EXPENSES.
CALL US AT 1.800.742.2845 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT 7-DAY YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Treasury Reserves has the following risks:
o INVESTMENT STRATEGY RISK - Although the Fund tries to maintain a
share price of $1.00, an investment in the Fund may lose money.
AN INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY.
o INCOME/PRINCIPAL PAYMENT RISK - The Fund's ability to pay
distributions depends on the creditworthiness of the issuers of
the securities the Fund holds. The Fund may not be able to pay
distributions, or could lose money, if the issuer of a security
is unable to pay interest or repay principal when it's due.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Market
Class Shares has varied from year to year. These returns do not
reflect deductions of sales charges or account fees, if any, and
would be lower if they did.
[GRAPHIC] 1996 1997 1998
3.26%* 5.11% 4.97%
* Return is from Inception (5-2-96) to 12-31-96
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 2.09%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1997: 1.29%
Worst: 4th quarter 1998: 1.08%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Market Class Shares 4.97% 5.01%
</TABLE>
8
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Investor Class Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.15%
Distribution (12b-1) and shareholder servicing fees 0.35%
Other expenses 0.15%
------
Total annual Fund operating expenses 0.65%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses(2) 0.55%
======
</TABLE>
(1) The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor Class Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor Class Shares $56 $198 $352 $801
</TABLE>
9
<PAGE>
[GRAPHIC] OTHER IMPORTANT INFORMATION
You'll find specific information about each Fund's principal investments,
strategies and risks in the description starting on page 4. The following are
some other risks and information you should consider before you invest:
o SPECIAL RULES FOR MONEY MARKET FUNDS - Money market funds must comply
with Rule 2a-7 under the Investment Company Act of 1940 (1940 Act).
Rule 2a-7 sets out certain limits on investments, which are designed
to help protect investors from risk of loss. These limits apply at
the time an investment is made. The Funds, like all money market
funds:
o may only invest in securities with a remaining maturity of 397 days or
less, or that have maturities longer than 397 days but have
demand, interest rate reset features or guarantees that are 397
days or less
o must maintain an AVERAGE DOLLAR-WEIGHTED MATURITY of 90 days or less
o may normally invest no more than 5% of its assets in a single security,
other than U.S. government securities; however, it may invest up
to 25% of its assets in a FIRST-TIER SECURITY for up to three
business days
o may generally only invest in U.S. dollar denominated instruments that
are determined to have minimal credit risk and are first-tier
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund cannot be changed
without shareholder approval.
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments that
aren't part of its principal investment strategies. Please refer to
the SAI for more information. The portfolio managers or management
team can also choose not to invest in specific securities described
in this prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn
or because of political or other conditions. A Fund may not achieve
its investment objective while it is investing defensively. Any cash
a Fund holds for defensive or other reasons does not earn income.
10
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and
that they expect them to be adapted in time. There is no guarantee,
however, that their computer systems will be ready by the year 2000.
If their computer systems are not ready in time, there could be a
negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
11
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] TRADESTREET INVESTMENT ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] HOW THE FUNDS ARE MANAGED
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in Nations
Funds, including the Money Market Funds described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation.
Nations Funds pays BAAI an annual fee for its investment advisory services.
The fee is calculated daily based on the average net assets of each Fund and
is paid monthly. BAAI uses part of this money to pay investment sub-advisers
for the services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee(1) fiscal year
<S> <C> <C>
Nations Cash Reserves 0.15% 0.15%
Nations Treasury Reserves 0.15% 0.13%
</TABLE>
(1)These fees are the current contract levels, which have been reduced from the
contract levels in effect during the last fiscal year.
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in
Nations Funds. TradeStreet takes a team approach to investment management.
Each team has access to the latest technology and analytical resources.
TradeStreet's Taxable Money Market Management Team is responsible for making
the day-to-day investment decisions for each Fund.
12
<PAGE>
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR SERVICES GROUP, INC.
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay distribution (12b-1) and shareholder servicing
fees to companies for selling shares and providing services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.10% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
13
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] BUYING, SELLING AND EXCHANGING SHARES
This prospectus offers Investor Class Shares of the Funds. Here are some
general rules about this class of shares:
o Investor Class Shares are available on a direct basis or through certain
financial institutions and intermediaries for their own accounts, and for
certain client accounts for which they may provide specific services.
o The minimum initial investment is $25,000. There is no minimum for
additional investments. Financial institutions or intermediaries can
total the investments they make on behalf of their clients to come up
with the minimum initial investment.
o There are no sales charges for buying, selling or exchanging these shares.
You'll find more information about buying, selling and exchanging Investor
Class Shares on the pages that follow. YOU SHOULD ALSO ASK YOUR FINANCIAL
INSTITUTION OR INTERMEDIARY ABOUT ITS LIMITS, FEES AND POLICIES FOR BUYING,
SELLING AND EXCHANGING SHARES, WHICH MAY BE DIFFERENT FROM THOSE DESCRIBED
HERE, AND ABOUT ITS RELATED SERVICES AND PROGRAMS.
Please contact your investment professional, or call us at 1.800.742.2845 if
you have any questions, or you need help placing an order.
14
<PAGE>
<TABLE>
<CAPTION>
Ways to
buy, sell or How much you can buy,
exchange sell or exchange Other things to know
----------------- -------------------------------------- ---------------------------------------------------
<S> <C> <C> <C>
Buying shares In a lump sum minimum initial investment: There is no limit to the amount you can invest
o $25,000 in Investor Class Shares.
minimum additional investment:
o none
Using our minimum initial investment: You can buy shares monthly, twice a month or
Systematic o $10,000 quarterly, using automatic transfers from your
Investment Plan minimum additional investment: bank account.
o $1,000
- ---------------------------------------------------------------------------------------------------------------------------------
Selling shares In a lump sum o you can sell up to $50,000 of your We usually send you the sale proceeds on the
shares by telephone, otherwise there same day that we receive your order.
are no limits to the amount you can If you paid for your shares with a check that
sell wasn't certified, we'll hold the sale proceeds
o other restrictions may apply to when you sell those shares for at least 15 days
withdrawals from retirement plan after the trade date of the purchase, or until the
accounts check has cleared.
Using our free o minimum $250 per check You can write checks for free. You can only use
checkwriting checks to make partial withdrawals from the
service Fund. You can't use a check to make a full
withdrawal from the Fund.
Using our o minimum $25 per withdrawal Your account balance must be at least $10,000
Automatic to set up the plan. You can make withdrawals
Withdrawal Plan monthly, twice a month or quarterly. We'll send
your money by check or deposit it directly to
your bank account.
- ---------------------------------------------------------------------------------------------------------------------------------
Exchanging shares In a lump sum o minimum $25,000 per exchange You can exchange Investor Class shares of the
Fund for Investor Class Shares of any other
Nations Reserves Money Market Fund.
</TABLE>
15
<PAGE>
[GRAPHIC] A BUSINESS DAY IS ANY DAY THAT THE FEDERAL RESERVE BANK OF NEW
YORK IS OPEN.
THE FEDERAL RESERVE BANK OF NEW YORK IS CLOSED ON WEEKENDS AND ON
THE FOLLOWING NATIONAL HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER
KING, JR. DAY, PRESIDENTS' DAY, MEMORIAL DAY, INDEPENDENCE DAY,
LABOR DAY, COLUMBUS DAY, VETERANS DAY, THANKSGIVING DAY AND
CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share at 5:00 p.m. Eastern
time each business day for this share class of each Fund.
First, we calculate the net asset value for each class of a Fund by
determining the value of the Fund's assets in the class and then subtracting
its liabilities. Next, we divide this amount by the number of shares that
investors are holding in the class.
Although we try to maintain a net asset value per share of $1.00 for the
Funds, we can't guarantee that we will be able to do so.
VALUING SECURITIES IN THE FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. We use the amortized cost method, which approximates
market value, to value the assets in the Money Market Funds.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents by 3:00 p.m. Eastern time for
the Fund on a business day will receive that day's net asset value per share.
Investors are encouraged to place orders to sell as early in the day as
possible. Orders received after this time will receive the next business day's
net asset value per share. The business day that applies to an order is also
called the TRADE DATE. We may refuse any order to buy or exchange shares. If
this happens, we'll return any money we've received.
16
<PAGE>
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Investor Class Shares at net asset value per share.
o If we don't receive payment by 4:00 p.m. Eastern time on the
business day Stephens, First Data or their agents receive the
order, we'll refuse the order. We'll return any payment received
for orders that we refuse. We can change this time under certain
circumstances, for example, when there's more wiring activity
than normal.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we
receive payment on time.
o Shares purchased are recorded on the books of the Fund. We
generally don't issue certificates.
SYSTEMATIC INVESTMENT PLAN
You can make regular purchases of $50 or more using automatic transfers from
your bank account to the Fund. You can contact your investment professional or
us to set up the plan.
Here's how the plan works:
o You can buy shares twice a month, monthly or quarterly.
o You can choose to have us transfer your money on or about the 15th or
the last day of the month.
o Some exceptions may apply to employees of Bank of America and its
affiliates, and to plans set up before August 1, 1997. For details,
please contact your investment professional.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire on the
same business day that Stephens, First Data or their agents
receive the order.
o We may take up to three business days to send the sale proceeds if
we believe that an earlier payment could adversely affect the
Fund.
o Investors that qualify for telephone orders can sell up to $50,000
in shares by telephone.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold for at least 15
days after the trade date of the purchase, or until the check has
cleared.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
17
<PAGE>
o Under certain circumstances allowed under the 1940 Act, we can pay
investors in securities or other property when they sell shares,
or delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions please contact your
retirement plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 30 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its
clients
o under certain other circumstances allowed under the 1940 Act
CHECKWRITING SERVICE
You can withdraw money from the Fund using our free checkwriting service. You
can contact your investment professional or us to set up the service.
Here's how the service works:
o Each check you write must be for $250 or more.
o You can only use checks to make partial withdrawals. You can't use a
check to make a full withdrawal of the shares you hold in the Fund.
o Shares you sell by writing a check are eligible to receive distributions
up to the day our custodian receives the check for payment.
o We can change or cancel the service by giving you 30 days notice in
writing.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan lets you withdraw $25 or more every month, every
quarter or every year. You can contact your investment professional or us to
set up the plan.
Here's how the plan works:
o Your account balance must be at least $10,000 to set up the plan.
o If you set up the plan after you've opened your account, your signature
must be guaranteed.
o You can choose to have us transfer your money on or about the 15th or
the 25th of the month.
o We'll send you a check or deposit the money directly to your bank
account.
o You can cancel the plan by giving your financial adviser or us 30 days
notice in writing.
It's important to remember that if you withdraw more than your investment in
the Fund is earning, you'll eventually use up your original investment.
18
<PAGE>
[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another
Nations Fund. This is called an exchange, and may be appropriate if
investment goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange between the two Nations Funds described in
this prospectus.
o Investors must exchange at least $25,000 at a time.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
19
<PAGE>
[GRAPHIC] THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE
BECAUSE IT'S PAID THROUGH A PLAN APPROVED UNDER RULE 12B-1 OF THE
1940 ACT.
THE SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
[GRAPHIC] HOW SELLING AND SERVICING AGENTS ARE PAID
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES
Stephens and selling and servicing agents are compensated for selling shares
and providing services to investors under distribution and shareholder
servicing plans.
Stephens may be reimbursed for distribution-related expenses up to an annual
maximum of 0.10% of the average daily net assets of Investor Class Shares of
the Funds, some or all of which may be paid to selling agents.
Servicing agents may receive a maximum annual shareholder servicing fee of
0.25% of the average daily net assets of Investor Class Shares of the Funds.
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Fund's assets on an ongoing basis, over time they will increase the
cost of your investment, and may cost you more than any sales charges you may
pay.
The Funds pay these fees to eligible selling and servicing agents for as long
as the plans continue. We may reduce or discontinue payments at any time.
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale, promotion
and marketing of the Funds
o non-cash compensation like trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift
certificates for meals or merchandise
This compensation, which is not paid by the Funds, is discretionary and may be
available only to selected selling and servicing agents. Selected selling and
servicing agents may also receive compensation for opening a minimum number of
accounts. Stephens may cancel any compensation program at any time.
BAAI also may pay amounts from its own assets to Stephens or to selling or
servicing agents for services they provide.
20
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] DISTRIBUTIONS AND TAXES
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends paid
on COMMON STOCKS.
o A fund can also have CAPITAL GAINS if the value of its investments
increases. If a fund sells an investment at a gain, the gain is realized.
If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gains to its shareholders. The Funds
intend to pay out a sufficient amount of its income and capital gains to its
shareholders so the Fund won't have to pay any income tax. When a Fund makes
this kind of a payment, it's split equally among all shares, and is called a
distribution.
Although the Funds do not expect to realize any capital gains, any capital
gains realized by a Fund will be distributed at least once a year.
The Funds declare distributions of net investment income each business day,
and pay them on the first business day of each month.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. Please
contact your financial adviser for more information about distributions.
21
<PAGE>
[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUND. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions of net investment income and any excess of net short-term
capital gains over net long-term capital losses generally are taxable to you
as ordinary income.
Although the Funds do not expect to realize any capital gains, any
distributions of net capital gains (generally the excess of net long-term
capital gains over net short-term capital losses) generally are taxable to you
as net capital gains.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
U.S. GOVERNMENT OBLIGATIONS
If you invest in U.S. government obligations directly, interest on those
obligations is free from state and local and personal income taxes.
Distributions you receive that come from interest each Fund earns from U.S.
government obligations may not be exempt from these taxes. Please consult with
your tax advisor.
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
As long as a Fund continually maintains a $1.00 net asset value per share, you
ordinarily will not recognize a taxable gain or loss on the redemption or
exchange of your shares of the Fund.
22
<PAGE>
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
EQUITY SECURITY - an investment that gives you part ownership in a company.
Equity securities (or "equities") include common and preferred stock, rights
and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
23
<PAGE>
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
24
<PAGE>
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
25
<PAGE>
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<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
[GRAPHIC] WHERE TO FIND MORE INFORMATION
You'll find more information about the Money Market Fund in the following
documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the
auditor's reports.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Fund and its
policies. The SAI is legally part of this prospectus (it's
incorporated by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Fund and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.742.2845
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and
ask them to mail you copies of these documents. They'll charge you
a fee for this service. You can also download them from the SEC's
website or visit the Public Reference Section and copy the
documents while you're there. Please call the SEC for more
information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file number:
[GRAPHIC] NATIONS FUNDS
Nations Reserves, 811-6030
NF-SVB-INV-8/99
<PAGE>
NATIONS FUND TRUST
NATIONS FUND, INC.
NATION FUND PORTFOLIOS, INC.
NATIONS EMERGING MARKETS FUND
NATIONS INTERNATIONAL VALUE FUND
NATIONS INTERNATIONAL EQUITY FUND
NATIONS MARSICO FOCUSED EQUITIES FUND
NATIONS MARSICO GROWTH & INCOME FUND
(THE "NAMED FUNDS")
NATIONS RESERVES
SUPPLEMENT -- AUGUST 1, 1999
In March 1999, the Boards of Directors/Trustees of Nations Fund Trust,
Nations Fund, Inc., Nations Fund Portfolios, Inc., and Nations Reserves approved
the reorganization of the Named Funds into substantially identical shell funds
of Nations Reserves. If the reorganizations are approved by shareholders, they
are expected to occur on or about August 20, 1999 (the "Closing Date"). On the
Closing Date, the attached "prospectus," which is currently the prospectus for
the Named Funds (as portfolios in Nations Fund Trust, Nations Fund, Inc. and
Nations Fund Portfolios, Inc.), will become the prospectus for the Named Funds
(as portfolios in Nations Reserves).
The attached prospectus for the Named Funds is modified as follows, until
the Closing Date, when this supplement automatically expires:
1. by deleting the phrase "August 20, 1999 for marked (*) Funds" from the
front cover.
2. by deleting "SEC File Number: Nations Institutional Reserves,
811-6030," as it relates to the Named Funds, from the back cover, and
inserting in its place the following: For Nations Emerging Markets Fund
- "SEC File Number: Nations Fund Portfolios, Inc., 811-08982;" For
Nations International Value Fund and Nations International Equity Fund
- "SEC File Number: Nations Fund, Inc., 811-04614;" and For Nations
Marsico Focused Equities Fund and Nations Marsico Growth & Income Fund
- "SEC File Number: Nations Fund Trust, 811-04305."
3. Nations Emerging Markets Fund and Nations International Value Fund will
not have the flexibility to adopt a master-feeder structure before
August 20, 1999. Until that date, all disclosure regarding this
flexibility should be disregarded.
4. Nations International Equity Fund, Nations Marsico Focused Equities
Fund and Nations Marsico Growth & Income Fund will not adopt a
master-feeder structure before August 20, 1999. On that date, these
Funds are expected to begin investing in the corresponding master
portfolios of Nations Master Investment Trust as discussed in the
prospectuses. Until that date, Nations International Equity Fund,
Nations Marsico Focused Equities Fund and Nations Marsico Growth &
Income Fund will continue to invest directly in securities, and all
disclosure regarding the adoption by these Funds of a master-feeder
structure should be disregarded.
[GRAPHIC]
Nations Funds
Prospectus -- Primary A Shares
August 1, 1999
August 20, 1999 for
marked (*) Funds
Equity Funds
Nations Capital Income Fund
Nations Value Fund
Nations Equity Income Fund
Nations Blue Chip Fund
Nations Marsico Growth & Income Fund*
Nations Strategic Equity Fund
Nations Capital Growth Fund
Nations Disciplined Equity Fund
Nations Marsico Focused Equities Fund*
Nations Emerging Growth Fund
Nations Small Company Growth Fund
International Funds
Nations International Value Fund*
Nations International Equity Fund*
Nations International Growth Fund
Nations Emerging Markets Fund*
Index Funds
Nations Equity Index Fund
Nations Managed Index Fund
Nations Managed SmallCap Index Fund
Nations Managed Value Index Fund
Nations Managed SmallCap Value Index Fund
Balanced Funds
Nations Balanced Assets Fund
Nations Asset Allocation Fund
Fixed Income Funds
Nations Short-Term Income Fund
Nations Short-Intermediate Government Fund
Nations Intermediate Bond Fund
Nations Strategic Fixed Income Fund
Nations Government Securities Fund
Nations U.S. Government Bond Fund
Nations Diversified Income Fund
Municipal Bond Funds
Nations Short-Term Municipal Income Fund
Nations Intermediate Municipal Bond Fund
Nations Municipal Income Fund
The Securities and Exchange Commission (SEC) has not approved or disapproved
these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
- -----------------
NOT FDIC
INSURED
- ------------------
MAY LOSE VALUE
- ------------------
NO BANK GUARANTEE
- ------------------
NATIONS FUNDS
<PAGE>
An overview of the Funds
- --------------------------------------------------------------------------------
[GRAPHIC] Terms used in this prospectus
In this prospectus, we, us and our refer to the Nations Funds
Family (Nations Funds). Some other important terms we've used may
be new to you. These are printed in italics where they first
appear in a section and are described in Terms used in this
prospectus.
[GRAPHIC] You'll find Terms used
in this prospectus on
page 167
Your investment in these Funds is not a bank deposit and is not
insured or guaranteed by Bank of America, N. A. (Bank of America),
the Federal Deposit Insurance Corporation (FDIC) or any other
government agency. Your investment may lose money.
Affiliates of Bank of America are paid for the services they
provide to the Funds.
This booklet, which is called a prospectus, tells you about six groups of
Nations Funds -- our Equity, International, Index, Balanced, Fixed Income and
Municipal Bond Funds. Please read it carefully, because it contains
information that's designed to help you make informed investment decisions.
About the Funds
Each group of Funds has a different investment focus:
o Equity Funds invest primarily in equity securities of U.S. companies
o International Funds invest primarily in equity securities of companies
outside the United States
o Index Funds are intended to match the industry and risk characteristics of
a specific stock market index, like the S&P 500, by investing primarily
in equity securities that are included in the index
o Balanced Funds invest in a mix of equity and fixed income securities, as
well as money market instruments
o Fixed Income Funds focus on the potential to earn income by investing
primarily in fixed income securities
o Municipal Bond Funds focus on the potential to earn income that is
generally free from federal income tax by investing primarily in
municipal securities
The Funds also have different risk/return characteristics because they invest
in different kinds of securities.
Equity securities have the potential to provide you with higher returns than
many other kinds of investments, but they also tend to have the highest risk.
Foreign securities also involve special risks not associated with investing in
the U.S. stock market, which you need to be aware of before you invest.
Fixed income securities and municipal securities have the potential to
increase in value because when interest rates fall, the value of these
securities tends to rise. When interest rates rise, however, the value of
these securities tends to fall. Other things can also affect the value of
fixed income securities.
In every case, there's a risk that you'll lose money or you may not earn as
much as you expect.
2
<PAGE>
Choosing the right Funds for you
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Equity, International and Index Funds all focus on long-term growth. They
may be suitable for you if:
o you have longer-term investment goals
o they're part of a balanced portfolio
o you want to try to protect your portfolio against a loss of buying power
that inflation can cause over time
They may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with equity securities, including foreign securities
o you have short-term investment goals
o you're looking for a regular stream of income
The Balanced Funds invest in a mix of equity and fixed income securities, as
well as money market instruments. They may be suitable for you if:
o you're looking for both long-term growth and income
o you want a diversified portfolio in a single mutual fund
They may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with equity and fixed income securities
o you have short-term investment goals
o you're looking for a regular stream of income
The Fixed Income and Municipal Bond Funds focus on the potential to earn
income. They may be suitable for you if:
o you're looking for income
o you have longer-term investment goals
The Municipal Bond Funds may be suitable if you also want to reduce taxes on
your investment income.
The Fixed Income and Municipal Bond Funds may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with fixed income securities
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 7.
For more information
If you have any questions about the Funds, please call us at 1.800.765.2668 or
contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
3
<PAGE>
What's inside
- --------------------------------------------------------------------------------
[GRAPHIC] Banc of America Advisors, Inc.
Banc of America Advisors, Inc. (BAAI)* is the investment adviser
to each of the Funds. BAAI is responsible for the overall
management and supervision of the investment management of each
Fund. BAAI and Nations Funds have engaged sub-advisers, which are
responsible for the day-to-day investment decisions for each of
the Funds.
[GRAPHIC] You'll find more about
BAAI and the sub-advisers
starting on page 131.
* BAAI's name is expected to be changed from NationsBanc Advisors,
Inc. on or about September 1, 1999.
<TABLE>
<S> <C>
[GRAPHIC] About the Funds
Equity Funds
Nations Capital Income Fund 7
Sub-adviser: TradeStreet Investment Associates, Inc.
- ------------------------------------------------------------------------
Nations Value Fund 11
Sub-adviser: TradeStreet Investment Associates, Inc.
- ------------------------------------------------------------------------
Nations Equity Income Fund 14
Sub-adviser: TradeStreet Investment Associates, Inc.
- ------------------------------------------------------------------------
Nations Blue Chip Fund 17
Sub-adviser: Chicago Equity Partners Corporation
- ------------------------------------------------------------------------
Nations Marsico Growth & Income Fund 21
Sub-adviser: Marsico Capital Management, LLC
- ------------------------------------------------------------------------
Nations Strategic Equity Fund 25
Sub-adviser: Bank of America Investment Management
- ------------------------------------------------------------------------
Nations Capital Growth Fund 28
Sub-adviser: TradeStreet Investment Associates, Inc.
- ------------------------------------------------------------------------
Nations Disciplined Equity Fund 31
Sub-adviser: TradeStreet Investment Associates, Inc.
- ------------------------------------------------------------------------
Nations Marsico Focused Equities Fund 34
Sub-adviser: Marsico Capital Management, LLC
- ------------------------------------------------------------------------
Nations Emerging Growth Fund 38
Sub-adviser: TradeStreet Investment Associates, Inc.
- ------------------------------------------------------------------------
Nations Small Company Growth Fund 42
Sub-adviser: TradeStreet Investment Associates, Inc.
International Funds
Nations International Value Fund 46
Sub-adviser: Brandes Investment Partners, L.P.
- -----------------------------------------------------------------------
Nations International Equity Fund 50
Sub-advisers: Gartmore Global Partners, INVESCO Global Asset
Management (N.A.), Inc., Putnam Investment Management, Inc.
- -----------------------------------------------------------------------
Nations International Growth Fund 54
Sub-adviser: Gartmore Global Partners
- -----------------------------------------------------------------------
Nations Emerging Markets Fund 57
Sub-adviser: Gartmore Global Partners
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Index Funds
Nations Equity Index Fund 61
Sub-adviser: TradeStreet Investment Associates, Inc.
- --------------------------------------------------------------------------
Nations Managed Index Fund 65
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------------------
Nations Managed SmallCap Index Fund 69
Sub-adviser: TradeStreet Investment Associates, Inc.
- --------------------------------------------------------------------------
Nations Managed Value Index Fund 73
Sub-adviser: TradeStreet Investment Associates, Inc.
- --------------------------------------------------------------------------
Nations Managed SmallCap Value Index Fund 77
Sub-adviser: TradeStreet Investment Associates, Inc.
Balanced Funds
Nations Balanced Assets Fund 81
Sub-adviser: TradeStreet Investment Associates, Inc.
- -------------------------------------------------------------------------
Nations Asset Allocation Fund 85
Sub-advisers: TradeStreet Investment Associates, Inc., Chicago
Equity Partners Corporation
Fixed Income Funds
Nations Short-Term Income Fund 89
Sub-adviser: TradeStreet Investment Associates, Inc.
- -------------------------------------------------------------------------
Nations Short-Intermediate Government Fund 93
Sub-adviser: TradeStreet Investment Associates, Inc.
- -------------------------------------------------------------------------
Nations Intermediate Bond Fund 97
Sub-adviser: TradeStreet Investment Associates, Inc.
- -------------------------------------------------------------------------
Nations Strategic Fixed Income Fund 101
Sub-adviser: TradeStreet Investment Associates, Inc.
- -------------------------------------------------------------------------
Nations Government Securities Fund 105
Sub-adviser: TradeStreet Investment Associates, Inc.
- --------------------------------------------------------------------------
Nations U.S. Government Bond Fund 109
Sub-adviser: Boatmen's Capital Management, Inc.
- -------------------------------------------------------------------------
Nations Diversified Income Fund 113
Sub-adviser: TradeStreet Investment Associates, Inc.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Municipal Bond Funds
Nations Short-Term Municipal Income Fund 117
Sub-adviser: TradeStreet Investment Associates, Inc.
- --------------------------------------------------------------------
Nations Intermediate Municipal Bond Fund 121
Sub-adviser: TradeStreet Investment Associates, Inc.
- --------------------------------------------------------------------
Nations Municipal Income Fund 125
Sub-adviser: TradeStreet Investment Associates, Inc.
- --------------------------------------------------------------------
Other important information 129
- --------------------------------------------------------------------
How the Funds are managed 131
[GRAPHIC] About your investment
Information for investors
Buying, selling and exchanging shares 142
Distributions and taxes 145
- -------------------------------------------------------------------
Financial highlights 148
- -------------------------------------------------------------------
Terms used in this prospectus 167
- -------------------------------------------------------------------
Where to find more information back cover
</TABLE>
6
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet Investment Associates, Inc. (TradeStreet) is this
Fund's sub-adviser. TradeStreet's Capital Income Management Team
makes the day-to-day investment decisions for the Fund.
[GRAPHIC] You'll find more about
TradeStreet on page 133.
[GRAPHIC] What are convertible securities?
Convertible securities, which include convertible bonds and
convertible preferred stocks, can be exchanged for common stock at
a specified rate. The common stock it converts to is called the
"underlying" common stock.
Convertible securities typically:
o have higher income potential than the underlying common stock
o are affected less by changes in the stock market than the
underlying common stock
o have the potential to increase in value if the value of the
underlying common stock increases
Nations Capital Income Fund
[GRAPHIC] Investment objective
This Fund seeks to provide investors with a total investment return,
comprised of current income and capital appreciation, consistent with
prudent investment risk.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in convertible
securities mostly issued by U.S. issuers. The Fund may invest up to 15%
of its assets in Eurodollar convertible securities.
Most convertible securities are not investment grade. The portfolio management
team generally chooses convertible securities that are rated at least "B" by a
nationally recognized statistical rating organization (NRSRO). The team may
choose unrated securities if it believes they are of comparable quality at the
time of investment.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team looks for opportunities to participate in the
growth potential of the underlying common stocks, while earning income that is
generally higher than the income these stocks earn.
When identifying individual investments, the portfolio management team
evaluates a number of factors, including:
o the issuer's financial strength and revenue outlook
o earnings trends, including changes in earnings estimates
o the security's conversion feature and other characteristics
The team diversifies the Fund's assets among different sized companies, tries
to limit conversion costs and generally sells securities when they take on the
trading characteristics of the underlying common stock. The portfolio
management team also may convert securities to common shares when it believes
it's appropriate to do so.
7
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations Capital Income Fund has the following risks:
o Investment strategy risk - The management team chooses convertible
securities that it believes have the potential for long-term growth.
There is a risk that the value of these investments will not rise as
high as the team expects, or will fall.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices.
o Interest rate risk - The prices of the Fund's fixed income securities
will tend to fall when interest rates rise. In general, fixed income
securities with longer terms tend to fall more in value when
interest rates rise than fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations. Fixed income
securities with the lowest investment grade rating or that aren't
investment grade are more speculative in nature than securities with
higher ratings, and they tend to be more sensitive to credit risk,
particularly during a downturn in the economy.
o Convertible security features - The issuer of a convertible security may
have the option to redeem it at a specified price. If a convertible
security is redeemed, the Fund may accept the redemption, convert
the convertible security to common stock, or sell the convertible
security to a third party. Any of these transactions could affect
the Fund's ability to meet its objective.
8
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
The returns shown are for a class not offered in this prospectus
that has similar annual returns because the shares are invested in
the same portfolio of securities. The annual returns differ only
to the extent that the classes do not have the same expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
35.32% -4.31% 38.24% 21.34% 22.71% -5.85% 24.11% 19.45% 21.96% 6.58%
</TABLE>
Year-to-date return as of June 30, 1999: 10.31%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 1st quarter 1991: 17.59%
Worst: 3rd quarter 1990: -12.28%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the First Boston Convertible Index, a widely-used
unmanaged index that measures the performance of convertible
securities. The index is not available for investment.
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Investor A Shares 6.58% 12.65% 17.07%
First Boston Convertible Index 6.55% 10.83% 12.30%
</TABLE>
9
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.65%
Other expenses 0.35%
------
Total annual Fund operating expenses 1.00%
Fee waivers and/or reimbursements (0.02)%
------
Total net expenses(2) 0.98%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
May 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire in May 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $100 $316 $551 $1,223
</TABLE>
10
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Value
Management Team makes the day-to-day investment decisions for the
Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] What is value investing?
Value investing means looking
for "undervalued" companies --
quality companies that may be currently out of favor and selling
at a reduced price, but that have good potential to increase in
value.
The management team uses fundamental analysis to help decide
whether the current stock price of a company may be lower than the
company's true value, and then looks for things that could trigger
a rise in price, like a new product line, new pricing or a change
in management. This trigger is often called a "catalyst."
Nations Value Fund
[GRAPHIC] Investment objective
This Fund seeks growth of capital by investing in companies that are
believed to be undervalued.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in common stocks
of U.S. companies. It generally invests in companies in a broad range
of industries with market capitalizations of at least $1 billion and
daily trading volumes of at least $3 million.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The management team uses fundamental analysis to identify stocks of companies
that it believes are undervalued, looking at, among other things:
o the quality of the company
o the company's projected earnings and dividends
o the stock's price-to-earnings ratio relative to other stocks in the same
industry or economic sector. The team believes that companies with lower
price-to-earnings ratios are generally more likely to provide better
opportunities for capital appreciation
o the stock's potential to provide total return
o the value of the stock relative to the overall stock market
The team also looks for a "catalyst" for improved earnings. This could be, for
example, a new product, new management or a new sales channel.
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of capital gains distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on shareholders
o may offset capital gains by selling securities to realize a capital loss
11
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing
in this Fund starting on
page 129 and in the SAI.
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The team may sell a security when its price reaches the target set by the
team, there is a deterioration in the company's financial situation, when the
team believes other investments are more attractive, or for other reasons.
[GRAPHIC] Risks and other things to consider
Nations Value Fund has the following risks:
o Investment strategy risk - The management team chooses stocks that it
believes are undervalued, with the expectation that they will rise
in value. There is a risk that the value of these investments will
not rise as high as the team expects, or will fall.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels wll
continue.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
0.73%* 3.53% 25.86% 7.30% 16.36% -2.99% 36.09% 21.12% 26.66% 17.34%
* Return is from inception (9-19-89) to 12-31-89.
</TABLE>
Year-to-date return as of June 30, 1999: 7.03%
12
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 19.69%
Worst: 3rd quarter 1998: -12.48%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500 and the S&P/BARRA Value Index. The S&P 500 is
an unmanaged index of 500 widely held common stocks. The S&P/BARRA
Value Index is an unmanaged index of a group of stocks from the S&P 500
that have low price-to-book ratios relative to the S&P 500 as a whole.
These indexes are weighted by market capitalization and are not
available for investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 17.34% 18.90% 15.77%
S&P 500 28.58% 24.06% 17.64%
S&P/BARRA Value Index 14.68% 19.88% 15.20%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.65%
Other expenses 0.31%
----
Total annual Fund operating expenses 0.96%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $98 $306 $531 $1,178
</TABLE>
13
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Structured
Products Management Team makes the day-to-day investment decisions
for the Fund.
[GRAPHIC] You'll find more about
TradeStreet on page 133.
[GRAPHIC] Why invest in an equity income fund?
Equity income funds are generally considered to be a more
conservative equity investment because they invest in large,
well-established companies that pay regular dividends. These
companies tend to be less volatile than other kinds of companies.
Nations Equity Income Fund
[GRAPHIC] Investment objective
This Fund seeks current income and growth of capital by investing in
companies with above-average dividend yields.
[GRAPHIC] Principal investment strategies
The Fund normally invests in 100 to 150 companies in a broad range of
industries with market capitalizations of at least $5 billion. The Fund
tries to provide a higher yield than the S&P 500. The Fund generally
invests at least 65% of its assets in common stocks that pay dividends
and that are listed on a national exchange or are traded on an
established over-the-counter market.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The management team evaluates the overall economy, industry conditions and the
financial conditions and management of each company, using a process called
fundamental analysis, to identify stocks of companies whose earnings are
believed to have the potential to grow. When selecting investments, the
management team looks at, among other things:
o value characteristics like book value, earnings yield and cash flow
o growth characteristics like the rate of growth of a company's stock price
and earnings
o a security's potential for above-average dividend yield
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of capital gains distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on shareholders
o may offset capital gains by selling securities to realize a capital loss
14
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The team may sell a security when its price reaches the target set by the
team, there is a deterioration in the company's financial situation, when the
team believes other investments are more attractive, or for other reasons.
[GRAPHIC] Risks and other things to consider
Nations Equity Income Fund has the following risks:
o Investment strategy risk - The management team chooses stocks that it
believes have the potential for dividend growth and capital
appreciation. There is a risk that dividend payments and the value
of these investments will not rise as high as the team expects, or
will fall.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996 1997 1998
14.65%* 10.20% 12.66% -0.99% 27.60% 19.93% 26.13% 3.73%
* Return is from inception (4-11-91) to 12-31-91.
</TABLE>
Year-to-date return as of June 30, 1999: 7.32%
15
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 14.21%
Worst: 3rd quarter 1998: -14.44%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The index is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 3.73% 14.67% 14.37%
S&P 500 28.58% 24.06% 19.96%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.65%
Other expenses 0.28%
----
Total annual Fund operating expenses 0.93%
====
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $95 $296 $515 $1,143
</TABLE>
16
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
The Fund does not have its own
investment adviser or sub-adviser because it's a "feeder" fund. A
feeder funds typically invests all of its assets in another fund,
which is called a "master portfolio." Master Portfolio and Fund
are sometimes used interchangeably.
BAAI is the Master Portfolio's investment adviser, and Chicago
Equity Partners Corporation (Chicago Equity) is its sub-adviser.
Chicago Equity's Equity Management Team makes the day-to-day
investment decisions for the Master Portfolio.
[GRAPHIC] You'll find more about
Chicago Equity on
page 136.
[GRAPHIC] Why invest in Nations Blue Chip Fund?
Nations Blue Chip Fund may be suitable for investors who are
looking for a "core" equity holding for their portfolio. It's
considered to be a more conservative equity investment because it
invests in a broad range of large, well-established companies.
These companies tend to be less volatile than other kinds of
companies.
Nations Blue Chip Fund
[GRAPHIC] Investment objective
This Fund seeks to achieve long-term capital appreciation through
investments in blue chip stocks.
[GRAPHIC] Principal investment strategies
The Fund invests all of its assets in Nations Blue Chip Master
Portfolio (the Master Portfolio). The Master Portfolio has the same
investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in blue chip
stocks. These are stocks of well established, nationally known companies that
have a long record of profitability and a reputation for quality management,
products and services.
The Master Portfolio primarily invests in blue chip stocks that are included
in the S&P 500, but may invest up to 15% of its assets in stocks that are not
included in the index. It usually holds approximately 100 stocks.
The Master Portfolio may also invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the
SAI.
The portfolio management team uses quantitative analysis to analyze
fundamental information about securities and identify value. Starting with a
universe of approximately 700 common stocks, the portfolio management team
uses a multi-factor computer model to rank securities, based on the following
criteria, among others:
o changes in actual and expected earnings
o unexpected changes in earnings
o price-to-earnings ratio
o price-to-book ratio
o price-to-cash flow
The portfolio management team tries to manage risk by matching the market
capitalization, style and industry weighting characteristics of the S&P 500.
The team focuses on selecting individual stocks to try to provide higher
returns than the S&P 500 while maintaining a level of risk similar to the
index.
The team may sell a security when there is a development in the company or its
industry that causes earnings estimates to fall, when the team believes other
investments are more attractive, or for other reasons.
17
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations Blue Chip Fund has the following risks:
o Investment strategy risk - The Master Portfolio uses quantitative
analysis to select blue chip stocks that are believed to have the
potential for long-term growth. There is a risk that the value of
these investments will not rise as high as expected, or will fall.
o Stock market risk - The value of the stocks the Master Portfolio holds
can be affected by changes in U.S. or foreign economies and
financial markets, and the companies that issue the stocks, among
other things. Stock prices can rise or fall over short as well as
long periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Investing in the Master Portfolio - Other mutual funds and eligible
investors can buy shares in the Master Portfolio. For example, the
World Horizon U.S. Equity Fund, which is also managed by BAAI,
invests all of its assets in the Master Portfolio.
All investors in the Master Portfolio invest under the same terms and
conditions as the Fund and pay a proportionate share of the Master
Portfolio's expenses. Other feeder funds that invest in the Master
Portfolio may have different share prices and returns than the Fund
because different feeder funds typically have varying sales charges,
and ongoing administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio
if it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses
could increase. The Fund might also have to pay brokerage, tax or
other charges.
18
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC]
The returns shown are for a class not offered in this prospectus
that has similar annual returns because the shares are invested in
the same portfolio of securities. The annual returns differ only
to the extent that the classes do not have the same expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
0.66%* 35.78% 23.76% 32.70% 27.86%
* Return is from inception (1-13-94) to 12-31-94.
Year-to-date return as of June 30, 1999: 11.24%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 23.71%
Worst: 3rd quarter 1998: -12.18%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The index is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Investor A Shares 27.86% 23.66%
S&P 500 28.58% 24.84%
</TABLE>
19
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)(2)
Management fees 0.65%
Other expenses 0.34%
------
Total annual Fund operating expenses 0.99%
Fee waivers and/or reimbursements (0.04)%
------
Total net expenses(3) 0.95%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
(3)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
May 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire in May 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $97 $311 $543 $1,209
</TABLE>
20
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
The Fund does not have its own
investment adviser or sub-adviser because it's a "feeder" fund. A
feeder fund typically invests all of its assets in another fund,
which is called a "master portfolio." Master Portfolio and Fund
are sometimes used interchangeably.
BAAI is the Master Portfolio's investment adviser, and Marsico
Capital Management, LLC (Marsico Capital) is its sub-adviser.
Thomas F. Marsico is the portfolio manager and makes the
day-to-day investment decisions for the Master Portfolio.
[GRAPHIC] You'll find more about
Marsico Capital and
Mr. Marsico on page 134.
[GRAPHIC] Why invest in a growth and income fund?
Growth and income funds can invest in a mix of equity and fixed
income securities. This can help reduce volatility and provide the
Fund with the flexibility to shift among securities that offer the
potential for higher returns.
While this Fund invests in a wide range of companies and
industries, it holds fewer investments than other kinds of funds.
This means it can have greater price swings than more diversified
funds. It also means it may have relatively higher returns when
one of its investments performs well, or relatively lower returns
when an investment performs poorly.
Nations Marsico Growth & Income Fund
[GRAPHIC] Investment objective
This Fund seeks long-term growth of capital with a limited emphasis on
income.
[GRAPHIC] Principal investment strategies
The Fund invests all of its assets in Nations Marsico Growth & Income
Master Portfolio (the Master Portfolio). The Master Portfolio has the
same investment objective as the Fund.
The Master Portfolio invests primarily in equity securities of large
capitalization companies that are selected for their growth potential. It
invests at least 25% of its assets in securities that are believed to have
income potential, and generally holds 35 to 50 securities. It may hold up to
25% of its assets in foreign securities.
Marsico Capital may shift assets between growth and income securities based on
its assessment of market, financial and economic conditions. The Master
Portfolio, however, is not designed to produce a consistent level of income.
The Master Portfolio may also invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the
SAI.
Marsico Capital looks for companies with earnings growth potential that may
not be recognized by other investors, focusing on companies that have some of
the following characteristics:
o products, markets or technologies in flux that can result in extraordinary
growth
o strong brand franchises that can take advantage of a changing global
environment
o global reach that allows the company to generate sales and earnings both in
the United States and abroad. This can give the company added growth
potential and also means the company may be less affected by changes in
local markets
o movement with, not against, the major social, economic and cultural shifts
taking place in the world
21
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
Once an investment opportunity is identified, Marsico Capital uses a
disciplined analytical process to assess its potential as an investment. This
process includes a "top-down" analysis that takes into account economic
factors like interest rates, inflation, the regulatory environment, the
industry and global competition.
The process also includes a "bottom-up" analysis of a company's financial
situation, as well as individual company characteristics like commitment to
research, market franchise and quality of management.
Marsico Capital may sell a security when it believes there is a deterioration
in the company's financial situation, the security is overvalued, when there
is a negative development in the company's competitive, regulatory or economic
environment, or for other reasons.
[GRAPHIC] Risks and other things to consider
Nations Marsico Growth & Income Fund has the following risks:
o Investment strategy risk - Marsico Capital uses an investment strategy
that tries to identify equities with growth or income potential.
There is a risk that the value of these investments will not rise as
high as Marsico Capital expects, or will fall.
o Stock market risk - The value of the stocks the Master Portfolio holds
can be affected by changes in U.S. or foreign economies and
financial markets, and the companies that issue the stocks, among
other things. Stock prices can rise or fall over short as well as
long periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Interest rate risk - The prices of the Master Portfolio's fixed income
securities will tend to fall when interest rates rise and to rise
when interest rates fall. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o Credit risk - The Master Portfolio could lose money if the issuer of a
fixed income security is unable to pay interest or repay principal
when it's due. Credit risk usually applies to most fixed income
securities, but is generally not a factor for U.S. government
obligations.
o Foreign investment risk - Because the Master Portfolio may invest up to
25% of its assets in foreign securities, it can be affected by the
risks of foreign investing. Foreign investments may be riskier than
U.S. investments because of political and economic conditions,
changes in currency exchange rates, the implementation of the Euro,
foreign controls on investment, difficulties selling some securities
and lack of or limited financial information. Withholding taxes also
may apply to some foreign investments.
o Investing in the Master Portfolio - The Fund began investing in the
Master Portfolio in August 1999. Other mutual funds and eligible
investors can buy shares in the Master Portfolio. All investors in
the Master Portfolio invest under the same terms and conditions as
the Fund and pay a proportionate share of the Master Portfolio's
expenses. Other feeder funds that invest in the Master Portfolio may
have different share prices and returns than the Fund because feeder
funds typically have varying sales charges, and ongoing
administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio
if it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses
could increase. The Fund might also have to pay brokerage, tax or
other charges.
22
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
For information about the performance of other equity funds
managed by Thomas Marsico, see How the Funds are managed.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1998
38.22%
Year-to-date return as of June 30, 1999: 14.15%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 20.72%
Worst: 3rd quarter 1998: -12.34%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The index is not available
for investment.
<TABLE>
<CAPTION>
1 year
<S> <C>
Primary A Shares 38.22%
S&P 500 28.58%
</TABLE>
23
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)(2)
Management fees 0.75%
Other expenses 0.50%
----
Total annual Fund operating expenses 1.25%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $127 $397 $686 $1,511
</TABLE>
24
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
Bank of America Investment Management (BAIM) is this Fund's
sub-adviser. Michael E. Kenneally makes the day-to-day investment
decisions for the Fund.
[GRAPHIC] You'll find more about
BAIM and Mr. Kenneally
on page 136.
[GRAPHIC] Minimizing taxes
This Fund tries to replace -- or turn over -- no more than 25% of
its investments in a year. Managing the number of buy and sell
transactions the Fund makes can help reduce the capital gains it
distributes.
Nations Strategic Equity Fund
[GRAPHIC] Investment objective
This Fund seeks long-term, after-tax returns by investing in a
diversified portfolio of common stocks.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in common stocks
of companies that it selects from most major industry sectors. The Fund
normally holds 60 to 80 securities, which include common stocks,
preferred stocks and convertible securities like warrants and rights.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio manager identifies stocks using a disciplined analytical
process. Starting with a universe of companies with market capitalizations of
at least $1 billion, the portfolio manager assesses the investment potential
of these companies and their industries by evaluating:
o the growth prospects of the company's industry
o the company's relative competitive position in the industry
The portfolio manager believes that this analysis identifies companies with
favorable long-term growth potential, competitive advantages and sensible
business strategies.
The portfolio manager then uses quantitative analysis to decide when to
invest, evaluating each company's earnings trends and stock valuations, among
other things, to try to determine when it is reasonably valued.
The portfolio manager may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of capital gains and income
distributed to shareholders. For example, the portfolio manager:
o will focus on long-term investments to try to limit the number of buy and
sell transactions
o will try to sell securities that have the lowest tax burden on shareholders
o may offset capital gains by selling securities to realize a capital loss
o invests primarily in securities with lower dividend yields
o may use options, instead of selling securities
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The portfolio manager may sell a security when he believes that the
profitability of the company's industry is beginning to decline, there is a
meaningful deterioration in the company's competitive position, the company's
management fails to execute its business strategy, when the manager considers
the security's price to be overvalued, or for other reasons.
25
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing
in this Fund starting on
page 129 and in the SAI.
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC] Risks and other things to consider
Nations Strategic Equity Fund has the following risks:
o Investment strategy risk - The portfolio manager chooses stocks that are
believed have the potential for long-term growth. There is a risk
that the value of these investments will not rise as expected, or
will fall.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Convertible security features - The issuer of a convertible security may
have the option to redeem it at a specified price. If a convertible
security is redeemed, the Fund may accept the redemption, convert
the convertible security to common stock, or sell the convertible
security to a third party. Any of these transactions could affect
the Fund's ability to meet its objective.
[GRAPHIC] A look at the Fund's performance
The Fund has been in operation for less than a full calendar year, so
no performance information has been included in this prospectus.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.65%
Other expenses 0.44%
----
Total annual Fund operating expenses 1.09%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
26
<PAGE>
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $111 $347 $601 $1,329
</TABLE>
27
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Core Growth
Management Team makes the day-to-day investment decisions for the
Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] What is a growth fund?
Growth funds invest in companies that have the potential for
significant increases in revenue or earnings. These are typically
companies that are developing or applying new technologies,
products or services in growing industry sectors.
Nations Capital Growth Fund
[GRAPHIC] Investment objective
This Fund seeks growth of capital by investing in companies that are
believed to have superior earnings growth potential.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in common stocks
of companies that have one or more of the following characteristics:
o above-average earnings growth compared with the S&P 500
o established operating histories, strong balance sheets and favorable
financial performance
o above-average return on equity compared with the S&P 500
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
When identifying investments, the management team starts with a universe of
companies from the Wilshire 5000 Equity Index, an index that measures the
performance of the equity securities of over 7,000 companies headquartered in
the United States. The index is weighted by market capitalization and is not
available for investment. The team then identifies a group of companies with
market capitalizations of more than $1 billion that it believes have strong
growth potential -- around 750 companies. The team then chooses investments
from this group based on intensive financial research, visits to companies and
market conditions, looking for companies:
o whose earnings growth is projected to be higher than average
o that develop or apply new technologies, new and improved methods of
distribution, or new services
o that may benefit from changing consumer demands and lifestyles
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of capital gains distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on shareholders
o may offset capital gains by selling securities to realize a capital loss
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The team may sell a security when its price reaches the target set by the
team, the company's growth prospects are deteriorating, when the team believes
other investments are more attractive, or for other reasons.
28
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] Risks and other things to consider
Nations Capital Growth Fund has the following risks:
o Investment strategy risk - The management team chooses stocks that it
believes have superior growth potential and are selling at
reasonable prices, with the expectation that they will rise in
value. There is a risk that the value of these investments will not
rise as high as the team expects, or will fall.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
7.80%* 7.85% -1.24% 28.72% 18.61% 30.52% 30.14%
* Return is from inception (9-30-92) to 12-31-92.
Year-to-date return as of June 30, 1999: 10.71%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 28.39%
Worst: 3rd quarter 1998: -14.94%
</TABLE>
29
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The index is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 30.14% 20.69% 19.07%
S&P 500 28.58% 24.06% 21.62%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.65%
Other expenses 0.33%
----
Total annual Fund operating expenses 0.98%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $100 $312 $542 $1,201
</TABLE>
30
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Structured
Products Management Team makes the day-to-day investment decisions
for the Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] Why use a computer modeling system?
The management team uses a computer modeling system as a key
component in managing this Fund. The system ranks stocks based on
the relative size and rate of growth of a company's earnings
(earnings momentum), and on the value of its stock compared with
others in the same industry. This helps the team choose stocks
that have the potential to generate attractive returns.
Nations Disciplined Equity Fund
[GRAPHIC] Investment objective
This Fund seeks growth of capital by investing in companies that are
expected to produce significant increases in earnings per share.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in common stocks
of large and medium-sized U.S. companies. These companies typically
have a market capitalization of $1 billion or more.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The management team uses a computer modeling system to help construct a
portfolio of 40 to 60 securities diversified across industry sectors. Each
security selected for investment by the Fund is in the top third of the
securities ranked by the team's quantitative model for earnings momentum and
in the top third of securities ranked by the model on a valuation basis.
When selecting investments, the team looks for securities it believes are
attractively priced with increasing earnings. It uses quantitative analysis,
which is an analysis of a company's financial information, to:
o identify companies with improving profit potential and increasing earnings
o identify companies with favorable price-to-earnings ratios
o identify companies with positive earnings trends. In general, these
companies also tend to experience favorable trends in their stock prices
o rank the attractiveness of equity securities based on a "multi-factor"
valuation model, a computer modeling system that takes into account value
measures like book value, earnings yield and cash flow to measure a
stock's intrinsic worth compared with its market price. The model also
considers growth measures like price momentum and the size and rate of
earnings growth to compare a stock with others in the same industry
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of capital gains it
distributes to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on shareholders
o may offset capital gains by selling securities to realize a capital loss
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
31
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
The team may sell a security when its earnings momentum begins to deteriorate,
when there is a development in the company that causes earnings estimates to
fall, or for other reasons.
[GRAPHIC] Risks and other things to consider
Nations Disciplined Equity Fund has the following risks:
o Investment strategy risk - The team uses a quantitative approach to
select investments it believes are attractively valued and whose
earnings per share are likely to increase. There is a risk that the
value of these investments will not rise as high as the team
expects, or will fall.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
33.11%* 29.81% -6.35% 27.53% 22.08% 29.92% 25.83%
* Return is from inception (10-1-92) to 12-31-92.
Year-to-date return as of June 30, 1999: 11.51%
32
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 24.61%
Worst: 3rd quarter 1998: -15.28%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The index is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 25.83% 18.97% 25.42%
S&P 500 28.58% 24.06% 21.62%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.65%
Other expenses 0.34%
----
Total annual Fund operating expenses 0.99%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $101 $315 $547 $1,213
</TABLE>
33
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
The Fund does not have its own
investment adviser or sub-adviser because it's a "feeder" fund. A
feeder fund typically invests all of its assets in another fund,
which is called a "master portfolio." Master Portfolio and Fund
are sometimes used interchangeably.
BAAI is the Master Portfolio's investment adviser, and Marsico
Capital Management, LLC (Marsico Capital) is its sub-adviser.
Thomas F. Marsico is the portfolio manager and makes the
day-to-day investment decisions for the Master Portfolio.
[GRAPHIC] You'll find more about
Marsico Capital and
Mr. Marsico on page 134.
[GRAPHIC] What is a focused fund?
A focused fund invests in a small number of companies with
earnings that are believed to have the potential to grow
significantly. This Fund focuses on large, established and well-
known U.S. companies.
Because a focused fund holds fewer investments than other kinds of
funds, it can have greater price swings than more diversified
funds. It may earn relatively higher returns when one of its
investments performs well, or relatively lower returns when an
investment performs poorly.
Nations Marsico Focused Equities Fund
[GRAPHIC] Investment objective
This Fund seeks long-term growth of capital.
[GRAPHIC] Principal investment strategies
The Fund invests all of its assets in Nations Marsico Focused Equities
Master Portfolio (the Master Portfolio). The Master Portfolio has the
same investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in common
stocks of large companies. The Master Portfolio, which is non-diversified,
generally holds a core position of 20 to 30 common stocks. It may invest up to
25% of its assets in foreign securities.
The Master Portfolio may also invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the
SAI.
Marsico Capital looks for companies with earnings growth potential that may
not be recognized by other investors, focusing on companies that have some of
the following characteristics:
o products, markets or technologies in flux that can result in extraordinary
growth
o strong brand franchises that can take advantage of a changing global
environment
o global reach that allows the company to generate sales and earnings both in
the United States and abroad. This can give the company added growth
potential and also means the company may be less affected by changes in
local markets
o movement with, not against, the major social, economic and cultural shifts
taking place in the world
Once an investment opportunity is identified, Marsico Capital uses a
disciplined analytical process to assess its potential as an investment. This
process includes a "top-down" analysis that takes into account economic
factors like interest rates, inflation, the regulatory environment, the
industry and global competition.
The process also includes a "bottom-up" analysis of a company's financial
situation, as well as individual company characteristics like commitment to
research, market franchise and quality of management.
Marsico Capital may sell a security when it believes there is a deterioration
in the company's financial situation, the security is overvalued, when there
is a negative development in the company's competitive, regulatory or economic
environment, or for other reasons.
34
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations Marsico Focused Equities Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the Master
Portfolio's investments will not rise as high as Marsico Capital
expects, or will fall.
o Holding fewer investments - This Master Portfolio is considered to be
non-diversified because it may hold fewer investments than other
kinds of equity funds. This increases the risk that its value could
go down significantly if even only one of its investments performs
poorly. The value of this Portfolio will tend to have greater price
swings than the value of more diversified equity funds. The Master
Portfolio may become a diversified fund by limiting the investments
in which more than 5% of its total assets are invested.
o Stock market risk - The value of the stocks the Master Portfolio holds
can be affected by changes in U.S. or foreign economies and
financial markets, and the companies that issue the stocks, among
other things. Stock prices can rise or fall over short as well as
long periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Foreign investment risk - Because the Master Portfolio may invest up to
25% of its assets in foreign securities, it can be affected by the
risks of foreign investing. Foreign investments may be riskier than
U.S. investments because of political and economic conditions,
changes in currency exchange rates, the implementation of the Euro,
foreign controls on investment, difficulties selling some securities
and lack of or limited financial information. Withholding taxes also
may apply to some foreign investments.
o Investing in the Master Portfolio - The Fund began investing in the
Master Portfolio in August 1999. Other mutual funds and eligible
investors can buy shares in the Master Portfolio. All investors in
the Master Portfolio invest under the same terms and conditions as
the Fund and pay a proportionate share of the Master Portfolio's
expenses. Other feeder funds that invest in the Master Portfolio may
have different share prices and returns than the Fund because
different feeder funds typically have varying sales charges, and
ongoing administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio
if it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses
could increase. The Fund might also have to pay brokerage, tax or
other charges.
35
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
For information about the performance of other equity funds
managed by Thomas Marsico, see How the Funds are managed.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1998
49.64%
Year-to-date return as of June 30, 1999: 15.56%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 22.35%
Worst: 3rd quarter 1998: -9.08%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The S&P 500 is not available
for investment.
<TABLE>
<CAPTION>
1 year
<S> <C>
Primary A Shares 49.64%
S&P 500 28.58%
</TABLE>
36
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)(2)
Management fees 0.75%
Other expenses 0.31%
----
Total annual Fund operating expenses 1.06%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $108 $337 $585 $1,294
</TABLE>
37
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Strategic
Growth Management Team makes the day-to-day investment decisions
for the Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] What is an emerging growth fund?
An emerging growth fund invests in emerging growth companies.
These are typically medium-sized and smaller companies whose
earnings are expected to grow or to continue growing. These
companies may be expanding in existing markets, entering into new
markets, developing new products or increasing their profit
margins by gaining market share or streamlining their operations.
These companies can have better potential for rapid earnings than
larger companies. They may, however, have a harder time securing
financing and may be more sensitive to a setback in sales than
larger, more established companies.
Nations Emerging Growth Fund
[GRAPHIC] Investment objective
This Fund seeks capital appreciation by investing in emerging growth
companies that are believed to have superior long-term earnings growth
prospects.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in companies
chosen from a universe of emerging growth companies. The Fund generally
holds 75 to 130 securities, which include common stocks, preferred
stocks and convertible securities like warrants, rights and convertible
debt.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The team identifies stocks using a disciplined process based on the
fundamental analysis of the overall economy, industry conditions, and the
financial position and management of each company. It starts with a universe
of nearly 1,500 companies with market capitalizations between $750 million and
$7 billion. The team then analyzes each company's financial information using
quantitative analysis. It looks at:
o earnings growth trends
o earnings momentum
o earnings estimate trends
o relative price performance
o valuation
The team then conducts a rigorous qualitative analysis of each company being
considered for investment. This involves, among other things:
o gaining an in-depth understanding of the company's business
o evaluating the company's growth potential, risks and competitive strengths
o discussing its growth strategy with company management
o validating the growth strategy with external research
The team will only invest in a company it has chosen when its stock price is
believed to be attractive relative to its forecasted growth.
38
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of capital gains distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on shareholders
o may offset capital gains by selling securities to realize a capital loss
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The team may sell a security when its price reaches the target set by the
team, the company's growth prospects are deteriorating, when the team believes
other investments are more attractive, or for other reasons.
[GRAPHIC] Risks and other things to consider
Nations Emerging Growth Fund has the following risks:
o Investment strategy risk - The team chooses stocks that it believes have
the potential for superior long-term growth. There is a risk that
the value of these investments will not rise as high as the team
expects, or will fall.
o Emerging company risk - Stocks of emerging companies tend to have
greater price swings than stocks of larger companies because they
trade less frequently and in lower volumes. These securities may
have a higher potential for gains but also carry more risk.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
39
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
3.42%* 12.00% 0.65% 30.00% 18.63% 20.66% 3.47%
* Return is from inception (12-4-92) to 12-31-92.
Year-to-date return as of June 30, 1999: 13.82%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 31.92%
Worst: 3rd quarter 1998: -26.07%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P MidCap 400, an unmanaged index of 400 domestic
stocks chosen for market size, liquidity and industry representation.
The index is weighted by market value, and is not available for
investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 3.47% 14.15% 14.24%
S&P MidCap 400 28.58% 24.06% 21.53%
</TABLE>
40
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.65%
Other expenses 0.35%
----
Total annual Fund operating expenses 1.00%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $102 $318 $552 $1,225
</TABLE>
41
<PAGE>
About the Equity Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Strategic
Growth Management Team makes the day-to-day investment decisions
for the Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] Why invest in a small company growth fund?
A small company growth fund invests in smaller companies with
promising products or that are operating in a dynamic field. These
companies can have stronger potential for rapid earnings growth
than larger companies. They may, however, have a harder time
securing financing and may be more sensitive to a setback than
larger, more established companies.
The portfolio management team looks for companies whose earnings
are growing quickly, and whose share prices are reasonably valued.
Nations Small Company Growth Fund
[GRAPHIC] Investment objective
This Fund seeks long-term capital growth by investing primarily in
equity securities.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in companies with
a market capitalization of $1 billion or less. The Fund usually holds
75 to 130 securities, which include common stocks, preferred stocks and
convertible securities like warrants, rights and convertible debt.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The team identifies stocks using a disciplined process based on the
fundamental analysis of the overall economy, industry conditions, and the
financial position and management of each company. It starts with a universe
of nearly 1,500 companies with market capitalizations between $750 million and
$7 billion. The team then analyzes each company's financial information using
quantitative analysis. It looks at:
o earnings growth trends
o earnings momentum
o earnings estimate trends
o relative price performance
o valuation
The team then conducts a rigorous qualitative analysis of each company being
considered for investment. This involves, among other things:
o gaining an in-depth understanding of the company's business
o evaluating the company's growth potential, risks and competitive strengths
o discussing its growth strategy with company management
o validating the growth strategy with external research
The team will only invest in a company when its stock price is attractive
relative to its forecasted growth.
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of capital gains distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on shareholders
o may offset capital gains by selling securities to realize a capital loss
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
42
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
The team may sell a security when its price reaches the target set by the
team, the company's growth prospects are deteriorating, when the team believes
other investments are more attractive, or for other reasons.
[GRAPHIC] Risks and other things to consider
Nations Small Company Growth Fund has the following risks:
o Investment strategy risk - The team chooses stocks that it believes have
the potential for long-term growth. There is a risk that the value
of these investments will not rise as high as the team expects, or
will fall.
o Small company risk - Stocks of smaller companies tend to have greater
price swings than stocks of larger companies because they trade less
frequently and in lower volumes. These securities may have a higher
potential for gains but also carry more risk.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1995 1996 1997 1998
- -1.25%* 20.59% 19.84% 1.53%
* Return is from inception (12-12-95) to 12-31-95.
Year-to-date return as of June 30, 1999: 4.86%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 23.45%
Worst: 3rd quarter 1998: -25.76%
</TABLE>
43
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the Russell 2000, an unmanaged index of 2,000 of the
smallest stocks representing approximately 11% of the U.S. equity
market. The index is weighted by market capitalization, and is not
available for investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 1.53% 12.92%
Russell 2000 -2.55% 12.19%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.90%
Other expenses 0.34%
------
Total annual Fund operating expenses 1.24%
Fee waivers and/or reimbursements (0.09)%
------
Total net expenses(2) 1.15%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
44
<PAGE>
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $117 $385 $672 $1,492
</TABLE>
45
<PAGE>
About the International Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
Brandes Investment Partners, L.P.
(Brandes) is this Fund's sub-adviser. Brandes's Large Cap
Investment Committee makes the day-to-day investment decisions for
the Fund.
[GRAPHIC] You'll find more about
Brandes on page 137.
[GRAPHIC] What is the Graham and Dodd
approach to investing?
Benjamin Graham is widely regarded as the founder of this classic
value approach to investing and a pioneer in modern security
analysis. In his 1934 book, Security Analysis, co-written by David
Dodd, Graham introduced the idea that stocks should be chosen by
identifying the "true" long-term -- or intrinsic -- value of a
company based on measurable data.
The team follows this approach, looking at each stock as though
it's a business that's for sale. By buying stocks at what it
believes are favorable prices, the Fund looks for the potential
for appreciation over the business cycle, and for a margin of
safety against price declines.
Nations International Value Fund
[GRAPHIC] Investment objective
This Fund seeks long-term capital appreciation by investing primarily
in equity securities of foreign issuers, including emerging markets
countries.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in foreign
companies anywhere in the world that have a market capitalization of
more than $1 billion at the time of investment. The Fund typically
invests in at least three countries other than the United States at any
one time.
The Fund primarily invests in common stocks, preferred stocks and convertible
securities, either directly or indirectly through closed-end investment
companies and depositary receipts.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team uses the "Graham and Dodd" value approach to
selecting securities and managing the Fund. The team invests in a company when
its current price appears to be below its true long-term -- or
intrinsic -- value.
The team uses fundamental analysis to determine intrinsic value, and will look
at a company's book value, cash flow, capital structure, and management
record, as well as its industry and its position in the industry. This
analysis includes a review of company reports, filings with the SEC, computer
databases, industry publications, general and business publications, brokerage
firm research reports and other information sources, as well as interviews
with company management.
The team may sell a security when its price reaches the target set by the
team, there is a deterioration in the company's financial situation, when the
team believes other investments are more attractive, or for other reasons.
46
<PAGE>
[GRAPHIC] Limits on investments
To help manage risk, the Fund has certain limits on its
investments. These limits apply at the time an investment is made:
o The Fund will normally invest no more than 5% of its assets in a single
security.
o It may not invest more than the higher of:
o 20% of its assets in a single country or industry, or
o 150% of the weighting of a single country or industry in the MSCI EAFE
Index (to a maximum of 25% of its assets in a single
industry, other than U.S. government securities).
o It generally may not invest more than 20% of its assets in emerging
markets or developing countries.
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on page
129 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations International Value Fund has the following risks:
o Investment strategy risk - The management team chooses stocks it
believes are undervalued or out of favor with the expectation that
these stocks will eventually rise in value. There is a risk that the
value of these investments will not rise as high or as quickly as
the manager expects, or will fall.
o Foreign investment risk - Foreign investments may be riskier than U.S.
investments because of political and economic conditions, changes in
currency exchange rates, the implementation of the Euro, foreign
controls on investment, difficulties selling some securities and
lack of or limited financial information. Withholding taxes may also
apply to some foreign investments.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices.
o Changing to a feeder fund - Unlike traditional mutual funds, which
invest in individual securities, a "feeder fund" invests all of its
assets in another fund, called a "master portfolio." Other feeder
funds generally also invest in a master portfolio. The master
portfolio invests in individual securities and has the same
investment objective, investment strategies and principal risks as
the feeder funds. This structure can help reduce a feeder fund's
expenses because its assets are combined with those of other feeder
funds. If a master portfolio doesn't attract other feeder funds,
however, a feeder fund's expenses could be higher than those of a
traditional mutual fund.
This Fund may become a feeder fund if the Board of Trustees decides
this would be in the best interests of shareholders. Management
currently intends to propose that the Fund change to a feeder fund
within the next year, but only if other feeder funds are likely to
also invest in the master portfolio. We don't require shareholder
approval to make the change, but we'll notify you if it happens.
If the Fund becomes a feeder fund, it would have the additional risks
of investing in a master portfolio. These are described on page 00.
47
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
For information about the performance of other international funds
managed by Brandes, see How the Funds are managed.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1995 1996 1997 1998
- -0.54%* 15.35% 21.01% 11.60%
*Return is from inception (12-27-95) to 12-31-95.
Year-to-date return as of June 30, 1999: 22.27%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 20.38%
Worst: 3rd quarter 1998: -16.57%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's annual total return for each period,
compared with the MSCI EAFE Index (Morgan Stanley Capital International
Europe, Australia and Far East Index), an index of over 1,000 stocks
from 21 developed markets in Europe, Australia, New Zealand and Asia.
The index reflects the relative size of each market.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 11.60% 15.65%
MSCI EAFE Index 20.33% 9.31%
</TABLE>
48
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.90%
Other expenses 0.50%
------
Total annual Fund operating expenses 1.40%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses(2) 1.30%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $132 $433 $756 $1,671
</TABLE>
49
<PAGE>
About the International Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-advisers
The Fund does not have its own investment adviser or sub-adviser
because it's a "feeder" fund. A feeder fund typically invests all
of its assets in another fund, which is called a "master
portfolio." Master Portfolio and Fund are sometimes used
interchangeably.
BAAI is the Master Portfolio's investment adviser. The Master
Portfolio is a "multi-manager" fund, which means that it's managed
by more than one sub-adviser. Gartmore Global Partners (Gartmore),
INVESCO Global Asset Management (N.A.), Inc. (INVESCO) and Putnam
Investment Management Inc. (Putnam) each manage approximately
one-third of the assets of the Master Portfolio. Six portfolio
managers from Gartmore, INVESCO's International Equity Portfolio
Management Team and Putnam's Core International Equity Group make
the day-to-day investment decisions for their portion of the
Master Portfolio.
[GRAPHIC] You'll find more about
Gartmore, INVESCO and
Putnam starting on
page 138.
[GRAPHIC] Why invest in an
international equity fund?
International equity funds invest in a diversified portfolio of
companies located in markets throughout the world. These companies
can offer investment opportunities that are not available in the
United States. Investing internationally also involves special
risks not associated with investing in the U.S. stock market.
Nations International Equity Fund
[GRAPHIC] Investment objective
This Fund seeks long-term capital growth by investing primarily in
equity securities of non-United States companies in Europe, Australia,
the Far East and other regions, including developing countries.
[GRAPHIC] Principal investment strategies
The Fund invests all of its assets in Nations International Equity
Master Portfolio (the Master Portfolio). The Master Portfolio has the
same investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in
established companies located in at least three countries other than the
United States. The investment managers select countries, including emerging
market or developing countries, and companies they believe have the potential
for growth.
The Master Portfolio primarily invests in equity securities which may include
equity interests in foreign investment funds or trusts, convertible
securities, real estate investment trust securities and depositary receipts.
The Master Portfolio may also invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the
SAI.
The Master Portfolio may invest in foreign currency exchange contracts to
convert foreign currencies to and from the U.S. dollar, and to hedge against
changes in foreign currency exchange rates.
The Master Portfolio is a "multi-manager" fund. It has three different
investment managers. Each is responsible for managing approximately one-third
of the Master Portfolio's assets. The managers all have different, but
complementary, investment styles:
o Gartmore combines "top down," allocation among regions around the world
with a stock selection process that focuses on investing in securities
when growth is likely to be higher, or sustained longer, than other
investors expect.
o INVESCO uses a "bottom up" approach, focusing exclusively on stock
selection, and looking for sustainable growth.
o Putnam is a "core manager," focusing on stable, long-term investments,
rather than growth or value stocks. It combines "bottom up" stock
selection with "top down" country allocation.
The multi-manager strategy is based on the belief that having more than one
manager may result in better performance and more stable returns over time.
A manager may sell a security when its price reaches the target set by the
manager, when the company's growth prospects are deteriorating, when the
manager believes other investments are more attractive, or for other reasons.
50
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on page
129 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations International Equity Fund has the following risks:
o Investment strategy risk - The managers choose stocks they believe have
the potential for long-term growth. There is a risk that the value
of these investments will not rise as high as expected, or will
fall. There is also a risk that the Fund's multi-manager strategy
may not result in better performance or more stable returns.
o Foreign investment risk - Foreign investments may be riskier than U.S.
investments because of political and economic conditions, changes in
currency exchange rates, the implementation of the Euro, foreign
controls on investment, difficulties selling some securities and
lack of or limited financial information. Withholding taxes may also
apply to some foreign investments.
o Stock market risk - The value of the stocks the Master Portfolio holds
can be affected by changes in U.S. or foreign economies and
financial markets, and the companies that issue the stocks, among
other things. Stock prices can rise or fall over short as well as
long periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices.
o Futures risk - This Master Portfolio may use futures contracts to
convert currencies and to hedge against changes in foreign currency
exchange rates. There is a risk that this could result in losses,
reduce returns, increase transaction costs or increase the Fund's
volatility.
o Investing in the Master Portfolio - The Fund began investing in the
Master Portfolio in August 1999. Other mutual funds and eligible
investors can buy shares in the Master Portfolio. All investors in
the Master Portfolio invest under the same terms and conditions as
the Fund and pay a proportionate share of the Master Portfolio's
expenses. Other feeder funds that invest in the Master Portfolio may
have different share prices and returns than the Fund because
different feeder funds typically have varying sales charges, and
ongoing administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio
if it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses
could increase. The Fund might also have to pay brokerage, tax or
other charges.
51
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
4.16%* -8.57% 27.21% 2.60% 8.45% 8.47% 1.27% 16.46%
* Return is from inception (12-2-91) to 12-31-91.
Year-to-date return as of June 30, 1999: 4.17%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 17.70%
Worst: 3rd quarter 1998: -13.94%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the MSCI EAFE Index (Morgan Stanley Capital International
Europe, Australasia and Far East Index), an index of over 1,100 stocks
from 21 developed markets in Europe, Australia, New Zealand and Asia.
The index reflects the relative size of each market.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 16.46% 7.32% 8.00%
MSCI EAFE Index 20.33% 9.50% 9.82%
</TABLE>
52
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)92)
Management fees 0.80%
Other expenses 0.34%
----
Total annual Fund operating expenses(3) 1.14%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2) These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
(3)The Fund's investment adviser and/or some of its other service
providers have agreed to limit total annual Fund operating expenses
to 1.15% for Primary A Shares until May 2000. There is no guarantee
that this limitation will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $116 $362 $628 $1,386
</TABLE>
53
<PAGE>
About the International Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
Gartmore is this Fund's sub-adviser. Brian O'Neill, the principal
senior investment manager of the Gartmore Global Portfolio Team,
makes the day-to-day investment decisions for the Fund.
[GRAPHIC] You'll find more about
Gartmore on page 138.
[GRAPHIC] What is an international
growth fund?
International growth funds invest in companies around the world
that have the potential for significant increases in revenue or
earnings. These are typically companies that are developing or
applying new technologies, products or services in strong industry
sectors.
The portfolio manager for this Fund looks for companies with
earnings growth that is expected to be higher than other investors
believe, and then sells these investments when growth may be lower
than others expect.
Nations International Growth Fund
[GRAPHIC] Investment objective
This Fund seeks long-term capital growth by investing primarily in
equity securities of companies domiciled in countries outside the
United States and listed on major stock exchanges primarily in Europe
and the Pacific Basin.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in foreign
companies listed on major exchanges in Europe and the Pacific Basin.
These companies can be of any size.
The Fund invests in common stocks, preferred stocks and convertible
securities, such as warrants, rights and convertible debt.
The Fund may invest up to 35% of its assets in securities of issuers located
in developing countries in the Asia and Pacific regions, Africa, Latin America
and Eastern Europe.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The Fund will generally hold 50 to 80 securities invested in approximately 10
industry sectors within 15 to 20 stock markets.
The portfolio manager uses a "bottom-up" approach to selecting securities,
looking for companies with:
o high quality and sustainable earnings
o high growth potential over a two-year investment horizon
o quality management teams
o the ability to finance growth internally
o strong financial results
Throughout the investment process, the portfolio manager balances the Fund's
emphasis on growth companies with a sensitivity to securities prices.
The portfolio manager may sell a security when its price reaches the target
set by the portfolio manager, when there is a deterioration in the growth
prospects of the company or its industry, when the portfolio manager believes
other investments are more attractive, or for other reasons.
54
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] Risks and other things to consider
Nations International Growth Fund has the following risks:
o Investment strategy risk - The portfolio manager chooses stocks believed
to have the potential for high growth. There is a risk that the
value of these investments will not rise as high as the portfolio
manager expects, or will fall.
o Foreign investment risk - Foreign investments may be riskier than U.S.
investments because of political and economic conditions, changes in
currency exchange rates, the implementation of the Euro, foreign
controls on investment, difficulties selling some securities and
lack of or limited financial information. Withholding taxes may also
apply to some foreign investments.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
15.50%* -0.02% 14.00% 11.18% 2.04% 20.19%
* Return is from inception (7-26-93) to 12-31-93.
Year-to-date return as of June 30, 1999: 3.14%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 21.00%
Worst: 3rd quarter 1998: -14.55%
</TABLE>
55
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the MSCI EAFE Index (Morgan Stanley Capital International
Europe, Australasia and Far East Index), an index of over 1,100 stocks
from 21 developed markets in Europe, Australia, New Zealand and Asia.
The index reflects the relative size of each market.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 20.19% 9.22% 11.37%
MSCI EAFE Index 20.33% 9.50% 9.54%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses91)
(Expenses that are deducted from the Fund's assets)
Management fees 0.80%
Other expenses 0.42%
----
Total annual Fund operating expenses 1.22%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the
end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $124 $387 $670 $1,477
</TABLE>
56
<PAGE>
About the International Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
Gartmore is this Fund's sub-adviser. Christopher Palmer, a senior
investment manager on the Gartmore Emerging Markets Team, makes
the day-to-day investment decisions for the Fund.
[GRAPHIC] You'll find more about
Gartmore on page 138.
[GRAPHIC] What's an emerging market?
This Fund considers a country to
be an emerging market if:
o the International Finance Corporation has defined it as an emerging
market,
o it has a low-to-middle income economy according to the World Bank, or
o it's listed as developing in World Bank publications.
There are over 25 countries that currently qualify as emerging
markets, including Argentina, Brazil, Chile, China, the Czech
Republic, Colombia, Ecuador, Greece, Hong Kong, Indonesia, India,
Malaysia, Mexico, the Philippines, Poland, Portugal, Peru, Russia,
Singapore, South Africa, Thailand, Taiwan and Turkey.
Nations Emerging Markets Fund
[GRAPHIC] Investment objective
This Fund seeks long-term capital growth by investing primarily in
equity securities of companies in emerging market countries, such as
those in Latin America, Eastern Europe, the Pacific Basin, the Far East
and India.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in companies in
emerging markets or developing countries. The Fund intends to invest in
securities of companies in at least three of these countries at any one
time.
The Fund normally invests in common stocks, preferred stocks, convertible
securities, equity interests in foreign investment funds or trusts, and
depositary receipts.
The Fund may invest in foreign currency exchange contracts to convert foreign
currencies to and from the U.S. dollar, and to hedge against changes in
foreign currency exchange rates.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio manager looks for emerging markets that are believed to have the
potential for strong economic growth, and tries to avoid emerging markets that
might be politically or economically risky.
The manager starts with approximately 800 companies in the most promising
markets, and:
o uses fundamental research to select 80 to 100 stocks in 15 or more
countries, looking at earnings growth, financial resources,
marketability, and other factors
o visits companies to confirm the corporate and industry factors that led to
a stock's selection as a potential investment
o regularly reviews the Fund's investments to determine whether companies are
meeting expected return targets and whether their fundamental financial
health has changed
The portfolio manager may sell a security when its price reaches the target
set by the portfolio manager, when there is a deterioration in the growth
prospects of the company or its industry, when the portfolio manager believes
other investments are more attractive, or for other reasons.
57
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations Emerging Markets Fund has the following risks:
o Investment strategy risk - The portfolio manager invests in securities
of companies in emerging markets, which have high growth potential,
but can be more volatile than securities in more developed markets.
There is a risk that the value of these investments will not rise as
high as the portfolio manager expects, or will fall.
o Foreign investment risk - Foreign investments may be riskier than U.S.
investments because of political and economic conditions, changes in
currency exchange rates, the implementation of the Euro, foreign
controls on investment, difficulties selling some securities and
lack of or limited financial information. Withholding taxes may also
apply to some foreign investments.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices.
o Futures risk - This Fund may use futures contracts to convert currencies
and to hedge against changes in foreign currency exchange rates.
There is a risk that this could result in losses, reduce returns,
increase transaction costs or increase the Fund's volatility.
o Changing to a feeder fund - Unlike traditional mutual funds, which
invest in individual securities, a "feeder fund" invests all of its
assets in another fund, called a "master portfolio." Other feeder
funds generally also invest in a master portfolio. The master
portfolio invests in individual securities and has the same
investment objective, investment strategies and principal risks as
the feeder funds. This structure can help reduce a feeder fund's
expenses because its assets are combined with those of other feeder
funds. If a master portfolio doesn't attract other feeder funds,
however, a feeder fund's expenses could be higher than those of a
traditional mutual fund.
This Fund may become a feeder fund if the Board of Trustees decides
this would be in the best interests of shareholders. Management
currently intends to propose that the Fund change to a feeder fund
within the next year, but only if other feeder funds are likely to
also invest in the master portfolio. We don't require shareholder
approval to make the change, but we'll notify you if it happens.
If the Fund becomes a feeder fund, it would have the additional risks
of investing in a master portfolio. These are described on page 00.
58
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1995 1996 1997 1998
- -2.18%* 8.73% -2.99% -25.58%
* Return is from inception (6-30-95) to 12-31-95.
Year-to-date return as of June 30, 1999: 38.73%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 15.86%
Worst: 3rd quarter 1998: -24.17%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the IFC Investables Index, an unmanaged index that tracks
more than 1,400 stocks in 25 emerging markets in Asia, Latin America,
Eastern Europe, Africa and the Middle East. The index is weighted by
market capitalization.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares -25.58% -7.26%
IFC Investables -22.02% -8.01%
</TABLE>
59
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC]
What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 1.00%
Other expenses 0.99%
----
Total annual Fund operating expenses(2) 1.99%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser has agreed to voluntarily limit total
annual Fund operating expenses to 1.90% for Primary A Shares. There
is no guarantee that this limitation will continue. This limit is
not reflected in the table above.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $202 $624 $1,073 $2,317
</TABLE>
60
<PAGE>
About the Index Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Structured
Products Management Team makes the day-to-day investment decisions
for the Fund.
[GRAPHIC] You'll find more about
TradeStreet on page 133.
[GRAPHIC] What is an index fund?
Index funds use a "passive" or "indexing" investment approach,
which attempts to duplicate the performance of a specific market
index.
Correlation measures how closely a fund's returns match those of
an index. A perfect correlation of 1.0 means that the net asset
value of the fund increases or decreases in exact proportion to
changes in the index.
Nations Equity Index Fund
[GRAPHIC] Investment objective
This Fund seeks investment results that (before fees and expenses)
correspond to the total return of the Standard & Poor's 500 Composite
Stock Price Index (S&P 500).
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 80% of its assets in common stocks
that are included in the S&P 500. The S&P 500 is an unmanaged index of
500 widely held common stocks, and is not available for investment.
The Fund may buy stock index futures and financial futures as substitutes for
the underlying securities in the S&P 500.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Different common stocks have different weightings in the S&P 500, depending on
the amount of stock outstanding and the stock's current price. In trying to
match the performance of the S&P 500, the management team will try to allocate
the Fund's portfolio among common stocks in approximately the same weightings
as the S&P 500, beginning with the most heavily weighted stocks that make up a
larger portion of the value of the S&P 500. The Fund may buy shares of Bank of
America Corporation, which is currently included in the S&P 500, subject to
certain restrictions.
The team generally will try to match the composition of the S&P 500 as closely
as possible. The team starts with the stocks that make up a larger portion of
the value of the S&P 500. It may not always invest in stocks that make up the
smaller percentages because it may be more difficult and costly to make
relatively small transactions. The team may remove a stock from the Fund's
holdings or not invest in a stock if it believes that the stock is not liquid
enough, or for other reasons. The team can substitute stocks that are not
included in the S&P 500, if it believes these stocks have similar
characteristics.
The Fund tries to achieve a correlation of 0.95 with the S&P 500 on an annual
basis (before fees and expenses). The Fund's ability to track the S&P 500 is
affected by transaction costs and other expenses, changes in the composition
of the S&P 500, changes in the number of shares issued by the companies
represented in the S&P 500, and by the timing and amount of shareholder
purchases and redemptions, among other things.
Equity mutual funds, like other investors in equity securities, incur
transaction costs, such as brokerage costs, when they buy and sell securities.
The management team tries to minimize these costs for the Fund by using
program trades and crossing networks.
The team may sell a stock when its percentage weighting in the index is
reduced, when the stock is removed from the index, or for other reasons.
61
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] Risks and other things to consider
Nations Equity Index Fund has the following risks:
o Investment strategy risk - This Fund tries to match (before fees and
expenses) the returns of the S&P 500, and is not actively managed.
There is no assurance that the returns of the Fund will match the
returns of the S&P 500. The value of the Fund will rise and fall
with the performance of the S&P 500.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Futures risk - This Fund may use futures contracts as a substitute for
the securities included in the index. There is a risk that this
could result in losses, reduce returns, or increase transaction
costs or increase the Fund's volatility.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
0.72%* 0.99% 37.02% 22.63% 32.70% 28.39%
* Return is from inception (12-15-93) to 12-31-93.
Year-to-date return as of June 30, 1999: 12.16%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 21.13%
Worst: 3rd quarter 1998: -9.84%
</TABLE>
62
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The index is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 28.39% 23.66% 23.61%
S&P 500 28.58% 24.06% 23.92%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.33%
------
Total annual Fund operating expenses 0.73%
Fee waivers and/or reimbursements (0.38)%
------
Total net expenses(2) 0.35%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
63
<PAGE>
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $36 $195 $368 $871
</TABLE>
64
<PAGE>
About the Index Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Structured
Products Management Team makes the day-to-day investment decisions
for the Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] What is a managed index fund?
A managed index fund combines the benefits of traditional index
funds -- relatively low costs and low portfolio turnover -- with
active management.
With a managed index fund, the portfolio manager starts with the
stocks of a specific market index -- in this case, the S&P
500 -- and then tries to achieve higher returns than the index by
emphasizing stocks in the index that are expected to generate the
highest returns.
There is no assurance that active management will result in a
higher return than the index.
Nations Managed Index Fund
[GRAPHIC] Investment objective
This Fund seeks, over the long term, to provide a total return that
(before fees and expenses) exceeds the total return of the Standard &
Poor's 500 Composite Stock Price Index (S&P 500).
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 80% of its assets in common stocks
that are included in the S&P 500. The S&P 500 is an unmanaged index of
500 widely held common stocks, and is not available for investment.
The management team tries to maintain a portfolio that matches the industry
and risk characteristics of the S&P 500. The team will, from time to time,
vary the number and percentages of the Fund's holdings to try to provide
higher returns than the S&P 500 and to reduce the risk of underperforming the
index over time. The Fund usually holds 300 to 400 of the stocks included in
the index. The Fund may invest in financial futures traded on U.S. exchanges.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
When selecting investments for the Fund, the management team starts with the
stocks included in the S&P 500. It uses quantitative analysis, which is an
analysis of a company's financial information, to:
o rank the attractiveness of each stock based on a "multi-factor" valuation
model, which takes into account value measures like book value, earnings
yield and cash flow to measure a stock's intrinsic worth versus its
market price. The model also considers growth measures like price
momentum and the size and rate of earnings growth when comparing a stock
with others in the same industry
o measure the rate of earnings growth of each stock. Each stock is assigned a
ranking from 1 to 10 (best to worst). The team will hold a slightly
higher percentage of an attractively ranked stock than the index and hold
a lower percentage -- or none -- of a less attractively ranked stock
The management team tries to control costs when it buys and sells securities
for the Fund by using computerized systems called crossing networks that allow
it to try to make trades at better prices and reduced commission rates.
65
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
The management team uses various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of capital gains distributed
to shareholders. For example, the team:
o may try to sell shares of a security with the highest cost for tax purposes
first, before selling other shares of the same security. The management
team will only use this strategy when it is in the best interest of the
Fund to do so and may sell other shares when appropriate
o may offset capital gains by selling securities to realize a capital loss.
This may reduce capital gains distributions
o will try to keep portfolio turnover low, which helps to defer the
realization of capital gains
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies may
also be affected by changes in tax laws and regulations, or by court
decisions.
The team may sell a stock when it believes other stocks in the index are more
attractive investments, when the stock is removed from the index, or for other
reasons.
[GRAPHIC] Risks and other things to consider
Nations Managed Index Fund has the following risks:
o Investment strategy risk - The team chooses stocks that it believes have
the potential for higher growth than the S&P 500. There is a risk
that the value of these investments will not rise as high as the
team expects, or will fall.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Futures risk - This Fund may use futures contracts periodically to
manage liquidity. There is a risk that this could result in losses,
reduce returns, increase transaction costs or increase the Fund's
volatility.
66
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
17.00%* 33.46% 26.64%
* Return is from inception (7-31-96) to 12-31-96.
Year-to-date return as of June 30, 1999: 10.43%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 20.98%
Worst: 3rd quarter 1998: -10.62%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The index is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 26.64% 32.55%
S&P 500 28.58% 33.32%
</TABLE>
67
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.35%
------
Total annual Fund operating expenses 0.75%
Fee waivers and/or reimbursements (0.25)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $215 $392 $907
</TABLE>
68
<PAGE>
About the Index Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Structured
Products Management Team makes the day-to-day investment decisions
for the Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] What is the S&P SmallCap 600?
The S&P SmallCap 600 is designed to be a benchmark of the
performance of small capitalization stocks. It is an unmanaged
index of 600 common stocks, weighted by market capitalization, and
is not available for investment.
Nations Managed SmallCap Index Fund
[GRAPHIC] Investment objective
This Fund seeks, over the long term, to provide a total return that
(before fees and expenses) exceeds the total return of the Standard &
Poor's SmallCap 600 Index (S&P SmallCap 600).
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 80% of its assets in common stocks
that are included in the S&P SmallCap 600.
The management team tries to maintain a portfolio that matches the industry
and risk characteristics of the S&P SmallCap 600. The team will, from time to
time, vary the number and percentages of the Fund's holdings to try to provide
higher returns than the S&P SmallCap 600 while reducing the risk of under-
performing the index over time. The Fund usually holds 400 to 500 of the
stocks included in the index. The Fund may invest in financial futures traded
on U.S. exchanges.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
When selecting investments for the Fund, the management team starts with the
stocks included in the S&P SmallCap 600. It uses quantitative analysis, which
is an analysis of a company's financial information, to:
o rank the attractiveness of each stock based on a "multi-factor" valuation
model, which takes into account value measures like book value, earnings
yield and cash flow to measure a stock's intrinsic worth versus its
market price. The model also considers momentum measures like price
momentum and the size and rate of earnings growth to compare a stock with
others in the same industry
o measure the rate of earnings growth of each stock. Each stock is assigned a
ranking from 1 to 10 (best to worst). The team will hold a slightly
higher percentage of an attractively ranked stock than the index and hold
a lower percentage -- or none -- of a less attractively ranked stock
The management team tries to control costs when it buys and sells securities
for the Fund by using computerized systems called crossing networks that allow
it to try to make trades at better prices and reduced commission rates.
69
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
The management team uses various strategies, consistent with the Funds
investment objective, to try to reduce the amount of capital gains distributed
to shareholders. For example, the team:
o may try to sell shares of a security with the highest cost for tax purposes
first, before selling other shares of the same security. The management
team will only use this strategy when it is in the best interest of the
Fund to do so and may sell other shares when appropriate
o may offset capital gains by selling securities to realize a capital loss.
This may reduce capital gains distributions
o will try to keep portfolio turnover low, which helps to defer the
realization of capital gains
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The team may sell a stock when it believes other stocks in the index are more
attractive investments, when the stock is removed from the index, or for other
reasons.
[GRAPHIC] Risks and other things to consider
Nations Managed SmallCap Index Fund has the following risks:
o Investment strategy risk - The team chooses stocks from the S&P SmallCap
600 that it believes have the potential for higher growth. There is
a risk that the value of these investments will not rise as high as
the team expects, or will fall. Smaller companies also tend to have
greater price swings than stocks of larger companies for many
reasons, for example, because they trade less frequently and in
lower volumes.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Futures risk - This Fund may use futures contracts to manage liquidity.
There is a risk that this could result in losses, reduce returns,
increase transaction costs or increase the Fund's volatility.
70
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand of the risks investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998
3.17%* 27.97% -1.65%
* Return is from inception (10-15-96) to 12-31-96.
Year-to-date return as of June 30, 1999: 2.71%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 2nd quarter 1997: 17.64%
Worst: 3rd quarter 1998: -20.83%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P SmallCap 600, an unmanaged index of 600 common
stocks, weighted by market capitalization. The index is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares -1.65% 12.54%
S&P SmallCap 600 -1.31% 12.75%
</TABLE>
71
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.44%
------
Total annual Fund operating expenses 0.84%
Fee waivers and/or reimbursements (0.34)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $234 $433 $1,006
</TABLE>
72
<PAGE>
About the Index Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Structured
Products Management Team makes the day-to-day investment decisions
for the Fund.
[GRAPHIC] You'll find more about
TradeStreet on page 133.
[GRAPHIC] What is the S&P/BARRA Value Index?
The S&P/BARRA Value Index is designed to be a benchmark of the
performance of value stocks. It is an unmanaged index of a group
of stocks included in the S&P 500 that have low price-to-book
ratios relative to the S&P 500 as a whole. The index is weighted
by market capitalization, and is not available for investment.
Nations Managed Value Index Fund
[GRAPHIC] Investment objective
This Fund seeks, over the long term, to provide a total return that
(before fees and expenses) exceeds the total return of the S&P
500/BARRA Value Index (the S&P/BARRA Value Index).
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 80% of its assets in common stocks
that are included in the S&P/BARRA Value Index.
The management team tries to maintain a portfolio that matches the industry
and risk characteristics of the S&P/BARRA Value Index. The team will, from
time to time, vary the number and percentages of the Fund's holdings to try to
provide higher returns than the S&P/BARRA Value Index while reducing the risk
of underperforming the index over time. The Fund usually holds 100 to 200
stocks. The Fund may invest in financial futures traded on U.S. exchanges.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
When selecting investments for the Fund, the management team starts with the
stocks included in the S&P/BARRA Value Index. It uses quantitative analysis,
which is an analysis of a company's financial information, to:
o rank the attractiveness of each stock based on a "multi-factor" valuation
model, which takes into account value measures like book value, earnings
yield and cash flow to measure a stock's intrinsic worth versus its
market price. The model also considers momentum measures like price
momentum and the size and rate of earnings growth to compare a stock with
others in the same industry
o measure the rate of earnings growth of each stock. Each stock is assigned a
ranking from 1 to 10 (best to worst). The team will hold a slightly
higher percentage of an attractively ranked stock than the index and hold
a lower percentage -- or none -- of a less attractively ranked stock
The management team tries to control costs when it buys and sells securities
for the Fund by using computerized systems called crossing networks that allow
it to try to make trades at better prices and reduced commission rates.
73
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
The management team uses various strategies, consistent with the Fund's
objective, to try to reduce the amount of capital gains distributed to
shareholders. For example, the team:
o may try to sell shares of a security with the highest cost for tax purposes
first, before selling other shares of the same security. The management
team will only use this strategy when it is in the best interest of the
Fund to do so and may sell other shares when appropriate
o may offset capital gains by selling securities to realize a capital loss.
This may reduce capital gains distributions
o will try to keep portfolio turnover low, which helps to defer the
realization of capital gains
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The team may sell a stock when it believes other stocks in the index are more
attractive investments, when the stock is removed from the index, or for other
reasons.
[GRAPHIC] Risks and other things to consider
Nations Managed Value Index Fund has the following risks:
o Investment strategy risk - The team chooses stocks from the S&P/
BARRA Value Index that it believes have the potential for higher
growth. There is a risk that the value of these investments will not
rise as high as the team expects, or will fall.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Futures risk - This Fund may use futures contracts to manage liquidity.
There is a risk that this could result in losses, reduce returns,
increase transaction costs or increase the Fund's volatility.
74
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1997 1998
2.71%* 13.71%
* Return is from inception (11-24-97) to 12-31-97.
Year-to-date return as of June 30, 1999: 11.29%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 17.06%
Worst: 3rd quarter 1998: -12.56%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P/BARRA Value Index, an unmanaged index of a group
of stocks included in the S&P 500 that have low price-to-book ratios
relative to the S&P 500 as a whole. The index is weighted by market
capitalization, and is not available for investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 13.71% 15.13%
S&P/BARRA Value Index 14.68% 15.80%
</TABLE>
75
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 1.61%
------
Total annual Fund operating expenses 2.01%
Fee waivers and/or reimbursements (1.51)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $484 $943 $2,216
</TABLE>
76
<PAGE>
About the Index Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Structured
Products Management Team makes the day-to-day investment decisions
for the Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] What is the S&P/BARRA SmallCap Value Index?
The S&P/BARRA SmallCap Value Index is designed to be a benchmark
of the performance of value stocks of small capitalization
companies. It is an unmanaged index of a group of stocks included
in the S&P SmallCap 600 that have low price-to-book ratios
relative to the S&P SmallCap 600 as a whole. The index is weighted
by market capitalization, and is not available for investment.
Nations Managed SmallCap Value Index Fund
[GRAPHIC] Investment objective
This Fund seeks, over the long term, to provide a total return that
(before fees and expenses) exceeds the total return of the S&P SmallCap
600/BARRA Value Index (the S&P/BARRA SmallCap Value Index).
[GRAPHIC] Investment strategies
The Fund normally invests at least 80% of its assets in common stocks
that are included in the S&P/BARRA SmallCap Value Index.
The management team tries to maintain a portfolio that matches the industry
and risk characteristics of the S&P/BARRA SmallCap Value Index. The team will,
from time to time, vary the number and percentages of the Fund's holdings to
try to provide higher returns than the S&P/BARRA SmallCap Value Index while
reducing the risk of underperforming the index over time. The Fund usually
holds 200 to 300 stocks. The Fund may invest in financial futures traded on
U.S. exchanges.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
When selecting investments for the Fund, the management team starts with the
stocks included in the S&P/BARRA SmallCap Value Index. It uses quantitative
analysis, which is an analysis of a company's financial information, to:
o rank the attractiveness of each stock based on a "multi-factor" valuation
model, which takes into account value measures like book value, earnings
yield and cash flow to measure a stock's intrinsic worth versus its
market price. The model also considers momentum measures like price
momentum and the size and rate of earnings growth to compare a stock with
others in the same industry
o measure the rate of earnings growth of each stock. Each stock is assigned a
ranking from 1 to 10 (best to worst). The team will hold a slightly
higher percentage of an attractively ranked stock than the index and hold
a lower percentage -- or none -- of a less attractively ranked stock
The management team tries to control costs when it buys and sells securities
for the Fund by using computerized systems called crossing networks that allow
it to try to make trades at better prices and reduced commission rates.
77
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
The management team uses various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of capital gains distributed
to shareholders. For example, the team:
o may try to sell shares of a security with the highest cost for tax purposes
first, before selling other shares of the same security. The management
team will only use this strategy when it is in the best interest of the
Fund to do so and may sell other shares when appropriate
o may offset capital gains by selling securities to realize a capital loss.
This may reduce capital gains distributions
o will try to keep portfolio turnover low, which helps to defer the
realization of capital gains
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies may
also be affected by changes in tax laws and regulations, or by court
decisions.
The team may sell a stock when it believes other stocks in the index are more
attractive investments, when the stock is removed from the index, or for other
reasons.
[GRAPHIC] Risks and other things to consider
Nations Managed SmallCap Value Index Fund has the following risks:
o Investment strategy risk - The team chooses stocks from the S&P/
BARRA SmallCap Value Index that it believes have the potential for
higher growth. There is a risk that the value of these investments
will not rise as high as the team expects, or will fall. Smaller
companies also tend to have greater price swings than stocks of
larger companies for many reasons, including because they trade less
frequently and in lower volumes.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Futures risk - This Fund may use futures contracts to manage liquidity.
There is a risk that this could result in losses, reduce returns,
increase transaction costs or increase the Fund's volatility.
78
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1997 1998
4.13%* -2.90%
*Return is from inception (11-24-97) to 12-31-97.
Year-to-date return as of June 30, 1999: 8.89%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 12.36%
Worst: 3rd quarter 1998: -20.02%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P/BARRA SmallCap Value Index, an unmanaged index of
a group of stocks included in the S&P SmallCap 600 that have low
price-to-book ratios relative to the S&P SmallCap 600 as a whole. The
index is weighted by market capitalization and is not available for
investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares -2.90% 1.01%
S&P/BARRA SmallCap Value Index -5.06% -2.14%
</TABLE>
79
<PAGE>
[GRAPHIC]
There are two kinds of fees -- annual sales charges you pay
directly, and fund operating expenses that are deducted from a
fund's assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 3.18%
------
Total annual Fund operating expenses 3.58%
Fee waivers and/or reimbursements (3.08)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $810 $1,591 $3,641
</TABLE>
80
<PAGE>
About the Balanced Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Value
Management Team makes the day-to-day investment decisions for the
equity portion of the Fund. Its Fixed Income Management Team makes
the day-to-day investment decisions for the fixed income and money
market portions of the Fund.
[GRAPHIC] You'll find more about
TradeStreet on page 133.
[GRAPHIC] What is a balanced fund?
A balanced fund invests in a mix of equity and fixed income
securities, and money market instruments.
Each of these "asset classes"
has different risk/return characteristics. Combining them in one
fund can help reduce risk and increase returns because at least
one asset class should have the potential to be a stronger
performer regardless of market conditions.
Balanced funds like this one can provide a diversified asset mix
for you in a single investment.
Nations Balanced Assets Fund
[GRAPHIC] Investment objective
This Fund seeks total return by investing in equity and fixed income
securities.
[GRAPHIC] Principal investment strategies
The Fund invests in a mix of equity and fixed income securities, as
well as money market instruments.
Equity securities the Fund invests in are primarily common stock of
established companies believed to be financially strong.
Fixed income securities normally make up at least 25% of the Fund's assets.
Fixed income securities the Fund invests in are primarily bonds, notes and
mortgage-backed and asset-backed securities issued by U.S. companies and
government entities.
Money market instruments the Fund invests in are primarily cash equivalents,
including U.S. government obligations, commercial paper and other short-term,
interest-bearing instruments.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The management team uses asset allocation as its primary investment approach.
The team allocates assets among the three asset classes based on its
assessment of the expected risks and returns of each class. The team
evaluates:
o current economic and financial market conditions, including trends in
interest rates, in the United States and abroad
o earnings and dividend prospects for common stocks
o the overall stability of financial markets
The team may change the Fund's asset allocation to try to increase returns and
reduce risk.
The team identifies individual investments using the following process:
o For the equity portion of the Fund, the team evaluates the overall economy,
industry conditions, and the financial condition and management of each
company, using a process called fundamental analysis.
o For the fixed income portion of the Fund, the team looks for securities
rated investment grade at the time of investment. The team may choose
unrated securities if it believes they are of comparable quality to
investment grade securities at the time of investment.
81
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
o For the money market portion of the Fund, the team chooses high-quality
securities primarily to provide liquidity.
The management team may use various tax strategies, consistent with the Fund's
investment objective, to try to reduce the amount of capital gains distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on shareholders
o may offset capital gains by selling securities to realize a capital loss
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The team may sell a security when the Fund's asset allocation changes, there
is a deterioration in the issuer's financial situation, when the team believes
other investments are more attractive, or for other reasons.
[GRAPHIC] Risks and other things to consider
Nations Balanced Assets Fund has the following risks:
o Investment strategy risk - The team uses an asset allocation strategy to
try to achieve the highest total return. There is a risk that the
mix of investments will not produce the returns the team expects, or
will fall in value.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Interest rate risk - The prices of the Fund's fixed income securities
will tend to fall when interest rates rise. In general, fixed income
securities with longer terms tend to fall more in value when
interest rates rise than fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o Prepayment and extension risk - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed securities that have lower yields.
82
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
3.84%* 9.94% -3.12% 26.33% 14.68% 21.69% 8.30%
* Return is from inception (9-30-92) to 12-31-92.
Year-to-date return as of June 30, 1999: 3.82%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 11.27%
Worst: 3rd quarter 1998: -8.95%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, the S&P/BARRA Value Index, and the Lehman
Aggregate Bond Index. The S&P 500 is an unmanaged index of 500 widely
held common stocks, weighted by market capitalization. The S&P/BARRA
Value Index is an unmanaged index of a group of stocks from the S&P 500
that have low price-to-book ratios relative to the S&P 500 as a whole.
It is weighted by market capitalization. The Lehman Aggregate Bond
Index is an index of fixed income securities issued by the U.S.
government and its agencies, and by corporations. These indexes are not
available for investment.
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Primary A Shares 8.30% 13.09% 12.70%
S&P 500 28.58% 24.06% 21.62%
S&P 500/BARRA Value Index 14.68% 19.88% 19.51%
Lehman Aggregate Bond Index 8.69% 7.27% 7.41%
</TABLE>
83
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.65%
Other expenses 0.37%
----
Total annual Fund operating expenses 1.02%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $104 $325 $563 $1,248
</TABLE>
84
<PAGE>
About the Balanced Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-advisers
This Fund is managed by two sub-advisers: TradeStreet and Chicago
Equity. Chicago Equity's Equity Management Team makes the
day-to-day investment decisions for the equity portion of the
Fund. TradeStreet's Fixed Income Management Team makes the
day-to-day investment decisions for the fixed income and money
market portions of the Fund.
[GRAPHIC] You'll find more about
TradeStreet and Chicago
Equity, starting on
page 133.
[GRAPHIC] What is an asset
allocation fund?
This asset allocation fund invests in a mix of equity and fixed
income securities, and cash equivalents.
Each of these "asset classes" has different risk/return
characteris-tics. The portfolio management team changes the mix
based on its assessment of the expected risks and returns of each
class.
Asset allocation funds like this one can provide a diversified
asset mix for you in a single investment.
Nations Asset Allocation Fund
[GRAPHIC] Investment objective
This Fund seeks to obtain long-term growth from capital appreciation,
and dividend and interest income.
[GRAPHIC] Principal investment strategies
The Fund invests in a mix of equity and fixed income securities, as
well as cash equivalents, including U.S. government obligations,
commercial paper and other short-term, interest-bearing instruments.
The equity securities the Fund invests in are primarily common stock of blue
chip companies. These companies are well established, nationally known
companies that have a long record of profitability and a reputation for
quality management, products and services.
The fixed income securities the Fund invests in are primarily investment grade
bonds and notes. The Fund normally invests at least 25% of its assets in
senior securities. The Fund may also invest up to 35% of its assets in
mortgage-backed and asset-backed securities.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team uses asset allocation as its principal
investment approach. The team actively allocates assets among the three asset
classes based on its assessment of the expected risks and returns of each
class.
For the equity portion of the Fund, the portfolio management team uses
quantitative analysis to analyze fundamental information about securities and
identify value. Starting with a universe of approximately 700 common stocks,
the team uses a multi-factor computer model to rank securities, based on the
following criteria, among others:
o changes in actual and expected earnings
o unexpected changes in earnings
o price-to-earnings ratio
o price-to-book ratio
o price-to-cash flow
The portfolio management team tries to manage risk by matching the market
capitalization, style and industry weighting characteristics of the S&P 500.
The team focuses on selecting individual stocks to try to provide higher
returns than the S&P 500 while maintaining a level of risk similar to the
index.
The team may sell a security when the Fund's asset allocation changes, there
is a deterioration in the issuer's financial situation, when the team believes
other investments are more attractive, or for other reasons.
85
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations Asset Allocation Fund has the following risks:
o Investment strategy risk - The team uses an asset allocation strategy to
try to achieve the highest total return. There is a risk that the
mix of investments will not produce the returns the team expects, or
will fall in value.
o Stock market risk - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o Interest rate risk - The prices of the Fund's fixed income securities
will tend to fall when interest rates rise. In general, fixed income
securities with longer terms tend to fall more in value when
interest rates rise than fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o Prepayment and extension risk - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed securities that have lower yields.
86
<PAGE>
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
The returns shown are for a class not offered in this prospectus
that has similar annual returns because the shares are invested in
the same portfolio of securities. The annual returns differ only
to the extent that the classes do not have the same expenses.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
- -1.38%* 26.90% 15.66% 21.38% 21.09%
* Return is from inception (1-18-94) to 12-31-94.
Year-to-date return as of June 30, 1999: 5.81%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1998: 12.77%
Worst: 3rd quarter 1998: -4.34%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500 and the Lehman Aggregate Bond Index. The S&P
500 is an unmanaged index of 500 widely held common stocks, weighted by
market capitalization. The Lehman Aggregate Bond Index is an index of
fixed income securities issued by the U.S. government and its agencies,
and by corporations. These indexes are not available for investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Investor A Shares 21.09% 23.66%
S&P 500 28.58% 23.67%
Lehman Aggregate Bond Index 8.69% 7.11%
</TABLE>
87
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC]
This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.65%
Other expenses 0.38%
------
Total annual Fund operating expenses 1.03%
Fee waivers and/or reimbursements (0.08)%
------
Total net expenses(2) 0.95%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
May 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire in May 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $97 $320 $561 $1,252
</TABLE>
88
<PAGE>
About the Fixed Income Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Fixed Income
Management Team makes the day-to-day investment decisions for the
Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] Corporate fixed-income
securities
This Fund focuses on fixed income securities issued by
corporations. Corporate fixed income securities have the potential
to pay higher income than U.S. Treasury securities with similar
maturities.
[GRAPHIC] Duration
Duration is a measure used to estimate how much a Fund's portfolio
will fluctuate in response to a change in interest rates.
Nations Short-Term Income Fund
[GRAPHIC] Investment objective
This Fund seeks high current income consistent with minimal
fluctuations of principal.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its total assets in
investment grade fixed income securities. The portfolio management team
may choose unrated securities if it believes they are of comparable
quality to investment grade securities at the time of investment.
The Fund may invest in:
o corporate debt securities, including bonds, notes and debentures
o mortgage-related securities issued by governments
o asset-backed securities
o U.S. government obligations
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be five years or
less, and its duration will be three years or less.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o allocates assets among U.S. government obligations, including securities
issued by government agencies, mortgage-backed securities and U.S Treasury
securities; asset-backed securities and corporate securities, based on how
they have performed in the past, and on how they are expected to perform
under current market conditions. The team may change the allocations when
market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest in
securities with lower credit ratings if it believes that the potential for a
higher yield is substantial compared with the risk involved, and that the
credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
o tries to manage risk by diversifying the Fund's investments in securities of
many different issuers
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
89
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC]
Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
Call us at 1.800.765.2668 or contact your investment professional
for the Fund's current yield.
[GRAPHIC] Risks and other things to consider
Nations Short-Term Income Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
investments that the portfolio management team chooses will not rise as
high as the team expects, or will fall.
o Interest rate risk - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o Derivatives risk - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o Prepayment and extension risk - The value of the Fund's mortgage- backed
securities can fall if the owners of the underlying mortgages pay off
their mortgages sooner than expected, which could happen when interest
rates fall, or later than expected, which could happen when interest
rates rise. If the underlying mortgages are paid off sooner than
expected, the Fund may have to reinvest this money in mortgage-backed
securities that have lower yields.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
1992 1993 1994 1995 1996 1997 1998
- -0.59%* 7.55% -0.27% 11.27% 4.89% 6.03% 6.30%
*Return is from inception (9-30-92) to 12-31-92.
[GRAPHIC] Year-to-date return as of June 30, 1999: 1.50%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 3.49%
Worst: 3rd quarter 1994: -0.94%
</TABLE>
90
<PAGE>
[GRAPHIC]
There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the Merrill Lynch 1-3 Year Treasury Index, an index of
U.S. Treasury bonds with maturities of one to three years. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 6.30% 5.58% 5.56%
Merrill Lynch 1-3 Year Treasury Index 7.00% 5.99% 5.68%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.30%
Other expenses 0.32%
------
Total annual Fund operating expenses 0.62%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses(2) 0.52%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
91
<PAGE>
[GRAPHIC] This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $53 $188 $336 $765
</TABLE>
92
<PAGE>
About the Fixed Income Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Fixed Income
Management Team makes the day-to-day investment decisions for the
Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] U.S. government securities
This Fund invests almost all of its assets in securities that are
U.S. government issued or guaranteed. This means the Fund is
generally not subject to credit risk, but it could earn less
income than funds that invest in other kinds of fixed income
securities.
[GRAPHIC] Duration
Duration is a measure used to estimate how much a Fund's portfolio
will fluctuate in response to a change in interest rates.
Nations Short-Intermediate Government Fund
[GRAPHIC] Investment objective
This Fund seeks high current income consistent with modest fluctuation
of principal.
[GRAPHIC] Principal investment strategies
The Fund invests most of its assets in U.S. government obligations and
repurchase agreements relating to these obligations. It may invest in
mortgage-related securities issued or backed by the U.S. by governments
or corporations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be five years or
less, and its duration will be four years or less.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o allocates assets primarily among U.S. government obligations, including
securities issued by government agencies, mortgage-backed securities and U.S
Treasury securities, based on how they have performed in the past, and on
how they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using structure analysis, which evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
93
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
Call us at 1.800.765.2668 or contact your investment professional
for the Fund's current yield.
[GRAPHIC] Risks and other things to consider
Nations Short-Intermediate Government Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
investments that the portfolio management team chooses will not rise as
high as the team expects, or will fall.
o Interest rate risk - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o Derivatives risk - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, should generally not affect the amount
of income they pay.
o Prepayment and extension risk - The value of the Fund's mortgage- backed
securities can fall if the owners of the underlying mortgages pay off
their mortgages sooner than expected, which could happen when interest
rates fall, or later than expected, which could happen when interest
rates rise. If the underlying mortgages are paid off sooner than
expected, the Fund may have to reinvest this money in mortgage-backed
securities that have lower yields.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
94
<PAGE>
[GRAPHIC] There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
9.25%* 5.78% 8.02% -2.41% 12.44% 3.19% 7.25% 6.60%
*Return is from inception (8-1-91) to 12-31-91.
[GRAPHIC] Year-to-date return as of June 30, 1999: -0.84%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 4th quarter 1991: 4.77%
Worst: 3rd quarter 1994: -1.74%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the Lehman Intermediate Government Bond Index, an index
of U.S. government agency and U.S. Treasury securities. All dividends
are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 6.60% 5.30% 6.69%
Lehman Intermediate Government Bond Index 8.49% 6.45% 7.57%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.30%
Other expenses 0.30%
----
Total annual Fund operating expenses(2) 0.60%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to limit total annual operating expenses to
0.60% for Primary A Shares until May 2000. There is no guarantee that
this limitation will continue after this date.
95
<PAGE>
[GRAPHIC] This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire May 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $61 $192 $335 $750
</TABLE>
96
<PAGE>
About the Fixed Income Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
The Fund does not have its own
investment adviser or sub-adviser because it's a "feeder" fund. A
feeder fund invests all of its assets in another fund, which is
called a "master portfolio." Master Portfolio and Fund are
sometimes used interchangeably.
BAAI is the Master Portfolio's investment adviser, and TradeStreet
is its sub-adviser. TradeStreet's Fixed Income Management Team
makes the day-to-day investment decisions for the Master
Portfolio.
[GRAPHIC] You'll find more about
TradeStreet on page 133.
[GRAPHIC] Intermediate-term securities
The portfolio management team focuses on fixed income securities
with intermediate terms. While these securities generally won't
earn as much income as securities with longer terms, they tend to
be less sensitive to changes in interest rates.
[GRAPHIC]
Duration is a measure used to estimate how much a Fund's portfolio
will fluctuate in response to a change in interest rates.
Nations Intermediate Bond Fund
[GRAPHIC] Investment objective
This Fund seeks to obtain interest income and capital appreciation.
[GRAPHIC] Principal investment strategies
The Fund invests all of its assets in Nations Intermediate Bond Master
Portfolio (the Master Portfolio). The Master Portfolio has the same
investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in
intermediate and longer term fixed income securities that are investment
grade. The Master Portfolio can invest up to 35% of its assets in
mortgage-backed securities, including collateralized mortgage obligations
(CMOs), that are backed by the U.S government or one of its agencies or
instrumentalities.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Master Portfolio's average dollar-weighted maturity will be
between three and six years. Its duration generally will be the same as the
Lehman Brothers Intermediate/Corporate Bond Index.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o allocates assets among U.S. corporate securities and mortgage-backed
securities, based on how they have performed in the past, and on how they
are expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using structure analysis, which evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
o tries to manage risk by diversifying the Fund's investments in securities of
many different issuers
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
97
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations Intermediate Bond Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
investments that the portfolio management team chooses for the Master
Portfolio will not rise as high as the team expects, or will fall.
o Interest rate risk - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o Credit risk - The Master Portfolio could lose money if the issuer of a
fixed income security is unable to pay interest or repay principal when
it's due. Credit risk usually applies to most fixed income securities,
but is generally not a factor for U.S. government obligations.
o Derivatives risk - The Master Portfolio may invest in derivatives. There
is a risk that these investments could result in losses, reduce returns,
increase transaction costs or increase the Master Portfolio's volatility.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o Prepayment and extension risk - The value of the Fund's mortgage- backed
securities can fall if the owners of the underlying mortgages pay off
their mortgages sooner than expected, which could happen when interest
rates fall, or later than expected, which could happen when interest
rates rise. If the underlying mortgages are paid off sooner than
expected, the Fund may have to reinvest this money in mortgage-backed
securities that have lower yields.
o Investing in the Master Portfolio - Other mutual funds and eligible
investors can buy shares in the Master Portfolio. For example, the World
Horizon U.S. Bond Fund, which is also managed by BAAI, invests all of its
assets in the Master Portfolio.
All investors in the Master Portfolio invest under the same terms and
conditions as the Fund and pay a proportionate share of the Master
Portfolio's expenses. Other feeder funds that invest in the Master
Portfolio may have different share prices and returns than the Fund
because different feeder funds typically have varying sales charges, and
ongoing administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio if
it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses could
increase. The Fund might also have to pay brokerage, tax or other
charges.
98
<PAGE>
[GRAPHIC] Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
The returns shown are for a class not offered in this prospectus
that has similar annual returns because the shares are invested in
the same portfolio of securities. The annual returns differ only
to the extent that the classes do not have the same expenses.
Call us at 1.800.765.2668 or contact your investment professional
for the Fund's current yield.
[GRAPHIC] There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
1994 1995 1996 1997 1998
- -2.02%* 14.54% 3.14% 6.54% 7.32%
*Return is from inception (1-24-94) to 12-31-94.
[GRAPHIC] Year-to-date return as of June 30, 1999: -0.91%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 3rd quarter 1995: 4.50%
Worst: 1st quarter 1996: 1.06%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the Lehman Intermediate Government Bond Index, an index
of U.S. government and agency securities and U.S. Treasury securities.
All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Investor A Shares 7.32% 5.84%
Lehman Intermediate
Government Bond Index 8.49% 6.35%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)(2)
Management fees 0.40%
Other expenses 0.56%
------
Total annual Fund operating expenses 0.96%
Fee waivers and/or reimbursements (0.15)%
------
Total net expenses(3) 0.81%
======
</TABLE>
99
<PAGE>
[GRAPHIC] This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
(3)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
May 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire in May 2000 and are
not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $83 $291 $516 $1,164
</TABLE>
100
<PAGE>
About the Fixed Income Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Fixed Income
Management Team makes the day-to-day investment decisions for the
Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] More investment opportunities
This Fund can invest in a wide range of fixed income securities as
long as they're investment grade. This allows the portfolio
management team to focus on securities that offer the potential
for higher returns.
Nations Strategic Fixed Income Fund
[GRAPHIC] Investment objective
This Fund seeks total return by investing in investment grade fixed
income securities.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in investment
grade fixed income securities. The portfolio management team may choose
unrated securities if it believes they are of comparable quality to
investment grade securities at the time of investment.
The Fund may invest in:
o corporate debt securities, including bonds, notes and debentures
o U.S. government obligations
o foreign debt securities denominated in U.S. dollars
o mortgage-related securities issued by governments
o asset-backed securities
o municipal securities
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be 10 years or less
and will never be more than 15 years.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o allocates assets primarily among U.S. government obligations, including
securities issued by government agencies, mortgage-backed securities and U.S
Treasury securities; and corporate securities, based on how they have
performed in the past, and on how they are expected to perform under current
market conditions. The team may change the allocations when market
conditions change
101
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
Call us at 1.800.765.2668 or contact your investment professional
for the Fund's current yield.
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest in
securities with lower credit ratings if it believes that the potential for a
higher yield is substantial compared with the risk involved, and that the
credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
o tries to manage risk by diversifying the Fund's investments in securities of
many different issuers
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
[GRAPHIC] Risks and other things to consider
Nations Strategic Fixed Income Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
investments that the portfolio management team chooses will not rise as
high as the team expects, or will fall.
o Interest rate risk - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o Derivatives risk - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o Prepayment and extension risk - The value of the Fund's mortgage- backed
securities can fall if the owners of the underlying mortgages pay off
their mortgages sooner than expected, which could happen when interest
rates fall, or later than expected, which could happen when interest
rates rise. If the underlying mortgages are paid off sooner than
expected, the Fund may have to reinvest this money in mortgage-backed
securities that have lower yields.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
102
<PAGE>
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
1.51%* 10.78% -3.32% 17.28% 2.12% 8.48% 7.16%
*Return is from inception (10-30-92) to 12-31-92.
Year-to-date return as of June 30, 1999: -1.50%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 5.95%
Worst: 3rd quarter 1994: -2.81%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the Lehman Aggregate Bond Index, an index made up of the
Lehman Government/Corporate Index, the Asset-Backed Securities Index
and the Mortgage-Backed Securities Index. These indexes include U.S.
government agency and U.S. Treasury securities, corporate bonds and
mortgage-backed securities. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 7.16% 6.12% 6.95%
Lehman Aggregate Bond Index 8.69% 7.27% 7.75%
</TABLE>
103
<PAGE>
[GRAPHIC] There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
[GRAPHIC] This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.30%
----
Total annual Fund operating expenses 0.70%
====
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $72 $224 $390 $871
</TABLE>
104
<PAGE>
About the Fixed Income Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Fixed Income
Management Team makes the day-to-day investment decisions for the
Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] Mortgage-backed securities
This Fund invests in mortgage- backed securities. Mortgage-backed
securities tend to pay higher income than U.S. Treasury bonds and
other government-backed bonds with similar maturities but also have
specific risks associated with them. They pay a monthly amount that
includes a portion of the principal on the underlying mortgages, as
well as interest.
Nations Government Securities Fund
[GRAPHIC] Investment objective
This Fund seeks high current income consistent with moderate
fluctuation of principal.
[GRAPHIC] Principal investment strategies
The Fund invests at least 65% of its assets in intermediate-term U.S.
government obligations.
The Fund may invest in:
o mortgage-related securities issued by governments or corporations
o asset-backed securities or municipal securities rated investment grade at
the time of investment, or unrated if the portfolio management team believes
they are of comparable quality to investment grade securities at the time of
investment
o corporate debt securities, including bonds, notes and debentures rated
investment grade at the time of investment, or unrated if the portfolio
management team believes they are of comparable quality to investment grade
securities at the time of investment
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be between five and
30 years.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o allocates assets primarily among U.S. government obligations, including
securities issued by government agencies, mortgage-backed securities and U.S
Treasury securities, based on how they have performed in the past, and on
how they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using structure analysis, which evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
105
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
Call us at 1.800.765.2668 or contact your investment professional
for the Fund's current yield.
[GRAPHIC] Risks and other things to consider
Nations Government Securities Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
investments that the portfolio management team chooses will not rise as
high as the team expects, or will fall.
o Interest rate risk - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o Derivatives risk - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o Prepayment and extension risk - The value of the Fund's mortgage- backed
securities can fall if the owners of the underlying mortgages pay off
their mortgages sooner than expected, which could happen when interest
rates fall, or later than expected, which could happen when interest
rates rise. If the underlying mortgages are paid off sooner than
expected, the Fund may have to reinvest this money in mortgage-backed
securities that have lower yields.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
11.78%* 5.41% 7.67% -5.11% 15.28% 2.53% 8.55% 8.43%
*Return is from inception (4-11-91) to 12-31-91.
[GRAPHIC] Year-to-date return as of June 30, 1999: -2.77%
106
<PAGE>
[GRAPHIC] There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 3rd quarter 1991: 5.23%
Worst: 3rd quarter 1994: -3.01%
</TABLE>
Average annual total return as of December 31, 1998 The table shows the
Fund's average annual total return for each period, compared with the
Lehman Intermediate Treasury Index and the Salomon Brothers Mortgage
Index. The Lehman Intermediate Treasury Index is an index of U.S.
Treasury securities with maturities of three to 10 years. All dividends
are reinvested. The Salomon Brothers Mortgage Index is an index of
30-year and 15-year GNMA, FNMA and FHLMC securities, and FNMA and FHLMC
balloon mortgages.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 8.43% 5.71% 6.90%
Lehman Intermediate Treasury Index 8.62% 6.45% 7.61%
Salomon Brothers Mortgage Index 6.98% 7.23% 8.98%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.36%
------
Total annual Fund operating expenses 0.86%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses(2) 0.76%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to limit total annual operating expenses to
0.85% for Primary A Shares until May 2000. The figure shown here is
after waivers and/or reimbursements. There is no guarantee that these
waivers and/or reimbursements will continue after this date.
107
<PAGE>
[GRAPHIC] This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund o your
investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire May 2000 and
are not reflected in the 3, 5 and 10 year examples.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $78 $264 $467 $1,052
</TABLE>
108
<PAGE>
About the Fixed Income Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
Boatmen's Capital Management, Inc. (Boatmen's) is this Fund's
sub-adviser. Boatmen's Fixed Income Committee makes the day-to-day
investment decisions for the Fund.
[GRAPHIC] You'll find more about Boatmen's on page 141.
[GRAPHIC] Longer-term securities
This Fund invests in securities with terms of more than five
years. These securities offer the potential for higher income than
securities with shorter terms, but they are also more sensitive to
changes in interest rates.
[GRAPHIC] Duration
Duration is a measure used to estimate how much a Fund's portfolio
will fluctuate in response to a change in interest rates.
Nations U.S. Government Bond Fund
[GRAPHIC] Investment objective
This Fund seeks total return and preservation of capital by investing
in U.S. government securities and repurchase agreements collateralized
by such securities.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in U.S. government
securities and repurchase agreements secured by these securities.
The Fund may also invest in:
o zero coupon bonds
o corporate debt securities rated investment grade at the time of investment,
or unrated if the portfolio management team believes they are of comparable
quality to investment grade securities at the time of investment
o foreign debt securities denominated in U.S. dollars.
o dollar roll transactions
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be between five and
30 years.
When selecting individual investments, the portfolio management team uses a
disciplined, prudent approach, based on its analysis of economic trends. The
team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o emphasizes securities with a longer duration when it believes that the
economy is in a period of stable inflation
o emphasizes securities with a shorter duration when it expects a period of
rising inflation
o uses a variety of other techniques to help manage risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
109
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
Call us at 1.800.765.2668 or contact your investment professional
for the Fund's current yield.
[GRAPHIC] Risks and other things to consider
Nations U.S. Government Bond Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
investments that the portfolio management team chooses will not rise as
high as the team expects, or will fall.
o Interest rate risk - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o Derivatives risk - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o Prepayment and extension risk - The value of the Fund's mortgage- backed
securities can fall if the owners of the underlying mortgages pay off
their mortgages sooner than expected, which could happen when interest
rates fall, or later than expected, which could happen when interest
rates rise. If the underlying mortgages are paid off sooner than
expected, the Fund may have to reinvest this money in mortgage-backed
securities that have lower yields.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
3.70%* 20.75% 1.80% 8.43% 8.38%
*Return is from inception (11-7-94) to 12-31-94.
[GRAPHIC] Year-to-date return as of June 30, 1999: -3.17%
110
<PAGE>
[GRAPHIC] There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 7.36%
Worst: 1st quarter 1996: -2.80%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the Lehman Government Bond Index, an index of government
bonds with an average maturity of approximately nine years. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 8.38% 10.23%
Lehman Government Bond Index 9.85% 9.69%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.39%
------
Total annual Fund operating expenses 0.89%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses(2) 0.79%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
111
<PAGE>
[GRAPHIC] This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $81 $274 $483 $1,087
</TABLE>
112
<PAGE>
About the Fixed Income Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Fixed Income
Management Team makes the day-to-day investment decisions for the
Fund.
[GRAPHIC] You'll find more about TradeStreet on page 133.
[GRAPHIC] High yield bonds
Although this Fund invests primarily in investment grade
securities, it can invest up to 35% of its assets in high yield
bonds. High yield bonds offer the potential for higher income than
other kinds of bonds with similar maturities, but they also have
higher credit risk.
The Fund tries to manage this risk by holding a large part of its
assets in investment grade debt securities. This allows the Fund
to maintain an average quality well within the investment grade
category.
Nations Diversified Income Fund
[GRAPHIC] Investment objective
This Fund seeks total return with an emphasis on current income by
investing in a diversified portfolio of fixed income securities.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 65% of its assets in investment
grade debt securities.
The Fund may invest in:
o corporate debt securities
o U.S. government obligations
o foreign debt securities denominated in U.S. dollars or foreign
currencies
o mortgage-related securities issued by governments and non-government
issuers
The Fund may invest up to 35% of its assets in lower-quality fixed income
securities ("junk bonds" or "high yield bonds") rated "B" or better by Moody's
or S&P. The portfolio management team may choose unrated securities if it
believes they are of comparable quality at the time of investment.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be more than five
years.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o allocates assets primarily among U.S. government obligations and U.S.
corporate securities, including high yield corporate bonds. The allocation
is structured to provide the potential for the best return, based on how
they have performed in the past, and on how they are expected to perform
under current market conditions. The team may change the allocations when
market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest in
securities with lower credit ratings if it believes that the potential for a
higher yield is substantial compared with the risk involved, and that the
credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
113
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
o tries to manage risk by diversifying the Fund's investments in securities of
many different issuers
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
[GRAPHIC] Risks and other things to consider
Nations Diversified Income Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
investments that the portfolio management team chooses will not rise as
high as the team expects, or will fall.
o Interest rate risk - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations. Fixed income
securities with the lowest investment grade rating or that aren't
investment grade are more speculative in nature than securities with
higher ratings, and they tend to be more sensitive to credit risk,
particularly during a downturn in the economy.
o Derivatives risk - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns, increase
transaction costs or increase the Fund's volatility.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o Prepayment and extension risk - The value of the Fund's mortgage- backed
securities can fall if the owners of the underlying mortgages pay off
their mortgages sooner than expected, which could happen when interest
rates fall, or later than expected, which could happen when interest
rates rise. If the underlying mortgages are paid off sooner than
expected, the Fund may have to reinvest this money in mortgage-backed
securities that have lower yields.
114
<PAGE>
[GRAPHIC] Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
Call us at 1.800.765.2668 or contact your investment professional
for the Fund's current yield.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
2.25%* 15.68% -2.52% 20.91% 2.46% 8.59% 7.53%
*Return is from inception (10-30-92) to 12-31-92.
[GRAPHIC] Year-to-date return as of June 30, 1999: -2.06%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 2nd quarter 1995: 7.48%
Worst: 1st quarter 1996: -3.18%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the Lehman Government/Corporate Bond Index, an index of
U.S. government, U.S. Treasury and agency securities, and corporate and
Yankee bonds. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 7.53% 7.12% 8.65%
Lehman Government/Corporate Bond Index 9.47% 7.30% 7.98%
</TABLE>
115
<PAGE>
[GRAPHIC] There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC] This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.32%
------
Total annual Fund operating expenses 0.82%
Fee waivers and/or reimbursements (0.10)%
------
Total net expenses(2) 0.72%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to limit total annual operating expenses to
0.72% for Primary A Shares until May 2000. The figure shown here is
after waivers and/or reimbursements. There is no guarantee that these
waivers and/or reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire May 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $74 $252 $445 $1,004
</TABLE>
116
<PAGE>
About the Municipal Bond Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Municipal
Fixed Income Management Team makes the day-to-day investment
decisions for the Fund.
[GRAPHIC] You'll find more about
TradeStreet on page 133.
[GRAPHIC] Lowest risk, lowest
income potential
This Fund has the lowest risk of the Nations Funds Municipal Bond
Funds because it has a duration of less than three years. Duration
is a measure used to estimate how much a Fund's portfolio will
fluctuate in response to a change in interest rates.
This means the Fund's value tends to change less when interest
rates change, but it could also earn less income than funds with
longer durations.
Nations Short-Term Municipal Income Fund
[GRAPHIC] Investment objective
This Fund seeks high current income exempt from federal income tax
consistent with minimal fluctuation of principal.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 80% of its assets in investment
grade municipal securities, which pay interest that is generally free
from federal income tax.
The Fund may invest up to 20% of its assets in:
o short-term debt securities that are taxable, like commercial paper
o debt securities issued by certain trusts, partnerships or other special
purpose issuers, like industrial revenue bonds
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be less than three
years, and its duration will be between 1.25 and 2.75 years.
When selecting individual investments, the portfolio management team looks at
a security's potential to generate both income and price appreciation. The
portfolio management team:
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and pre-refunded bonds (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change the
allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest in
securities with lower credit ratings if it believes that the potential for a
higher yield is substantial compared with the risk involved, and that the
credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
The team also considers other factors. It reviews public policy issues that
may affect the municipal bond market. Securities with different coupon rates
may also represent good investment opportunities based on supply and demand
conditions for bonds.
117
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
Call us at 1.800.765.2668 or contact your investment professional
for the Fund's current yield.
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
o tries to manage risk by diversifying the Fund's investments in securities of
many different issuers
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
[GRAPHIC] Risks and other things to consider
Nations Short-Term Municipal Income Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
investments that the portfolio management team chooses will not rise as
high as the team expects, or will fall.
o Interest rate risk - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o Holding cash - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o Tax considerations - Most of the distributions paid by the Fund come from
interest on municipal securities, and are generally free from federal
income tax, but may be subject to the federal alternative minimum tax,
and other state and local taxes. Any portion of a distribution that comes
from income paid by other kinds of securities or from realized capital
gains is generally subject to federal, state and local taxes.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
118
<PAGE>
[GRAPHIC] There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
1.07%* 0.46% 8.26% 4.18% 4.73% 4.74%
*Return is from inception (10-7-93) to 12-31-93.
[GRAPHIC] Year-to-date return as of June 30, 1999: 1.24%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 1st quarter 1995: 2.90%
Worst: 1st quarter 1994: -0.91%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the Lehman 3-Year Municipal Bond Index, a broad-based,
unmanaged index of investment grade bonds with maturities of two to
four years. All dividends are reinvested.
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Primary A Shares 4.74% 4.44% 4.45%
Lehman 3-Year
Municipal Bond Index 5.21% 4.90% 4.89%
</TABLE>
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.30%
Other expenses 0.42%
------
Total annual Fund operating expenses 0.72%
Fee waivers and/or reimbursements (0.32)%
------
Total net expenses(2) 0.40%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
119
<PAGE>
[GRAPHIC] This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $41 $198 $369 $864
</TABLE>
120
<PAGE>
About the Municipal Bond Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Municipal
Fixed Income Management Team makes the day-to-day investment
decisions for the Fund.
[GRAPHIC] You'll find more about
TradeStreet on page 133.
[GRAPHIC] Moderate risk, moderate
income potential
This Fund has relatively moderate risk compared with the other two
Nations Funds Municipal Bond Funds because it has a duration of
between three and six years. Duration is a measure used to
estimate how much a Fund's share price will fluctuate in response
to a change in interest rates.
The Fund's value will tend to change more when interest rates
change than the value of Nations Short-Term Municipal Income Fund,
but it could also earn more income.
Its value will change less when interest rates change than the
value of Nations Municipal Income Fund, but it could also earn
less income.
Nations Intermediate Municipal Bond Fund
[GRAPHIC] Investment objective
This Fund seeks high current income exempt from federal income tax
consistent with moderate fluctuation of principal.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 80% of its assets in investment
grade municipal securities, which pay interest that is generally free
from federal income tax.
The Fund may invest up to 20% of its assets in:
o short-term debt securities that are taxable, like commercial paper
o debt securities issued by certain trusts, partnerships or other special
purpose issuers, like industrial revenue bonds
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be between three
and 10 years, and its duration will be between three and six years.
When selecting individual investments, the portfolio management team looks at
a security's potential to generate both income and price appreciation. The
portfolio management team:
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and pre-refunded bonds (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change the
allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team will invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and that
the credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
The team also considers other factors. It reviews public policy issues that
may affect the municipal bond market. Securities with different coupon rates
may also represent good investment opportunities based on supply and demand
conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
o tries to manage risk by diversifying the Fund's investments in securities of
many different issuers
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
121
<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund starting on
page 129 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations Intermediate Municipal Income Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
investments that the portfolio management team chooses will not rise as
high as the team expects, or will fall.
o Interest rate risk - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o Holding cash - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o Tax considerations - Most of the distributions paid by the Fund come from
interest on municipal securities, and are generally free from federal
income tax, but may be subject to the federal alternative minimum tax,
and other state and local taxes. Any portion of a distribution that comes
from income paid by other kinds of securities or from realized capital
gains is generally subject to federal, state and local taxes.
122
<PAGE>
[GRAPHIC] Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
Call us at 1.800.765.2668 or contact your investment professional
for the Fund's current yield.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
4.35%* -4.54% 14.76% 4.04% 7.36% 5.45%
*Return is from inception (7-30-93) to 12-31-93.
Year-to-date return as of June 30, 1999: -0.96%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 1st quarter 1995: 6.00%
Worst: 1st quarter 1994: -4.02%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the Lehman 7-Year Municipal Bond Index, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.45% 5.23% 5.64%
Lehman 7-Year
Municipal Bond Index 8.49% 6.45% 6.14%
</TABLE>
123
<PAGE>
[GRAPHIC] There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC] This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.30%
------
Total annual Fund operating expenses 0.70%
Fee waivers and/or reimbursements (0.20)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $204 $370 $852
</TABLE>
124
<PAGE>
About the Municipal Bond Funds
- --------------------------------------------------------------------------------
[GRAPHIC] About the sub-adviser
TradeStreet is this Fund's sub-adviser. TradeStreet's Municipal
Fixed Income Management Team makes the day-to-day investment
decisions for the Fund.
[GRAPHIC] You'll find more about
TradeStreet on page 133.
[GRAPHIC] Highest risk, highest
income potential
This Fund has the relatively highest risk of the three Nations
Funds Municipal Bond Funds because it has a duration of more than
six years. Duration is a measure used to estimate how much a
fund's portfolio will fluctuate in response to a change in
interest rates.
This means the Fund's value tends to change more when interest
rates change, but it could also earn more income than the two
Funds with shorter durations.
Nations Municipal Income Fund
[GRAPHIC] Investment objective
This Fund seeks high current income exempt from federal income tax with
the potential for principal fluctuation associated with investments in
long-term municipal securities.
[GRAPHIC] Principal investment strategies
The Fund normally invests at least 80% of its assets in investment
grade municipal securities, which pay interest that is generally free
from federal income tax.
The Fund may invest up to 20% of its assets in:
o short-term debt securities that are taxable, like commercial paper
o debt securities issued by certain trusts, partnerships or other
special purpose issuers, like industrial revenue bonds
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's average dollar-weighted maturity will be more than seven
years, and its duration will be more than six years.
When selecting individual investments, the portfolio management team looks at
a security's potential to generate both income and price appreciation. The
portfolio management team:
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and pre-refunded bonds (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change the
allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team will invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and that
the credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
The team also considers other factors. It reviews public policy issues that
may affect the municipal bond market. Securities with different coupon rates
may also represent good investment opportunities based on supply and demand
conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
o tries to manage risk by diversifying the Fund's investments in securities of
many different issuers
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
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<PAGE>
[GRAPHIC] You'll find more about
other risks of investing in
this Fund on starting
page 129 and in the SAI.
[GRAPHIC] Risks and other things to consider
Nations Municipal Income Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
investments that the portfolio management team chooses will not rise as
high as the team expects, or will fall.
o Interest rate risk - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o Credit risk - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o Changing distribution levels - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o Holding cash - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o Tax considerations - Most of the distributions paid by the Fund come from
interest on municipal securities, and are generally free from federal
income tax, but may be subject to state and local taxes, and the federal
alternative minimum tax. Any portion of a distribution that comes from
income paid by other kinds of securities or from realized capital gains
is generally subject to federal, state and local taxes.
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<PAGE>
[GRAPHIC] Many things affect a Fund's performance, including market
conditions, the composition of the Fund's holdings, and Fund
expenses.
Call us at 1.800.765.2668 or contact your investment professional
for the Fund's current yield.
[GRAPHIC] A look at the Fund's performance
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A Fund's past performance is no guarantee of how it will perform
in the future.
Year by year total return (%) as of December 31 each year
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
10.84%* 8.32% 13.51% -7.44% 19.51% 4.71% 9.56% 6.00%
*Return is from inception (2-1-91) to 12-31-91.
[GRAPHIC] Year-to-date return as of June 30, 1999: -1.43%
Best and worst quarterly returns during this period
<TABLE>
<S> <C>
Best: 1st quarter 1995: 8.01%
Worst: 1st quarter 1994: -6.61%
</TABLE>
Average annual total return as of December 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the Lehman Municipal Bond Index, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 6.00% 6.11% 7.96%
Lehman Muncipal
Bond Index 6.48% 6.22% 7.92%
</TABLE>
127
<PAGE>
[GRAPHIC] There are two kinds of fees -- sales charges you pay directly, and
annual fund operating expenses that are deducted from a fund's
assets.
Total net expenses are actual expenses paid by the Fund after
waivers and/or reimbursements.
[GRAPHIC] This is an example only. Your actual costs could be higher or
lower, depending on the amount you invest, and on the Fund's
actual expenses and performance.
[GRAPHIC] What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.32%
------
Total annual Fund operating expenses 0.82%
Fee waivers and/or reimbursements (0.22)%
------
Total net expenses(2) 0.60%
======
</TABLE>
(1)The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $61 $240 $433 $993
</TABLE>
128
<PAGE>
[GRAPHIC] Other important information
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 7. The following are
some other risks and information you should consider before you invest:
o Changing investment objectives and policies - The investment objective
and certain investment policies of any Fund can be changed without
shareholder approval. Other investment policies may be changed only with
shareholder approval.
o Holding other kinds of investments - The Funds may hold investments that
aren't part of their principal investment strategies. Please refer to the
SAI for more information. The portfolio managers or management team can
also choose not to invest in specific securities described in this
prospectus and in the SAI.
o Foreign investment risk - Funds that invest in foreign securities may be
affected by changes in currency exchange rates and the costs of
converting currencies; the implementation of the Euro; foreign government
controls on foreign investment, repatriation of capital, and currency and
exchange; foreign taxes; inadequate supervision and regulation of some
foreign markets; difficulty selling some investments which may increase
volatility; different settlement practices or delayed settlements in some
markets; difficulty getting complete or accurate information about
foreign companies; less strict accounting, auditing and financial
reporting standards than those in the U.S.; political, economic or social
instability; and difficulty enforcing legal rights outside the U.S.
o Emerging markets risk - Securities issued by companies in developing or
emerging market countries, like those in Eastern Europe, the Middle East,
Asia or Africa, may be more sensitive to the risks of foreign investing.
In particular, these countries may experience instability resulting from
rapid social, political and economic development. Many of these countries
are dependent on international trade, which makes them sensitive to world
commodity prices and economic downturns in other countries. Some emerging
countries have a higher risk of currency devaluation, and some countries
may experience long periods of high inflation or rapid changes in
inflation rates.
o Investing defensively - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn or
because of political or other conditions. A Fund may not achieve its
investment objective while it is investing defensively.
129
<PAGE>
o Portfolio turnover - A Fund that replaces -- or turns over -- more than
100% of its investments in a year is considered to trade frequently.
Frequent trading can result in larger distributions of short-term capital
gains to shareholders. These gains are taxable at higher rates than
long-term capital gains. Frequent trading can also mean higher brokerage
and other transaction costs, which could reduce the Fund's returns. The
Funds generally buy securities for capital appreciation, investment
income, or both, and don't engage in short- term trading. The annual
portfolio turnover rate for Nations Strategic Equity Fund and the Managed
Index Funds is expected to be no more than 25%. You'll find the portfolio
turnover rate for each Fund in Financial highlights.
o Preparing for the year 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer systems
that cannot read a four-digit year may not be able to calculate and
process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they have
been working to make the necessary changes to their systems, and that
they expect them to be adapted in time. There is no guarantee, however,
that their computer systems will be ready by the year 2000. If their
computer systems are not ready in time, there could be a negative effect
on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer systems of
foreign issuers, governments or other entities may not be ready for the
year 2000.
130
<PAGE>
[GRAPHIC] Banc of America Advisors, Inc.
One Bank of America Plaza
Charlotte, North Carolina 28255
[GRAPHIC] How the Funds are managed
Investment adviser
BAAI is the investment adviser to over 60 mutual fund portfolios in the
Nations Funds family, including the Equity, Balanced and Fixed Income Funds
described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation. Nations Funds
pay BAAI an annual fee for its investment advisory services. The fee is
calculated daily based on the average net assets of each Fund and is paid
monthly. BAAI uses part of this money to pay investment sub-advisers for the
services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until May 2000 or July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after these dates.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
131
<PAGE>
Annual investment advisory fee, as a % of average daily net assets
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee1 fiscal year
<S> <C> <C>
Nations Capital Income Fund 0.65% 0.45%
Nations Value Fund 0.65% 0.75%
Nations Equity Income Fund 0.65% 0.64%
Nations Blue Chip Fund(2) 0.65% 0.50%
Nations Marsico Growth & Income Fund(2) 0.75% 0.85%
Nations Strategic Equity Fund 0.65% 0.75%
Nations Capital Growth Fund 0.65% 0.75%
Nations Disciplined Equity Fund 0.65% 0.75%
Nations Marsico Focused Equities Fund(2) 0.75% 0.85%
Nations Emerging Growth Fund 0.65% 0.75%
Nations Small Company Growth Fund 0.90% 0.73%
Nations International Value Fund 0.90% 0.91%
Nations International Equity Fund(2) 0.80% 0.90%
Nations International Growth Fund 0.80% 0.81%
Nations Emerging Markets Fund 1.00% 0.90%
Nations Equity Index Fund 0.40% 0.14%
Nations Managed Index Fund 0.40% 0.27%
Nations Managed SmallCap Index Fund 0.40% 0.18%
Nations Managed Value Index Fund 0.40% 0.00%
Nations Managed SmallCap Value Index Fund 0.40% 0.00%
Nations Balanced Assets Fund 0.65% 0.75%
Nations Asset Allocation Fund 0.65% 0.40%
Nations Short-Term Income Fund 0.30% 0.30%
Nations Short-Intermediate Government Fund 0.30% 0.40%
Nations Intermediate Bond Fund(2) 0.40% 0.21%
Nations Strategic Fixed Income Fund 0.40% 0.50%
Nations Government Securities Fund 0.50% 0.50%
Nations U.S. Government Bond Fund 0.50% 0.32%
Nations Diversified Income Fund 0.50% 0.50%
Nations Short-Term Municipal Income Fund 0.30% 0.12%
Nations Intermediate Municipal Bond Fund 0.40% 0.34%
Nations Municipal Income Fund 0.50% 0.42%
</TABLE>
(1)These fees are the current contract levels, which in most cases have been
reduced from the contract levels that were in effect during the last fiscal
year.
(2)These funds don't have their own investment adviser because they invest in
the Nations Blue Chip Master Portfolio, Nations Marsico Growth & Income
master Portfolio, Nations Marsico Focused Equities Master Portfolio, Nations
International Equity Master Portfolio, and the Nations Intermediate Bond
Master Portfolio, respectively. BAAI is the investment adviser to these
Master Portfolios.
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<PAGE>
[GRAPHIC] TradeStreet Investment
Associates, Inc.
One Bank of America Plaza
Charlotte, North Carolina 28255
Investment sub-advisers
Nations Funds and BAAI have engaged investment sub-advisers to provide day-
to-day portfolio management for the Funds. These sub-advisers function under
the supervision of BAAI and the Boards of Directors/Trustees of Nations Funds.
TradeStreet Investment Associates, Inc.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including equity and fixed income securities, and money market
instruments.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in the
Nations Funds family. TradeStreet takes a team approach to investment
management. Each team has access to the latest technology and analytical
resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Capital Income Fund Value Management Team
Nations Value Fund Value Management Team
Nations Equity Income Fund Structured Products Management Team
Nations Capital Growth Fund Core Growth Management Team
Nations Disciplined Equity Fund Structured Products Management Team
Nations Emerging Growth Fund Strategic Growth Management Team
Nations Small Company Growth Fund Strategic Growth Management Team
Nations Equity Index Fund Structured Products Management Team
Nations Managed Index Fund Structured Products Management Team
Nations Managed SmallCap Index Fund Structured Products Management Team
Nations Managed Value Index Fund Structured Products Management Team
Nations Managed SmallCap Value Index Fund Structured Products Management Team
Nations Balanced Assets Fund Value Management Team
Nations Asset Allocation Fund Value Management Team for the equity
portion of the Fund
Fixed Income Management Team
for the fixed income and money market
portions of the Fund
Nations Short-Term Income Fund Fixed Income Management Team
Nations Short-Intermediate Government Fund Fixed Income Management Team
Nations Intermediate Bond Fund(1) Fixed Income Management Team
Nations Strategic Fixed Income Fund Fixed Income Management Team
Nations Government Securities Fund Fixed Income Management Team
Nations Diversified Income Fund Fixed Income Management Team
Nations Short-Term Municipal Income Fund Municipal Fixed Income Management Team
Nations Intermediate Municipal Bond Fund Municipal Fixed Income Management Team
Nations Municipal Income Fund Municipal Fixed Income Management Team
</TABLE>
(1)Nations Intermediate Bond Fund doesn't have its own investment sub-adviser
because it invests in Nations Intermediate Bond Master Portfolio.
TradeStreet is the investment sub-adviser to the Master Portfolio.
133
<PAGE>
[GRAPHIC] Marsico Capital
Management, LLC
1200 17th Street
Suite 1300
Denver, Colorado 80202
Marsico Capital Management, LLC
Marsico Capital is a full service investment advisory firm founded by Thomas
F. Marsico in September 1997. It is a registered investment adviser,
specializing in large capitalization stocks, and currently has $6.5 billion in
assets under management.
Marsico Management Holdings, LLC, a wholly-owned subsidiary of Bank of America
Corporation, indirectly owns 50% of the equity of Marsico Capital.
Marsico Capital is the investment sub-adviser to:
o Nations Marsico Focused Equities Master Portfolio
o Nations Marsico Growth & Income Master Portfolio
Thomas F. Marsico, Chairman and Chief Executive Officer of Marsico Capital, is
the portfolio manager responsible for making the day-to-day investment
decisions for these Master Portfolios. Mr. Marsico was an executive vice
president and portfolio manager at Janus Capital Corporation from 1988 until
he formed Marsico Capital in September 1997. He has more than 20 years of
experience as a securities analyst and portfolio manager.
134
<PAGE>
Performance of other equity funds managed by Thomas Marsico
Nations Marsico Focused Equities Fund and Nations Marsico Growth & Income Fund
have been in operation since December 31, 1997, so they have a relatively
short performance history. The tables below are designed to show you how
similar equity funds managed by Thomas Marsico performed in the past.
The Janus Twenty Fund has an investment objective, policies and strategies
that are substantially similar to Nations Marsico Focused Equities Fund. Mr.
Marsico managed the Janus Twenty Fund from January 31, 1988 through August 11,
1997. He had full discretionary authority for selecting investments for that
Fund, which had approximately $6 billion in net assets on August 11, 1997.
The table below shows the returns for the Janus Twenty Fund compared with the
S&P 500 for the periods ending August 7, 1997. The returns reflect deductions
of fees and expenses, and assume all dividends and distributions have been
reinvested.
Average annual total returns as of August 7, 1997
<TABLE>
<CAPTION>
Janus Twenty
Fund (%) S&P 500 (%)
<S> <C> <C>
one year 48.21 46.41
three years 32.07 30.63
five years 20.02 20.98
during the period of Mr. Marsico's management
(January 31, 1988 to August 7, 1997) 23.38 18.20
</TABLE>
This information is designed to show the historical track record of Mr.
Marsico. It does not indicate how the Fund has performed or will perform in
the future.
Performance will vary based on many factors, including market conditions, the
composition of the Fund's holdings and the Fund's expenses.
The Janus Growth and Income Fund has an investment objective, policies and
strategies that are substantially similar to Nations Marsico Growth & Income
Fund. Mr. Marsico managed the Janus Growth and Income Fund from its inception
on May 31, 1991 through August 11, 1997. He had full discretionary authority
for selecting investments for that Fund, which had approximately $1.7 billion
in net assets on August 11, 1997.
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[GRAPHIC] Bank of America
Investment Management
100 North Broadway
St. Louis, Missouri 63102
[GRAPHIC] Chicago Equity Partners
Corporation
231 South LaSalle
Chicago, Illinois 60697
The table below shows the returns for the Janus Growth and Income Fund
compared with the S&P 500 for the period ending August 7, 1997. The returns
reflect deductions of fees and expenses, and assume all dividends and
distributions have been reinvested.
Average annual total returns as of August 7, 1997
<TABLE>
<CAPTION>
Janus
Growth and
Income Fund (%) S&P 500 (%)
<S> <C> <C>
one year 47.77 46.41
three years 31.13 30.63
five years 21.16 20.98
during the period of Mr. Marsico's management
(May 31, 1991 to August 7, 1997) 21.19 18.59
</TABLE>
This information is designed to show the historical track record of Mr.
Marsico. It does not indicate how the Fund has performed or will perform in
the future.
Performance will vary based on many factors, including market conditions, the
composition of the Fund's holdings and the Fund's expenses.
Bank of America Investment Management
BAIM, a division of Bank of America, is the investment sub-adviser to Nations
Strategic Equity Fund.
The Fund is managed by Michael E. Kenneally, president and chief investment
officer of BAIM since 1997. He has managed the Fund since its inception on
October 2, 1998. Before joining BAIM, Mr. Kenneally was managing director at
Boatmen's Trust Company, in charge of fundamental and quantitative research,
small-capitalization, passive and international equity investment. He holds a
bachelor's degree in economics and an MBA in finance from the University of
Missouri.
Chicago Equity Partners Corporation
Chicago Equity is a registered investment adviser and a wholly-owned
subsidiary of Bank of America. Chicago Equity is the investment sub-adviser to
Nations Blue Chip Master Portfolio, and is one of two sub-advisers to Nations
Asset Allocation Fund.
Chicago Equity's Equity Management Team is responsible for making the day-
to-day investment decisions for Nations Blue Chip Master Portfolio and for the
equity portion of Nations Asset Allocation Fund.
136
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[GRAPHIC] Brandes Investment
Partners, L.P.
12750 High Bluff Drive
San Diego, California 92130
Brandes Investment Partners, L.P.
Founded in 1974, Brandes is an investment advisory firm with 37 investment
professionals who manage more than $20 billion in assets. Brandes uses a
value-oriented approach to managing international investments, seeking to
build wealth by buying high quality, undervalued stocks.
Brandes is the investment sub-adviser to Nations International Value Fund.
Brandes' Large Cap Investment Committee is responsible for making the day-
to-day investment decisions for the Fund.
Performance of other international equity funds and accounts managed by Brandes
Nations International Value Fund has been in operation since December 27,
1995. The table below is designed to show you how a similar composite of
international equity accounts managed by Brandes performed over a longer
period in the past.
The Brandes composite's investment objective, policies and strategies are
substantially similar to Nations International Value Fund.
The table below shows the returns for the Brandes composite compared with the
MSCI EAFE Index for the periods ending December 31, 1998. The returns reflect
deductions of fees and expenses, and assume all dividends and distributions
have been reinvested.
Average annual total returns as of December 31, 1998
<TABLE>
<CAPTION>
Brandes MSCI EAFE
Composite (%) Index (%)
<S> <C> <C>
one year 15.03% 20.33%
three years 17.12% 9.00%
five years 12.13% 9.19%
since inception (6/30/90) 18.10% 6.97%
</TABLE>
Average annual total returns as of December 31, 1998
<TABLE>
<CAPTION>
Brandes MSCI EAFE
Composite (%) Index (%)
<S> <C> <C>
1998 15.03% 20.33%
1997 20.00% 1.78%
1996 16.34% 6.05%
1995 13.75% 11.21%
1994 (2.98)% 7.78%
1993 40.86% 32.56%
1992 6.28% (12.17)%
1991 40.17% 12.13%
</TABLE>
137
<PAGE>
[GRAPHIC] Gartmore Global Partners
One Bank of America Plaza
Charlotte, North Carolina 28255
This information is designed to demonstrate the historical track record of
Brandes. It does not indicate how the Fund has performed or will perform in
the future.
Performance will vary based on many factors, including market conditions, the
composition of the Fund's holdings and the Fund's expenses.
The Brandes composite includes Brandes International Equity Fund (since 1995)
and international equity accounts managed by Brandes. The accounts don't pay
the same expenses that mutual funds pay and aren't subject to the
diversification rules, tax restrictions and investment limits under the 1940
Act or Subchapter M of the Internal Revenue Code. Returns could have been
lower if the composite had been subject to these expenses and regulations. The
aggregate returns of the accounts in the composite may not reflect the returns
of any particular account of Brandes.
Gartmore Global Partners
Gartmore is a global asset manager dedicated to serving the needs of U.S.
based investors. Gartmore was formed in 1995 as a registered investment
adviser and manages more than $1 billion in assets.
Gartmore is a joint venture structured as a general partnership between NB
Partner Corp., a wholly-owned subsidiary of Bank of America, and Gartmore U.S.
Limited, an indirect, wholly-owned subsidiary of Gartmore Investment
Management plc, a UK holding company for a leading UK-based international fund
management group of companies.
Gartmore follows a growth philosophy, which is reflected in its active
management of market allocation and stock selection.
Gartmore is one of three investment sub-advisers to:
o Nations International Equity Master Portfolio
Gartmore is the investment sub-adviser to:
o Nations International Growth Fund
o Nations Emerging Markets Fund
Nations International Equity Master Portfolio is co-managed by six portfolio
managers:
Christopher Palmer has been responsible since May 1999 for investments in
developing countries, and has been the principal portfolio manager of Nations
Emerging Markets Fund since that time. He joined Gartmore in 1995 and is a
senior investment manager on the Gartmore Emerging Markets Team. Before he
joined Gartmore, Mr. Palmer worked for Unifund, S.A., a private investment
bank, in its Mexico City and Hong Kong offices, and managed global
derivatives, credit and counterparty credit risk as vice president in the
Institutional Credit Department of Bear Stearns & Co. He graduated from
Colgate University in 1986 with a BA Honors degree in History and completed an
MBA in Finance at New York University in 1988. Mr. Palmer was awarded the CFA
designation by the Association of Investment Management and Research in 1993.
138
<PAGE>
SEOK TEOH has been responsible since June 1998 for investments in Asia. Ms.
Teoh has been with Gartmore since 1990 as the London based manager of its Far
East Team. Previously, she managed four equity funds for Rothschild Asset
Management in Tokyo and Singapore, and was also responsible for Singaporean
and Malaysian equity sales at Overseas Union Bank Securities in Singapore. Ms.
Teoh is native to Singapore and is fluent in Mandarin and Cantonese. She
received an Economics degree from the University of Durham.
JOHN STEWART has shared responsibility with Nick Reid for investments in Japan
since August 1999. He is also senior investment manager for the Gartmore
Japanese Equities Team and is responsible for managing specialist
institutional portfolios and providing input to the global asset allocation
team in London. Mr. Stewart joined Gartmore in 1992, after starting his career
at the London office of Prudential Portfolio Managers. He graduated from
Loughborough University in 1991 with a BS Honors degree in Banking and
Finance. Mr. Stewart is also a member of the Institute of Investment
Management and Research, and the Chartered Institute of Bankers.
NICK REID has shared responsibility with John Stewart for investments in Japan
since August 1999. He has been investment manager for the Gartmore Japanese
Equities Team since he joined Gartmore in 1994 and has specific responsibility
for managing retail funds. Before he joined Gartmore, Mr. Reid was an United
Kingdom Smaller Companies Analyst with Panmure Gordon and a fund manager
covering Japanese and other Asian markets with Refuge Assurance. He graduated
from Cambridge University in 1989 with an honors degree in History. Mr. Reid
is also an associate member of the Institute of Investment Management and
Research.
STEPHEN JONES has been responsible for investments in Europe since 1998. He is
also head of Gartmore European Equities. Mr. Jones joined Gartmore in 1994 and
was appointed head of the European equity team in 1995. He began his career at
The Prudential in 1984, and became a European equities investment manager in
1987, focusing on France, Belgium and Switzerland. He graduated from
Manchester University in 1984 with an honors degree in Economics.
STEPHEN WATSON has been responsible since June 1998 for allocating assets
among the various regions, and for determining investments in regions not
covered by the other portfolio managers. He was the sole portfolio manager
from February 1995 to June 1998. Mr. Watson joined Gartmore in 1993 as a
global fund manager, and is the chief investment officer of Gartmore Global
Partners and a member of Gartmore's global policy group. Before joining
Gartmore, he was a director and global fund manager with James Capel Fund
Managers, London, as well as client service manager for international clients.
He was in Capel-Cure Myers' portfolio management division from 1980 to 1987,
and began his career in 1976 with Samuel Motagu. He is a member of the
Securities Institute.
139
<PAGE>
Nations International Growth Fund is managed by Brian O'Neill, the principal
senior investment manager of the Gartmore Global Portfolio Team at Gartmore
Global Partners. He has managed the Fund since 1997. Before joining Gartmore
in 1981, Mr. O'Neill was a fund manager in global equities at Antony Gibbs &
Sons and an investment analyst at Royal Insurance. He graduated from Glasgow
University in 1969 with a MA Honors degree in Political Economy.
Nations Emerging Markets Fund is managed by Christopher Palmer, a senior
investment manager on the Gartmore Emerging Markets Team. He has managed the
Fund since August 1999. He also co-manages Nations International Equity Master
Portfolio.
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<PAGE>
[GRAPHIC] INVESCO Global Asset
Management (N.A), Inc.
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
[GRAPHIC] Putnam Investment
Management, Inc.
One Post Office Square
Boston, Massachusetts 02109
[GRAPHIC] Boatmen's Capital
Management, Inc.
100 North Broadway
St. Louis, Missouri 63102
[GRAPHIC] Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
[GRAPHIC] First Data Investor
Services Group, Inc.
101 Federal Street
Boston, Massachusetts 02110
INVESCO Global Asset Management (N.A), Inc.
INVESCO is a division of INVESCO Global, a publicly traded investment
management firm located in London, England, and a wholly-owned subsidiary of
AMVESCAP PLC, a publicly traded UK financial holding company, which is also
located in London.
INVESCO is one of three investment sub-advisers to Nations International
Equity Master Portfolio. INVESCO's International Equity Portfolio Management
Team is responsible for making the day-to-day investment decisions for its
portion of the Fund.
Putnam Investment Management, Inc.
Putnam is a wholly-owned subsidiary of Putnam Investments, Inc., which, except
for shares held by employees, is owned by Marsh & McLennan Companies.
Putnam is one of three investment sub-advisers to Nations International Equity
Master Portfolio. Putnam's Core International Equity Group is responsible for
making the day-to-day investment decisions for its portion of the Fund.
Boatmen's Capital Management, Inc.
Boatmen's is a wholly-owned subsidiary of Bank of America. Boatmen's is the
investment sub-adviser to Nations U.S. Government Bond Fund. Boatmen's Fixed
Income Committee is responsible for making the day-to-day investment decisions
for the Fund.
Other service providers
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee for their services, plus certain out-of-pocket expenses. The fee
is calculated as an annual percentage of the average daily net assets of the
Funds and is paid monthly, as follows:
<TABLE>
<S> <C>
Domestic Equity Funds 0.23%
International Funds 0.22%
Fixed Income Funds 0.22%
</TABLE>
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
141
<PAGE>
About your investment
- --------------------------------------------------------------------------------
[GRAPHIC] When you sell shares of a mutual fund, the fund is effectively
"buying" them back from you. This is called a redemption.
[GRAPHIC]
A business day is any day that the New York Stock Exchange (NYSE)
is open. A business day ends at the close of regular trading on
the NYSE, usually at 4:00 p.m. Eastern time. If the NYSE closes
early, the business day ends as of the time the NYSE closes.
The NYSE is closed on weekends and on the following national
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
[GRAPHIC] Buying, selling and exchanging shares
This prospectus offers Primary A Shares of the Funds. Here are some general
rules about this class of shares:
o Primary A Shares are available to certain financial institutions and
intermediaries for their own accounts, and for certain client accounts for
which they act as a fiduciary, agent or custodian. These include:
o Bank of America and certain of its affiliates
o certain other financial institutions and intermediaries, including
financial planners and investment advisers
o institutional investors
o charitable foundations
o endowments
o other Funds in Nations Funds Family
o The minimum initial investment is $250,000. Financial institutions or
intermediaries can total the investments they make on behalf of their
clients to meet the minimum initial investment amount.
o There is no minimum amount for additional investments.
o There are no sales charges for buying, selling or exchanging these shares.
You'll find more information about buying, selling and exchanging Primary A
Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related programs or services.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. Please contact your
investment professional, or call us at 1.800.765.2668 if you have any
questions or you need help placing an order.
How shares are priced
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share for each class of each
Fund at the end of each business day. First, we calculate the net asset value
for each class of a Fund by determining the value of the Fund's assets in the
class and then subtracting its liabilities. Next, we divide this amount by the
number of shares that investors are holding in the class.
142
<PAGE>
Valuing securities in a Fund
The value of a Fund's assets is based on the total market value of all of the
securities it holds. The prices reported on stock exchanges and securities
markets around the world are usually used to value securities in a Fund. If
prices aren't readily available, we'll base the price of a security on its
fair market value. We use the amortized cost method, which approximates market
value, to value short-term investments maturing in 60 days or less.
International markets may be open on days when U.S. markets are closed. The
value of foreign securities owned by a Fund could change on days when Fund
shares may not be bought or sold.
How orders are processed
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents before the end of a business
day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will
receive that day's net asset value per share. Orders received after the end of
a business day will receive the next business day's net asset value per share.
The business day that applies to your order is also called the trade date. We
may refuse any order to buy or exchange shares. If this happens, we'll return
any money we've received.
[GRAPHIC] Buying shares
Here are some general rules for buying shares:
o Investors buy Primary A Shares at net asset value per share.
o If we don't receive payment within three business days of receiving
an order, we'll refuse the order. We'll return any payment received
for orders that we refuse.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we receive
payment on time.
o Shares purchased are recorded on the books of the Fund. We don't
issue certificates.
o Financial institutions and intermediaries are responsible for
recording the beneficial ownership of the shares of their clients,
and for reporting this ownership on account statements they send to
their clients.
[GRAPHIC] Selling shares
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire within
three business days after Stephens, First Data or their agents
receive the order.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold for at least 15
days after the trade date of the purchase, or until the check has
cleared.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
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<PAGE>
[GRAPHIC] You should make sure you understand the investment objectives and
policies of the Fund you're exchanging into. Please read its
prospectus carefully.
o Under certain circumstances allowed under the Investment Company Act
of 1940 (1940 Act), we can pay investors in securities or other
property when they sell shares, or delay payment of the sale
proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions, please contact your retirement
plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 60 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its clients
o under certain other circumstances allowed under the 1940 Act
[GRAPHIC] Exchanging shares
Investors can sell shares of a Fund to buy shares of another Nations
Fund. This is called an exchange, and may be appropriate if investment
goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Primary A Shares of a Fund for Primary A
Shares of any other Nations Fund. In some cases, the only Money
Market Fund option is Trust Class Shares of Nations Reserves Money
Market Funds.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
144
<PAGE>
[GRAPHIC] The power of compounding
Reinvesting your distributions buys you more shares of a
Fund -- which lets you take advantage of the potential for
compound growth.
Putting the money you earn back into your investment means it, in
turn, may earn even more money. Over time, the power of
compounding has the potential to significantly increase the value
of your investment. There is no assurance, however, that you'll
earn more money if you reinvest your distributions.
[GRAPHIC] Distributions and taxes
About distributions
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and
dividends paid on common stocks.
o A fund can also have capital gain if the value of its investments
increases. If a fund sells an investment at a gain, the gain is
realized. If a fund continues to hold the investment, any gain is
unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gain to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gain to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
All of the Funds distribute any net realized capital gain at least once a
year. The frequency of distributions of net investment income varies by Fund:
<TABLE>
<CAPTION>
Frequency of
Fund income distributions
<S> <C>
Nations Capital Income Fund quarterly
Nations Value Fund monthly
Nations Equity Income Fund monthly
Nations Blue Chip Fund quarterly
Nations Marsico Growth & Income Fund quarterly
Nations Strategic Equity Fund monthly
Nations Capital Growth Fund monthly
Nations Disciplined Equity Fund monthly
Nations Marsico Focused Equities Fund quarterly
Nations Emerging Growth Fund quarterly
Nations Small Company Growth Fund monthly
Nations International Value Fund annually
Nations International Equity Fund quarterly
Nations International Growth Fund annually
Nations Emerging Markets Fund quarterly
Nations Equity Index Fund quarterly
Nations Managed Index Fund monthly
Nations Managed SmallCap Index Fund quarterly
Nations Managed Value Index Fund quarterly
Nations Managed SmallCap Value Index Fund quarterly
Nations Balanced Assets Fund quarterly
Nations Asset Allocation Fund quarterly
Nations Short-Term Income Fund monthly
Nations Short-Intermediate Government Fund monthly
Nations Intermediate Bond Fund monthly
Nations Strategic Fixed Income Fund monthly
Nations Government Securities Fund monthly
Nations U.S. Government Bond Fund monthly
Nations Diversified Income Fund monthly
Nations Short-Term Municipal Income Fund monthly
Nations Intermediate Municipal Bond Fund monthly
Nations Municipal Income Fund monthly
</TABLE>
145
<PAGE>
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day before the distribution is declared. Shares of
the Equity, International, Index and Balanced Funds are eligible to receive
distributions from the trade date of the purchase, as long as it's at least
one day before a distribution is declared, up to the day before the shares are
sold. Shares of the Fixed Income and Municipal Bond Funds are eligible to
receive distributions from the trade date of the purchase up to and including
the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses. Each time a distribution is made,
the net asset value per share of the share class is reduced by the amount of
the distribution.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.765.2668.
We generally pay cash distributions within five business days after the end of
the month, quarter or year in which the distribution was made. If you sell all
of your shares, we'll pay any distribution that applies to those shares in
cash within five business days after the sale was made.
If you buy shares of a Fund shortly before it makes a distribution, you will,
in effect, receive part of your purchase back in the distribution, which is
subject to tax. Similarly, if you buy shares of a Fund that holds securities
with unrealized capital gain, you will, in effect, receive part of your
purchase back if and when the Fund sells those securities and realizes and
distributes the gain. This distribution is also subject to tax. Some Funds
have built up, or have the potential to build up, high levels of unrealized
capital gain.
146
<PAGE>
[GRAPHIC] This information is a summary of how federal income taxes may
affect your investment in the Funds. It is not intended as a
substitute for careful tax planning. You should consult with your
own tax advisor about your situation, including any foreign, state
and local taxes that may apply.
[GRAPHIC] For more information about
taxes, please see the SAI.
How taxes affect your investment
Distributions that come from net investment income, net foreign currency gain
and any excess of net short-term capital gain over net long-term capital loss,
generally are taxable to you as ordinary income.
Distributions that come from net capital gain (generally the excess of net
long-term capital gain over net short-term capital loss) generally are taxable
to you as net capital gain.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
Municipal Bond Funds
Distributions that come from a Municipal Bond Fund's tax-exempt interest
income are generally free from federal income tax, but may be subject to state
or local tax. All or a portion of these distributions may also be subject to
the federal alternative minimum tax.
Any distributions that come from taxable income or realized capital gain are
generally subject to tax. Distributions that come from taxable income and any
net short-term capital gain (generally the excess of net short-term capital
gain over net long-term capital loss) generally are taxable to you as ordinary
income. Distributions of net capital gain (generally the excess of net
long-term capital gain over net short-term capital loss) generally are taxable
to you as net capital gain. Corporate shareholders will not be able to deduct
any distributions from these Funds when determining their taxable income.
Withholding tax
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
147
<PAGE>
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
Foreign taxes
Mutual funds that maintain most of their portfolio in foreign
securities -- like the International Funds -- have special tax considerations.
You'll generally be required to:
o include in your gross income your proportional amount of foreign taxes paid
by the fund
o treat this amount as foreign taxes you paid directly
o either deduct this amount when calculating your income, or subject to
certain conditions and limitations, claim this amount as a foreign tax
credit against your federal income tax liability
In general, each year you can claim up to $300 ($600 if you're filing jointly)
of foreign taxes paid (or deemed paid) by you as a foreign tax credit against
your federal income tax liability.
Taxation of redemptions and exchanges
Your redemptions (including redemptions "in kind") and exchanges of Fund
shares will usually result in a taxable capital gain or loss to you, depending
on the amount you receive for your shares (or are deemed to receive in the
case of exchanges) and the amount you paid (or are deemed to have paid) for
them.
[GRAPHIC] Financial highlights
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. Financial highlights for Primary A
Shares of Capital Income Fund, Blue Chip Fund, Asset Allocation Fund and
Intermediate Bond Fund are not provided because this class of shares had not
yet commenced operations during the periods indicated. The total investment
return line indicates how much an investment in the Fund would have earned,
assuming all dividends and distributions had been reinvested.
This information, except as noted below, has been audited by
PricewaterhouseCoopers LLP. The independent accountant's report and Nations
Funds financial statements are incorporated by reference into the SAI. Please
see the back cover to find out how you can get a copy.
The financial highlights of Nations International Value Fund, formerly Emerald
International Equity Fund, for the period ended May 15, 1998 and the year
ended November 30, 1997 have been audited by KPMG Peat Marwick LLP.
The financial highlights of Nations Small Company Growth Fund, Nations U.S.
Government Bond Fund and Nations International Growth Fund for the periods
ended May 16, 1997 were audited by other independent accountants.
148
<PAGE>
<TABLE>
<CAPTION>
Nations Value Fund For a Share outstanding throughout each period
Year ended Year ended
Primary A Shares 3/31/99# 03/31/98#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 19.92 $ 17.87
Net investment income 0.13 0.20
Net realized and unrealized gain/(loss) on
investments 0.64 5.98
Net increase/(decrease) in net asset value from
operations 0.77 6.18
Distributions:
Dividends from net investment income ( 0.14) ( 0.19)
Distributions from net realized capital gains ( 2.39) ( 3.94)
Total dividends and distributions ( 2.53) ( 4.13)
Net asset value, end of period $ 18.16 $ 19.92
Total return++ 4.15% 38.53%
==================================================== ========= ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,939,704 $2,248,460
Ratio of operating expenses to average net assets 0.94%(b)(c) 0.95%(b)
Ratio of net investment income to average net
assets 0.76% 1.04%
Portfolio turnover rate 38% 79%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.94%(b) 0.95%(b)
<CAPTION>
Primary A Shares Year ended Period ended Year ended Year ended
03/31/97 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 16.60 $ 16.21 $ 12.98 $ 13.74
Net investment income 0.26 0.07 0.27 0.24
Net realized and unrealized gain/(loss) on
investments 2.69 1.06 3.91 ( 0.23)
Net increase/(decrease) in net asset value from
operations 2.95 1.13 4.18 0.01
Distributions:
Dividends from net investment income ( 0.26) ( 0.12) ( 0.28) ( 0.23)
Distributions from net realized capital gains ( 1.42) ( 0.62) ( 0.67) ( 0.54)
Total dividends and distributions ( 1.68) ( 0.74) ( 0.95) ( 0.77)
Net asset value, end of period $ 17.87 $ 16.60 $ 16.21 $ 12.98
Total return++ 18.07% 7.20% 34.53% ( 0.08)%
==================================================== ======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,200,853 $998,957 $956,669 $799,743
Ratio of operating expenses to average net assets 0.97%(b) 0.96%+ 0.94% 0.93%
Ratio of net investment income to average net
assets 1.51% 1.30%+ 1.90% 1.85%
Portfolio turnover rate 47% 12% 63% 75%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.97%(b) 0.96%+ 0.94% 0.93%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
<TABLE>
<CAPTION>
Nations Equity Income Fund For a Share outstanding throughout each period
Year ended Year ended
Primary A Shares 3/31/99# 03/31/98#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 13.94 $ 12.30
Net investment income 0.23 0.29
Net realized and unrealized gain/(loss) on investments ( 1.45) 3.79
Net increase/(decrease) in net asset value from
operations ( 1.22) 4.08
Distributions:
Dividends from net investment income ( 0.23) ( 0.28)
Distributions from net realized capital gains ( 1.13) ( 2.16)
Total dividends and distributions ( 1.36) ( 2.44)
Net asset value, end of period $ 11.36 $ 13.94
Total return++ ( 9.40)% 37.21%
========================================================= ======= ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $575,076 $915,630
Ratio of operating expenses to average net assets 0.80%(b)(c) 0.86%(b)
Ratio of net investment income to average net assets 1.92% 2.22%
Portfolio turnover rate 69% 74%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.80%(b) 0.86%(b)
<CAPTION>
Primary A Shares Year ended Period ended Year ended Year ended
03/31/97 03/31/96(a) 05/31/95 5/31/94
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 13.14 $ 11.81 $ 11.43 $ 12.06
Net investment income 0.43 0.30 0.42 0.38
Net realized and unrealized gain/(loss) on investments 1.55 1.77 1.11 0.22
Net increase/(decrease) in net asset value from
operations 1.98 2.07 1.53 0.60
Distributions:
Dividends from net investment income ( 0.41) ( 0.37) ( 0.42) ( 0.42)
Distributions from net realized capital gains ( 2.41) ( 0.37) ( 0.73) ( 0.81)
Total dividends and distributions ( 2.82) ( 0.74) ( 1.15) ( 1.23)
Net asset value, end of period $ 12.30 $ 13.14 $ 11.81 $ 11.43
Total return++ 15.62% 17.98% 14.79% 5.00%
========================================================= ======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $200,772 $283,142 $283,082 $225,740
Ratio of operating expenses to average net assets 0.91%(b) 0.90%+ 0.92% 0.94%
Ratio of net investment income to average net assets 3.09% 2.84%+ 3.75% 3.41%
Portfolio turnover rate 102% 59% 158% 116%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.91%(b) 0.90%+ 0.93% 0.95%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was May 31.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expenses
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
149
<PAGE>
<TABLE>
<CAPTION>
Nations Marsico Growth & Income
Fund For a Share outstanding throughout the period
Year ended Period ended
Primary A Shares 3/31/99# 03/31/98*#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 12.03 $ 10.00
Income from investment operations:
Net investment income 0.00 0.01
Net realized and unrealized gain on investments 2.89 2.02
Net increase in net asset value from operations 2.89 2.03
Distributions:
Dividends from net investment income 0.00 0.00
Distributions from net realized capital gains ( 0.01) 0.00
Total dividends and distributions ( 0.01) 0.00
Net asset value, end of period $ 14.91 $ 12.03
Total return++ 24.05% 20.30%
==================================================== ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $52,229 $2,517
Ratio of operating expenses to average net assets 1.25%(a) 1.09%+(a)
Ratio of net investment income/(loss) to average
net assets 0.05% 0.38%+
Portfolio turnover rate 150% 22%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.25%(a) 1.97%+(a)
</TABLE>
* Nations Marsico Growth & Income Fund Primary A
Shares commenced operations on December 31, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
<TABLE>
<CAPTION>
Nations Strategic Equity Fund For a Share outstanding throughout the period
Period ended
Primary A Shares 03/31/99*#
<S> <C>
Operating performance:
Net asset value, beginning of period $ 10.00
Net investment income 0.00
Net realized and unrealized gain on investments 3.87
Net increase in net asset value from operations 3.87
Distributions:
Dividends from net investment income ( 0.00)(b)
Distributions from net realized capital gains ( 0.01)
Total dividends and distributions ( 0.01)
Net asset value, end of period $ 13.86
Total return++ 38.65%
==================================================== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $266,823
Ratio of operating expenses to average net assets 1.07%+(a)
Ratio of net investment loss to average net assets ( 0.03)%+
Portfolio turnover rate 34%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.07%+(a)
</TABLE>
* Strategic Equity Primary A Shares commenced
operations on October 2, 1998.
+ 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 share method.
(a) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
(b) Amount represents less than $0.01 per share.
150
<PAGE>
<TABLE>
<CAPTION>
Nations Capital Growth Fund For a Share outstanding throughout each period
Year Year
ended ended
Primary A Shares 3/31/99# 03/31/98#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 13.30 $ 11.70
Net investment income/(loss) ( 0.00) 0.02
Net realized and unrealized gain on investments 1.59 5.27
Net increase in net asset value from operations 1.59 5.29
Distributions:
Dividends from net investment income -- ( 0.01)
Distributions from net realized capital gains ( 2.84) ( 3.68)
Total dividends and distributions ( 2.84) ( 3.69)
Net asset value, end of period $ 12.05 $ 13.30
Total return++ 14.99% 53.89%
================================================== ======== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $737,620 $872,150
Ratio of operating expenses to average net
assets 0.96%(c) 0.95%(c)(d)
Ratio of net investment income/(loss) to average
net assets ( 0.04)% 0.13%
Portfolio turnover rate 39% 113%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.96%(c) 0.95%(c)
<CAPTION>
Year Period Year Year
Primary A Shares ended ended ended ended
03/31/97# 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 13.43 $ 14.24 $ 11.23 $ 11.08
Net investment income/(loss) 0.05 0.02 0.09 0.09
Net realized and unrealized gain on investments 1.66 0.38 3.28 0.14
Net increase in net asset value from operations 1.71 0.40 3.37 0.23
Distributions:
Dividends from net investment income ( 0.05) ( 0.02) ( 0.10) ( 0.08)
Distributions from net realized capital gains ( 3.39) ( 1.19) ( 0.26) ( 0.00)(b)
Total dividends and distributions ( 3.44) ( 1.21) ( 0.36) ( 0.08)
Net asset value, end of period $ 11.70 $ 13.43 $ 14.24 $ 11.23
Total return++ 11.88% 3.14% 30.96% 2.14%
================================================== ======== ======== ======== =========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $533,168 $839,300 $867,361 $717,914
Ratio of operating expenses to average net
assets 0.96%(d) 0.96%+ 0.98% 0.90%
Ratio of net investment income/(loss) to average
net assets 0.39% 0.38%+ 0.71% 0.85%
Portfolio turnover rate 75% 25% 80% 56%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.96% 0.96%+ 0.98% 0.91%
</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 share 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 per share.
(c) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(d) The effect of interest expense on the operating
expense ratio was less than 0.01%.
151
<PAGE>
<TABLE>
<CAPTION>
Nations Disciplined Equity Fund For a Share outstanding throughout each period
Year Year
ended ended
Primary A Shares 3/31/99 03/31/98##
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 22.17 $ 18.47
Net investment income/(loss) 0.02 0.08
Net realized and unrealized gain/(loss) on
investments 3.22 7.88
Net increase/(decrease) in net asset value from
operations 3.24 7.96
Distributions:
Dividends from net investment income ( 0.01)+++ ( 0.03)
Distributions from net realized capital gains ( 2.04) ( 4.23)
Return of capital -- --
Total dividends and distributions ( 2.05) ( 4.26)
Net asset value, end of period $ 23.36 $ 22.17
Total return++ 15.74% 48.65%
================================================== ========= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $412,176 $132,504
Ratio of operating expenses to average net
assets 0.97%(c)(d) 0.98%(c)(d)
Ratio of net investment income/(loss) to average
net assets 0.12% 0.37%
Portfolio turnover rate 72% 79%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.97%(d) 0.98%(d)
<CAPTION>
Year Period Year Period Period
Primary A Shares ended ended ended ended ended
03/31/97 03/31/96(a) 11/30/95 11/30/94* 04/29/94*
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 17.19 $ 17.06 $ 13.08 $ 13.31 $ 13.65
Net investment income/(loss) 0.14 0.05 0.10 0.01 ( 0.05)
Net realized and unrealized gain/(loss) on
investments 2.79 0.35 3.96 ( 0.23)# 2.66
Net increase/(decrease) in net asset value from
operations 2.93 0.40 4.06 ( 0.22) 2.61
Distributions:
Dividends from net investment income ( 0.14) ( 0.04) ( 0.08) ( 0.01) --
Distributions from net realized capital gains ( 1.51) ( 0.23) -- -- ( 2.95)
Return of capital -- -- -- ( 0.00)(b) --
Total dividends and distributions ( 1.65) ( 0.27) ( 0.08) ( 0.01) ( 2.95)
Net asset value, end of period $ 18.47 $ 17.19 $ 17.06 $ 13.08 $ 13.31
Total return++ 17.00% 2.44% 31.13% ( 1.62)% 18.79%
================================================== ======== ======== ======== ======== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $100,260 $116,469 $109,939 $9,947 $8,079
Ratio of operating expenses to average net
assets 1.04%(c) 1.02%+ 1.30% 1.13%+ 1.20%+
Ratio of net investment income/(loss) to average
net assets 0.70% 0.82%+ 0.85% 0.12%+ ( 0.60)%+
Portfolio turnover rate 120% 47% 124% 177% 475%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.04% 1.02%+ 1.30% 1.56%+ 1.53%+
</TABLE>
* The period for Nations Disciplined Equity Fund
Primary A Shares reflects operations from April 30,
1994 through November 30, 1994. The financial
information for the fiscal periods through April 29,
1994 is based on the financial information for The
Capitol Mutual Funds Special Equity Portfolio Class
A Shares, which were reorganized into Primary A
Shares of Nations Disciplined Equity Fund (then
named Nations Special Equity Fund) as of the close
of business on April 29, 1994.
+ 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 includes distributions in excess of net
investment income of less than $0.01 per share.
# The amount shown at this caption for each share
outstanding throughout the period may not accord
with the change in the aggregate gains and losses in
the portfolio securities for the period because of
the timing of purchases and withdrawals of shares in
relation to the fluctuating market value of the
portfolio.
## Per share net investment income has been
calculated using the monthly average share 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 per share.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(d) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
152
<PAGE>
<TABLE>
<CAPTION>
Nations Marsico Focused Equities
Fund For a Share outstanding throughout the period
Year ended Period ended
Primary A Shares 3/31/99# 03/31/98*#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 12.13 $ 10.00
Net investment income/(loss) ( 0.01) ( 0.01)
Net realized and unrealized gains on investments 4.58 2.14
Net increase in net asset value from operations 4.57 2.13
Distributions:
Dividends from net investment income 0.00 0.00
Distributions from net realized capital gains ( 0.01) 0.00
Total dividends and distributions ( 0.01) 0.00
Net asset value, end of period $ 16.69 $ 12.13
Total return++ 37.73% 21.30%
==================================================== ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $105,458 $8,808
Ratio of operating expenses to average net assets 1.06%(a) 1.52%+(a)
Ratio of net investment income/(loss) to average
net assets 0.05% ( 0.30)%+
Portfolio turnover rate 177% 25%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.06%(a) 1.52%+(a)
</TABLE>
* Nations Marsico Focused Equities Fund Primary A
Shares commenced operations on December 31, 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 charge.
# Per share net investment income has been
calculated using the monthly average share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was 0.01%.
<TABLE>
<CAPTION>
Nations Emerging Growth Fund For a Share outstanding throughout each period
Year ended Year ended
Primary A Shares 3/31/99# 03/31/98#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 16.56 $ 12.86
Net investment income/(loss) ( 0.04) ( 0.06)
Net realized and unrealized gain/(loss) on
investments ( 0.94) 5.55
Net increase/(decrease) in net asset value from
operations ( 0.98) 5.49
Distributions:
Distributions from net realized capital gains ( 2.27) ( 1.79)
Total dividends and distributions ( 2.27) ( 1.79)
Net asset value, end of period $ 13.31 $ 16.56
Total return++ ( 7.21)% 45.09%
=================================================== ======= ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $177,861 $318,584
Ratio of operating expenses to average net assets 0.98%(c)(d) 0.98%(c)
Ratio of operating expenses to average net assets
including interest expense N/A 0.99%
Ratio of net investment income/(loss) to average
net assets ( 0.29)% ( 0.42)%
Portfolio turnover rate 43% 76%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.98%(c) 0.98%(c)
<CAPTION>
Primary A Shares Year ended Period ended Year ended Year ended
03/31/97# 03/31/96#(a) 11/30/95 11/30/94#
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 14.04 $ 14.28 $ 11.41 $ 10.87
Net investment income/(loss) ( 0.04) 0.00 (b) 0.01 ( 0.03)
Net realized and unrealized gain/(loss) on
investments 0.20 1.26 3.26 0.71
Net increase/(decrease) in net asset value from
operations 0.16 1.26 3.27 0.68
Distributions:
Distributions from net realized capital gains ( 1.34) ( 1.50) ( 0.40) ( 0.14)
Total dividends and distributions ( 1.34) ( 1.50) ( 0.40) ( 0.14)
Net asset value, end of period $ 12.86 $ 14.04 $ 14.28 $ 11.41
Total return++ 0.48% 9.87% 29.95% 6.26%
=================================================== ======== ========= ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $267,319 $295,764 $269,484 $182,459
Ratio of operating expenses to average net assets 0.98%(c) 0.99%+ 0.98% 1.01%
Ratio of operating expenses to average net assets
including interest expense N/A N/A N/A N/A
Ratio of net investment income/(loss) to average
net assets ( 0.26)% ( 0.06)%+ 0.08% ( 0.29)%
Portfolio turnover rate 93% 39% 139% 129%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.98%(c) 0.99%+ 0.98% 1.01%
</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 share 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 per share.
(c) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(d) The effect of interest expense on the operating
expense ratio was less than 0.01%.
153
<PAGE>
<TABLE>
<CAPTION>
Nations Small Company Growth
Fund For a Share outstanding throughout each period
Primary A Shares Year ended Period ended Period ended Period ended
3/31/99# 03/31/98* 5/16/97* 08/31/96*(a)
<S> <C> <C> <C> <C>
Operating performance:
Net asset value at the beginning of the period $ 15.79 $ 12.07 $ 10.65 $ 10.00
Net investment income/(loss) ( 0.05) 0.01 0.04 0.09
Net realized and unrealized gain on investments ( 3.11) 4.43 1.47 0.64
Net increase in net asset value from operations ( 3.16) 4.44 1.51 0.73
Distributions:
Dividends from net investment income -- ( 0.01) ( 0.04) ( 0.08)
Distributions from net realized capital gains ( 1.13) ( 0.71) ( 0.05) --
Total dividends and distributions ( 1.13) ( 0.72) ( 0.09) ( 0.08)
Net asset value at the end of the period $ 11.50 $ 15.79 $ 12.07 $ 10.65
Total return ++ (21.05)% 37.27% 14.21% 7.37%
==================================================== ======== ======= ======== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $327,981 $235,427 $109,450 $70,483
Ratio of operating expenses to average net assets 0.95%(b) 0.95%+(b) 0.98%+ 1.00%+
Ratio of net investment income/(loss) to average
net assets ( 0.42)% 0.05%+ 0.54%+ 1.06%+
Portfolio turnover rate 87% 59% 48% 31%
Ratio of operating expenses to average net assets
(without waivers and/or expense
reimbursements) 1.22%(b) 1.26%+(b) 1.41%+ 1.54%+
</TABLE>
* The financial information for the fiscal periods
prior to May 23, 1997 reflect the financial
information for the Pilot Small Capitalization
Equity Fund's Pilot Shares, which were reorganized
into the Primary A Shares of Nations Small Company
Growth Fund as of May 23, 1997. Prior to May 23,
1997, the investment adviser to Nations Small
Company Growth Fund was Boatman's Trust Company.
Effective May 23, 1997, the investment adviser to
Nations Small Company Growth Fund was TradeStreet
Investment Associates, Inc.
+ 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 charge.
# Per share net investment income has been
calculated using the monthly average share method.
(a) Represents the period from December 12, 1995
(commencement of operations) to August 31, 1996.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
154
<PAGE>
<TABLE>
<CAPTION>
Nations International Value Fund For a Share outstanding throughout each period
Period ended Period ended Year ended Period ended
Primary A Shares* 3/31/99# 05/15/98 11/30/97 11/30/96**
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.53 $ 13.17 $ 11.29 $ 10.00
Income from investment operations:
Net investment income 0.16 0.09 0.09 0.06
Net realized and unrealized gains on securities 0.28 2.56 1.91 1.29
Total income from investment operations 0.44 2.65 2.00 1.35
Less dividends and distributions:
Dividends from net investment income ( 0.18) -- ( 0.09) ( 0.06)
Distributions in excess of net investment income -- -- ( 0.01) --
Distributions from net realized gains on securities ( 1.34) ( 0.29) ( 0.02) --
Total dividends and distributions ( 1.52) ( 0.29) ( 0.12) ( 0.06)
Net asset value, end of period $ 14.45 $ 15.53 $ 13.17 $ 11.29
Total return++ 1.48% 20.54% 17.75% 13.47%
====================================================== ======== ======== ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $142,546 $119,412 $54,277 $17,528
Ratio of operating expenses to average net assets 1.30%+ 1.25%+ 1.21% 0.00%+
Ratio of net investment income to average net
assets 1.36%+ 2.06%+ 0.89% 0.00%+
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.39%+ 1.26%+ 1.21% 3.46%+
Portfolio turnover rate 44% 88% 29% 50%
</TABLE>
* Primary A Shares of Nations International Value
Fund were formerly Institutional Shares of the
Emerald International Equity Fund prior to May 22,
1998.
** For the period December 27, 1995 (commencement of
operations) through November 30, 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 share method.
<TABLE>
<CAPTION>
Nations International Equity Fund For a Share outstanding throughout each period
Year ended Year ended
Primary A Shares 3/31/99# 03/31/98#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 14.81 $ 13.13
Net investment income/(loss) 0.11 0.11
Net realized and unrealized gain/(loss) on
investments 0.39 1.95
Net increase/(decrease) in net asset value from
operations 0.50 2.06
Distributions:
Dividends from net investment income ( 0.12) ( 0.17)
Distributions in excess of net investment income -- ( 0.05)
Distributions from net realized capital gains ( 1.07) ( 0.16)
Distributions in excess of net realized capital
gains -- --
Total dividends and distributions ( 1.19) ( 0.38)
Net asset value, end of period $ 14.12 $ 14.81
Total return++ 3.68% 16.06%
================================================== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $743,861 $885,329
Ratio of operating expenses to average net
assets 1.13% 1.14%
Ratio of net investment income/(loss) to average
net assets 0.79% 0.76%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.13% 1.14%
Portfolio turnover rate 146% 64%
<CAPTION>
Primary A Shares Year ended Period ended Year ended Year ended
03/31/97# 03/31/96(a)# 05/31/95# 05/31/94#
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 13.50 $ 11.75 $ 12.06 $ 10.60
Net investment income/(loss) 0.08 0.07 0.14 0.09
Net realized and unrealized gain/(loss) on
investments 0.11 1.80 ( 0.20) 1.44
Net increase/(decrease) in net asset value from
operations 0.19 1.87 ( 0.06) 1.53
Distributions:
Dividends from net investment income ( 0.11) ( 0.06) ( 0.03) ( 0.05)
Distributions in excess of net investment income ( 0.00)** ( 0.04) -- --
Distributions from net realized capital gains ( 0.42) ( 0.02) ( 0.12) ( 0.02)
Distributions in excess of net realized capital
gains ( 0.03) -- ( 0.10) --
Total dividends and distributions ( 0.56) ( 0.12) ( 0.25) ( 0.07)
Net asset value, end of period $ 13.13 $ 13.50 $ 11.75 $ 12.06
Total return++ 1.32% 16.01% ( 0.46)% 14.37%
================================================== ======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $976,855 $849,731 $572,940 $401,559
Ratio of operating expenses to average net
assets 1.16% 1.17%+ 1.03% 1.17%
Ratio of net investment income/(loss) to average
net assets 0.62% 0.65%+ 1.17% 0.75%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.16% 1.18%+ 1.04% 1.18%
Portfolio turnover rate 36% 26% 92% 39%
</TABLE>
** Amount represents less than $0.01 per share.
+ 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/(loss) has been
calculated using the monthly average share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was May 31.
155
<PAGE>
<TABLE>
<CAPTION>
Nations International Growth
Fund For a Share outstanding throughout each period
Year ended Period ended
Primary A Shares* 3/31/99# 03/31/98#
<S> <C> <C>
Operating performance:
Net asset value at the beginning of the period $ 19.42 $ 18.43
Net investment income/(loss) 0.05 0.03
Net realized and unrealized gain/(loss) on
investments 0.87 1.30
Net increase/(decrease) in net asset value from
operations 0.92 1.33
Dividends from net investment income -- --
Distributions from net realized capital gains ( 4.81) ( 0.34)
Total dividends and distributions ( 4.81) ( 0.34)
Net asset value at the end of the period $ 15.53 $ 19.42
Total return++ 6.16% 7.39%
==================================================== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $182,316 $401,105
Ratio of operating expenses to average net assets 1.12% 1.15%+
Ratio of operating expenses to average net assets
including interest expense 1.14% --
Ratio of operating expenses to average net assets
without waivers 1.21% 1.17%+
Ratio of net investment income to average net
assets 0.24% 0.21%+
Portfolio turnover rate 21% 11%
<CAPTION>
Period ended Year ended Year ended Year ended
Primary A Shares* 05/16/97 08/31/96 08/31/95# 08/31/94#
<S> <C> <C> <C> <C>
Operating performance:
Net asset value at the beginning of the period $ 17.05 $ 16.24 $ 16.34 $ 14.14
Net investment income/(loss) 0.05 0.18 0.13 0.11
Net realized and unrealized gain/(loss) on
investments 1.84 1.48 0.17 2.24
Net increase/(decrease) in net asset value from
operations 1.89 1.66 0.30 2.35
Dividends from net investment income ( 0.17) ( 0.46) ( 0.11) --
Distributions from net realized capital gains ( 0.34) ( 0.39) ( 0.29) ( 0.15)
Total dividends and distributions ( 0.51) ( 0.85) ( 0.40) ( 0.15)
Net asset value at the end of the period $ 18.43 $ 17.05 $ 16.24 $ 16.34
Total return++ 11.28% 10.64% 2.08% 16.75%
==================================================== ======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $701,033 $579,019 $363,212 $307,561
Ratio of operating expenses to average net assets 1.18%+ 1.08% 1.18% 1.12%
Ratio of operating expenses to average net assets
including interest expense -- -- -- --
Ratio of operating expenses to average net assets
without waivers 1.18%+ 1.08% 1.18% 1.12%
Ratio of net investment income to average net
assets 0.47%+ 0.69% 0.82% 0.75%
Portfolio turnover rate 34% 22% 36% 35%
</TABLE>
* The financial information for fiscal periods
through May 23, 1997 reflect the financial
information for Pilot International Equity Funds'
Pilot Shares, which were reorganized into the
Primary A Shares of Nations International Growth
Fund as of May 23, 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 investment income/(loss) has been
calculated using the monthly average share method.
156
<PAGE>
<TABLE>
<CAPTION>
Nations Emerging Markets Fund For a Share outstanding throughout each period
Year ended Year ended Year ended Period ended
Primary A Shares 3/31/99# 03/31/98# 03/31/97# 03/31/96*#
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.60 $ 11.41 $ 10.34 $ 10.00
Net investment income/(loss) 0.14 0.04 0.01 ( 0.03)
Net realized and unrealized gain/(loss) on
investments ( 2.53) ( 0.76) 1.21 0.37
Net increase/(decrease) in net asset value from
operations ( 2.39) ( 0.72) 1.22 0.34
Distributions:
Dividends from net investment income ( 0.07) ( 0.09) ( 0.02) --
Distributions in excess of net investment income -- -- ( 0.07) 0.00**
Distributions from net realized capital gains -- -- ( 0.06) --
Total dividends and distributions ( 0.07) ( 0.09) ( 0.15) 0.00**
Net asset value, end of period $ 8.14 $ 10.60 $ 11.41 $ 10.34
Total return++ (22.60)% ( 6.39)% 11.97% 3.42%
=================================================== ======= ======= ======= ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $21,689 $73,797 $76,483 $47,560
Ratio of operating expenses to average net assets 1.78%(b)(c) 1.57% 1.74% 2.13%+
Ratio of net investment income/(loss) to average
net assets 1.66% 0.36% 0.13% ( 0.38)%+
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.98%(c) 1.57% 1.74% 2.13%+
Portfolio turnover rate 71% 63% 31% 17%
</TABLE>
* Nations Emerging Markets Fund Primary A Shares
commenced operations on June 30, 1995.
** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return
for the period indicated, assumes reinvestment of
all distributions, and does not reflect the
deduction of any applicable sales charges.
# Per share net investment income/(loss) has been
calculated using the monthly average share method.
(b) The effect of interest expense on the operating
expense ratio was less than 0.01%
(c) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
157
<PAGE>
<TABLE>
<CAPTION>
Nations Equity Index Fund For a Share outstanding throughout each period
Year ended Year ended
Primary A Shares 3/31/99 03/31/98#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 22.41 $ 15.89
Net investment income 0.26 0.27
Net realized and unrealized gain/(loss) on
investments 3.63 7.11
Net increase in net asset value from operations 3.89 7.38
Distributions:
Dividends from net investment income ( 0.25) ( 0.27)
Distributions from net realized capital gains ( 0.99) ( 0.59)
Total dividends and distributions ( 1.24) ( 0.86)
Net asset value, end of period $ 25.06 $ 22.41
Total return++ 18.26% 47.38%
==================================================== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $933,313 $656,523
Ratio of operating expenses to average net assets 0.35%(b) 0.35%(b)
Ratio of operating expenses to average net assets
including interest expense -- 0.36%
Ratio of net investment income to average net
assets 1.17% 1.39%
Portfolio turnover rate 4% 26%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.71%(b) 0.66%(b)
<CAPTION>
Primary A Shares Year ended Period ended Year ended Period ended
03/31/97 03/31/96(a) 11/30/95 11/30/94*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 13.58 $ 12.91 $ 9.84 $ 10.00
Net investment income 0.26 0.08 0.28 0.24
Net realized and unrealized gain/(loss) on
investments 2.36 0.86 3.20 ( 0.21)
Net increase in net asset value from operations 2.62 0.94 3.48 0.03
Distributions:
Dividends from net investment income ( 0.26) ( 0.13) ( 0.28) ( 0.19)
Distributions from net realized capital gains ( 0.05) ( 0.14) ( 0.13) --
Total dividends and distributions ( 0.31) ( 0.27) ( 0.41) ( 0.19)
Net asset value, end of period $ 15.89 $ 13.58 $ 12.91 $ 9.84
Total return++ 19.41% 7.33% 36.35% 0.29%
==================================================== ======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $567,039 $192,388 $145,021 $123,147
Ratio of operating expenses to average net assets 0.35%(b) 0.35%+ 0.37% 0.35%+
Ratio of operating expenses to average net assets
including interest expense -- 0.35%+ 0.38% --
Ratio of net investment income to average net
assets 1.91% 1.99%+ 2.44% 2.64%+
Portfolio turnover rate 5% 2% 18% 14%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.70%(b) 0.73%+ 0.78% 0.79%+
</TABLE>
* Nations Equity Index Fund Primary A Shares
commenced operations on December 15, 1993.
+ Annualized.
++ Total return represents aggregate total return
for the period indicated, 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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
<TABLE>
<CAPTION>
Nations Managed Index Fund For a Share outstanding throughout the period
Year ended Year ended Period ended
Primary A Shares 3/31/99# 03/31/98 03/31/97*
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 17.14 $ 11.89 $ 10.00
Net investment income 0.18 0.15 0.15
Net realized and unrealized gain on investments 2.40 5.42 1.87
Net increase in net asset value from operations 2.58 5.57 2.02
Distributions:
Dividends from net investment income ( 0.18) ( 0.17) ( 0.13)
Distributions from net realized capital gains ( 0.15) ( 0.15) --
Total dividends and distributions ( 0.33) ( 0.32) ( 0.13)
Net asset value, end of period $ 19.39 $ 17.14 $ 11.89
Total return++ 15.25% 47.54% 20.22%
==================================================== ======= ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $665,631 $374,504 $42,226
Ratio of operating expenses to average net assets 0.50%(a) 0.50%(a)(b) 0.50%+(a)
Ratio of net investment income to average net
assets 1.03% 1.26% 1.92 +
Portfolio turnover rate 35% 30% 17%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.73%(a) 0.80%(a) 1.05%+(a)
</TABLE>
* Nations Managed Index Fund Primary A Shares
commenced operations on July 31, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(b) The effect of interest expense on the operating
expense ratio was less than 0.01%.
158
<PAGE>
<TABLE>
<CAPTION>
Nations Managed SmallCap Index
Fund For a Share outstanding throughout the period
Year ended Year ended Period ended
Primary A Shares 3/31/99# 03/31/98 3/31/97*
<S> <C> <C> <C>
Operating performance:
Net asset value at the beginning of period $ 14.10 $ 9.83 $ 10.00
Net investment income 0.06 0.06 0.03
Net realized and unrealized gain/(loss) on
investments ( 2.92) 4.58 ( 0.17)
Net increase/(decrease) in net asset value from
operations ( 2.86) 4.64 ( 0.14)
Distributions:
Dividends from net investment income ( 0.06) ( 0.06) ( 0.03)
Distributions from net realized capital gains ( 0.14) ( 0.31) --
Total dividends and distributions ( 0.20) ( 0.37) ( 0.03)
Net asset value, end of period $ 11.04 $ 14.10 $ 9.83
Total return++ (20.50)% 47.71% ( 1.37)%
================================================ ======= ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $189,379 $102,437 $40,851
Ratio of operating expenses to average net
assets 0.50%(a)(b) 0.50%(a)(b) 0.50%+
Ratio of net investment income to average net
assets 0.52% 0.52% 1.05%+
Portfolio turnover rate 65% 62% 18%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.82%(a) 1.02%(a) 1.21%+
</TABLE>
* Nations Managed SmallCap Index Fund Primary A
Shares commenced operations on October 15, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(b) The effect of interest expense on the operating
expense ratio was less than 0.01%
<TABLE>
<CAPTION>
Nations Managed Value Index
Fund For a Share outstanding throughout the period
Year ended Period ended
Primary A Shares 3/31/99# 03/31/98*#
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.32 $ 10.00
Net investment income 0.16 0.07
Net realized and unrealized gain on investments 0.18 1.31
Net increase in net asset value from operations 0.34 1.38
Distributions:
Dividends from net investment income ( 0.19) ( 0.06)
Distributions from net realized capital gains ( 0.05) --
Total dividends and distributions ( 0.24) ( 0.06)
Net asset value, end of period $ 11.42 $ 11.32
Total return++ 3.06% 13.78%
==================================================== ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $4,292 $7,330
Ratio of operating expenses to average net assets 0.50%(a) 0.50%+(a)(b)
Ratio of net operating expenses to average net
assets including interest expense 0.55%(a) --
Ratio of net investment income to average net
assets 1.45% 1.72%+
Portfolio turnover rate 115% 3%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.99%(a) 1.57%+(a)
</TABLE>
* Nations Managed Value Index Fund Primary A Shares
commenced operations on November 24, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(b) The effect of interest expense on the operating
expense ratio was less than 0.01%.
159
<PAGE>
<TABLE>
<CAPTION>
Nations Managed SmallCap Value
Index Fund For a Share outstanding throughout the period
Year ended Period ended
Primary A Shares 3/31/99# 03/31/98*
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.46 $ 10.00
Net investment income 0.09 0.03
Net realized and unrealized gain/loss on
investments ( 2.38) 1.46
Net increase/decrease in net asset value from
operations ( 2.29) 1.49
Distributions:
Dividends from net investment income ( 0.07) ( 0.03)
Dividends from net realized capital gains ( 0.12) --
Total dividends and distributions ( 0.19) ( 0.03)
Net asset value, end of period $ 8.98 $ 11.46
Total return++ (20.11)% 14.88%
================================================ ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 3,084 $2,106
Ratio of operating expenses to average net
assets 0.50%(a)(b) 0.50%+(a)(b)
Ratio of net investment income to average net
assets 0.96% 0.78%+
Portfolio turnover rate 136% 30%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 3.56%(a) 2.17%+(a)
</TABLE>
* Nations Managed SmallCap Value Index Fund Primary
A Shares commenced operations on November 24, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(b) The effect of interest expense on the operating
expense ratio was less than 0.01%.
160
<PAGE>
<TABLE>
<CAPTION>
Nations Balanced Assets Fund For a Share outstanding throughout each period
Year ended Year ended
Primary A Shares 3/31/99# 03/31/98
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.49 $ 11.15
Net investment income 0.26 0.29
Net realized and unrealized gain/(loss) on
investments ( 0.39) 2.68
Net increase/(decrease) in net asset value from
operations ( 0.13) 2.97
Distributions:
Dividends from net investment income ( 0.23) ( 0.29)
Distributions from net realized capital gains ( 0.74) ( 2.34)
Total dividends and distributions ( 0.97) ( 2.63)
Net asset value, end of period $ 10.39 $ 11.49
Total return++ ( 1.20)% 30.35%
================================================ ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $48,373 $20,299
Ratio of operating expenses to average net
assets 1.00%(b)(c) 1.08%(b)(c)
Ratio of net investment income to average net
assets 2.43% 2.70%
Portfolio turnover rate 126% 276%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.00%(b) 1.08%(b)
<CAPTION>
Primary A Shares Year ended Period ended Year ended Year ended
03/31/97 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.65 $ 12.68 $ 10.44 $ 10.87
Net investment income 0.39 0.11 0.38 0.25
Net realized and unrealized gain/(loss) on
investments 1.03 0.45 2.21 ( 0.43)
Net increase/(decrease) in net asset value from
operations 1.42 0.56 2.59 ( 0.18)
Distributions:
Dividends from net investment income ( 0.38) ( 0.18) ( 0.33) ( 0.25)
Distributions from net realized capital gains ( 1.54) ( 1.41) ( 0.02) --
Total dividends and distributions ( 1.92) ( 1.59) ( 0.35) ( 0.25)
Net asset value, end of period $ 11.15 $ 11.65 $ 12.68 $ 10.44
Total return++ 12.50% 4.90% 25.27% ( 1.73)%
================================================ ======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $135,731 $164,215 $163,198 $162,215
Ratio of operating expenses to average net
assets 1.00%(b) 1.00%+ 0.99% 0.98%
Ratio of net investment income to average net
assets 3.31% 2.91%+ 3.25% 2.31%
Portfolio turnover rate 264% 83% 174% 156%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.00%(b) 1.00%+ 0.99% 0.99%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
161
<PAGE>
<TABLE>
<CAPTION>
Nations Short-Term Income Fund For a Share outstanding throughout each period
Year Year
ended ended
Primary A Shares 3/31/99 03/31/98
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.77 $ 9.68
Net investment income 0.56 0.56
Net realized and unrealized gain/(loss) on investments 0.02 0.09
Net increase/(decrease) in net asset value from
operations 0.58 0.65
Distributions:
Dividends from net investment income (0.56) (0.56)
Distributions in excess of net investment income -- --
Distributions from capital -- --
Total dividends and distributions (0.56) (0.56)
Net asset value, end of period $ 9.79 $ 9.77
Total return++ 6.07% 6.89%
========================================================= ======== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $397,467 $331,961
Ratio of operating expenses to average net assets 0.50%(c) 0.56%(b)(c)
Ratio of net investment income to average net assets 5.70% 5.75%
Portfolio turnover rate 64% 66%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.80%(c) 0.86%(c)
<CAPTION>
Year Period Year Year
Primary A Shares ended ended ended ended
03/31/97# 03/31/96(a)# 11/30/95# 11/30/94#
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.76 $ 9.84 $ 9.48 $ 10.01
Net investment income 0.58 0.20 0.61 0.50
Net realized and unrealized gain/(loss) on investments (0.08) (0.08) 0.36 ( 0.51)
Net increase/(decrease) in net asset value from
operations 0.50 0.12 0.97 ( 0.01)
Distributions:
Dividends from net investment income (0.58) (0.20) (0.61) ( 0.48)
Distributions in excess of net investment income -- -- -- ( 0.02)
Distributions from capital -- -- -- ( 0.02)
Total dividends and distributions (0.58) (0.20) (0.61) ( 0.52)
Net asset value, end of period $ 9.68 $ 9.76 $ 9.84 $ 9.48
Total return++ 5.25% 1.19% 10.48% ( 0.11)%
========================================================= ======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $181,455 $179,957 $169,291 $176,712
Ratio of operating expenses to average net assets 0.55%(b) 0.55%+ 0.56% 0.50%
Ratio of net investment income to average net assets 5.97% 6.07%+ 6.32% 5.23%
Portfolio turnover rate 172% 73% 224% 293%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.85% 0.88%+ 0.86% 0.82%
</TABLE>
+ Annualized.
++ Total return represents aggregate total return
for the periods 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 share 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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
<TABLE>
<CAPTION>
Nations Short-Intermediate
Government Fund For a Share outstanding throughout each period
Year Year
ended ended
Primary A Shares 3/31/99 03/31/98
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 4.12 $ 3.99
Net investment income 0.22 0.23
Net realized and unrealized gain/(loss) on investments (0.02) 0.13
Net increase/(decrease) in net asset value from
operations 0.20 0.36
Distributions:
Dividends from net investment income (0.22) (0.23)
Distributions from net realized capital gains -- --
Total dividends and distributions (0.22) (0.23)
Net asset value, end of period $ 4.10 $ 4.12
Total return++ 4.97% 9.11%
========================================================= ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $589,092 $663,833
Ratio of operating expenses to average net assets 0.58%(d) 0.61%
Ratio of net investment income to average net assets 5.36% 5.53%
Portfolio turnover rate 242% 538%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.78%(d) 0.81%
<CAPTION>
Year Period Year
Primary A Shares ended ended ended
03/31/97# 03/31/96(b)# 11/30/95#
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 4.07 $ 4.14 $ 3.93
Net investment income 0.23 0.07 0.24
Net realized and unrealized gain/(loss) on investments (0.08) (0.07) 0.21
Net increase/(decrease) in net asset value from
operations 0.15 0.00 0.45
Distributions:
Dividends from net investment income (0.23) (0.07)(a) (0.24)(a)
Distributions from net realized capital gains -- -- --
Total dividends and distributions (0.23) (0.07) (0.24)
Net asset value, end of period $ 3.99 $ 4.07 $ 4.14
Total return++ 3.72% 0.07% 11.70%
========================================================= ======= ========= =========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $371,118 $399,915 $425,200
Ratio of operating expenses to average net assets 0.63%(c)(d) 0.63%+ 0.60%
Ratio of net investment income to average net assets 5.73% 5.32%+ 5.88%
Portfolio turnover rate 529% 189% 328%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.83%(d) 0.86%+ 0.80%
<CAPTION>
Year
ended
Primary A Shares 11/30/94
<S> <C>
Operating performance:
Net asset value, beginning of period $ 4.28
Net investment income 0.23
Net realized and unrealized gain/(loss) on investments (0.33)
Net increase/(decrease) in net asset value from
operations (0.10)
Distributions:
Dividends from net investment income (0.23)(a)
Distributions from net realized capital gains (0.02)
Total dividends and distributions (0.25)
Net asset value, end of period $ 3.93
Total return++ (2.23)%
========================================================= =========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $433,278
Ratio of operating expenses to average net assets 0.59%
Ratio of net investment income to average net assets 5.76%
Portfolio turnover rate 133%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.80%
</TABLE>
+ Annualized.
++ Total return represents aggregate total return
for the periods 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 share method.
(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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
162
<PAGE>
<TABLE>
<CAPTION>
Nations Strategic Fixed Income
Fund For a Share outstanding throughout each period
Year Year
ended ended
Primary A Shares 3/31/99 03/31/98
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.03 $ 9.62
Net investment income 0.59 0.58
Net realized and unrealized gain/(loss) on investments ( 0.04) 0.41
Net increase/(decrease) in net asset value from
operations 0.55 0.99
Distributions:
Dividends from net investment income ( 0.59) ( 0.58)
Distributions in excess of net investment income -- --
Distributions from net realized capital gains ( 0.06) --
Distributions from capital -- --
Total dividends and distributions ( 0.65) ( 0.58)
Net asset value, end of period $ 9.93 $ 10.03
Total return++ 5.61% 10.53%
========================================================= ======== =========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $1,798,155 $1,681,990
Ratio of operating expenses to average net assets 0.68%(c) 0.72%(c)(d)
Ratio of net investment income to average net assets 5.86% 5.86%
Portfolio turnover rate 107% 244%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.78%(c) 0.83%(d)
<CAPTION>
Year Period Year Year
Primary A Shares ended ended ended ended
03/31/97# 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.93 $ 10.22 $ 9.32 $ 10.55
Net investment income 0.58 0.19 0.59 0.53
Net realized and unrealized gain/(loss) on investments (0.20) ( 0.29) 0.90 ( 0.89)
Net increase/(decrease) in net asset value from
operations 0.38 ( 0.10) 1.49 ( 0.36)
Distributions:
Dividends from net investment income (0.58) ( 0.19) ( 0.59) ( 0.51)
Distributions in excess of net investment income -- -- -- ( 0.02)
Distributions from net realized capital gains (0.11) -- -- ( 0.34)
Distributions from capital (0.00)(b) -- -- --
Total dividends and distributions (0.69) ( 0.19) ( 0.59) ( 0.87)
Net asset value, end of period $ 9.62 $ 9.93 $ 10.22 $ 9.32
Total return++ 3.90% ( 1.04)% 16.45% ( 3.58)%
========================================================= ========= ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $947,277 $823,890 $823,098 $550,697
Ratio of operating expenses to average net assets 0.71%(c) 0.72%+ 0.71% 0.68%
Ratio of net investment income to average net assets 5.98% 5.49%+ 6.05% 5.43%
Portfolio turnover rate 368% 1.33% 228% 307%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.81%(d) 0.83%+ 0.81% 0.76%
</TABLE>
+ Annualized.
++ Total return represents aggregate total return
for the periods 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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year was November 30.
(b) Amount represents less than $0.01.
(c) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(d) The effect of interest expense on the operating
expense ratio was less than 0.01%.
<TABLE>
<CAPTION>
Nations Government Securities
Fund For a Share outstanding throughout each period
Year Year
ended ended
Primary A Shares 3/31/99# 03/31/98
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.90 $ 9.39
Net investment income 0.58 0.55
Net realized and unrealized gain/(loss) on investments (0.05) 0.51
Net increase/(decrease) in net asset value from
operations 0.53 1.06
Distributions:
Dividends from net investment income (0.57) (0.55)
Distributions in excess of net investment income -- --
Distributions in excess of net realized capital gains -- --
Distributions from capital -- --
Total dividends and distributions (0.57) (0.55)
Net asset value, end of period $ 9.86 $ 9.90
Total return++ 5.41% 11.65%
========================================================= ======== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $119,659 $75,796
Ratio of operating expenses to average net assets 0.73%(d) 0.85%(c)(d)
Ratio of net investment income to average net assets 5.70% 5.63%
Portfolio turnover rate 600% 303%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.84%(d) 0.99%(d)
<CAPTION>
Year Period Year Year
Primary A Shares ended ended ended ended
03/31/97# 03/31/96(a)# 05/31/95# 05/31/94
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.67 $ 9.86 $ 9.80 $ 10.46
Net investment income 0.60 0.52 0.64 0.64
Net realized and unrealized gain/(loss) on investments (0.30) (0.19) 0.06 ( 0.61)
Net increase/(decrease) in net asset value from
operations 0.30 0.33 0.70 0.03
Distributions:
Dividends from net investment income (0.58) (0.50) (0.60) ( 0.58)
Distributions in excess of net investment income -- (0.02) -- ( 0.02)
Distributions in excess of net realized capital gains -- -- -- ( 0.05)
Distributions from capital (0.00)(b) -- (0.04) ( 0.04)
Total dividends and distributions (0.58) (0.52) (0.64) ( 0.69)
Net asset value, end of period $ 9.39 $ 9.67 $ 9.86 $ 9.80
Total return++ 3.18% 3.41% 7.55% 0.06%
========================================================= ======== ======= ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $52,606 $55,962 $39,909 $44,536
Ratio of operating expenses to average net assets 0,80% 0.80%+ 0.76% 0.73%
Ratio of net investment income to average net assets 6.28% 6.36%+ 6.69% 6.08%
Portfolio turnover rate 468% 199% 413% 56%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.94% 0.95%+ 0.94% 0.94%
</TABLE>
+ Annualized.
++ Total return represents aggregate total return
for the periods 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 share 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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
163
<PAGE>
<TABLE>
<CAPTION>
Nations U.S. Government Bond
Fund For a Share outstanding throughout each period
Year ended
Primary A Shares 3/31/99#
<S> <C>
Operating performance:
Net asset value at the beginning of the period $ 10.37
Net investment income 0.52
Net realized and unrealized gain/(loss) on
investments 0.07
Net increase in net asset value from operations 0.59
Distributions:
Dividends from net investment income ( 0.52)
Distributions from net realized capital gains ( 0.36)
Total dividends and distributions ( 0.88)
Net asset value at the end of the period $ 10.08
Total return++ 5.83%
====================================================== =======
Ratios to average net assets/supplemental data:
Net assets at end of period (in 000's) $109,028
Ratio of operating expenses to average net assets 0.59%(a)(c)
Ratio of net investment income to average net assets 5.06%
Portfolio turnover rate 270%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursement 0.87%(a)
<CAPTION>
Primary A Shares Period ended Period ended Period ended Period ended
03/31/98* 5/16/97 08/31/96 08/31/95(b)
<S> <C> <C> <C> <C>
Operating performance:
Net asset value at the beginning of the period $ 10.19 $ 10.53 $ 11.20 $ 10.00
Net investment income 0.48 0.41 0.61 0.56
Net realized and unrealized gain/(loss) on
investments 0.31 0.17 ( 0.22) 1.20
Net increase in net asset value from operations 0.79 0.58 0.39 1.76
Distributions:
Dividends from net investment income ( 0.48) ( 0.41) ( 0.61) ( 0.56)
Distributions from net realized capital gains ( 0.13) ( 0.51) ( 0.45) --
Total dividends and distributions ( 0.61) ( 0.92) ( 1.06) ( 0.56)
Net asset value at the end of the period $ 10.37 $ 10.19 $ 10.53 $ 11.20
Total return++ 7.84% 5.62% 3.46% 18.03%
====================================================== ======== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets at end of period (in 000's) $263,428 $148,082 $145,066 $137,261
Ratio of operating expenses to average net assets 0.60%(a)+ 0.62%+ 0.65% 0.62%+
Ratio of net investment income to average net assets 5.26%+ 5.60%+ 5.61% 6.45%+
Portfolio turnover rate 188% 58% 87% 132%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursement 0.86%(a)+ 0.77%+ 0.82% 0.87%+
</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's Pilot Shares, which were reorganized into the
Primary A Shares of Nations U.S. Government Bond
Fund as of May 23, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(b) Primary A Shares commenced operations on
November 7, 1994.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%
<TABLE>
<CAPTION>
Nations Diversified Income Fund For a Share outstanding throughout each period
Year Year
ended ended
Primary A Shares 3/31/99# 03/31/98
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.55 $ 10.11
Net investment income 0.66 0.65
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.44
Net increase/(decrease) in net asset value from
operations 0.52 1.09
Distributions:
Dividends from net investment income ( 0.66) ( 0.65)
Distributions from net realized capital gains ( 0.10) --
Total dividends and distributions ( 0.76) ( 0.65)
Net asset value, end of period $ 10.31 $ 10.55
Total return++ 5.00% 11.07%
====================================================== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $317,937 $263,840
Ratio of operating expenses to average net assets 0.70%(c) 0.73%(c)
Ratio of net investment income to average net assets 6.27% 6.27%
Portfolio turnover rate 94% 203%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.80%(c) 0.83%(c)
<CAPTION>
Year Period Year Year
Primary A Shares ended ended ended ended
03/31/97# 03/31/96(b) 11/30/95 11/30/94#
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.42 $ 10.82 $ 9.67 $ 10.88
Net investment income 0.69 0.23 0.73 0.74
Net realized and unrealized gain/(loss) on
investments ( 0.18) ( 0.40) 1.15 ( 1.06)
Net increase/(decrease) in net asset value from
operations 0.51 ( 0.17) 1.88 ( 0.32)
Distributions:
Dividends from net investment income ( 0.69) ( 0.23) ( 0.73) ( 0.74)(a)
Distributions from net realized capital gains ( 0.13) -- -- ( 0.15)
Total dividends and distributions ( 0.82) ( 0.23) ( 0.73) ( 0.89)
Net asset value, end of period $ 10.11 $ 10.42 $ 10.82 $ 9.67
Total return++ 4.97% ( 1.59)% 20.11% ( 3.05)%
====================================================== ======== ======= ======= ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $152,070 $65,081 $64,800 $22,298
Ratio of operating expenses to average net assets 0.75%(c) 0.77%+ 0.80% 0.74%
Ratio of net investment income to average net assets 6.73% 6.49%+ 7.03% 7.31%
Portfolio turnover rate 278% 69% 96% 144%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.85%(c) 0.87%+ 0.93% 0.95%
</TABLE>
+ Annualized.
++ Total return represents aggregate total return
for the periods 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 share method.
(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 the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
164
<PAGE>
<TABLE>
<CAPTION>
Nations Short-Term Municipal
Income Fund For a Share outstanding throughout each period
Year Year Year
Primary A Shares ended ended ended
3/31/99(c) 03/31/98 03/31/97
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.05 $ 9.95 $ 9.98
Net investment income 0.41 0.42 0.44
Net realized and unrealized gain/(loss) on
investments 0.05 0.10 (0.03)
Net increase/(decrease) in net asset value from
operations 0.46 0.52 0.41
Distributions:
Dividends from net investment income ( 0.41) ( 0.42) (0.44)
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.41) ( 0.42) (0.44)
Net asset value, end of period $ 10.10 $ 10.05 $ 9.95
Total return++ 4.71% 5.33% 4.15%
====================================================== ======= ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $79,002 $70,740 $61,072
Ratio of operating expenses to average net assets 0.40%(a) 0.40%(a) 0.40%(a)
Ratio of net investment income to average net assets 4.11% 4.17% 4.36%
Portfolio turnover rate 53% 94% 80%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.80% 0.77% 0.84%
<CAPTION>
Period Year Year
Primary A Shares ended ended ended
03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.03 $ 9.69 $ 9.96
Net investment income 0.15 0.44 0.38
Net realized and unrealized gain/(loss) on
investments ( 0.05) 0.34 (0.27)
Net increase/(decrease) in net asset value from
operations 0.10 0.78 0.11
Distributions:
Dividends from net investment income ( 0.15) ( 0.44) (0.38)
Distributions from net realized capital gains -- -- (0.00)#
Total dividends and distributions ( 0.15) ( 0.44) (0.38)
Net asset value, end of period $ 9.98 $ 10.03 $ 9.69
Total return++ 0.96% 8.16% 1.09%
====================================================== ======= ======= ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $48,511 $49,961 $33,488
Ratio of operating expenses to average net assets 0.40%+(a) 0.45%(a) 0.34%(a)
Ratio of net investment income to average net assets 4.37%+ 4.38% 3.83%
Portfolio turnover rate 16% 82% 57%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.86%+ 0.93% 0.80%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
<TABLE>
<CAPTION>
Nations Intermediate Municipal
Bond Fund For a Share outstanding throughout each period
Year Year Year
ended ended ended
Primary A Shares 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.30 $ 10.01 $ 10.03
Net investment income 0.47 0.48 0.48
Net realized and unrealized gain/(loss) on
investments 0.07 0.33 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.54 0.81 0.46
Distributions:
Dividends from net investment income ( 0.47) ( 0.48) ( 0.48)
Distributions from net realized capital gains ( 0.07) ( 0.04) --
Total dividends and distributions ( 0.54) ( 0.52) ( 0.48)
Net asset value, end of period $ 10.30 $ 10.30 $ 10.01
Total return++ 5.33% 8.20% 4.63%
==================================================== ======== ======== ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $918,367 $867,154 $108,204
Ratio of operating expenses to average net assets 0.50%(a) 0.50%(a) 0.50%(a)
Ratio of net investment income to average net
assets 4.55% 4.65% 4.74%
Portfolio turnover rate 40% 47% 21%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.68% 0.74% 0.81%
<CAPTION>
Period Year Year
Primary A Shares ended ended ended
03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.17 $ 9.24 $ 10.11
Net investment income 0.16 0.48 0.45
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.93 ( 0.86)
Net increase/(decrease) in net asset value from
operations 0.02 1.41 ( 0.41)
Distributions:
Dividends from net investment income ( 0.16) ( 0.48) ( 0.45)#
Distributions from net realized capital gains -- -- ( 0.01)
Total dividends and distributions ( 0.16) ( 0.48) ( 0.46)
Net asset value, end of period $ 10.03 $ 10.17 $ 9.24
Total return++ 0.20% 15.60% ( 4.25)%
==================================================== ======= ======= ========
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $77,423 $73,897 $38,055
Ratio of operating expenses to average net assets 0.50%+(a) 0.45%(a) 0.35%(a)
Ratio of net investment income to average net
assets 4.75%+ 4.91% 4.59%
Portfolio turnover rate 4% 31% 51%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.83%+ 0.84% 0.88%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
165
<PAGE>
<TABLE>
<CAPTION>
Nations Municipal Income Fund For a Share outstanding throughout each period
Year Year
ended ended
Primary A Shares 3/31/99 03/31/98
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.46 $ 10.89
Net investment income 0.54 0.57
Net realized and unrealized gain/(loss) on investments 0.07 0.62
Net increase/(decrease) in net asset value from
operations 0.61 1.19
Distributions:
Dividends from net investment income ( 0.54) ( 0.57)
Distributions from net realized capital gains ( 0.05) ( 0.05)
Total dividends and distributions ( 0.59) ( 0.62)
Net asset value, end of period $ 11.48 $ 11.46
Total return++ 5.42% 11.12%
========================================================= ======== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $635,629 $456,485
Ratio of operating expenses to average net assets 0.60% 0.60%
Ratio of operating expenses to average net asset
including interest expenses -- (a)
Ratio of net investment income to average net assets 4.71% 4.97%
Portfolio turnover rate 11% 38%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.80% 0.84%
<CAPTION>
Year Period Year Year
Primary A Shares ended ended ended ended
03/31/97 03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 10.84 $ 11.08 $ 9.64 $ 11.33
Net investment income 0.59 0.20 0.59 0.57
Net realized and unrealized gain/(loss) on investments 0.05 ( 0.24) 1.44 ( 1.44)
Net increase/(decrease) in net asset value from
operations 0.64 ( 0.04) 2.03 ( 0.87)
Distributions:
Dividends from net investment income ( 0.59) ( 0.20) ( 0.59) ( 0.57)#
Distributions from net realized capital gains -- -- -- ( 0.25)
Total dividends and distributions ( 0.59) ( 0.20) ( 0.59) ( 0.82)
Net asset value, end of period $ 10.89 $ 10.84 $ 11.08 $ 9.64
Total return++ 6.03% ( 0.41)% 21.55% ( 8.17)%
========================================================= ======= ======= ======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $77,260 $68,022 $68,836 $59,279
Ratio of operating expenses to average net assets 0.60% 0.60%+ 0.60% 0.61%
Ratio of operating expenses to average net asset
including interest expenses (a) (a) (a) 0.62%
Ratio of net investment income to average net assets 5.41% 5.35%+ 5.63% 5.42%
Portfolio turnover rate 25% 4% 49% 63%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.91% 0.91%+ 0.88% 0.90%
</TABLE>
+ Annualized.
++ Total return represents aggregate total return
for the periods indicated, assumes reinvestment of
all distributions, and does not reflect the
deduction of any applicable sales charges.
# Amount includes distributions in excess of net
investment income, which was less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
166
<PAGE>
[GRAPHIC] Terms used in this prospectus
Asset-backed security - a debt security that gives you an interest in a pool
of assets that is collateralized or "backed" by one or more kinds of assets,
including real property, receivables or mortgages, generally issued by banks,
credit card companies or other lenders. Some securities may be issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities. Asset-backed securities typically make periodic payments,
which may be interest or a combination of interest and a portion of the
principal of the underlying assets.
Average dollar-weighted maturity - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
Bank obligation - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
Capital gain or loss - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
Cash equivalents - short-term, interest-bearing instruments, including
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities, bank obligations, asset-backed securities, foreign
government securities and commercial paper issued by U.S. and foreign issuers
which, at the time of investment, is rated at least Prime-2 by Moody's
Investor Services, Inc. (Moody's), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).
Collateralized mortgage obligation (CMO) - a debt security that is backed by
real estate mortgages. CMO payment obligations are covered by interest and/or
principal payments from a pool of mortgages. In addition, the underlying
assets of a CMO are typically separated into classes, called tranches, based
on maturity. Each tranche pays a different rate of interest. CMOs are not
generally issued by the U.S. government, its agencies or instrumentalities.
Commercial paper - a money market instrument issued by a large company.
Common stock - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
Convertible debt - a debt security that can be exchanged for common stock (or
another type of security) on a specified basis and date.
Convertible security - a security that can be exchanged for common stock (or
another type of security) at a specified rate. Convertible securities include
convertible debt, rights and warrants.
167
<PAGE>
Corporate obligation - a money market instrument issued by a corporation or
commercial bank.
Crossing networks - an electronic system where anonymous parties can match buy
and sell transactions. These transactions don't affect the market, and
transaction costs are extremely low.
Debt security - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
Depositary receipts - evidence of the deposit of a security with a custodian
bank. American Depositary Receipts (ADRs), for example, are certificates
traded in U.S. markets representing an interest of a foreign company. They
were created to make it possible for foreign issuers to meet U.S. security
registration requirements. Other examples include ADSs, GDRs and EDRs.
Dividend yield - rate of return of dividends paid on a common or preferred
stock. It equals the amount of the annual dividend on a stock expressed as a
percentage of the stock's current market value.
Dollar roll transaction - the sale by a Fund of mortgage-backed or other
asset-backed securities, together with a commitment to buy similar, but not
identical, securities at a future date.
Duration - a security's or portfolio's sensitivity to changes in interest
rates. For example, if interest rates rise by one percentage point, the share
price of a fund with a duration of five years would decline by about 5%. If
interest rates fall by one percentage point, the fund's share price would rise
by about 5%.
Equity security - an investment that gives you an equity ownership right in a
company. Equity securities (or "equities") include common and preferred stock,
rights and warrants.
First Boston Convertible Index - a widely-used unmanaged index that measures
the performance of convertible securities. The index is not available for
investment.
First-tier security - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
168
<PAGE>
Fixed income security - an intermediate to long-term debt security that
matures in more than one year.
Foreign security - a debt or equity security issued by a foreign company or
government.
Fundamental analysis - a method of securities analysis that tries to evaluate
the intrinsic, or "true," value of a particular stock. It includes a study of
the overall economy, industry conditions and the financial condition and
management of a company.
Futures contract - a contract to buy or sell an asset or an index of
securities at a specified price on a specified future date. The price is set
through a futures exchange.
Guaranteed investment contract - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
High quality - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or Prime-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
IFC Investables Index - an unmanaged index that tracks more than 1,400 stocks
in 25 emerging markets in Asia, Latin America, Eastern Europe, Africa and the
Middle East. The index is weighted by market capitalization.
Investment grade - a debt security that has been given a medium to high credit
rating (Baa or higher by Moody's, BBB or higher by S&P or a comparable rating
by other NRSROs) based on the issuer's ability to pay interest and repay
principal on time. The portfolio management team may consider an unrated debt
security to be investment grade if the team believes it is of comparable
quality. Please see the SAI for more information about credit ratings.
Lehman 3-Year Municipal Bond Index - a broad-based, unmanaged index of
investment grade bonds with maturities of two to four years. All dividends are
reinvested.
Lehman 7-Year Municipal Bond Index - a broad-based, unmanaged index of
investment grade bonds with maturities of seven to eight years. All dividends
are reinvested.
169
<PAGE>
Lehman Aggregate Bond Index - an index made up of the Lehman
Government/Corporate Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index. These indexes include U.S. government agency
and U.S. Treasury securities, corporate bonds and mortgage-backed securities.
All dividends are reinvested.
Lehman Government Bond Index - an index of government bonds with an average
maturity of approximately nine years. All dividends are reinvested.
Lehman Government/Corporate Bond Index - an index of U.S. government, U.S.
Treasury and agency securities, and corporate and Yankee bonds. All dividends
are reinvested.
Lehman Intermediate Government Bond Index - an index of U.S. government agency
and U.S. Treasury securities. All dividends are reinvested.
Lehman Intermediate Treasury Index - an index of U.S. Treasury securities with
maturities of three to 10 years. All dividends are reinvested.
Lehman Municipal Bond Index - a broad-based, unmanaged index of 8,000
investment grade bonds with long-term maturities. All dividends are
reinvested.
Liquidity - a measurement of how easily a security can be bought or sold at a
price that is close to its market value.
Merrill Lynch 1-3 Year Treasury Index - an index of U.S. Treasury bonds with
maturities of 1 to 3 years. All dividends are reinvested.
Money market instrument - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
Mortgage-backed security or Mortgage-related security - a debt security that
gives you an interest in, and is backed by, a pool of residential mortgages
issued by the U.S. government or by financial institutions. The underlying
mortgages may be guaranteed by the U.S. government or one of its agencies,
authorities or instrumentalities. Mortgage-backed securities typically make
monthly payments, which are a combination of interest and a portion of the
principal of the underlying mortgages.
MSCI EAFE Index - Morgan Stanley Capital International Europe, Australasia and
Far East Index, an index of over 1,100 stocks from 21 developed markets in
Europe, Australia, New Zealand and Asia. The index reflects the relative size
of each market.
170
<PAGE>
Municipal security (obligation) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
Non-diversified - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
Over-the-counter market - a market where dealers trade securities through a
telephone or computer network rather than through a public stock exchange.
Participation - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
Pass-through certificate - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
Preferred stock - a type of equity security that gives you a limited ownership
right in a company, with certain preferences or priority over common stock.
Preferred stock generally pays a fixed annual dividend. If the company goes
bankrupt, preferred shareholders generally receive their share of the
company's remaining assets before common shareholders and after bondholders
and other creditors.
Pre-refunded bond - a bond that is repaid before its maturity date. The
repayment is generally financed by a new issue. Issuers generally pre-refund
bonds during periods of lower interest rates to reduce their interest costs.
Price-to-earnings ratio (P/E ratio) - the current price of a share divided by
its actual or estimated earnings per share. The P/E ratio is one measure of
the value of a company.
Private activity bond - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
Quantitative analysis - an analysis of financial information about a company
or security to identify securities that have the potential for growth or are
otherwise suitable for a fund to buy.
171
<PAGE>
Real Estate Investment Trust (REIT) - a portfolio of real estate investments
which may include office buildings, apartment complexes, hotels and shopping
malls, and real-estate-related loans or interests.
Repurchase agreement - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
Reverse repurchase agreement - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
Right - a temporary privilege allowing investors who already own a common
stock to buy additional shares directly from the company at a specified price
or formula.
Russell 2000 - an unmanaged index of 2,000 of the smallest stocks representing
approximately 11% of the U.S. equity market. The index is weighted by market
capitalization, and is not available for investment.
S&P 5001 - Standard & Poor's 500 Composite Stock Price Index, an unmanaged
index of 500 widely held common stocks. It is not available for investment.
S&P MidCap 4001 - an unmanaged index of 400 domestic stocks chosen for market
size, liquidity and industry representation. The index is weighted by market
value, and is not available for investment.
S&P SmallCap 6001 - Standard & Poor's SmallCap 600 Index, an unmanaged index
of 600 common stocks, weighted by market capitalization. It is not available
for investment.
S&P/BARRA SmallCap Value Index1 - an unmanaged index of a group of stocks from
the S&P SmallCap 600 that have low price-to-book ratios relative to the S&P
SmallCap 600 as a whole. It is weighted by market capitalization, and is not
available for investment.
S&P/BARRA Value Index1 - an unmanaged index of a group of stocks from the S&P
500 that have low price-to-book ratios relative to the S&P 500 as a whole. It
is weighted by market capitalization, and is not available for investment.
Salomon Brothers Mortgage Index - an index of 30-year and 15-year GNMA, FNMA
and FHLMC securities, and FNMA and FHLMC balloon mortgages.
Second-tier security - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
172
<PAGE>
Senior security - a debt security that allows holders to receive their share
of a company's remaining assets in a bankruptcy before other bondholders,
creditors, and common and preferred shareholders.
Special purpose issuer - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
Trade date - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. government obligations - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. Treasury obligation - a debt security issued by the U.S. Treasury.
Warrant - a certificate that gives you the right to buy common shares at a
specified price within a specified period of time.
Wilshire 5000 Equity Index - an index that measures the performance of the
equity securities of all companies headquartered in the U.S. that have readily
available price data -- over 7, 000 companies. The index is weighted by market
capitalization and is not available for investment.
Zero-coupon bond - a bond that makes no periodic interest payments. Zero
coupon bonds are sold at a deep discount to their face value and mature at
face value. The difference between the face value at maturity and the purchase
price represents the return.
(1)S&P and BARRA have not reviewed any stock included in the S&P 500, S&P 600,
BARRA Index or BARRA SmallCap Index for its investment merit. S&P and BARRA
determine and calculate their indexes independently of the Funds and are not
a sponsor or affiliate of the Funds. S&P and BARRA give no information and
make no statements about the suitability of investing in the Funds or the
ability of their indexes to track stock market performance. S&P and BARRA
make no guarantees about the indexes, any data included in them and the
suitability of the indexes or their data for any purpose. "Standard and
Poor's," "S&P 500" and "S&P 600" are trademarks of the McGraw-Hill
Companies, Inc.
173
<PAGE>
[GRAPHIC] Where to find more information
You'll find more information about the Equity, International, Index, Balanced,
Fixed Income and Municipal Bond Funds in the following documents:
[GRAPHIC] Annual and semi-annual reports
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports. The annual report also includes a discussion about the market
conditions and investment strategies that had a significant effect on
each Fund's performance during the period covered.
[GRAPHIC] Statement of Additional Information
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.765.2668
By mail:
Nations Funds
c/o Stephens Inc.
One Bank of America Plaza
33rd Floor
Charlotte, NC 28255
On the Internet: www.nationsbank.com/nationsfunds
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
Public Reference Section of the SEC
Washington, DC 20549-6009
1.800.SEC.0330
www.sec.gov
SEC file numbers:
Nations Fund Trust, 811-04305
Nations Fund, Inc., 811-04614
Nations Reserves, 811-6030
NF-COMPROPA-8/99
<PAGE>
[GRAPHIC]
EQUITY AND BALANCED FUNDS
PROSPECTUS -- INVESTOR A, B AND C SHARES
AUGUST 1, 1999
AUGUST 20, 1999 FOR
MARKED (*) FUNDS
Equity Funds
NATIONS CAPITAL INCOME FUND
NATIONS VALUE FUND
NATIONS EQUITY INCOME FUND
NATIONS BLUE CHIP FUND
NATIONS MARSICO GROWTH & INCOME FUND*
NATIONS STRATEGIC EQUITY FUND
NATIONS CAPITAL GROWTH FUND
NATIONS DISCIPLINED EQUITY FUND
NATIONS MARSICO FOCUSED EQUITIES FUND*
NATIONS EMERGING GROWTH FUND
NATIONS SMALL COMPANY GROWTH FUND
Balanced Funds
NATIONS BALANCED ASSETS FUND
NATIONS ASSET ALLOCATION FUND
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------
NOT FDIC
INSURED
- ------------------------
May Lose Value
- ------------------------
No Bank Guarantee
- ------------------------
Nations Funds
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 115.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about two groups of
Nations Funds -- our Equity and Balanced Funds. Please read it carefully,
because it contains information that's designed to help you make informed
investment decisions.
ABOUT THE FUNDS
Each Fund group has a different investment focus:
o Equity Funds invest primarily in EQUITY SECURITIES of U.S. companies
o Balanced Funds invest in a mix of equity and FIXED INCOME SECURITIES,
as well as MONEY MARKET INSTRUMENTS
The Funds also have different risk/return characteristics because they invest
in different kinds of securities.
Equity securities have the potential to provide you with higher returns than
many other kinds of investments, but they also tend to have the highest risk.
Fixed income securities have the potential to provide you with income. They
also have the potential to increase in value because when interest rates fall,
the value of these securities tends to rise. When interest rates rise,
however, the value of these securities tends to fall. Other things can also
affect the value of fixed income securities.
Money market instruments include short-term DEBT SECURITIES that are
government issued or guaranteed or have relatively low risk. Over time, the
return on these investments may be lower than the return on other kinds of
investments.
In every case, there's a risk that you'll lose money or you may not earn as
much as you expect.
CHOOSING THE RIGHT FUNDS FOR YOU
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
2
<PAGE>
The Equity Funds all focus on long-term growth. They may be suitable for you
if:
o you have longer-term investment goals
o they're part of a balanced portfolio
o you want to try to protect your portfolio against a loss of buying
power that inflation can cause over time
They may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks
associated with equity securities
o you have short-term investment goals
o you're looking for a regular stream of income
The Balanced Funds invest in a mix of equity and fixed income securities, as
well as money market instruments. They may be suitable for you if:
o you're looking for both long-term growth and income
o you want a diversified portfolio in a single mutual fund
They may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks
associated with equity and fixed income securities
o you have short-term investment goals
o you're looking for a regular stream of income
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 6.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.321.7854 or
contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
3
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER
TO EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED SUB-ADVISERS, WHICH ARE
RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT DECISIONS FOR EACH OF
THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAAI AND THE SUB-ADVISERS
STARTING ON PAGE 66.
*BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC
ADVISORS, INC. ON OR ABOUT SEPTEMBER 1, 1999.
[GRAPHIC] About the Funds
Equity Funds
NATIONS CAPITAL INCOME FUND 6
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------
NATIONS VALUE FUND 11
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------
NATIONS EQUITY INCOME FUND 15
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------
NATIONS BLUE CHIP FUND 20
Sub-adviser: Chicago Equity Partners Corporation
- ---------------------------------------------------------------
NATIONS MARSICO GROWTH & INCOME FUND 25
Sub-adviser: Marsico Capital Management, LLC
- ---------------------------------------------------------------
NATIONS STRATEGIC EQUITY FUND 30
Sub-adviser: Bank of America Investment Management
- ---------------------------------------------------------------
NATIONS CAPITAL GROWTH FUND 33
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------
NATIONS DISCIPLINED EQUITY FUND 37
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------
NATIONS MARSICO FOCUSED EQUITIES FUND 41
Sub-adviser: Marsico Capital Management, LLC
- ---------------------------------------------------------------
NATIONS EMERGING GROWTH FUND 46
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------
NATIONS SMALL COMPANY GROWTH FUND 50
Sub-adviser: TradeStreet Investment Associates, Inc.
Balanced Funds
- ---------------------------------------------------------------
NATIONS BALANCED ASSETS FUND 54
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------
NATIONS ASSET ALLOCATION FUND 59
Sub-advisers: TradeStreet Investment Associates, Inc.,
Chicago Equity Partners Corporation
- ---------------------------------------------------------------
OTHER IMPORTANT INFORMATION 64
- ---------------------------------------------------------------
HOW THE FUNDS ARE MANAGED 66
4
<PAGE>
[GRAPHIC] About your investment
INFORMATION FOR INVESTORS
Choosing a share class 71
Buying, selling and exchanging shares 80
How selling and servicing agents are paid 88
Distributions and taxes 90
- ---------------------------------------------------------------
FINANCIAL HIGHLIGHTS 92
- ---------------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 115
- ---------------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
5
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S CAPITAL
INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS
FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 67.
[GRAPHIC] WHAT ARE CONVERTIBLE SECURITIES?
CONVERTIBLE SECURITIES, WHICH INCLUDE CONVERTIBLE BONDS AND
CONVERTIBLE PREFERRED STOCKS, CAN BE EXCHANGED FOR COMMON STOCK AT
A SPECIFIED RATE. THE COMMON STOCK IT CONVERTS TO IS CALLED THE
"UNDERLYING" COMMON STOCK.
CONVERTIBLE SECURITIES TYPICALLY:
o HAVE HIGHER INCOME POTENTIAL THAN THE UNDERLYING COMMON STOCK
o ARE AFFECTED LESS BY CHANGES IN THE STOCK MARKET THAN THE
UNDERLYING COMMON STOCK
o HAVE THE POTENTIAL TO INCREASE IN VALUE IF THE VALUE OF THE
UNDERLYING COMMON STOCK INCREASES
Nations Capital Income Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to provide investors with a total investment return,
comprised of current income and capital appreciation, consistent with
prudent investment risk.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its assets in CONVERTIBLE
SECURITIES mostly issued by U.S. issuers. The Fund may invest up to 15%
of its assets in Eurodollar convertible securities.
Most convertible securities are not INVESTMENT GRADE. The portfolio management
team generally chooses convertible securities that are rated at least "B" by a
nationally recognized statistical rating organization (NRSRO).The team may
choose unrated securities if it believes they are of comparable quality at the
time of investment.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team looks for opportunities to participate in the
growth potential of the underlying COMMON STOCKS, while earning income that is
generally higher than the income these stocks earn.
When identifying individual investments, the portfolio management team
evaluates a number of factors, including:
o the issuer's financial strength and revenue outlook
o earnings trends, including changes in earnings estimates
o the security's conversion feature and other characteristics
The team diversifies the Fund's assets among different sized companies, tries
to limit conversion costs and generally sells securities when they take on the
trading characteristics of the underlying common stock. The portfolio
management team also may convert securities to common shares when it believes
it's appropriate to do so.
6
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Capital Income Fund has the following risks:
o INVESTMENT STRATEGY RISK - The management team chooses convertible
securities that it believes have the potential for long-term
growth. There is a risk that the value of these investments will
not rise as high as the team expects, or will fall.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o INTEREST RATE RISK - The prices of the Fund's FIXED INCOME
SECURITIES will tend to fall when interest rates rise. In general,
fixed income securities with longer terms tend to fall more in
value when interest rates rise than fixed income securities with
shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when
it's due. Credit risk usually applies to most fixed income
securities, but is generally not a factor for U.S. GOVERNMENT
OBLIGATIONS. Fixed income securities with the lowest investment
grade rating or that aren't investment grade are more speculative
in nature than securities with higher ratings, and they tend to be
more sensitive to credit risk, particularly during a downturn in
the economy.
o CONVERTIBLE SECURITY FEATURES - The issuer of a convertible
security may have the option to redeem it at a specified price. If
a convertible security is redeemed, the Fund may accept the
redemption, convert the convertible security to common stock, or
sell the convertible security to a third party. Any of these
transactions could affect the Fund's ability to meet its objective.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
7
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
35.32% -4.31% 38.24% 21.34% 22.71% -5.85% 24.11% 19.45% 21.96% 6.58%
</TABLE>
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 10.31%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 3rd quarter 1991: 17.59%
Worst: 3rd quarter 1990: -12.28%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998*
The table shows the Fund's average annual total return for each period,
compared with the FIRST BOSTON CONVERTIBLE INDEX, a widely-used
unmanaged index that measures the performance of convertible
securities. The index is not available for investment.
<TABLE>
<CAPTION>
Since
1 year 5 years 10 years inception
<S> <C> <C> <C> <C>
Investor A Shares 0.46% 11.32% 16.37% 14.85%
Investor C Shares 5.30% -- -- 13.63%
First Boston Convertible Index 6.55% 10.83% 12.30% 11.37**
</TABLE>
*Investor B Shares have been in operation for less than a full calendar
year, so no performance information for this class of shares has been
included in this prospectus.
**Return is from inception of Investor A Shares. The inception dates
for classes shown may vary.
8
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge (load),
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none none none
ANNUAL FUND OPERATING EXPENSES(4)
(Expenses that are deducted from the
Fund's assets)
Management fees 0.65% 0.65 % 0.65 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.35% 0.35 % 0.35 %
------ -------- --------
Total annual Fund operating expenses 1.25% 2.00 % 2.00 %
Fee waivers and/or reimbursements (0.02)% (0.02) % (0.02) %
------ -------- --------
Total net expenses(5) 1.23% 1.98 % 1.98 %
====== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
(5) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
May 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
9
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire in May 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $693 $948 $1,221 $2,001
Investor B Shares $701 $926 $1,276 $2,132
Investor C Shares $301 $626 $1,076 $2,326
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $201 $626 $1,076 $2,132
Investor C Shares $201 $626 $1,076 $2,326
</TABLE>
10
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET INVESTMENT ASSOCIATES, INC. (TRADESTREET) IS THIS
FUND'S SUB-ADVISER. TRADESTREET'S VALUE MANAGEMENT TEAM MAKES THE
DAY-TO-DAY INVESTMENT DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 67.
[GRAPHIC] WHAT IS VALUE INVESTING?
VALUE INVESTING MEANS LOOKING FOR "UNDERVALUED" COMPANIES --
QUALITY COMPANIES THAT MAY BE CURRENTLY OUT OF FAVOR AND SELLING
AT A REDUCED PRICE, BUT THAT HAVE GOOD POTENTIAL TO INCREASE IN
VALUE.
THE MANAGEMENT TEAM USES FUNDAMENTAL ANALYSIS TO HELP DECIDE
WHETHER THE CURRENT STOCK PRICE OF A COMPANY MAY BE LOWER THAN THE
COMPANY'S TRUE VALUE, AND THEN LOOKS FOR THINGS THAT COULD TRIGGER
A RISE IN PRICE, LIKE A NEW PRODUCT LINE, NEW PRICING OR A CHANGE
IN MANAGEMENT. THIS TRIGGER IS OFTEN CALLED A "CATALYST."
Nations Value Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks growth of capital by investing in companies that are
believed to be undervalued.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its assets in COMMON STOCKS
of U.S. companies. It generally invests in companies in a broad range
of industries with market capitalizations of at least $1 billion and
daily trading volumes of at least $3 million.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The management team uses FUNDAMENTAL ANALYSIS to identify stocks of companies
that it believes are undervalued, looking at, among other things:
o the quality of the company
o the company's projected earnings and dividends
o the stock's PRICE-TO-EARNINGS RATIO relative to other stocks in the
same industry or economic sector. The team believes that companies
with lower price-to-earnings ratios are generally more likely to
provide better opportunities for capital appreciation
o the stock's potential to provide total return
o the value of the stock relative to the overall stock market
The team also looks for a "catalyst" for improved earnings. This could be, for
example, a new product, new management or a new sales channel.
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of CAPITAL GAINS distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on
shareholders
o may offset capital gains by selling securities to realize a CAPITAL
LOSS
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The team may sell a security when its price reaches the target set by the
team, there is a deterioration in the company's financial situation, when the
team believes other investments are more attractive, or for other reasons.
11
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Value Fund has the following risks:
o INVESTMENT STRATEGY RISK - The management team chooses stocks that
it believes are undervalued, with the expectation that they will
rise in value. There is a risk that the value of these investments
will not rise as high as the team expects, or will fall.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.32%* 3.53% 25.86% 7.12% 16.06% -3.08% 35.78% 20.85% 26.30% 17.14%
</TABLE>
*Return is from inception (12-6-89) to 12-31-89.
[GRAPHIC] YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 6.90%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 19.39%
Worst: 3rd quarter 1998: -12.32%
</TABLE>
12
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEXES' RETURNS DO NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500 and the S&P/BARRA VALUE INDEX. The S&P 500 is
an unmanaged index of 500 widely held common stocks. The S&P/BARRA
Value Index is an unmanaged index of a group of stocks from the S&P 500
that have low price-to-book ratios relative to the S&P 500 as a whole.
These indexes are weighted by market capitalization and are not
available for investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 10.39% 17.27% 15.19%
Investor B Shares 11.16% 17.77% 17.86%
Investor C Shares 15.54% 18.04% 17.40%
S&P 500 28.58% 24.06% 18.03%**
S&P/BARRA Value Index 14.68% 19.88% 15.80%**
</TABLE>
**Return is from inception of Investor A Shares. The inception dates
for classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge,
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the
Fund's assets)
Management fees 0.65% 0.65 % 0.65 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.31% 0.31 % 0.31 %
----- -------- --------
Total annual Fund operating expenses 1.21% 1.96 % 1.96 %
===== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
Different charges apply to Investor B Shares bought before January
1, 1996 and after July 31, 1997. Please see page 73 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) A 1.00% redemption fee applies to investors who bought $1 million
or more of Investor A Shares between July 31, 1997 and November 15,
1998 and sell them within 18 months of buying them. The fee is paid
to the Fund. Please see page 73 for details.
(5) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
13
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $691 $938 $1,203 $1,960
Investor B Shares $699 $915 $1,257 $2,091
Investor C Shares $299 $615 $1,057 $2,285
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $199 $615 $1,057 $2,091
Investor C Shares $199 $615 $1,057 $2,285
</TABLE>
14
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S STRUCTURED
PRODUCTS MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS
FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 67.
[GRAPHIC] WHY INVEST IN AN EQUITY INCOME FUND?
EQUITY INCOME FUNDS ARE GENERALLY CONSIDERED TO BE A MORE
CONSERVATIVE EQUITY INVESTMENT BECAUSE THEY INVEST IN LARGE,
WELL-ESTABLISHED COMPANIES THAT PAY REGULAR DIVIDENDS. THESE
COMPANIES TEND TO BE LESS VOLATILE THAN OTHER KINDS OF COMPANIES.
Nations Equity Income Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks current income and growth of capital by investing in
companies with above-average DIVIDEND YIELDS.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests in 100 to 150 companies in a broad range of
industries with market capitalizations of at least $5 billion. The Fund
tries to provide a higher yield than the S&P 500. The Fund generally
invests at least 65% of its assets in COMMON STOCKS that pay dividends
and that are listed on a national exchange or are traded on an
established OVER-THE-COUNTER MARKET.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The management team evaluates the overall economy, industry conditions and the
financial conditions and management of each company, using a process called
FUNDAMENTAL ANALYSIS, to identify stocks of companies whose earnings are
believed to have the potential to grow. When selecting investments, the
management team looks at, among other things:
o value characteristics like book value, earnings yield and cash flow
o growth characteristics like the rate of growth of a company's stock
price and earnings
o a security's potential for above-average dividend yield
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of CAPITAL GAINS distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on
shareholders
o may offset capital gains by selling securities to realize a CAPITAL
LOSS
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
15
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
The team may sell a security when its price reaches the target set by the
team, there is a deterioration in the company's financial situation, when the
team believes other investments are more attractive, or for other reasons.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Equity Income has the following risks:
o INVESTMENT STRATEGY RISK - The management team chooses stocks that
it believes have the potential for dividend growth and capital
appreciation. There is a risk that dividend payments and the value
of these investments will not rise as high as the team expects, or
will fall.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
16
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
13.95%* 9.77% 12.47% -1.29% 27.35% 19.61% 25.72% 3.25%
*Return is from inception (4-16-91) to 12-31-91.
[GRAPHIC] YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 7.22%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 14.21%
Worst: 3rd quarter 1998: -14.75%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The S&P 500 is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares -2.70% 12.97% 13.13 %
Investor B Shares -2.10% 13.44% 13.42 %
Investor C Shares 1.76% 13.69% 13.71 %
S&P 500 28.58% 24.06% 19.65%**
</TABLE>
**Return is from inception of Investor A Shares. The inception dates
for classes shown may vary.
17
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge (load),
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the
Fund's assets)
Management fees 0.65% 0.65 % 0.65 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.28% 0.28 % 0.28 %
----- -------- --------
Total annual Fund operating expenses 1.18% 1.93 % 1.93 %
===== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
Different charges apply to Investor B Shares bought before January
1, 1996 and after July 31, 1997. Please see page 73 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 73 for
details.
(4) A 1.00% redemption fee applies to investors who bought $1 million
or more of Investor A Shares between July 31, 1997 and November 15,
1998 and sell them within 18 months of buying them. The fee is paid
to the Fund. Please see page 73 for details.
(5) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
18
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $688 $929 $1,188 $1,927
Investor B Shares $696 $906 $1,242 $2,059
Investor C Shares $296 $606 $1,042 $2,254
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $196 $606 $1,042 $2,059
Investor C Shares $196 $606 $1,042 $2,254
</TABLE>
19
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
THE FUND DOES NOT HAVE ITS OWN INVESTMENT ADVISER OR SUB-ADVISER
BECAUSE IT'S A "FEEDER" FUND. A FEEDER FUND TYPICALLY INVESTS ALL
OF ITS ASSETS IN ANOTHER FUND, WHICH IS CALLED A "MASTER
PORTFOLIO." MASTER PORTFOLIO AND FUND ARE SOMETIMES USED
INTERCHANGEABLY.
BAAI IS THE MASTER PORTFOLIO'S INVESTMENT ADVISER, AND CHICAGO
EQUITY PARTNERS CORPORATION (CHICAGO EQUITY) IS ITS SUB-ADVISER.
CHICAGO EQUITY'S EQUITY MANAGEMENT TEAM MAKES THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE MASTER PORTFOLIO.
[GRAPHIC] YOU'LL FIND MORE ABOUT
CHICAGO EQUITY ON PAGE 69.
[GRAPHIC] WHY INVEST IN NATIONS BLUE CHIP FUND?
NATIONS BLUE CHIP FUND MAY BE SUITABLE FOR INVESTORS WHO ARE
LOOKING FOR A "CORE" EQUITY HOLDING FOR THEIR PORTFOLIO. IT'S
CONSIDERED TO BE A MORE CONSERVATIVE EQUITY INVESTMENT BECAUSE IT
INVESTS IN A BROAD RANGE OF LARGE, WELL-ESTABLISHED COMPANIES.
THESE COMPANIES TEND TO BE LESS VOLATILE THAN OTHER KINDS OF
COMPANIES.
Nations Blue Chip Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to achieve long-term capital appreciation through
investments in blue chip stocks.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund invests all of its assets in Nations Blue Chip Master
Portfolio (the Master Portfolio). The Master Portfolio has the same
investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in blue chip
stocks. These are stocks of well established, nationally known companies that
have a long record of profitability and a reputation for quality management,
products and services.
The Master Portfolio primarily invests in blue chip stocks that are included
in the S&P 500, but may invest up to 15% of its assets in stocks that are not
included in the index. It usually holds approximately 100 stocks.
The Master Portfolio may also invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the
SAI.
The portfolio management team uses QUANTITATIVE ANALYSIS to analyze
fundamental information about securities and identify value. Starting with a
universe of approximately 700 COMMON STOCKS, the portfolio management team
uses a multi-factor computer model to rank securities, based on the following
criteria, among others:
o changes in actual and expected earnings
o unexpected changes in earnings
o PRICE-TO-EARNINGS RATIO
o price-to-book ratio
o price-to-cash flow
The portfolio management team tries to manage risk by matching the market
capitalization, style and industry weighting characteristics of the S&P 500.
The team focuses on selecting individual stocks to try to provide higher
returns than the S&P 500 while maintaining a level of risk similar to the
index.
The team may sell a security when there is a development in the company or its
industry that causes earnings estimates to fall, when the team believes other
investments are more attractive, or for other reasons.
20
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Blue Chip Fund has the following risks:
o INVESTMENT STRATEGY RISK - The Master Portfolio uses quantitative
analysis to select blue chip stocks that are believed to have the
potential for long-term growth. There is a risk that the value of
these investments will not rise as high as expected, or will fall.
o STOCK MARKET RISK - The value of the stocks the Master Portfolio
holds can be affected by changes in U.S. or foreign economies and
financial markets, and the companies that issue the stocks, among
other things. Stock prices can rise or fall over short as well as
long periods. In general, stock markets tend to move in cycles,
with periods of rising prices and periods of falling prices. As of
the date of this prospectus, the stock markets, as measured by the
S&P 500 and other commonly used indices, were trading at or close
to record levels. There can be no guarantee that these levels will
continue.
o INVESTING IN THE MASTER PORTFOLIO - Other mutual funds and eligible
investors can buy shares in the Master Portfolio. For example, the
World Horizon U.S. Equity Fund, which is also managed by BAAI,
invests all of its assets in the Master Portfolio.
All investors in the Master Portfolio invest under the same terms and
conditions as the Fund and pay a proportionate share of the Master
Portfolio's expenses. Other feeder funds that invest in the Master
Portfolio may have different share prices and returns than the Fund
because different feeder funds typically have varying sales charges,
and ongoing administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio
if it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses
could increase. The Fund might also have to pay brokerage, tax or
other charges.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
21
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
0.66%* 35.78% 23.76% 32.70% 27.86%
*Return is from inception (1-13-94) to 12-31-94.
[GRAPHIC] YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 11.24%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 23.71%
Worst: 3rd quarter 1998: -12.18%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998**
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The S&P 500 is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Investor A Shares 20.50% 22.19 %
Investor C Shares 26.24% 27.81 %
S&P 500 28.58% 24.06%***
</TABLE>
**Investor B Shares have been in operation for less than a full
calendar year, so no performance information for this class of shares
has been included in this prospectus.
***Return is from inception of Investor A Shares. The inception dates
for classes shown may vary.
22
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge (load),
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none none none
ANNUAL FUND OPERATING EXPENSES(4)
(Expenses that are deducted from the
Fund's assets)(5)
Management fees 0.65% 0.65 % 0.65 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.34% 0.34 % 0.34 %
------ -------- --------
Total annual Fund operating expenses 1.24% 1.99 % 1.99 %
Fee waivers and/or reimbursements (0.04)% (0.04) % (0.04) %
------ -------- --------
Total net expenses6 1.20% 1.95 % 1.95 %
====== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
(5) These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
(6) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
May 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
23
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire in May 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $690 $943 $1,214 $1,988
Investor B Shares $698 $920 $1,269 $2,119
Investor C Shares $298 $620 $1,069 $2,313
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $198 $620 $1,069 $2,119
Investor C Shares $198 $620 $1,069 $2,313
</TABLE>
24
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
THE FUND DOES NOT HAVE ITS OWN INVESTMENT ADVISER OR SUB-ADVISER
BECAUSE IT'S A "FEEDER" FUND. A FEEDER FUND TYPICALLY INVESTS ALL
OF ITS ASSETS IN ANOTHER FUND, WHICH IS CALLED A "MASTER
PORTFOLIO." MASTER PORTFOLIO AND FUND ARE SOMETIMES USED
INTERCHANGEABLY.
BAAI IS THE MASTER PORTFOLIO'S INVESTMENT ADVISER, AND MARSICO
CAPITAL MANAGEMENT, LLC (MARSICO CAPITAL) IS ITS SUB-ADVISER.
THOMAS F. MARSICO IS THE PORTFOLIO MANAGER AND MAKES THE
DAY-TO-DAY INVESTMENT DECISIONS FOR THE MASTER PORTFOLIO.
[GRAPHIC] YOU'LL FIND MORE ABOUT
MARSICO CAPITAL AND
MR. MARSICO ON PAGE 67.
[GRAPHIC] WHY INVEST IN A GROWTH AND INCOME FUND?
GROWTH AND INCOME FUNDS CAN INVEST IN A MIX OF EQUITY AND FIXED
INCOME SECURITIES. THIS CAN HELP REDUCE VOLATILITY AND PROVIDE THE
FUND WITH THE FLEXIBILITY TO SHIFT AMONG SECURITIES THAT OFFER THE
POTENTIAL FOR HIGHER RETURNS.
WHILE THIS FUND INVESTS IN A WIDE RANGE OF COMPANIES AND
INDUSTRIES, IT HOLDS FEWER INVESTMENTS THAN OTHER KINDS OF FUNDS.
THIS MEANS IT CAN HAVE GREATER PRICE SWINGS THAN MORE DIVERSIFIED
FUNDS. IT ALSO MEANS IT MAY HAVE RELATIVELY HIGHER RETURNS WHEN
ONE OF ITS INVESTMENTS PERFORMS WELL, OR RELATIVELY LOWER RETURNS
WHEN AN INVESTMENT PERFORMS POORLY.
Nations Marsico Growth & Income Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks long-term growth of capital with a limited emphasis on
income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund invests all of its assets in Nations Marsico Growth & Income
Master Portfolio (the Master Portfolio). The Master Portfolio has the
same investment objective as the Fund.
The Master Portfolio invests primarily in EQUITY SECURITIES of large
capitalization companies that are selected for their growth potential. It
invests at least 25% of its assets in securities that are believed to have
income potential, and generally holds 35 to 50 securities. It may hold up to
25% of its assets in FOREIGN SECURITIES.
Marsico Capital may shift assets between growth and income securities based on
its assessment of market, financial and economic conditions. The Master
Portfolio, however, is not designed to produce a consistent level of income.
The Master Portfolio may also invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the
SAI.
Marsico Capital looks for companies with earnings growth potential that may
not be recognized by other investors, focusing on companies that have some of
the following characteristics:
o products, markets or technologies in flux that can result in
extraordinary growth
o strong brand franchises that can take advantage of a changing
global environment
o global reach that allows the company to generate sales and earnings
both in the United States and abroad. This can give the company
added growth potential and also means the company may be less
affected by changes in local markets
o movement with, not against, the major social, economic and cultural
shifts taking place in the world
25
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
Once an investment opportunity is identified, Marsico Capital uses a
disciplined analytical process to assess its potential as an investment. This
process includes a "top-down" analysis that takes into account economic
factors like interest rates, inflation, the regulatory environment, the
industry and global competition.
The process also includes a "bottom-up" analysis of a company's financial
situation, as well as individual company characteristics like commitment to
research, market franchise and quality of management.
Marsico Capital may sell a security when it believes there is a deterioration
in the company's financial situation, the security is overvalued, when there
is a negative development in the company's competitive, regulatory or economic
environment, or for other reasons.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Marsico Growth & Income Fund has the following risks:
o INVESTMENT STRATEGY RISK - Marsico Capital uses an investment
strategy that tries to identify equities with growth or income
potential. There is a risk that the value of these investments will
not rise as high as Marsico Capital expects, or will fall.
o STOCK MARKET RISK - The value of the stocks the Master Portfolio
holds can be affected by changes in U.S. or foreign economies and
financial markets, and the companies that issue the stocks, among
other things. Stock prices can rise or fall over short as well as
long periods. In general, stock markets tend to move in cycles,
with periods of rising prices and periods of falling prices. As of
the date of this prospectus, the stock markets, as measured by the
S&P 500 and other commonly used indices, were trading at or close
to record levels. There can be no guarantee that these levels will
continue.
o INTEREST RATE RISK - The prices of the Master Portfolio's FIXED
INCOME SECURITIES will tend to fall when interest rates rise and to
rise when interest rates fall. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Master Portfolio could lose money if the issuer
of a fixed income security is unable to pay interest or repay
principal when it's due. Credit risk usually applies to most fixed
income securities, but is generally not a factor for U.S.
GOVERNMENT OBLIGATIONS.
o FOREIGN INVESTMENT RISK - Because the Master Portfolio may invest
up to 25% of its assets in foreign securities, it can be affected
by the risks of foreign investing. Foreign investments may be
riskier than U.S. investments because of political and economic
conditions, changes in currency exchange rates, the implementation
of the Euro, foreign controls on investment, difficulties selling
some securities and lack of or limited financial information.
Withholding taxes also may apply to some foreign investments.
26
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR INFORMATION ABOUT THE PERFORMANCE OF OTHER EQUITY FUNDS
MANAGED BY THOMAS MARSICO, SEE HOW THE FUNDS ARE MANAGED.
o INVESTING IN THE MASTER PORTFOLIO - The Fund began investing in the
Master Portfolio in August 1999. Other mutual funds and eligible
investors can buy shares in the Master Portfolio. All investors in
the Master Portfolio invest under the same terms and conditions as
the Fund and pay a proportionate share of the Master Portfolio's
expenses. Other feeder funds that invest in the Master Portfolio
may have different share prices and returns than the Fund because
different feeder funds typically have varying sales charges, and
ongoing administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio
if it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses
could increase. The Fund might also have to pay brokerage, tax or
other charges.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1998
38.62%
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 14.03%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 20.75%
Worst: 3rd quarter 1998: -12.24%
</TABLE>
27
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held COMMON
STOCKS, weighted by market capitalization. The S&P 500 is not available
for investment.
<TABLE>
<CAPTION>
1 year
<S> <C>
Investor A Shares 30.65%
Investor B Shares 32.92%
Investor C Shares 37.22%
S&P 500 28.58%
</TABLE>
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge,
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the
Fund's assets)(6)
Management fees 0.75% 0.75 % 0.75 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.50% 0.50 % 0.50 %
----- -------- --------
Total annual Fund operating expenses 1.50% 2.25 % 2.25 %
===== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
Different charges apply to Investor B Shares bought before January
1, 1996 and after July 31, 1997. Please see page 73 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) A 1.00% redemption fee applies to investors who bought $1 million
or more of Investor A Shares between July 31, 1997 and November 15,
1998 and sell them within 18 months of buying them. The fee is paid
to the Fund. Please see page 73 for details.
(5) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
(6) These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
28
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $719 $1,023 $1,348 $2,266
Investor B Shares $728 $1,003 $1,405 $2,396
Investor C Shares $328 $ 703 $1,205 $2,585
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $228 $703 $1,205 $2,396
Investor C Shares $228 $703 $1,205 $2,585
</TABLE>
29
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
BANK OF AMERICA INVESTMENT MANAGEMENT (BAIM) IS THIS FUND'S
SUB-ADVISER. MICHAEL E. KENNEALLY MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAIM AND MR. KENNEALLY
ON PAGE 69.
[GRAPHIC] MINIMIZING TAXES
THIS FUND TRIES TO REPLACE -- OR TURN OVER -- NO MORE THAN 25% OF
ITS INVESTMENTS IN A YEAR. MANAGING THE NUMBER OF BUY AND SELL
TRANSACTIONS THE FUND MAKES CAN HELP REDUCE THE CAPITAL GAINS IT
DISTRIBUTES.
Nations Strategic Equity Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks long-term, after-tax returns by investing in a
diversified portfolio of COMMON STOCKS.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its assets in common stocks
of companies that it selects from most major industry sectors. The Fund
normally holds 60 to 80 securities, which include common stocks,
PREFERRED STOCKS and CONVERTIBLE SECURITIES like WARRANTS and RIGHTS.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio manager identifies stocks using a disciplined analytical process.
Starting with a universe of companies with market capitalizations of at least
$1 billion, the portfolio manager assesses the investment potential of these
companies and their industries by evaluating:
o the growth prospects of the company's industry
o the company's relative competitive position in the industry
The portfolio manager believes that this analysis identifies companies with
favorable long-term growth potential, competitive advantages and sensible
business strategies.
The portfolio manager then uses QUANTITATIVE ANALYSIS to decide when to
invest, evaluating each company's earnings trends and stock valuations, among
other things, to try to determine when it is reasonably valued.
The portfolio manager may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of CAPITAL GAINS and income
distributed to shareholders. For example, the portfolio manager:
o will focus on long-term investments to try to limit the number of
buy and sell transactions
o will try to sell securities that have the lowest tax burden on
shareholders
o may offset capital gains by selling securities to realize a CAPITAL
LOSS
o invests primarily in securities with lower DIVIDEND YIELDS
o may use options, instead of selling securities
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The portfolio manager may sell a security when he believes that the
profitability of the company's industry is beginning to decline, there is a
meaningful deterioration in the company's competitive position, the company's
management fails to execute its business strategy, when the portfolio manager
considers the security's price to be overvalued, or for other reasons.
30
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Strategic Equity Fund has the following risks:
o INVESTMENT STRATEGY RISK - The portfolio manager chooses stocks
that are believed to have the potential for long-term growth. There
is a risk that the value of these investments will not rise as
expected, or will fall.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o CONVERTIBLE SECURITY FEATURES - The issuer of a convertible
security may have the option to redeem it at a specified price. If
a convertible security is redeemed, the Fund may accept the
redemption, convert the convertible security to common stock, or
sell the convertible security to a third party. Any of these
transactions could affect the Fund's ability to meet its objective.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The Fund has been in operation for less than a full calendar year, so
no performance information has been included in this prospectus.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge (load),
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none none none
ANNUAL FUND OPERATING EXPENSES(4)
(Expenses that are deducted from the
Fund's assets)
Management fees 0.65% 0.65 % 0.65 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.44% 0.44 % 0.44 %
----- -------- --------
Total annual Fund operating expenses 1.34% 2.09 % 2.09 %
===== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
31
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $704 $976 $1,268 $2,098
Investor B Shares $712 $955 $1,324 $2,229
Investor C Shares $312 $655 $1,124 $2,421
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $212 $655 $1,124 $2,229
Investor C Shares $212 $655 $1,124 $2,421
</TABLE>
32
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S CORE GROWTH
MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 67.
[GRAPHIC] WHAT IS A GROWTH FUND?
GROWTH FUNDS INVEST IN COMPANIES THAT HAVE THE POTENTIAL FOR
SIGNIFICANT INCREASES IN REVENUE OR EARNINGS. THESE ARE TYPICALLY
COMPANIES THAT ARE DEVELOPING OR APPLYING NEW TECHNOLOGIES,
PRODUCTS OR SERVICES IN GROWING INDUSTRY SECTORS.
Nations Capital Growth Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks growth of capital by investing in companies that are
believed to have superior earnings growth potential.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its assets in COMMON STOCKS
of companies that have one or more of the following characteristics:
o above-average earnings growth compared with the S&P 500
o established operating histories, strong balance sheets and
favorable financial performance
o above-average return on equity compared with the S&P 500
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
When identifying investments, the management team starts with a universe of
companies from the WILSHIRE 5000 EQUITY INDEX, an index that measures the
performance of the EQUITY SECURITIES of over 7,000 companies headquartered in
the United States. The index is weighted by market capitalization and is not
available for investment. The team then identifies a group of companies with
market capitalizations of more than $1 billion that it believes have strong
growth potential -- around 750 companies. The team then chooses investments
from this group based on intensive financial research, visits to companies and
market conditions, looking for companies:
o whose earnings growth is projected to be higher than average
o that develop or apply new technologies, new and improved methods of
distribution, or new services
o that may benefit from changing consumer demands and lifestyles
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of CAPITAL GAINS distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on
shareholders
o may offset capital gains by selling securities to realize a CAPITAL
LOSS
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The team may sell a security when its price reaches the target set by the
team, the company's growth prospects are deteriorating, when the team believes
other investments are more attractive, or for other reasons.
33
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Capital Growth Fund has the following risks:
o INVESTMENT STRATEGY RISK - The management team chooses stocks that
it believes have superior growth potential and are selling at
reasonable prices, with the expectation that they will rise in
value. There is a risk that the value of these investments will not
rise as high as the team expects, or will fall.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
7.77%* 7.53% -1.55% 28.56% 18.29% 30.36% 29.73%
*Return is from inception (10-2-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 10.61%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 28.21%
Worst: 3rd quarter 1998: -14.93%
</TABLE>
34
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The S&P 500 is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 22.23% 19.00% 17.68 %
Investor B Shares 23.84% 19.32% 19.08 %
Investor C Shares 27.72% 19.70% 18.07 %
S&P 500 28.58% 24.06% 21.62%**
</TABLE>
**Return is from inception of Investor A Shares. The inception dates
for classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge,
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the
Fund's assets)
Management fees 0.65% 0.65 % 0.65 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.33% 0.33 % 0.33 %
----- -------- --------
Total annual Fund operating expenses 1.23% 1.98 % 1.98 %
===== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
Different charges apply to Investor B Shares bought before January
1, 1996 and after July 31, 1997. Please see page 73 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) A 1.00% redemption fee applies to investors who bought $1 million
or more of Investor A Shares between July 31, 1997 and November 15,
1998 and sell them within 18 months of buying them. The fee is paid
to the Fund. Please see page 73 for details.
(5) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
35
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $693 $944 $1,213 $1,981
Investor B Shares $701 $921 $1,268 $2,113
Investor C Shares $301 $621 $1,068 $2,306
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $201 $621 $1,068 $2,113
Investor C Shares $201 $621 $1,068 $2,306
</TABLE>
36
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S STRUCTURED
PRODUCTS MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS
FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 67.
[GRAPHIC] WHY USE A COMPUTER MODELING SYSTEM?
THE MANAGEMENT TEAM USES A COMPUTER MODELING SYSTEM AS A KEY
COMPONENT IN MANAGING THIS FUND. THE SYSTEM RANKS STOCKS BASED ON
THE RELATIVE SIZE AND RATE OF GROWTH OF A COMPANY'S EARNINGS
(EARNINGS MOMENTUM), AND ON THE VALUE OF ITS STOCK COMPARED WITH
OTHERS IN THE SAME INDUSTRY. THIS HELPS THE TEAM CHOOSE STOCKS
THAT HAVE THE POTENTIAL TO GENERATE ATTRACTIVE RETURNS.
Nations Disciplined Equity Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks growth of capital by investing in companies that are
expected to produce significant increases in earnings per share.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its assets in COMMON STOCKS
of large and medium-sized U.S. companies. These companies typically
have a market capitalization of $1 billion or more.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The management team uses a computer modeling system to help construct a
portfolio of 40 to 60 securities diversified across industry sectors. Each
security selected for investment by the Fund is in the top third of the
securities ranked by the team's quantitative model for earnings momentum and
in the top third of securities ranked by the model on a valuation basis.
When selecting investments, the team looks for securities it believes are
attractively priced with increasing earnings. It uses QUANTITATIVE ANALYSIS,
which is an analysis of a company's financial information, to:
o identify companies with improving profit potential and increasing
earnings
o identify companies with favorable PRICE-TO-EARNINGS RATIOS
o identify companies with positive earnings trends. In general, these
companies also tend to experience favorable trends in their stock
prices
o rank the attractiveness of EQUITY SECURITIES based on a
"multi-factor" valuation model, a computer modeling system that
takes into account value measures like book value, earnings yield
and cash flow to measure a stock's intrinsic worth compared with
its market price. The model also considers growth measures like
price momentum and the size and rate of earnings growth to compare
a stock with others in the same industry
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of CAPITAL GAINS it
distributes to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on
shareholders
o may offset capital gains by selling securities to realize a CAPITAL
LOSS
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
37
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
The team may sell a security when its earnings momentum begins to deteriorate,
when there is a development in the company that causes earnings estimates to
fall, or for other reasons.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Disciplined Equity Fund has the following risks:
o INVESTMENT STRATEGY RISK - The team uses a quantitative approach to
select investments it believes are attractively valued and whose
earnings per share are likely to increase. There is a risk that the
value of these investments will not rise as high as the team
expects, or will fall.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
15.06%* -6.42% 27.30% 21.90% 29.59% 25.57%
*Return is from inception (7-26-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 11.34%
38
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 24.55%
Worst: 3rd quarter 1998: -15.31%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The S&P 500 is not available
for investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 18.34% 17.36% 18.91 %
Investor B Shares 19.72% -- 21.97 %
Investor C Shares 23.69% -- 25.89 %
S&P 500 28.58% 24.06% 23.21%**
</TABLE>
**Return is from inception of Investor A Shares. The inception dates
for classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge
(load), as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the
Fund's assets)
Management fees 0.65% 0.65 % 0.65 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.34% 0.34 % 0.34 %
----- -------- --------
Total annual Fund operating expenses 1.24% 1.99 % 1.99 %
===== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
Different charges apply to Investor B Shares bought before January
1, 1996 and after July 31, 1997. Please see page 73 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) A 1.00% redemption fee applies to investors who bought $1 million
or more of Investor A Shares between July 31, 1997 and November 15,
1998 and sell them within 18 months of buying them. The fee is paid
to the Fund. Please see page 73 for details.
(5) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
39
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $694 $946 $1,218 $1,992
Investor B Shares $702 $924 $1,273 $2,123
Investor C Shares $302 $624 $1,073 $2,317
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $202 $624 $1,073 $2,123
Investor C Shares $202 $624 $1,073 $2,317
</TABLE>
40
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
THE FUND DOES NOT HAVE ITS OWN INVESTMENT ADVISER OR SUB-ADVISER
BECAUSE IT'S A "FEEDER" FUND. A FEEDER FUND TYPICALLY INVESTS ALL
OF ITS ASSETS IN ANOTHER FUND, WHICH IS CALLED A "MASTER
PORTFOLIO." MASTER PORTFOLIO AND FUND ARE SOMETIMES USED
INTERCHANGEABLY.
BAAI IS THE MASTER PORTFOLIO'S INVESTMENT ADVISER, AND MARSICO
CAPITAL MANAGEMENT, LLC (MARSICO CAPITAL) IS ITS SUB-ADVISER.
THOMAS F. MARSICO IS THE PORTFOLIO MANAGER AND MAKES THE
DAY-TO-DAY INVESTMENT DECISIONS FOR THE MASTER PORTFOLIO.
[GRAPHIC] YOU'LL FIND MORE ABOUT
MARSICO CAPITAL AND
MR. MARSICO ON PAGE 67.
[GRAPHIC] WHAT IS A FOCUSED FUND?
A FOCUSED FUND INVESTS IN A SMALL NUMBER OF COMPANIES WITH
EARNINGS THAT ARE BELIEVED TO HAVE THE POTENTIAL TO GROW
SIGNIFICANTLY. THIS FUND FOCUSES ON LARGE, ESTABLISHED AND WELL-
KNOWN U.S. COMPANIES.
BECAUSE A FOCUSED FUND HOLDS FEWER INVESTMENTS THAN OTHER KINDS OF
FUNDS, IT CAN HAVE GREATER PRICE SWINGS THAN MORE DIVERSIFIED
FUNDS. IT MAY EARN RELATIVELY HIGHER RETURNS WHEN ONE OF ITS
INVESTMENTS PERFORMS WELL, OR RELATIVELY LOWER RETURNS WHEN AN
INVESTMENT PERFORMS POORLY.
Nations Marsico Focused Equities Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks long-term growth of capital.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund invests all of its assets in Nations Marsico Focused Equities
Master Portfolio (the Master Portfolio). The Master Portfolio has the
same investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in COMMON
STOCKS of large companies. The Master Portfolio, which is NON-DIVERSIFIED,
generally holds a core position of 20 to 30 common stocks. It may invest up to
25% of its assets in FOREIGN SECURITIES.
The Master Portfolio may also invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the
SAI.
Marsico Capital looks for companies with earnings growth potential that may
not be recognized by other investors, focusing on companies that have some of
the following characteristics:
o products, markets or technologies in flux that can result in
extraordinary growth
o strong brand franchises that can take advantage of a changing
global environment
o global reach that allows the company to generate sales and earnings
both in the United States and abroad. This can give the company
added growth potential and also means the company may be less
affected by changes in local markets
o movement with, not against, the major social, economic and cultural
shifts taking place in the world
Once an investment opportunity is identified, Marsico Capital uses a
disciplined analytical process to assess its potential as an investment. This
process includes a "top-down" analysis that takes into account economic
factors like interest rates, inflation, the regulatory environment, the
industry and global competition.
The process also includes a "bottom-up" analysis of a company's financial
situation, as well as individual company characteristics like commitment to
research, market franchise and quality of management.
Marsico Capital may sell a security when it believes there is a deterioration
in the company's financial situation, the security is overvalued, when there
is a negative development in the company's competitive, regulatory or economic
environment, or for other reasons.
41
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Marsico Focused Equities Fund has the following risks:
o INVESTMENT STRATEGY RISK - There is a risk that the value of the
Master Portfolio's investments will not rise as high as Marsico
Capital expects, or will fall.
o HOLDING FEWER INVESTMENTS - This Master Portfolio is considered to
be non-diversified because it may hold fewer investments than other
kinds of equity funds. This increases the risk that its value could
go down significantly if even only one of its investments performs
poorly. The value of this Portfolio will tend to have greater price
swings than the value of more diversified equity funds. The Master
Portfolio may become a diversified fund by limiting the investments
in which more than 5% of its total assets are invested.
o STOCK MARKET RISK - The value of the stocks the Master Portfolio
holds can be affected by changes in U.S. or foreign economies and
financial markets, and the companies that issue the stocks, among
other things. Stock prices can rise or fall over short as well as
long periods. In general, stock markets tend to move in cycles,
with periods of rising prices and periods of falling prices. As of
the date of this prospectus, the stock markets, as measured by the
S&P 500 and other commonly used indices, were trading at or close
to record levels. There can be no guarantee that these levels will
continue.
o FOREIGN INVESTMENT RISK - Because the Master Portfolio may invest
up to 25% of its assets in foreign securities, it can be affected
by the risks of foreign investing. Foreign investments may be
riskier than U.S. investments because of political and economic
conditions, changes in currency exchange rates, the implementation
of the Euro, foreign controls on investment, difficulties selling
some securities and lack of or limited financial information.
Withholding taxes also may apply to some foreign investments.
o INVESTING IN THE MASTER PORTFOLIO - The Fund began investing in the
Master Portfolio in August 1999. Other mutual funds and eligible
investors can buy shares in the Master Portfolio. All investors in
the Master Portfolio invest under the same terms and conditions as
the Fund and pay a proportionate share of the Master Portfolio's
expenses. Other feeder funds that invest in the Master Portfolio
may have different share prices and returns than the Fund because
different feeder funds typically have varying sales charges, and
ongoing administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio
if it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses
could increase. The Fund might also have to pay brokerage, tax or
other charges.
42
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
FOR INFORMATION ABOUT THE PERFORMANCE OF OTHER EQUITY FUNDS
MANAGED BY THOMAS MARSICO, SEE HOW THE FUNDS ARE MANAGED.
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
(BAR CHART APPEARS HERE)
1998
50.14%
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 15.17%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 22.46%
Worst: 3rd quarter 1998: -8.99%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The S&P 500 is not available
for investment.
<TABLE>
<CAPTION>
1 year
<S> <C>
Investor A Shares 41.51%
Investor B Shares 44.34%
Investor C Shares 48.14%
S&P 500 28.58%
</TABLE>
43
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge
(load), as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES5
(Expenses that are deducted from the
Fund's assets)(6)
Management fees 0.75% 0.75 % 0.75 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.31% 0.31 % 0.31 %
----- -------- --------
Total annual Fund operating expenses 1.31% 2.06 % 2.06 %
===== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
Different charges apply to Investor B Shares bought before January
1, 1996 and after July 31, 1997. Please see page 73 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) A 1.00% redemption fee applies to investors who bought $1 million
or more of Investor A Shares between July 31, 1997 and November 15,
1998 and sell them within 18 months of buying them. The fee is paid
to the Fund. Please see page 73 for details.
(5) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
(6) These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
44
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $701 $967 $1,253 $2,066
Investor B Shares $709 $946 $1,308 $2,197
Investor C Shares $309 $646 $1,108 $2,390
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $209 $646 $1,108 $2,197
Investor C Shares $209 $646 $1,108 $2,390
</TABLE>
45
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S STRATEGIC
GROWTH MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS
FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 67.
[GRAPHIC] WHAT IS AN EMERGING GROWTH FUND?
AN EMERGING GROWTH FUND INVESTS IN EMERGING GROWTH COMPANIES.
THESE ARE TYPICALLY MEDIUM-SIZED AND SMALLER COMPANIES WHOSE
EARNINGS ARE EXPECTED TO GROW OR TO CONTINUE GROWING. THESE
COMPANIES MAY BE EXPANDING IN EXISTING MARKETS, ENTERING INTO NEW
MARKETS, DEVELOPING NEW PRODUCTS OR INCREASING THEIR PROFIT
MARGINS BY GAINING MARKET SHARE OR STREAMLINING THEIR OPERATIONS.
THESE COMPANIES CAN HAVE BETTER POTENTIAL FOR RAPID EARNINGS THAN
LARGER COMPANIES. THEY MAY, HOWEVER, HAVE A HARDER TIME SECURING
FINANCING AND MAY BE MORE SENSITIVE TO A SETBACK IN SALES THAN
LARGER, MORE ESTABLISHED COMPANIES.
Nations Emerging Growth Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks capital appreciation by investing in emerging growth
companies that are believed to have superior long-term earnings growth
prospects.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its assets in companies
chosen from a universe of emerging growth companies. The Fund generally
holds 75 to 130 securities, which include COMMON STOCKS, PREFERRED
STOCKS and CONVERTIBLE SECURITIES like WARRANTS, RIGHTS and CONVERTIBLE
DEBT.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The team identifies stocks using a disciplined process based on the
FUNDAMENTAL ANALYSIS of the overall economy, industry conditions, and the
financial position and management of each company. It starts with a universe
of nearly 1,500 companies with market capitalizations between $750 million and
$7 billion. The team then analyzes each company's financial information using
QUANTITATIVE ANALYSIS. It looks at:
o earnings growth trends
o earnings momentum
o earnings estimate trends
o relative price performance
o valuation
The team then conducts a rigorous qualitative analysis of each company being
considered for investment. This involves, among other things:
o gaining an in-depth understanding of the company's business
o evaluating the company's growth potential, risks and competitive
strengths
o discussing its growth strategy with company management
o validating the growth strategy with external research
The team will only invest in a company it has chosen when its stock price is
believed to be attractive relative to its forecasted growth.
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of CAPITAL GAINS distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on
shareholders
o may offset capital gains by selling securities to realize a CAPITAL
LOSS
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
46
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
The team may sell a security when its price reaches the target set by the
team, the company's growth prospects are deteriorating, when the team believes
other investments are more attractive, or for other reasons.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Emerging Growth Fund has the following risks:
o INVESTMENT STRATEGY RISK - The team chooses stocks that it believes
have the potential for superior long-term growth. There is a risk
that the value of these investments will not rise as high as the
team expects, or will fall.
o EMERGING COMPANY RISK - Stocks of emerging companies tend to have
greater price swings than stocks of larger companies because they
trade less frequently and in lower volumes. These securities may
have a higher potential for gains but also carry more risk.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
4.77%* 11.66% 0.39% 29.71% 18.32% 20.48% 3.30%
*Return is from inception (12-10-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 13.64%
47
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 32.49%
Worst: 3rd quarter 1998: -26.48%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P MIDCAP 400, an unmanaged index of 400 domestic
stocks chosen for market size, LIQUIDITY and industry representation.
The index is weighted by market value, and is not available for
investment.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares -2.65% 12.56% 13.16 %
Investor B Shares -1.88% 12.80% 14.63 %
Investor C Shares 1.55% 13.21% 13.56 %
S&P MidCap 400 19.11% 18.84% 18.39%**
</TABLE>
**Return is from inception of Investor A Shares. The inception dates
for classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge (load),
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none4 none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the
Fund's assets)
Management fees 0.65% 0.65 % 0.65 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.35% 0.35 % 0.35 %
----- -------- --------
Total annual Fund operating expenses 1.25% 2.00 % 2.00 %
===== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
Different charges apply to Investor B Shares bought before January
1, 1996 and after July 31, 1997. Please see page 73 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) A 1.00% redemption fee applies to investors who bought $1 million
or more of Investor A Shares between July 31, 1997 and November 15,
1998 and sell them within 18 months of buying them. The fee is paid
to the Fund. Please see page 73 for details.
(5) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
48
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $695 $949 $1,223 $2,002
Investor B Shares $703 $927 $1,278 $2,134
Investor C Shares $303 $627 $1,078 $2,327
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $203 $627 $1,078 $2,134
Investor C Shares $203 $627 $1,078 $2,327
</TABLE>
49
<PAGE>
ABOUT THE EQUITY FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S STRATEGIC
GROWTH MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS
FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 67.
[GRAPHIC] WHY INVEST IN A SMALL
COMPANY GROWTH FUND?
A SMALL COMPANY GROWTH FUND INVESTS IN SMALLER COMPANIES WITH
PROMISING PRODUCTS OR THAT ARE OPERATING IN A DYNAMIC FIELD. THESE
COMPANIES CAN HAVE STRONGER POTENTIAL FOR RAPID EARNINGS GROWTH
THAN LARGER COMPANIES. THEY MAY, HOWEVER, HAVE A HARDER TIME
SECURING FINANCING AND MAY BE MORE SENSITIVE TO A SETBACK THAN
LARGER, MORE ESTABLISHED COMPANIES.
THE PORTFOLIO MANAGEMENT TEAM LOOKS FOR COMPANIES WHOSE EARNINGS
ARE GROWING QUICKLY, AND WHOSE SHARE PRICES ARE REASONABLY VALUED.
Nations Small Company Growth Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks long-term capital growth by investing primarily in
EQUITY SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund normally invests at least 65% of its assets in companies with
a market capitalization of $1 billion or less. The Fund usually holds
75 to 130 securities, which include COMMON STOCKS, PREFERRED STOCKS and
CONVERTIBLE SECURITIES like WARRANTS, RIGHTS and CONVERTIBLE DEBT.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The team identifies stocks using a disciplined process based on the
FUNDAMENTAL ANALYSIS of the overall economy, industry conditions, and the
financial situation and management of each company. It starts with a universe
of nearly 1,500 companies with market capitalizations between $750 million and
$7 billion. The team then analyzes each company's financial information using
QUANTITATIVE ANALYSIS. It looks at:
o earnings growth trends
o earnings momentum
o earnings estimate trends
o relative price performance
o valuation
The team then conducts a rigorous qualitative analysis of each company being
considered for investment. This involves, among other things:
o gaining an in-depth understanding of the company's business
o evaluating the company's growth potential, risks and competitive
strengths
o discussing its growth strategy with company management
o validating the growth strategy with external research
The team will only invest in a company when its stock price is attractive
relative to its forecasted growth.
The management team may use various strategies, consistent with the Fund's
investment objective, to try to reduce the amount of CAPITAL GAINS distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on
shareholders
o may offset capital gains by selling securities to realize a CAPITAL
LOSS
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
50
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
The team may sell a security when its price reaches the target set by the
team, the company's growth prospects are deteriorating, when the team believes
other investments are more attractive, or for other reasons.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Small Company Growth Fund has the following risks:
o INVESTMENT STRATEGY RISK - The team chooses stocks that it believes
have the potential for long-term growth. There is a risk that the
value of these investments will not rise as high as the team
expects, or will fall.
o SMALL COMPANY RISK - Stocks of small companies tend to have greater
price swings than stocks of larger companies because they trade
less frequently and in lower volumes. These securities may have a
higher potential for gains but also carry more risk.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1995 1996 1997 1998
- -1.19%* 19.92% 19.47% 1.22%
*Return is from inception (12-12-95) to 12-31-95.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 4.74%
51
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 23.28%
Worst: 3rd quarter 1998: -25.80%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the RUSSELL 2000, an unmanaged index of 2,000 of the
smallest stocks representing approximately 11% of the U.S. equity
market. The index is weighted by market capitalization, and is not
available for investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Investor A Shares -4.57% 10.35 %
Investor B Shares -4.11% 11.00 %
Investor C Shares -0.18% -5.45%
Russell 2000 -2.55% 25.72%**
</TABLE>
**Return is from inception of Investor A Shares. The inception dates
for classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge
(load), as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the
Fund's assets)
Management fees 0.90% 0.90 % 0.90 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.34% 0.34 % 0.34 %
------ -------- --------
Total annual Fund operating expenses 1.49% 2.24 % 2.24 %
Fee waivers and/or reimbursements (0.09)% (0.09) % (0.09) %
------ -------- --------
Total net expenses(6) 1.40% 2.15 % 2.15 %
====== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
Different charges apply to Investor B Shares bought before January
1, 1996 and after July 31, 1997. Please see page 73 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
52
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
(4) A 1.00% redemption fee applies to investors who bought $1 million
or more of Investor A Shares between July 31, 1997 and November 15,
1998 and sell them within 18 months of buying them. The fee is paid
to the Fund. Please see page 73 for details.
(5) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
(6) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements included in above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $709 $1,011 $1,335 $2,248
Investor B Shares $718 $ 992 $1,392 $2,379
Investor C Shares $318 $ 692 $1,192 $2,568
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $218 $692 $1,192 $2,379
Investor C Shares $218 $692 $1,192 $2,568
</TABLE>
53
<PAGE>
ABOUT THE BALANCED FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THE FUND'S SUB-ADVISER. TRADESTREET'S VALUE
MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
EQUITY PORTION OF THE FUND. ITS FIXED INCOME MANAGEMENT TEAM MAKES
THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE FIXED INCOME AND MONEY
MARKET PORTIONS OF THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT
TRADESTREET ON PAGE 67.
[GRAPHIC] WHAT IS A BALANCED FUND?
A BALANCED FUND INVESTS IN A MIX OF EQUITY AND FIXED INCOME
SECURITIES, AND MONEY MARKET INSTRUMENTS.
EACH OF THESE "ASSET CLASSES" HAS DIFFERENT RISK/RETURN
CHARACTERISTICS. COMBINING THEM IN ONE FUND CAN HELP REDUCE RISK
AND INCREASE RETURNS BECAUSE AT LEAST ONE ASSET CLASS SHOULD HAVE
THE POTENTIAL TO BE A STRONGER PERFORMER REGARDLESS OF MARKET
CONDITIONS.
BALANCED FUNDS LIKE THIS ONE CAN PROVIDE A DIVERSIFIED ASSET MIX
FOR YOU IN A SINGLE INVESTMENT.
Nations Balanced Assets Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks total return by investing in EQUITY and FIXED INCOME
SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in a mix of equity and fixed income securities, as
well as MONEY MARKET INSTRUMENTS.
Equity securities the Fund invests in are primarily COMMON STOCK of
established companies believed to be financially strong.
Fixed income securities normally make up at least 25% of the Fund's assets.
Fixed income securities the Fund invests in are primarily bonds, notes and
MORTGAGE-BACKED and ASSET-BACKED SECURITIES issued by U.S. companies and
government entities.
Money market instruments the Fund invests in are primarily CASH EQUIVALENTS,
including U.S. GOVERNMENT OBLIGATIONS, commercial paper and other short-term,
interest-bearing instruments.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The management team uses asset allocation as its primary investment approach.
The team allocates assets among the three asset classes based on its
assessment of the expected risks and returns of each class. The team
evaluates:
o current economic and financial market conditions, including trends
in interest rates, in the United States and abroad
o earnings and dividend prospects for common stocks
o the overall stability of financial markets
The team may change the Fund's asset allocation to try to increase returns and
reduce risk.
The team identifies individual investments using the following process:
o For the equity portion of the Fund, the team evaluates the overall
economy, industry conditions, and the financial condition and
management of each company, using a process called FUNDAMENTAL
ANALYSIS.
o For the fixed income portion of the Fund, the team looks for
securities rated INVESTMENT GRADE at the time of investment. The
team may choose unrated securities if it believes they are of
comparable quality to investment grade securities at the time of
investment.
o For the money market portion of the Fund, the team chooses
high-quality securities primarily to provide LIQUIDITY.
54
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
The management team may use various tax strategies, consistent with the Fund's
investment objective, to try to reduce the amount of CAPITAL GAINS distributed
to shareholders. For example, the team:
o may limit the number of buy and sell transactions it makes
o will try to sell shares that have the lowest tax burden on
shareholders
o may offset capital gains by selling securities to realize a CAPITAL
LOSS
While the Fund tries to manage its capital gain distributions, it will not be
able to completely avoid making taxable distributions. These strategies also
may be affected by changes in tax laws and regulations, or by court decisions.
The team may sell a security when the Fund's asset allocation changes, there
is a deterioration in the issuer's financial situation, when the team believes
other investments are more attractive, or for other reasons.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Balanced Assets Fund has the following risks:
o INVESTMENT STRATEGY RISK - The team uses an asset allocation
strategy to try to achieve the highest total return. There is a
risk that the mix of investments will not produce the returns the
team expects, or will fall in value.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o INTEREST RATE RISK - The prices of the Fund's fixed income
securities will tend to fall when interest rates rise. In general,
fixed income securities with longer terms tend to fall more in
value when interest rates rise than fixed income securities with
shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when
it's due. Credit risk usually applies to most fixed income
securities, but is generally not a factor for U.S. GOVERNMENT
OBLIGATIONS.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying
mortgages pay off their mortgages sooner than expected, which could
happen when interest rates fall, or later than expected, which
could happen when interest rates rise. If the underlying mortgages
are paid off sooner than expected, the Fund may have to reinvest
this money in mortgage-backed securities that have lower yields.
55
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
3.72%* 9.71% -3.34% 26.06% 14.36% 21.35% 8.26%
*Return is from inception (10-2-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 3.64%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 11.21%
Worst: 3rd quarter 1998: -9.02%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, the S&P/BARRA VALUE INDEX, and the LEHMAN
AGGREGATE BOND INDEX. The S&P 500 is an unmanaged index of 500 widely
held common stocks, weighted by market capitalization. The S&P/BARRA
Value Index is an unmanaged index of a group of stocks from the S&P 500
that have low price-to-book ratios relative to the S&P 500 as a whole.
It is weighted by market capitalization. The Lehman Aggregate Bond
Index is an index of fixed income securities issued by the U.S.
government and its agencies, and by corporations. These indexes are not
available for investment.
56
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEXES' RETURNS DO NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Investor A Shares 2.00% 11.53% 11.41 %
Investor B Shares 2.52% 11.99% 11.87 %
Investor C Shares 6.48% 12.18% 11.75 %
S&P 500 28.58% 24.06% 21.62%**
S&P 500/BARRA Value Index 14.68% 19.88% 19.51%**
Lehman Aggregate Bond Index 8.69% 7.27% 7.41%**
</TABLE>
**Return is from inception of Investor A Shares. The inception dates
for classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge (load),
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the
Fund's assets)
Management fees 0.65% 0.65 % 0.65 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.37% 0.37 % 0.37 %
----- -------- --------
Total annual Fund operating expenses 1.27% 2.02 % 2.02 %
===== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
Different charges apply to Investor B Shares bought before January
1, 1996 and after July 31, 1997. Please see page 73 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) A 1.00% redemption fee applies to investors who bought $1 million
or more of Investor A Shares between July 31, 1997 and November 15,
1998 and sell them within 18 months of buying them. The fee is paid
to the Fund. Please see page 73 for details.
(5) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
57
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $697 $955 $1,233 $2,024
Investor B Shares $705 $934 $1,288 $2,155
Investor C Shares $305 $634 $1,088 $2,348
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $205 $634 $1,088 $2,155
Investor C Shares $205 $634 $1,088 $2,348
</TABLE>
58
<PAGE>
ABOUT THE BALANCED FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISERS
THIS FUND IS MANAGED BY TWO SUB-ADVISERS: TRADESTREET AND CHICAGO
EQUITY. CHICAGO EQUITY'S EQUITY MANAGEMENT TEAM MAKES THE
DAY-TO-DAY INVESTMENT DECISIONS FOR THE EQUITY PORTION OF THE FUND.
TRADESTREET'S FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE FIXED INCOME AND MONEY MARKET PORTIONS
OF THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT
TRADESTREET AND CHICAGO
EQUITY, STARTING ON
PAGE 67.
[GRAPHIC] WHAT IS AN ASSET
ALLOCATION FUND?
THIS ASSET ALLOCATION FUND INVESTS IN A MIX OF EQUITY AND FIXED
INCOME SECURITIES, AND CASH EQUIVALENTS.
EACH OF THESE "ASSET CLASSES" HAS DIFFERENT RISK/RETURN
CHARACTERIS-TICS. THE PORTFOLIO MANAGEMENT TEAM CHANGES THE MIX
BASED ON ITS ASSESSMENT OF THE EXPECTED RISKS AND RETURNS OF EACH
CLASS.
ASSET ALLOCATION FUNDS LIKE THIS ONE CAN PROVIDE A DIVERSIFIED
ASSET MIX FOR YOU IN A SINGLE INVESTMENT.
Nations Asset Allocation Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to obtain long-term growth from capital appreciation,
and dividend and interest income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in a mix of EQUITY and FIXED INCOME SECURITIES, as
well as CASH EQUIVALENTS, including U.S. GOVERNMENT OBLIGATIONS,
commercial paper and other short-term, interest-bearing instruments.
The equity securities the Fund invests in are primarily COMMON STOCK of blue
chip companies. These companies are well established, nationally known
companies that have a long record of profitability and a reputation for
quality management, products and services.
The fixed income securities the Fund invests in are primarily INVESTMENT GRADE
bonds and notes. The Fund normally invests at least 25% of its assets in
SENIOR SECURITIES. The Fund may also invest up to 35% of its assets in
MORTGAGE-BACKED and ASSET-BACKED SECURITIES.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team uses asset allocation as its principal
investment approach. The team actively allocates assets among the three asset
classes based on its assessment of the expected risks and returns of each
class.
For the equity portion of the Fund, the portfolio management team uses
QUANTITATIVE ANALYSIS to analyze fundamental information about securities and
identify value. Starting with a universe of approximately 700 common stocks,
the team uses a multi-factor computer model to rank securities, based on the
following criteria, among others:
o changes in actual and expected earnings
o unexpected changes in earnings
o PRICE-TO-EARNINGS RATIO
o price-to-book ratio
o price-to-cash flow
The portfolio management team tries to manage risk by matching the market
capitalization, style and industry weighting characteristics of the S&P 500.
The team focuses on selecting individual stocks to try to provide higher
returns than the S&P 500 while maintaining a level of risk similar to the
index.
The team may sell a security when the Fund's asset allocation changes, there
is a deterioration in the issuer's financial situation, when the team believes
other investments are more attractive, or for other reasons.
59
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 64 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Asset Allocation Fund has the following risks:
o INVESTMENT STRATEGY RISK - The team uses an asset allocation
strategy to try to achieve the highest total return. There is a
risk that the mix of investments will not produce the returns the
team expects, or will fall in value.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other
things. Stock prices can rise or fall over short as well as long
periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o INTEREST RATE RISK - The prices of the Fund's fixed income
securities will tend to fall when interest rates rise. In general,
fixed income securities with longer terms tend to fall more in
value when interest rates rise than fixed income securities with
shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when
it's due. Credit risk usually applies to most fixed income
securities, but is generally not a factor for U.S. government
obligations.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying
mortgages pay off their mortgages sooner than expected, which could
happen when interest rates fall, or later than expected, which
could happen when interest rates rise. If the underlying mortgages
are paid off sooner than expected, the Fund may have to reinvest
this money in mortgage-backed securities that have lower yields.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
60
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
- -1.38%* 26.90% 15.66% 21.38% 21.09%
*Return is from inception (1-18-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 5.81%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 12.77%
Worst: 3rd quarter 1998: -4.34%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998**
The table shows the Fund's average annual total return for each period,
compared with the S&P 500 and the LEHMAN AGGREGATE BOND INDEX. The S&P
500 is an unmanaged index of 500 widely held common stocks, weighted by
market capitalization. The Lehman Aggregate Bond Index is an index of
fixed income securities issued by the U.S. government and its agencies,
and by corporations. These indexes are not available for investment.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Investor A Shares 14.13% 15.09 %
Investor C Shares 19.47% 19.71 %
S&P 500 28.58% 23.67%***
Lehman Aggregate Bond Index 8.69% 7.11%***
</TABLE>
**Investor B Shares have been in operation for less than a full
calendar year, so no performance information for this class of shares
has been included in this prospectus.
***Return is from inception of Investor A Shares. The inception dates
for classes shown may vary.
61
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge (load),
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none none none
ANNUAL FUND OPERATING EXPENSES(4)
(Expenses that are deducted from the
Fund's assets)
Management fees 0.65% 0.65 % 0.65 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.38% 0.38 % 0.38 %
------ -------- --------
Total annual Fund operating expenses 1.28% 2.03 % 2.03 %
Fee waivers and/or reimbursements (0.08)% (0.08) % (0.08) %
------ -------- --------
Total net expenses(5) 1.20% 1.95 % 1.95 %
====== ======== ========
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy
$1 million or more of Investor A Shares and sell them within
eighteen months of buying them. Different charges may apply to
purchases made prior to August 1, 1999. Please see page 73 for
details.
(2) This charge decreases over time. Please see page 74 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for
details.
(4) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been
adjusted, as necessary, to reflect current service provider fees.
(5) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
May 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
62
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares
of the Fund for the time periods indicated and then sell all of
your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire in May 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $690 $951 $1,231 $2,027
Investor B Shares $698 $929 $1,285 $2,158
Investor C Shares $298 $629 $1,085 $2,350
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $198 $629 $1,085 $2,158
Investor C Shares $198 $629 $1,085 $2,350
</TABLE>
63
<PAGE>
[GRAPHIC] Other important information
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 6. The following are
some other risks and information you should consider before you invest:
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment
objective and certain investment policies of any Fund can be
changed without shareholder approval. Other investment policies may
be changed only with shareholder approval.
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments
that aren't part of their principal investment strategies. Please
refer to the SAI for more information. The portfolio managers or
management team can also choose not to invest in specific
securities described in this prospectus and in the SAI.
o FOREIGN INVESTMENT RISK - Funds that invest in foreign securities
may be affected by changes in currency exchange rates and the costs
of converting currencies; the implementation of the Euro; foreign
government controls on foreign investment, repatriation of capital,
and currency and exchange; foreign taxes; inadequate supervision
and regulation of some foreign markets; difficulty selling some
investments, which may increase volatility; different settlement
practices or delayed settlements in some markets; difficulty
getting complete or accurate information about foreign companies;
less strict accounting, auditing and financial reporting standards
than those in the U.S.; political, economic or social instability;
and difficulty enforcing legal rights outside the U.S.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments
that are not part of its investment objective or its principal
investment strategies to try to protect it during a market or
economic downturn or because of political or other conditions. A
Fund may not achieve its investment objective while it is investing
defensively.
o PORTFOLIO TURNOVER - A Fund that replaces -- or turns over -- more
than 100% of its investments in a year is considered to trade
frequently. Frequent trading can result in larger distributions of
short-term CAPITAL GAINS to shareholders. These gains are taxable
at higher rates than long-term capital gains. Frequent trading can
also mean higher brokerage and other transaction costs, which could
reduce the Fund's returns. The Funds generally buy securities for
capital appreciation, investment income, or both, and don't engage
in short- term trading. The annual portfolio turnover rate for
Nations Strategic Equity Fund is expected to be no more than 25%.
You'll find the portfolio turnover rate for each Fund in FINANCIAL
HIGHLIGHTS.
64
<PAGE>
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and
that they expect them to be adapted in time. There is no guarantee,
however, that their computer systems will be ready by the year 2000.
If their computer systems are not ready in time, there could be a
negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
65
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] How the Funds are managed
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in the
Nations Funds family, including the Equity and Balanced Funds described in
this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation. Nations Funds
pays BAAI an annual fee for its investment advisory services. The fee is
calculated daily based on the average net assets of each Fund and is paid
monthly. BAAI uses part of this money to pay investment sub-advisers for the
services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until May 2000 or July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after these dates.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee(1) fiscal year
<S> <C> <C>
Nations Capital Income Fund 0.65% 0.45%
Nations Value Fund 0.65% 0.75%
Nations Equity Income Fund 0.65% 0.64%
Nations Blue Chip Fund2 0.65% 0.50%
Nations Marsico Growth & Income Fund2 0.75% 0.85%
Nations Strategic Equity Fund 0.65% 0.75%
Nations Capital Growth Fund 0.65% 0.75%
Nations Disciplined Equity Fund 0.65% 0.75%
Nations Marsico Focused Equities Fund2 0.75% 0.85%
Nations Emerging Growth Fund 0.65% 0.75%
Nations Small Company Growth Fund 0.90% 0.73%
Nations Balanced Assets Fund 0.65% 0.75%
Nations Asset Allocation Fund 0.65% 0.40%
</TABLE>
(1) These fees are the current contract levels, which in most cases have been
reduced from the contract levels that were in effect during the last fiscal
year.
(2) These Funds don't have their own investment adviser because they invest in
Nations Blue Chip Master Portfolio, Nations Marsico Growth & Income Master
Portfolio and Nations Marsico Focused Equities Master Portfolio,
respectively. BAAI is the investment adviser to the Master Portfolio.
66
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] MARSICO CAPITAL
MANAGEMENT, LLC
1200 17TH STREET
SUITE 1300
DENVER, COLORADO 80202
INVESTMENT SUB-ADVISERS
Nations Funds and BAAI have engaged investment sub-advisers to provide day-
to-day portfolio management for the Funds. These sub-advisers function under
the supervision of BAAI and the Boards of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in the
Nations Funds family. TradeStreet takes a team approach to investment
management. Each team has access to the latest technology and analytical
resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Capital Income Fund Capital Income Management Team
Nations Value Fund Value Management Team
Nations Equity Income Fund Structured Products Management Team
Nations Capital Growth Fund Core Growth Management Team
Nations Disciplined Equity Fund Structured Products Management Team
Nations Emerging Growth Fund Strategic Growth Management Team
Nations Small Company Growth Fund Strategic Growth Management Team
Nations Balanced Assets Fund Value Management Team for the equity portion
of the Fund
Fixed Income Management Team for the fixed
income and money market portions of the Fund
Nations Asset Allocation Fund Fixed Income Management Team for the
fixed income and money market portions
of the Fund
</TABLE>
MARSICO CAPITAL MANAGEMENT, LLC
Marsico Capital is a full service investment advisory firm founded by Thomas
F. Marsico in September 1997. It is a registered investment adviser,
specializing in large capitalization stocks, and currently has $6.5 billion in
assets under management.
Marsico Management Holdings, LLC, a wholly-owned subsidiary of Bank of America
Corporation, indirectly owns 50% of the equity of Marsico Capital.
67
<PAGE>
Marsico Capital is the investment sub-adviser to:
o Nations Marsico Focused Equities Master Portfolio
o Nations Marsico Growth & Income Master Portfolio
THOMAS F. MARSICO, Chairman and Chief Executive Officer of Marsico Capital, is
the portfolio manager responsible for making the day-to-day investment
decisions for these Master Portfolios. Mr. Marsico was an executive vice
president and portfolio manager at Janus Capital Corporation from 1988 until
he formed Marsico Capital in September 1997. He has more than 20 years of
experience as a securities analyst and portfolio manager.
PERFORMANCE OF OTHER EQUITY FUNDS MANAGED BY THOMAS MARSICO
Nations Marsico Focused Equities Fund and Nations Marsico Growth & Income Fund
have been in operation since December 31, 1997, so they have a relatively
short performance history. The tables below are designed to show you how
similar equity funds managed by Thomas Marsico performed in the past.
The Janus Twenty Fund has an investment objective, policies and strategies
that are substantially similar to Nations Marsico Focused Equities Fund. Mr.
Marsico managed the Janus Twenty Fund from January 31, 1988 through August 11,
1997. He had full discretionary authority for selecting investments for that
Fund, which had approximately $6 billion in net assets on August 11, 1997.
The table below shows the returns for the Janus Twenty Fund compared with the
S&P 500 for the periods ending August 7, 1997. The returns reflect deductions
of fees and expenses, and assume all dividends and distributions have been
reinvested.
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 7, 1997
<TABLE>
<CAPTION>
Janus Twenty
Fund (%) S&P 500 (%)
<S> <C> <C>
one year 48.21 46.41
three years 32.07 30.63
five years 20.02 20.98
during the period of Mr. Marsico's management
(January 31, 1988 to August 7, 1997) 23.38 18.20
</TABLE>
This information is designed to show the historical track record of Mr.
Marsico. It does not indicate how the Fund has performed or will perform in
the future.
Performance will vary based on many factors, including market conditions, the
composition of the Fund's holdings and the Fund's expenses.
68
<PAGE>
[GRAPHIC] BANK OF AMERICA INVESTMENT MANAGEMENT
100 NORTH BROADWAY
ST. LOUIS, MISSOURI 63102
[GRAPHIC] CHICAGO EQUITY PARTNERS CORPORATION
231 SOUTH LASALLE
CHICAGO, ILLINOIS 60697
The Janus Growth and Income Fund has an investment objective, policies and
strategies that are substantially similar to Nations Marsico Growth & Income
Fund. Mr. Marsico managed the Janus Growth and Income Fund from its inception
on May 31, 1991 through August 11, 1997. He had full discretionary authority
for selecting investments for that Fund, which had approximately $1.7 billion
in net assets on August 11, 1997.
The table below shows the returns for the Janus Growth and Income Fund
compared with the S&P 500 for the period ending August 7, 1997. The returns
reflect deductions of fees and expenses, and assume all dividends and
distributions have been reinvested.
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 7, 1997
<TABLE>
<CAPTION>
Janus Growth
and Income
Fund (%) S&P 500 (%)
<S> <C> <C>
one year 47.77 46.41
three years 31.13 30.63
five years 21.16 20.98
during the period of Mr. Marsico's management
(May 31, 1991 to August 7, 1997) 21.19 18.59
</TABLE>
This information is designed to show the historical track record of Mr.
Marsico. It does not indicate how the Fund has performed or will perform in
the future.
Performance will vary based on many factors, including market conditions, the
composition of the Fund's holdings and the Fund's expenses.
BANK OF AMERICA INVESTMENT MANAGEMENT
BAIM, a division of Bank of America, is the investment sub-adviser to Nations
Strategic Equity Fund.
The Fund is managed by MICHAEL E. KENNEALLY, president and chief investment
officer of BAIM since 1997. He has managed the Fund since its inception on
October 2, 1998. Before joining BAIM, Mr. Kenneally was managing director at
Boatmen's Trust Company, in charge of fundamental and quantitative research,
small-capitalization, passive and international equity investment. He holds a
bachelor's degree in economics and an MBA in finance from the University of
Missouri.
CHICAGO EQUITY PARTNERS CORPORATION
Chicago Equity is a registered investment adviser and a wholly-owned
subsidiary of Bank of America. Chicago Equity is the investment sub-adviser to
Nations Blue Chip Master Portfolio and is one of two sub-advisers to Nations
Asset Allocation Fund.
Chicago Equity's Equity Management Team is responsible for making the day-
to-day investment decisions for Nations Blue Chip Master Portfolio and for the
equity portion of Nations Asset Allocation Fund.
69
<PAGE>
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay commissions, distribution (12b-1) and
shareholder servicing fees, and/or other compensation to companies for selling
shares and providing services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.23% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
70
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WE'VE USED THE TERM, INVESTMENT PROFESSIONAL, TO REFER TO THE
PERSON WHO HAS ASSISTED YOU WITH BUYING NATIONS FUNDS. SELLING
AGENT OR SERVICING AGENT (SOMETIMES REFERRED TO AS A SELLING
AGENT) MEANS THE COMPANY THAT EMPLOYS YOUR INVESTMENT
PROFESSIONAL. SELLING AND SERVICING AGENTS INCLUDE BANKS,
BROKERAGE FIRMS, MUTUAL FUND DEALERS AND OTHER FINANCIAL
INSTITUTIONS, INCLUDING AFFILIATES OF BANK OF AMERICA.
[GRAPHIC] FOR MORE INFORMATION
ABOUT HOW TO CHOOSE A
SHARE CLASS, CONTACT YOUR
INVESTMENT PROFESSIONAL OR
CALL US AT 1.800.321.7854.
[GRAPHIC] BEFORE YOU INVEST,
PLEASE NOTE THAT,
OVER TIME,DISTRIBUTION
(12B-1) AND SHAREHOLDER
SERVICING FEES WILL INCREASE
THE COST OF YOUR INVESTMENT,
AND MAY COST YOU MORE THAN
ANY SALES CHARGES YOU MAY
PAY. FOR MORE INFORMATION,
SEE HOW SELLING AND
SERVICING AGENTS
ARE PAID.
[GRAPHIC] Choosing a share class
Before you can invest in the Funds, you'll need to choose a share class. There
are three classes of shares for each Fund offered by this prospectus. Each
class has its own sales charges and fees. The table below compares the charges
and fees of the share classes.
<TABLE>
<CAPTION>
Investor A Investor B Investor C
Shares Shares Shares
<S> <C> <C> <C>
Maximum amount no limit $250,000 no limit
you can buy
Maximum front-end 5.75% none none
sales charge
Maximum deferred none(1) 5.00%(2) 1.00%(3)
sales charge
Redemption fee none(4) none none
Maximum annual 0.25% distribution 0.75% distribution 0.75% distribution
distribution (12b-1)/service (12b-1) fee (12b-1) fee
and shareholder fee 0.25% service fee 0.25% service fee
servicing fees
Conversion feature none yes none
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 73 for details.
(2) This charge decreases over time. Please see page 74 for details.
(3) This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 75 for details.
(4) A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares of certain Funds between July 31, 1997 and
November 15, 1998 and sell them within 18 months of buying them. The
fee is paid to the Fund. Please see page 73 for details.
The share class you choose will depend on how much you're investing, how long
you're planning to stay invested, and how you prefer to pay the sales charge.
The total cost of your investment over the time you expect to hold your shares
will be affected by the distribution (12b-1) and shareholder servicing fees,
as well as by the amount of any front-end sales charge or contingent deferred
sales charge (CDSC) that applies, and when you're required to pay the charge.
You should think about these things carefully before you invest.
Investor A Shares have a front-end sales charge, which is deducted when you
buy your shares. This means that a smaller amount is invested in the Funds,
unless you qualify for a waiver or reduction of the sales charge. However,
Investor A Shares have lower ongoing distribution (12b-1) and shareholder
servicing fees than Investor B and Investor C Shares. This means that Investor
A Shares can be expected to pay relatively higher dividends per share.
71
<PAGE>
[GRAPHIC] THE OFFERING PRICE PER SHARE IS THE NET ASSET VALUE PER SHARE PLUS
ANY SALES CHARGE THAT APPLIES.
THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED
BY A FUND EVERY BUSINESS DAY.
Investor B Shares have limits on how much you can invest. When you buy
Investor B or Investor C Shares, the full amount is invested in the Funds.
However, you may pay a CDSC when you sell your shares. Over time, Investor B
and Investor C Shares can incur distribution (12b-1) and shareholder servicing
fees that are equal to or more than the front-end sales charge, and the
distribution (12b-1) and shareholder servicing fees you would pay for Investor
A Shares. Although the full amount of your purchase is invested in the Funds,
any positive investment return on this money may be partially or fully offset
by the expected higher annual expenses of Investor B and Investor C Shares.
You should also consider the conversion feature for Investor B Shares, which
is described in ABOUT INVESTOR B SHARES.
[GRAPHIC] ABOUT INVESTOR A SHARES
There is no limit to the amount you can invest in Investor A Shares.
You generally will pay a front-end sales charge when you buy your
shares, or in some cases, a CDSC when you sell your shares.
FRONT-END SALES CHARGE
You'll pay a front-end sales charge when you buy Investor A Shares,
unless:
o you qualify for a waiver of the sales charge. You can find out if
you qualify for a waiver in the section, WHEN YOU MIGHT NOT HAVE TO
PAY A SALES CHARGE
o you're reinvesting distributions
The sales charge you'll pay depends on the amount you're
investing -- the larger the investment, the smaller the sales charge.
<TABLE>
<CAPTION>
by selling agents
Sales charge Sales charge as a % of the
as a % of the as a % of the offering price
offering price net asset value Amount retained
Amount you bought per share per share per share
<S> <C> <C> <C>
$ 0-$49,999 5.75% 6.10% 5.00 %
$ 50,000-$99,999 4.50% 4.71% 3.75 %
$ 100,000-$249,999 3.50% 3.63% 2.75 %
$ 250,000-$499,999 2.50% 2.56% 2.00 %
$ 500,000-$999,999 2.00% 2.04% 1.75 %
$1,000,000 or more 0.00% 0.00% 1.00%1
</TABLE>
(1) 1.00% on the first $3,000,000, 0.50% on the next $47,000,000, 0.25%
on amounts over $50,000,000. Stephens pays the amount retained by
selling agents on investments of $1,000,000 or more, but may be
reimbursed when a CDSC is deducted if the shares are sold within
eighteen months from the time they were bought. Please see HOW
SELLING AND SERVICING AGENTS ARE PAID for more information.
72
<PAGE>
CONTINGENT DEFERRED SALES CHARGE
If you own or buy $1,000,000 or more of Investor A Shares, there are
two situations when you'll pay a CDSC:
o If you bought your shares before August 1, 1999, and you sell them:
o during the first year you own them, you'll pay a CDSC of 1.00%
o during the second year you own them, you'll pay a CDSC of 0.50%
o If you buy your shares on or after August 1, 1999 and sell them
within 18 months of buying them, you'll pay a CDSC of 1.00%.
The CDSC is calculated from the day your purchase is accepted (the
TRADE DATE). We deduct the CDSC from the market value or purchase price
of the shares, whichever is lower.
You won't pay a CDSC on any increase in net asset value since you
bought your shares, or on any shares you receive from reinvested
distributions. We'll sell any shares that aren't subject to the CDSC
first. We'll then sell shares that result in the lowest CDSC.
REDEMPTION FEE
There are two situations when we'll charge a 1% redemption fee on the
sale of Investor A Shares:
o if you bought $1,000,000 or more Investor A Shares between July 31,
1997 and November 15, 1998 and sell them within 18 months of buying
them
o if an employee benefit plan made its initial investment in Investor
A Shares between July 31, 1997 and November 15, 1998 and sold those
shares within 18 months of buying them because the plan sold all of
its Nations Funds holdings.
The fee is deducted from the amount sold and is paid to the Fund. The
Fund can reduce or cancel the fee at any time. This fee doesn't apply
to Nations Capital Income Fund, Nations Blue Chip Fund, Nations
Strategic Equity Fund and Nations Asset Allocation Fund.
[GRAPHIC] ABOUT INVESTOR B SHARES
You can buy up to $250,000 of Investor B Shares at a time. You don't
pay a sales charge when you buy Investor B Shares, but you may have to
pay a CDSC when you sell them.
CONTINGENT DEFERRED SALES CHARGE
You'll pay a CDSC when you sell your Investor B Shares, unless:
o you bought the shares on or after January 1, 1996 and before August
1, 1997
o you received the shares from reinvested distributions
o you qualify for a waiver of the CDSC. You can find out how to
qualify for a waiver on page 78
73
<PAGE>
The CDSC you pay depends on when you bought your shares, how much you
bought in some cases, and how long you held them.
<TABLE>
<CAPTION>
If you sell your shares
during the following year: You'll pay a CDSC of:
- ---------------------------------- -----------------------------------------------------------------------
Shares
you
bought Shares
Shares on or after you
you bought Shares you bought between 1/1/1996 bought
after 8/1/1997 and 11/15/1998 and before before
11/15/1998 in the following amounts: 8/1/1997 1/1/1996
------------ ----------------------------------- ------------ --------
$250,000- $500,000-
$0-$249,999 $499,999 $999,999
<S> <C> <C> <C> <C> <C> <C>
the first year you own them 5.0% 5.0% 3.0% 2.0% none 5.0%
the second year you own them 4.0% 4.0% 2.0% 1.0% none 4.0%
the third year you own them 3.0% 3.0% 1.0% none none 3.0%
the fourth year you own them 3.0% 3.0% none none none 2.0%
the fifth year you own them 2.0% 2.0% none none none 2.0%
the sixth year you own them 1.0% 1.0% none none none 1.0%
after six years of owning them none none none none none none
</TABLE>
The CDSC is calculated from the trade date of your purchase. We deduct
the CDSC from the market value or purchase price of the shares,
whichever is lower. We'll sell any shares that aren't subject to the
CDSC first. We'll then sell shares that result in the lowest CDSC.
Your selling agent receives compensation when you buy Investor B
Shares. Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more
information.
ABOUT THE CONVERSION FEATURE
Investor B Shares generally convert automatically to Investor A Shares
according to the following schedule:
<TABLE>
<CAPTION>
Will convert to Investor A Shares
Investor B Shares you bought after you've owned them for
<S> <C>
after November 15, 1998 eight years
between August 1, 1997
and November 15, 1998
$ 0-$249,000 nine years
$ 250,000-$499,999 six years
$ 500,000-$999,999 five years
before August 1, 1997 nine years
</TABLE>
The conversion feature allows you to benefit from the lower operating
costs of Investor A Shares, which can help increase total returns.
74
<PAGE>
Here's how the conversion works:
o We won't convert your shares if you tell your investment
professional, selling agent or the transfer agent within 90 days
before the conversion date that you don't want your shares to be
converted. Remember, it's in your best interest to convert your
shares because Investor A Shares have lower expenses.
o Shares are converted at the end of the month in which they become
eligible for conversion. Any shares you received from reinvested
distributions on these shares will convert to Investor A Shares at
the same time.
o You'll receive the same dollar value of Investor A Shares as the
Investor B Shares that were converted. No sales charge or other
charges apply.
o Investor B Shares that you received from an exchange of Investor B
Shares of another Nations Fund will convert based on the day you
bought the original shares. Your conversion date may be later if
you exchanged to or from a Nations Fund Money Market Fund.
o Conversions are free from federal tax.
[GRAPHIC] ABOUT INVESTOR C SHARES
There is no limit to the amount you can invest in Investor C Shares.
You don't pay a sales charge when you buy Investor C Shares, but you
may pay a CDSC when you sell them.
CONTINGENT DEFERRED SALES CHARGE
You'll pay a CDSC of 1.00% when you sell Investor C Shares within one
year of buying them, unless:
o you received the shares from reinvested distributions
o you qualify for a waiver of the CDSC. You can find out how to
qualify for a waiver on page 78
The CDSC is calculated from the trade date of your purchase. We deduct
the CDSC from the market value or purchase price of the shares,
whichever is lower. We'll sell any shares that aren't subject to the
CDSC first. We'll then sell shares that result in the lowest CDSC.
Your selling agent receives compensation when you buy Investor C
Shares. Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more
information.
75
<PAGE>
[GRAPHIC] PLEASE CONTACT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION
ABOUT REDUCTIONS AND WAIVERS OF SALES CHARGES.
YOU SHOULD TELL YOUR INVESTMENT PROFESSIONAL THAT YOU MAY QUALIFY
FOR A REDUCTION OR A WAIVER BEFORE BUYING SHARES.
WE CAN CHANGE OR CANCEL THESE TERMS AT ANY TIME. ANY CHANGE OR
CANCELLATION APPLIES ONLY TO FUTURE PURCHASES.
WHEN YOU MIGHT NOT HAVE TO PAY A SALES CHARGE
FRONT-END SALES CHARGES
(Investor A Shares)
There are three ways you can lower the front-end sales charge you pay
on Investor A Shares:
o COMBINE PURCHASES YOU'VE ALREADY MADE Rights of accumulation allow
you to combine the value of Investor A, Investor B and Investor C
Shares you already own with Investor A Shares you're buying to
calculate the sales charge. The sales charge is based on the total
value of the shares you already own, or the original purchase cost,
whichever is higher, plus the value of the shares you're buying.
Index Funds and Money Market Funds, except Investor B and Investor
C Shares of Nations Reserves Money Market Funds, don't qualify for
rights of accumulation.
o COMBINE PURCHASES YOU PLAN TO MAKE By signing a letter of intent,
you can combine the value of shares you already own with the value
of shares you plan to buy over a 13-month period to calculate the
sales charge.
o You can choose to start the 13-month period up to 90 days before
you sign the letter of intent.
o Each purchase you make will receive the sales charge that applies
to the total amount you plan to buy.
o If you don't buy as much as you planned within the period, you must
pay the difference between the charges you've paid and the charges
that actually apply to the shares you've bought.
o Your first purchase must be at least 5% of the minimum amount for
the sales charge level that applies to the total amount you plan to
buy.
o If the purchase you've made later qualifies for a reduced sales
charge through the 90-day backdating provisions, we'll make an
adjustment for the lower charge when the letter of intent expires.
Any adjustment will be used to buy additional shares at the reduced
sales charge.
o COMBINE PURCHASES WITH FAMILY MEMBERS You can receive a quantity
discount by combining purchases of Investor A Shares that you, your
spouse and children under age 21 make on the same day. Some
distributions or payments from the dissolution of certain qualified
plans also qualify for the quantity discount. Index Funds and Money
Market Funds, except Investor B and Investor C Shares of Nations
Reserves Money Market Funds, don't qualify.
The following investors can buy Investor A Shares without paying a
front-end sales charge:
o full-time employees and retired employees of Bank of America
Corporation (and its predecessors), its affiliates and subsidiaries
and the immediate families of these people
76
<PAGE>
o banks, trust companies and thrift institutions acting as
fiducuaries
o individuals receiving a distribution from a Bank of America trust
or other fiduciary account may use the proceeds of that
distribution to buy Investor A Shares without paying a front-end
sales charge, as long as the proceeds are invested through a trust
account established with certain trustees and invested in the Funds
within 90 days
o Nations Funds' Trustees, Directors and employees of its investment
sub-advisers
o registered broker/dealers that have entered into a Nations Funds
dealer agreement with Stephens may buy Investor A Shares without
paying a front-end sales charge for their investment account only
o registered personnel and employees of these broker/dealers may buy
Investor A Shares without paying a front-end sales charge according
to the internal policies and procedures of their employer as long
as these purchases are made for their own investment purposes
o employees or partners of any service provider to the Funds
o former shareholders of Class B Shares of the Special Equity
Portfolio of The Capitol Mutual Funds who held these shares as of
January 31, 1994 or received Investor A Shares of Nations
Disciplined Equity Fund may buy Investor A Shares of Nations
Disciplined Equity Fund without paying a front-end sales charge
o investors who buy through accounts established with certain
fee-based investment advisers or financial planners, including
Nations Funds Personal Investment Planner accounts, wrap fee
accounts and other managed agency/asset allocation accounts
o shareholders of certain Funds that reorganized into the Nations
Funds who were entitled to buy shares at net asset value
The following plans can buy Investor A Shares without paying a front-end
sales charge:
o pension, profit-sharing or other employee benefit plans established
under Section 401 or Section 457 of the Internal Revenue Code of
1986, as amended (the tax code)
o employee benefit plans created according to Section 403(b) of the
tax code and sponsored by a non-profit organization qualified under
Section 501(c)(3) of the tax code. To qualify for the waiver, the
plan must:
o have at least $500,000 invested in Investor A Shares of Nations
Funds (except Money Market Funds), or
o sign a letter of intent to buy at least $500,000 of Investor A
Shares of Nations Funds (except Money Market Funds), or
o be an employer-sponsored plan with at least 100 eligible
participants, or
o be a participant in an alliance program that has signed an
agreement with the Fund or a selling agent
77
<PAGE>
You can also buy Investor A Shares without paying a sales charge if you
buy the shares within 120 days of selling the same Fund. This is called
the reinstatement privilege. You can invest up to the amount of the
sale proceeds. We'll credit your account with any CDSC paid when you
sold the shares. The reinstatement privilege does not apply to any
shares you bought through a previous reinstatement. First Data,
Stephens or their agents must receive your written request within 120
days after you sell your shares.
Stephens may pay selling agents up to 1.00% of the net asset value of
Investor A Shares bought without a sales charge. Stephens may be
reimbursed through any CDSC that applies.
CONTINGENT DEFERRED SALES CHARGES
(Investor A, Investor B and Investor C Shares)
You won't pay a CDSC on the following transactions:
o shares sold following the death or disability (as defined in the
tax code) of a shareholder, including a registered joint owner
o the following retirement plan distributions:
o lump-sum or other distributions from a qualified corporate or self-
employed retirement plan following the retirement (or following
attainment of age 59 1/2 in the case of a "key employee" of a "top
heavy" plan)
o distributions from an IRA or Custodial Account under Section
403(b)(7) of the tax code, following attainment of age 59 1/2
o a tax-free return of an excess contribution to an IRA
o distributions from a qualified retirement plan that aren't subject
to the 10% additional federal withdrawal tax under Section 72(t)(2)
of the tax code
o payments made to pay medical expenses which exceed 7.5% of income,
and distributions made to pay for insurance by an individual who
has separated from employment and who has received unemployment
compensation under a federal or state program for at least 12 weeks
o shares sold under our right to liquidate a shareholder's account,
including instances where the aggregate net asset value of Investor
A, Investor B or Investor C Shares held in the account is less than
the minimum account size
78
<PAGE>
o withdrawals made under the Automatic Withdrawal Plan described in
BUYING, SELLING AND EXCHANGING SHARES, if the total withdrawals of
Investor A, Investor B or Investor C Shares made in a year are less
than 12% of the total value of those shares in your account. A CDSC
may only apply to Investor A Shares if you bought more than
$1,000,000
We'll also waive the CDSC on the sale of Investor A or Investor C
Shares bought before September 30, 1994 by current or retired employees
of Bank of America and its affiliates, or by current or former trustees
or directors of the Nations Funds or other management companies managed
by Bank of America.
You won't pay a CDSC on the sale of Investor B or Investor C Shares if
you reinvest any of the proceeds in the same Fund within 120 days of
the sale. This is called the reinstatement privilege. You can invest up
to the amount of the sale proceeds. We'll credit your account with any
CDSC paid when you sold the shares. The reinstatement privilege does
not apply to any shares you bought through a previous reinstatement.
First Data, Stephens or their agents must receive your written request
within 120 days after you sell your shares.
79
<PAGE>
[GRAPHIC] WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] Buying, selling and exchanging shares
You can invest in the Funds through your selling agent or directly from
Nations Funds.
We encourage you to consult with an investment professional who can open an
account for you with a selling agent and help you with your investment
decisions. Once you have an account, you can buy, sell and exchange shares by
contacting your investment professional or selling agent. They will look after
any paperwork that's needed to complete a transaction and send your order to
us.
You should also ask your selling agent about its limits, fees and policies for
buying, selling and exchanging shares, which may be different from those
described here, and about its related programs or services.
The table on the next page summarizes some key information about buying,
selling and exchanging shares. You'll find sales charges and other fees that
apply to these transactions in CHOOSING A SHARE CLASS.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. Please contact your
investment professional, or call us at 1.800.321.7854 if you have questions or
you need help placing an order.
80
<PAGE>
<TABLE>
<CAPTION>
Ways to
buy, sell or How much you can buy,
exchange sell or exchange Other things to know
----------------- ---------------------------------------- -----------------------------------------------------
<S> <C> <C> <C>
Buying shares In a lump sum minimum initial investment: There is no limit to the amount you can invest in
o $1,000 for regular accounts Investor A and C Shares. You can invest up to
o $500 for traditional and Roth IRA $250,000 in Investor B Shares at a time.
accounts
o $250 for certain fee-based accounts
o no minimum for certain retirement
plan accounts like 401(k) plans and
SEP accounts, but other restrictions
apply
minimum additional investment:
o $100 for all accounts
Using our minimum initial investment: You can buy shares monthly, twice a month or
Systematic o $100 quarterly, using automatic transfers from your
Investment Plan minimum additional investment: bank account.
o $50
- -----------------------------------------------------------------------------------------------------------------------------------
Selling shares In a lump sum o you can sell up to $50,000 of your We'll deduct any CDSC from the amount you're
shares by telephone, otherwise there selling and send you or your selling agent the
are no limits to the amount you can balance, usually within three business days of
sell receiving your order.
o other restrictions may apply to If you paid for your shares with a check that
withdrawals from retirement plan wasn't certified, we'll hold the sale proceeds
accounts when you sell those shares for at least 15 days
after the trade date of the purchase, or until the
check has cleared.
Using our o minimum $25 per withdrawal Your account balance must be at least $10,000
Automatic to set up the plan. You can make withdrawals
Withdrawal Plan monthly, twice a month or quarterly. We'll send
your money by check or deposit it directly to your
bank account. No CDSC is deducted if you
withdraw 12% or less of the value of your shares
in a class.
- -----------------------------------------------------------------------------------------------------------------------------------
Exchanging In a lump sum o minimum $1,000 per exchange You can exchange your Investor A Shares for
shares Investor A shares of any other Nations Fund,
except Index Funds. You won't pay a front-end
sales charge, CDSC or redemption fee on the
shares you're exchanging.
You can exchange your Investor B Shares for:
o Investor B Shares of any other Nations Fund,
except Nations Funds Money Market Funds
o Investor C Shares of Nations Funds Money
Market Funds (before October 1, 1999)
o Investor B Shares of Nations Reserves Money
Market Funds (on or after October 1, 1999)
You won't pay a CDSC on the shares you're
exchanging.
You can exchange your Investor C Shares for:
o Investor C Shares of any other Nations Fund,
except Nations Funds Money Market Funds
o Daily Shares of Nations Funds Money Market
Funds (before October 1, 1999)
o Investor C Shares of Nations Reserves Money
Market Funds (on or after October 1, 1999)
If you received Investor C Shares of a Fund from
an exchange of Investor A Shares of a Managed
Index Fund, you can also exchange these shares
for Investor A Shares of an Index Fund.
You won't pay a CDSC on the shares you're
exchanging.
Using our o minimum $25 per exchange This feature is not available for Investor B
Automatic Shares.
Exchange You must already have an investment in the
Feature Funds you want to exchange. You can make
exchanges monthly or quarterly.
</TABLE>
81
<PAGE>
[GRAPHIC] A BUSINESS DAY IS ANY DAY THAT THE NEW YORK STOCK EXCHANGE (NYSE)
IS OPEN. A BUSINESS DAY ENDS AT THE CLOSE OF REGULAR TRADING ON
THE NYSE, USUALLY AT 4:00 P.M. EASTERN TIME. IF THE NYSE CLOSES
EARLY, THE BUSINESS DAY ENDS AS OF THE TIME THE NYSE CLOSES.
THE NYSE IS CLOSED ON WEEKENDS AND ON THE FOLLOWING NATIONAL
HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY, PRESIDENTS'
DAY, GOOD FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY,
THANKSGIVING DAY AND CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share for each class of each
Fund at the end of each business day. First, we calculate the net asset value
for each class of a Fund by determining the value of the Fund's assets in the
class and then subtracting its liabilities. Next, we divide this amount by the
number of shares that investors are holding in the class.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. The prices reported on stock exchanges and securities
markets around the world are usually used to value securities in a Fund. If
prices aren't readily available, we'll base the price of a security on its
fair market value. We use the amortized cost method, which approximates market
value, to value short-term investments maturing in 60 days or less.
International markets may be open on days when U.S. markets are closed. The
value of foreign securities owned by a Fund could change on days when Fund
shares may not be bought or sold.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents before the end of a business
day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will
receive that day's net asset value per share. Orders received after the end of
a business day will receive the next business day's net asset value per share.
The business day that applies to your order is also called the TRADE DATE. We
may refuse any order to buy or exchange shares. If this happens, we'll return
any money we've received to your selling agent.
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone if you complete the
telephone authorization section of our account application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account,
you must have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be
responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions
are genuine. For example, we require proof of your identification
before we will act on instructions received by telephone and may
record telephone conversations. If we and our service providers
don't take these steps, we may be liable for any losses from
unauthorized or fraudulent instructions.
o Telephone orders may be difficult to complete during periods of
significant economic or market change.
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<PAGE>
[GRAPHIC] THE OFFERING PRICE PER SHARE IS THE NET ASSET VALUE PER SHARE PLUS
ANY SALES CHARGE THAT APPLIES.
THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED
BY A FUND EVERY BUSINESS DAY.
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o You buy Investor A Shares at the offering price per share. You buy
Investor B and Investor C Shares at net asset value per share.
o If we don't receive your money within three business days of
receiving your order, we'll refuse the order.
o Selling agents are responsible for sending orders to us and
ensuring we receive your money on time.
o Shares you buy are recorded on the books of the Fund. We don't
issue certificates unless you ask for them in writing, and we don't
issue certificates for fractions of shares.
MINIMUM INITIAL INVESTMENT
The minimum initial amount you can buy is usually $1,000.
If you're buying shares through one of the following accounts or plans,
the minimum initial amount you can buy is:
o $500 for traditional and Roth individual retirement accounts (IRAs)
o $250 for accounts set up with some fee-based investment advisers or
financial planners, including wrap fee accounts and other managed
accounts
o $100 using our Systematic Investment Plan
o There is no minimum for 401(k) plans, simplified employee pension
plans (SEPs), salary reduction-simplified employee pension plans
(SAR-SEPs), Savings Incentives Match Plans for Employees (SIMPLE
IRAs), salary reduction-IRAs (SAR-IRAs) or other similar kinds of
accounts. However, if the value of your account falls below $1,000
for 401(k) plans or $500 for the other plans within one year after
you open your account, we may sell your shares. We'll give you 60
days notice in writing if we're going to do this
MINIMUM ADDITIONAL INVESTMENT
You can make additional purchases of $100, or $50 if you use our
Systematic Investment Plan.
83
<PAGE>
[GRAPHIC] FOR MORE INFORMATION
ABOUT TELEPHONE ORDERS,
SEE PAGE 82.
SYSTEMATIC INVESTMENT PLAN
You can make regular purchases of $50 or more using automatic transfers from
your bank account to the Funds you choose. You can contact your investment
professional or us to set up the plan.
Here's how the plan works:
o You can buy shares twice a month, monthly or quarterly.
o You can choose to have us transfer your money on or about the 15th
or the last day of the month.
o Some exceptions may apply to employees of Bank of America and its
affiliates, and to plans set up before August 1, 1997. For details,
please contact your investment professional.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We'll deduct any CDSC from the amount you're selling and send you
the balance.
o If you're selling your shares through a selling agent, we'll
normally send the sale proceeds by federal funds wire within three
business days after Stephens, First Data or their agents receive
your order. Your selling agent is responsible for depositing the
sale proceeds to your account on time.
o If you're selling your shares directly through us, we'll send the
sale proceeds by mail or wire them to your bank account within
three business days after the Fund receives your order.
o You can sell up to $50,000 of shares by telephone if you qualify
for telephone orders.
o If you paid for your shares with a check that wasn't certified,
we'll hold the sale proceeds when you sell those shares for at
least 15 days after the trade date of the purchase, or until the
check has cleared.
o If you hold any shares in certificate form, you must sign the
certificates (or send a signed stock power with them) and send them
to First Data. Your signature must be guaranteed unless you've made
other arrangements with us. We may ask for any other information we
need to prove that the order is properly authorized.
o Under certain circumstances allowed under the Investment Company
Act of 1940 (1940 Act), we can pay you in securities or other
property when you sell your shares, or delay payment of the sale
proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information these restrictions, please contact your retirement plan
administrator.
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<PAGE>
[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
We may sell your shares:
o if the value of your account falls below $500. We'll give you 60
days notice in writing if we're going to do this
o if your selling agent tells us to sell your shares under
arrangements made between the selling agent and its customers
o under certain other circumstances allowed under the 1940 Act
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan lets you withdraw $25 or more every month, every
quarter or every year. You can contact your investment professional or us to
set up the plan.
Here's how the plan works:
o Your account balance must be at least $10,000 to set up the plan.
o If you set up the plan after you've opened your account, your
signature must be guaranteed.
o You can choose to have us transfer your money on or about the 15th
or the 25th of the month.
o You won't pay a CDSC on Investor A, Investor B or Investor C Shares
if you withdraw 12% or less of the value of those shares in a year.
Otherwise, we'll deduct any CDSC from the withdrawals.
o We'll send you a check or deposit the money directly to your bank
account.
o You can cancel the plan by giving your selling agent or us 30 days
notice in writing.
It's important to remember that if you withdraw more than your investment in
the Fund is earning, you'll eventually use up your original investment.
[GRAPHIC] EXCHANGING SHARES
You can sell shares of a Fund to buy shares of another Nations Fund.
This is called an exchange. You might want to do this if your
investment goals or tolerance for risk changes.
Here's how exchanges work:
o You must exchange at least $1,000, or $25 if you use our Automatic
Exchange Feature.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o You may only make an exchange into a Fund that is legally sold in
your state of residence.
o You generally may only make an exchange into a Fund that is
accepting investments.
85
<PAGE>
o We may limit the number of exchanges you can make within a
specified period of time.
o We may change or cancel your right to make an exchange by giving
the amount of notice required by regulatory authorities (generally
60 days for a material change or cancellation).
o You cannot exchange any shares you own in certificate form until
First Data has received the certificate and deposited the shares to
your account.
EXCHANGING INVESTOR A SHARES
You can exchange Investor A Shares of a Fund for Investor A Shares of
any other Nations Fund, except Index Funds.
Here are some rules for exchanging Investor A Shares:
o You won't pay a front-end sales charge on the shares of the Fund
you're exchanging.
o You won't pay a CDSC on the shares you're exchanging. Any CDSC will
be deducted later on when you sell the shares you received from the
exchange. The CDSC at that time will be based on the period from
when you bought the original shares until you sold the shares you
received from the exchange.
o You won't pay a redemption fee on the shares you're exchanging. Any
redemption fee will be deducted later on when you sell the shares
you received from the exchange. Any redemption fee will be paid to
the original Fund.
EXCHANGING INVESTOR B SHARES
You can exchange Investor B Shares of a Fund for:
o Investor B Shares of any other Nations Fund, except Nations Funds
Money Market Funds
o Investor C Shares of Nations Funds Money Market Funds (before
October 1, 1999)
o Investor B Shares of Nations Reserves Money Market Funds (on or
after October 1, 1999)
You won't pay a CDSC on the shares you're exchanging. Any CDSC will be
deducted later on when you sell the shares you received from the
exchange. The CDSC will be based on the period from when you bought the
original shares until you sold the shares you received from the
exchange.
If you received Investor C Shares of a Nations Funds Money Market Fund
through an exchange of Investor B Shares of a Fund before October 1,
1999, a CDSC may apply when you sell your Investor C Shares. The CDSC
will be based on the period from when you bought the original shares
until you exchanged them.
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<PAGE>
EXCHANGING INVESTOR C SHARES
You can exchange Investor C Shares of a Fund for:
o Investor C Shares of any other Nations Fund, except Nations Funds
Money Market Funds
o Daily Shares of Nations Funds Money Market Funds (before October 1,
1999)
o Investor C Shares of Nations Reserves Money Market Funds (on or
after October 1, 1999)
If you received Investor C Shares of a Fund from an exchange of
Investor A Shares of a Managed Index Fund, you can also exchange these
shares for Investor A Shares of an Index Fund.
You won't pay a CDSC on the shares you're exchanging. Any CDSC will be
deducted later on when you sell the shares you received from the
exchange. The CDSC will be based on the period from when you bought the
original shares until you sold the shares you received from the
exchange.
If you received Daily Shares of a Nations Funds Money Market Fund
through an exchange of Investor C Shares of a Fund before October 1,
1999, a CDSC may apply when you sell your Daily Shares. The CDSC will
be based on the period from when you bought the original shares until
you exchanged them.
AUTOMATIC EXCHANGE FEATURE
The Automatic Exchange Feature lets you exchange $25 or more of Investor A or
Investor C Shares every month or every quarter. You can contact your
investment professional or us to set up the plan.
Here's how automatic exchanges work:
o Send your request to First Data in writing or call 1.800.321.7854.
o You must already have an investment in the Funds you want to
exchange.
o You can choose to have us transfer your money on or about the 15th
or the last day of the month in which the exchange is scheduled to
occur.
o The rules for making exchanges apply to automatic exchanges.
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<PAGE>
[GRAPHIC] THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE BECAUSE
IT'S PAID THROUGH A PLAN APPROVED UNDER RULE 12B-1 UNDER THE 1940
ACT.
YOUR SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
[GRAPHIC] How selling and servicing agents are paid
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
COMMISSIONS
Your selling agent may receive an up-front commission (reallowance) when you
buy shares of a Fund. The amount of this commission depends on which share
class you choose:
o up to 5.00% of the offering price per share of Investor A Shares.
The commission is paid from the sales charge we deduct when you buy
your shares
o up to 4.00% of the net asset value per share of Investor B Shares.
The commission is not deducted from your purchase -- we pay your
selling agent directly
o up to 1.00% of the net asset value per share of Investor C Shares.
The commission is not deducted from your purchase -- we pay your
selling agent directly
If you buy Investor B or Investor C Shares you will be subject to higher
distribution (12b-1) and shareholder servicing fees and may be subject to a
CDSC when you sell your shares.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES
Stephens and selling and servicing agents may be compensated for selling
shares and providing services to investors under distribution and shareholder
servicing plans.
The amount of the fee depends on the class of shares you own:
<TABLE>
<CAPTION>
Maximum annual distribution (12b-1)
and shareholder servicing fees
(as an annual % of average daily net assets)
<S> <C>
Investor A Shares 0.25% combined distribution (12b-1) and shareholder servicing fee
Investor B Shares 0.75% distribution (12b-1) fee, 0.25% shareholder servicing fee
Investor C Shares 0.75% distribution (12b-1) fee, 0.25% shareholder servicing fee
</TABLE>
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Funds' assets on an ongoing basis they will increase the cost of
your investment over time, and may cost you more than any sales charges you
may pay.
The Funds pay these fees to Stephens and to eligible selling and servicing
agents for as long as the plans continue. We may reduce or discontinue
payments at any time.
88
<PAGE>
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale,
promotion and marketing of the Funds
o additional amounts on all sales of shares:
o up to 1.00% of the offering price per share of Investor A
Shares
o up to 1.00% of the net asset value per share of Investor B
Shares
o up to 1.00% of the net asset value per share of Investor C
Shares
o non-cash compensation like trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other
outings and gift certificates for meals or merchandise
This compensation, which is not paid by the Funds, is discretionary and may be
available only to selected selling and servicing agents. For example, Stephens
sometimes sponsors promotions involving Banc of America Investments, Inc., an
affiliate of BAAI, and certain other selling or servicing agents. Selected
selling and servicing agents also may receive compensation for opening a
minimum number of accounts.
BAAI also may pay amounts from its own assets to Stephens or to selling or
servicing agents for services they provide.
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<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] Distributions and taxes
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and
dividends paid on COMMON STOCKS.
o A fund can also have CAPITAL GAIN if the value of its investments
increases. If a fund sells an investment at a gain, the gain is
realized. If a fund continues to hold the investment, any gain is
unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gain to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gain to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
All of the Funds distribute any net realized capital gain, at least once a
year. The frequency of distributions of net investment income varies by Fund:
<TABLE>
<CAPTION>
Frequency of
Fund income distributions
<S> <C>
Nations Capital Income Fund quarterly
Nations Value Fund monthly
Nations Equity Income Fund monthly
Nations Blue Chip Fund quarterly
Nations Marsico Growth & Income Fund quarterly
Nations Strategic Equity Fund monthly
Nations Capital Growth Fund monthly
Nations Disciplined Equity Fund monthly
Nations Marsico Focused Equities Fund quarterly
Nations Emerging Growth Fund quarterly
Nations Small Company Growth Fund monthly
Nations Balanced Assets Fund quarterly
Nations Asset Allocation Fund quarterly
</TABLE>
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to recieve distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
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[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT
TAXES, PLEASE SEE THE SAI.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses. Each time a distribution is made,
the net asset value per share of the share class is reduced by the amount of
the distribution.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.321.7854.
We generally pay cash distributions within five business days after the end of
the month, quarter or year in which the distribution was made. If you sell all
of your shares, we'll pay any distribution that applies to those shares in
cash within five business days after the sale was made.
If you buy shares of a Fund shortly before it makes a distribution, you will,
in effect, receive part of your purchase back in the distribution, which is
subject to tax. Similarly, if you buy shares of a Fund that holds securities
with unrealized capital gain, you will, in effect, receive part of your
purchase back if and when the Fund sells those securities and distributes the
gain. This distribution is also subject to tax. Some Funds have built up, or
have the potential to build up, high levels of unrealized capital gain.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions of net investment income, including net foreign currency gain
and any excess of net short-term capital gain over net long-term capital loss
generally are taxable to you as ordinary income.
Distributions of net capital gain (generally the excess of net long-term
capital gain over net short-term capital loss) generally are taxable to you as
net capital gain.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN)
and haven't certified that the TIN is correct and withholding
doesn't apply
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o the Internal Revenue Service (IRS) has notified us that the TIN
listed on your account is incorrect according to its records
o the IRS informs us that you're otherwise subject to backup
withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
Your redemptions (including redemptions "in kind") and exchanges of Fund
shares will usually result in a taxable capital gain or loss, depending on the
amount you receive for your shares (or are deemed to receive in the case of
exchanges) and the amount you paid (or are deemed to have paid) for them.
[GRAPHIC] Financial highlights
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. The total investment return line
indicates how much an investment in the Fund would have earned, assuming all
dividends and distributions had been reinvested.
This information, except as noted below, has been audited by
PricewaterhouseCoopers LLP. The independent accountant's report and Nations
Funds financial statements are incorporated by reference into the SAI. Please
see the back cover to find out how you can get a copy.
The financial highlights of Nations Small Company Growth Fund for the period
ended May 16, 1997 were audited by other independent accountants.
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<PAGE>
<TABLE>
<CAPTION>
NATIONS CAPITAL INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
CAPITAL INCOME FUND)
INVESTOR A SHARES* Period ended Year ended
5/14/99 2/28/99(b)
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 17.34 $ 17.28
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.12 0.51
Net realized and unrealized gain (loss) on
investments 0.96 0.25
Net increase in net asset value from operations 1.08 0.76
DISTRIBUTIONS:
Dividends from net investment income ( 0.11) ( 0.52)
Distributions from net realized capital gains -- ( 0.18)
Total dividends and distributions ( 0.11) ( 0.70)
Net asset value, end of period $ 18.31 $ 17.34
TOTAL RETURN (EXCLUDES SALES CHARGE) 6.25%(e) 4.64 %
===================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 352 $ 356
Ratio of expenses to average net assets 1.30%(d) 1.15 %
Ratio of net investment income (loss) to average net
assets 3.07%(d) 2.97 %
Ratio of expenses to average net assets** 1.32%(d) 1.16%***(c)
Ratio of net investment income to average net
assets** 3.05%(d) 2.96%***(c)
Portfolio turnover rate 16%(e) 66%
<CAPTION>
INVESTOR A SHARES* Year ended Year ended Year ended Year ended
2/28/98 2/28/97(a) 2/29/96 2/28/95
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 17.35 $ 16.42 $ 13.65 $ 15.42
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.58 0.57 0.62 0.57
Net realized and unrealized gain (loss) on
investments 2.89 2.34 2.84 ( 1.43)
Net increase in net asset value from operations 3.47 2.91 3.46 ( 0.86)
DISTRIBUTIONS:
Dividends from net investment income ( 0.59) ( 0.57) ( 0.69) ( 0.54)
Distributions from net realized capital gains ( 2.95) ( 1.41) -- ( 0.37)
Total dividends and distributions ( 3.54) ( 1.98) ( 0.69) ( 0.91)
Net asset value, end of period $ 17.28 $ 17.35 $ 16.42 $ 13.65
TOTAL RETURN (EXCLUDES SALES CHARGE) 21.54 % 18.53 % 25.96 % ( 5.61%)
===================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 391 $ 309 $ 247 $ 198
Ratio of expenses to average net assets 1.10 % 1.18 % 1.23 % 0.97%
Ratio of net investment income (loss) to average net
assets 3.35 % 3.40 % 4.05 % 4.48%
Ratio of expenses to average net assets** 1.12%*** 1.19%*** 1.26%*** 1.14%
Ratio of net investment income to average net
assets** 3.33 % (c) (c) 4.31%
Portfolio turnover rate 69% 124% 57% 94%
</TABLE>
* Investor A Shares of Nations Capital Income Fund
were formerly A Shares of the Pacific Horizon
Capital Income Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
*** During the years ended February 28, 1999, 1998,
1997 and February 29, 1996, the Portfolio received
credits from its custodian for interest earned on
uninvested balances which were used to offset
custodian fees and expenses. If such credits had not
occurred, the expense ratios would have been as
indicated. The ratio of net investment income was
not affected.
(a) As of July 22, 1996, the Portfolio designated
the existing series of shares as "A" Shares.
(b) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationsBank Corporation.
(c) There were no waivers or expense reimbursements
during the period.
(d) Annualized.
(e) Not annualized.
93
<PAGE>
<TABLE>
<CAPTION>
NATIONS CAPITAL INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
CAPITAL INCOME FUND)
INVESTOR B SHARES* Period ended Period ended
5/14/99 2/28/99(a)(b)
<S> <C> <C>
Net asset value, beginning of period $ 17.30 $ 17.67
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.09 0.22
Net realized loss on investments 0.96 ( 0.17)
Net increase in net asset value from operations 1.05 0.05
DISTRIBUTIONS:
Dividends from net investment income ( 0.08) ( 0.24)
Distributions from net realized capital gains -- ( 0.18)
Total dividends and distributions ( 0.08) ( 0.42)
Net asset value, end of period $ 18.27 $ 17.30
TOTAL RETURN 6.10 %(e) 0.44 %(e)
===================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 4 $ 3
Ratio of expenses to average net assets 2.06 %(d) 1.96 %(d)
Ratio of net investment income to average net
assets 2.34 %(d) 2.14 %(d)
Ratio of expenses to average net assets 2.08%**(d) 1.97%***(c)(d)
Ratio of net investment income to average net
assets 2.32%**(d) 2.13%***(c)(d)
Portfolio turnover rate 16%(e) 66%
</TABLE>
* Investor B Shares of Nations Capital Income Fund
were formerly B Shares of the Pacific Horizon
Capital Income Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
*** During the period ended February 28, 1999, the
Portfolio received credits from its custodian for
interest earned on uninvested balances which were
used to offset custodian fees and expenses. If such
credits had not occurred, the expense ratios would
have been as indicated. The ratio of net investment
income was not affected.
(a) Period from July 15, 1998 (inception date) to
February 28, 1999.
(b) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationsBank Corporation.
(c) There were no fee waivers or expense
reimbursements during the period.
(d) Annualized.
(e) Not annualized.
94
<PAGE>
<TABLE>
<CAPTION>
NATIONS CAPITAL INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
CAPITAL INCOME FUND)
INVESTOR C SHARES* Period ended Year ended Year ended Period ended
5/14/99 2/28/99(b) 2/28/98 2/28/97(a)
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 17.37 $ 17.24 $ 17.30 $ 16.24
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.10 0.40 0.48 0.32
Net realized gain on investments 0.97 0.31 2.89 2.43
Net increase in net asset value from operations 1.07 0.71 3.37 2.75
DISTRIBUTIONS:
Dividends from net investment income ( 0.09) ( 0.40) ( 0.48) ( 0.28)
Distributions from net realized capital gains -- ( 0.18) ( 2.95) ( 1.41)
Total dividends and distributions ( 0.09) ( 0.58) ( 3.43) ( 1.69)
Net asset value, end of period $ 18.35 $ 17.37 $ 17.24 $ 17.30
TOTAL RETURN 6.17%(d) 4.29% 20.97% 17.47%(d)
===================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 4 $ 4 $ 3 $ 1
Ratio of expenses to average net assets 1.80%(c) 1.65% 1.60% 1.66%(c)
Ratio of net investment income to average net
assets 2.56%(c) 2.45% 2.85% 2.85%(c)
Ratio of expenses to average net assets** 2.07%(c) 1.91%+ 1.86% 1.91%(c)***
Ratio of net investment income to average net
assets** 2.29%(c) 2.19%+ 2.59% 2.60%(c)
Portfolio turnover rate 16%(d) 66% 69% 124%
</TABLE>
* Investor C Shares of Nations Capital Income Fund
were formerly K Shares of the Pacific Horizon
Capital Income Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
*** Fees paid by third parties had no effect on the
ratios.
+ During the year ended February 28, 1999, the
Portfolio received credits from its custodian for
interest earned on uninvested balances which were
used to offset custodian fees and expenses. If such
credits had not occurred, the expense ratios would
have been as indicated. The ratio of net investment
income was not affected.
(a) Period from July 22, 1996 (inception date) to
February 28, 1997.
(b) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationsBank Corporation.
(c) Annualized.
(d) Not annualized.
95
<PAGE>
NATIONS VALUE FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended
INVESTOR A SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.92 $ 17.87
Net investment income 0.09 0.15
Net realized and unrealized gain/(loss) on
investments 0.63 5.98
Net increase/(decrease) in net asset value from
operations 0.72 6.13
DISTRIBUTIONS:
Dividends from net investment income ( 0.09) ( 0.14)
Distributions from net realized capital gains ( 2.39) ( 3.94)
Total dividends and distributions ( 2.48) ( 4.08)
Net asset value, end of period $ 18.16 $ 19.92
TOTAL RETURN++ 3.96% 38.22%
===================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $136,691 $149,167
Ratio of operating expenses to average net
assets 1.19%(b)(c) 1.20%(b)
Ratio of net investment income to average net
assets 0.51% 0.79%
Portfolio turnover rate 38% 79%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.19%(b) 1.20%(b)
<CAPTION>
INVESTOR A SHARES Year ended Period ended Year ended Year ended
03/31/97 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 16.60 $ 16.21 $ 12.98 $ 13.72
Net investment income 0.21 0.05 0.23 0.20
Net realized and unrealized gain/(loss) on
investments 2.70 1.06 3.92 ( 0.20)
Net increase/(decrease) in net asset value from
operations 2.91 1.11 4.15 0.00
DISTRIBUTIONS:
Dividends from net investment income ( 0.22) ( 0.10) ( 0.25) ( 0.20)
Distributions from net realized capital gains ( 1.42) ( 0.62) ( 0.67) ( 0.54)
Total dividends and distributions ( 1.64) ( 0.72) ( 0.92) ( 0.74)
Net asset value, end of period $ 17.87 $ 16.60 $ 16.21 $ 12.98
TOTAL RETURN++ 17.80% 7.07% 34.22% ( 0.17)%
====================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $70,305 $54,341 $48,440 $35,445
Ratio of operating expenses to average net
assets 1.22%(b) 1.21%+ 1.19% 1.18%
Ratio of net investment income to average net
assets 1.26% 1.05%+ 1.65% 1.60%
Portfolio turnover rate 47% 12% 63% 75%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.22%(b) 1.21%+ 1.19% 1.18%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS VALUE FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR B SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.81 $ 17.81
Net investment income ( 0.05) 0.02
Net realized and unrealized gain/(loss) on
investments 0.63 5.96
Net increase/(decrease) in net asset value from
operations 0.58 5.98
DISTRIBUTIONS:
Dividends from net investment income -- ( 0.04)
Distributions from net realized capital gains ( 2.39) ( 3.94)
Total dividends and distributions ( 2.39) ( 3.98)
Net asset value, end of period $ 18.00 $ 19.81
TOTAL RETURN++ 3.11% 37.29%
========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $154,025 $149,635
Ratio of operating expenses to average net assets 1.94%(b)(c) 1.87%(b)
Ratio of net investment income to average net
assets ( 0.24)% 0.12%
Portfolio turnover rate 38% 79%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.94%(b) 1.87%(b)
<CAPTION>
INVESTOR B SHARES Year ended Period ended Year ended Year ended
3/31/97 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 16.55 $ 16.15 $ 12.94 $ 13.71
Net investment income 0.14 0.03 0.17 0.15
Net realized and unrealized gain/(loss) on
investments 2.68 1.05 3.89 ( 0.22)
Net increase/(decrease) in net asset value from
operations 2.82 1.08 4.06 ( 0.07)
DISTRIBUTIONS:
Dividends from net investment income ( 0.14) ( 0.06) ( 0.18) ( 0.16)
Distributions from net realized capital gains ( 1.42) ( 0.62) ( 0.67) ( 0.54)
Total dividends and distributions ( 1.56) ( 0.68) ( 0.85) ( 0.70)
Net asset value, end of period $ 17.81 $ 16.55 $ 16.15 $ 12.94
TOTAL RETURN++ 17.21% 6.90% 33.55% ( 0.69)%
========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $99,999 $88,861 $83,699 $42,530
Ratio of operating expenses to average net assets 1.72%(b) 1.71%+ 1.69% 1.68%
Ratio of net investment income to average net
assets 0.76% 0.55%+ 1.15% 1.10%
Portfolio turnover rate 47% 12% 63% 75%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.72%(b) 1.71%+ 1.69% 1.68%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
96
<PAGE>
NATIONS VALUE FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended
INVESTOR C SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.75 $ 17.75
Net investment income ( 0.02) 0.04
Net realized and unrealized gain/(loss) on
investments 0.65 5.95
Net increase/(decrease) in net asset value from
operations 0.63 5.99
DISTRIBUTIONS:
Dividends from net investment income ( 0.01) ( 0.05)
Distributions from net realized capital gains ( 2.39) ( 3.94)
Total dividends and distributions ( 2.40) ( 3.99)
Net asset value, end of period $ 17.98 $ 19.75
TOTAL RETURN++ 3.39% 37.55%
===================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $12,106 $13,969
Ratio of operating expenses to average net assets 1.70%(b)(c) 1.78%(b)
Ratio of net investment income to average net
assets 0.00% 0.21%
Portfolio turnover rate 38% 79%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.94%(b) 1.78%(b)
<CAPTION>
INVESTOR C SHARES Year ended Period ended Year ended Year ended
03/31/97 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 16.50 $ 16.09 $ 12.90 $ 13.64
Net investment income 0.17 0.04 0.13 0.12
Net realized and unrealized gain/(loss) on
investments 2.68 1.05 3.88 ( 0.22)
Net increase/(decrease) in net asset value from
operations 2.85 1.09 4.01 ( 0.10)
DISTRIBUTIONS:
Dividends from net investment income ( 0.18) ( 0.06) ( 0.15) ( 0.10)
Distributions from net realized capital gains ( 1.42) ( 0.62) ( 0.67) ( 0.54)
Total dividends and distributions ( 1.60) ( 0.68) ( 0.82) ( 0.64)
Net asset value, end of period $ 17.75 $ 16.50 $ 16.09 $ 12.90
TOTAL RETURN++ 17.51% 6.99% 33.15% ( 0.92)%
=======================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $6,519 $4,633 $4,185 $2,983
Ratio of operating expenses to average net assets 1.47%(b) 1.58%+ 1.94% 1.93%
Ratio of net investment income to average net
assets 1.01% 0.68%+ 0.90% 0.85%
Portfolio turnover rate 47% 12% 63% 75%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.47%(b) 1.58%+ 1.94% 1.93%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS EQUITY INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year Year
ended ended
INVESTOR A SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.89 $ 12.26
Net investment income 0.20 0.26
Net realized and unrealized gain on investments ( 1.45) 3.77
Net increase in net asset value from operations ( 1.25) 4.03
DISTRIBUTIONS:
Dividends from net investment income ( 0.20) ( 0.24)
Distributions from net realized capital gains ( 1.13) ( 2.16)
Total dividends and distributions ( 1.33) ( 2.40)
Net asset value, end of period $ 11.31 $ 13.89
TOTAL RETURN++ ( 9.87)% 36.92%
===================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $51,278 $68,006
Ratio of operating expenses to average net assets 1.05%(b)(c) 1.11%(b)
Ratio of net investment income to average net
assets 1.67% 1.97%
Portfolio turnover rate 69% 74%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.05%(b) 1.11%(b)
<CAPTION>
Year Period Year Year
INVESTOR A SHARES ended ended ended ended
03/31/97 03/31/96(a) 05/31/95 05/31/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.11 $ 11.78 $ 11.41 $ 12.02
Net investment income 0.36 0.27 0.40 0.37
Net realized and unrealized gain on investments 1.58 1.77 1.10 0.21
Net increase in net asset value from operations 1.94 2.04 1.50 0.58
DISTRIBUTIONS:
Dividends from net investment income ( 0.38) ( 0.34) ( 0.40) ( 0.38)
Distributions from net realized capital gains ( 2.41) ( 0.37) ( 0.73) ( 0.81)
Total dividends and distributions ( 2.79) ( 0.71) ( 1.13) ( 1.19)
Net asset value, end of period $ 12.26 $ 13.11 $ 11.78 $ 11.41
TOTAL RETURN++ 15.30% 17.75% 14.53% 4.74%
==========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $47,891 $42,606 $35,538 $33,691
Ratio of operating expenses to average net assets 1.16%(b) 1.15%+ 1.17% 1.19%
Ratio of net investment income to average net
assets 2.84% 2.59%+ 3.50% 3.16%
Portfolio turnover rate 102% 59% 158% 116%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.16%(b) 1.15%+ 1.18% 1.20%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was May 31.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
97
<PAGE>
NATIONS EQUITY INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended
INVESTOR B SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.87 $ 12.25
Net investment income 0.11 0.17
Net realized and unrealized gain on investments ( 1.45) 3.77
Net increase in net asset value from operations ( 1.34) 3.94
DISTRIBUTIONS:
Dividends from net investment income ( 0.09) ( 0.16)
Distributions from net realized capital gains ( 1.13) ( 2.16)
Total dividends and distributions ( 1.22) ( 2.32)
Net asset value, end of period $ 11.31 $ 13.87
TOTAL RETURN++ (10.49)% 36.02%
======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $107,747 $144,929
Ratio of operating expenses to average net assets 1.80%(b)(c) 1.78%(b)
Ratio of net investment income to average net
assets 0.92% 1.30%
Portfolio turnover rate 69% 74%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.80%(b) 1.78%(b)
<CAPTION>
INVESTOR B SHARES Year ended Period ended Year ended Period ended
03/31/97 03/31/96(a) 05/31/95 05/31/94*
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.10 $ 11.77 $ 11.40 $ 11.98
Net investment income 0.31 0.22 0.34 0.37
Net realized and unrealized gain on investments 1.57 1.76 1.11 0.22
Net increase in net asset value from operations 1.88 1.98 1.45 0.59
DISTRIBUTIONS:
Dividends from net investment income ( 0.32) ( 0.28) ( 0.35) ( 0.36)
Distributions from net realized capital gains ( 2.41) ( 0.37) ( 0.73) ( 0.81)
Total dividends and distributions ( 2.73) ( 0.65) ( 1.08) ( 1.17)
Net asset value, end of period $ 12.25 $ 13.10 $ 11.77 $ 11.40
TOTAL RETURN++ 14.76% 17.21% 14.03% 4.84%
=========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $108,055 $104,026 $75,371 $46,043
Ratio of operating expenses to average net assets 1.66%(b) 1.65%+ 1.67% 1.69%+
Ratio of net investment income to average net
assets 2.34% 2.09%+ 3.00% 2.66%+
Portfolio turnover rate 102% 59% 158% 116%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.66%(b) 1.65%+ 1.68% 1.70%+
</TABLE>
* Nations Equity Income 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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was May 31.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS EQUITY INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR C SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.01 $ 12.35
Net investment income 0.12 0.18
Net realized and unrealized gain on investments ( 1.44) 3.83
Net increase in net asset value from operations ( 1.32) 4.01
DISTRIBUTIONS:
Dividends from net investment income ( 0.11) ( 0.19)
Distributions from net realized capital gains ( 1.13) ( 2.16)
Total dividends and distributions ( 1.24) ( 2.35)
Net asset value, end of period $ 11.45 $ 14.01
TOTAL RETURN++ (10.28)% 36.28%
====================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 5,801 $10,348
Ratio of operating expenses to average net assets 1.64%(b)(c) 1.69%(b)
Ratio of net investment income to average net
assets 1.08% 1.39%
Portfolio turnover rate 69% 74%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.80%(b) 1.69%(b)
<CAPTION>
INVESTOR C SHARES Year ended Period ended Year ended Year ended
03/31/97 03/31/96(a) 05/31/95 05/31/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.19 $ 11.83 $ 11.47 $ 12.04
Net investment income 0.33 0.21 0.32 0.28
Net realized and unrealized gain on investments 1.59 1.78 1.08 0.21
Net increase in net asset value from operations 1.92 1.99 1.40 0.49
DISTRIBUTIONS:
Dividends from net investment income ( 0.35) ( 0.26) ( 0.31) ( 0.25)
Distributions from net realized capital gains ( 2.41) ( 0.37) ( 0.73) ( 0.81)
Total dividends and distributions ( 2.76) ( 0.63) ( 1.04) ( 1.06)
Net asset value, end of period $ 12.35 $ 13.19 $ 11.83 $ 11.47
TOTAL RETURN++ 15.01% 17.20% 13.49% 3.96%
=======================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $5,007 $4,612 $4,278 $4,221
Ratio of operating expenses to average net assets 1.41%(b) 1.75%+ 1.92% 1.94%
Ratio of net investment income to average net
assets 2.59% 1.99%+ 2.75% 2.41%
Portfolio turnover rate 102% 59% 158% 116%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.41%(b) 1.75%+ 1.93% 1.95%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was May 31.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
98
<PAGE>
NATIONS BLUE CHIP FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
BLUE CHIP FUND)
<TABLE>
<CAPTION>
Period ended Year ended
INVESTOR A SHARES* 5/14/99 2/28/99
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 33.43 $ 29.90
INCOME FROM INVESTMENT OPERATIONS:
Net investment income --(d) 0.09
Net realized and unrealized gain (loss) on investments 2.49 5.26
Net increase in net asset value from operations 2.49 5.35
DISTRIBUTIONS:
Dividends from net investment income -- ( 0.10)
Distributions from net realized capital gains -- ( 1.72)
Total dividends and distributions -- ( 1.82)
Net asset value, end of period $ 35.92 $ 33.43
TOTAL RETURN (EXCLUDES SALES CHARGE) 7.45%(c) 18.58%
======================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 423 $ 401
Ratio of expenses to average net assets 1.29%(b) 1.16%
Ratio of net investment income to average net assets ( 0.03)%(b) 0.31%
Ratio of expenses to average net assets** 1.33%(b) 1.17%
Ratio of net investment income to average net assets** ( 0.07)%(b) 0.30%
<CAPTION>
INVESTOR A SHARES* Year ended Year ended Year ended Year ended
2/28/98 2/28/97(a) 2/29/96 2/28/95
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 25.22 $ 20.53 $ 15.81 $ 14.97
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.16 0.23 0.26 0.31
Net realized and unrealized gain (loss) on investments 7.91 5.21 4.96 0.80
Net increase in net asset value from operations 8.07 5.44 5.22 1.11
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.22) ( 0.28) ( 0.27)
Distributions from net realized capital gains ( 3.24) ( 0.53) ( 0.22) --
Total dividends and distributions ( 3.39) ( 0.75) ( 0.50) ( 0.27)
Net asset value, end of period $ 29.90 $ 25.22 $ 20.53 $ 15.81
TOTAL RETURN (EXCLUDES SALES CHARGE) 33.96% 27.01% 33.39% 7.60%
======================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 288 $ 153 $ 67 $ 6
Ratio of expenses to average net assets 1.18% 1.28% 0.83% 0.00%
Ratio of net investment income to average net assets 0.63% 0.99% 1.63% 2.46%
Ratio of expenses to average net assets** 1.22% 1.71% 2.28% 6.32%
Ratio of net investment income to average net assets** 0.59% 0.56% 0.18% ( 3.86%)
</TABLE>
* Investor A Shares of Nations Blue Chip Fund were
formerly A Shares of the Pacific Horizon Blue Chip
Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) As of July 22, 1996, the Fund designated the
existing series of shares as "A" Shares.
(b) Annualized.
(c) Not annualized.
(d) Amount represents less than a penny per share.
NATIONS BLUE CHIP FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
BLUE CHIP FUND)
<TABLE>
<CAPTION>
INVESTOR B SHARES* Period ended Period ended
5/14/99 2/28/99(a)
<S> <C> <C>
Net asset value, beginning of period $ 33.34 $ 33.73
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ( 0.02) ( 0.05)
Net realized gain on investments 2.45 1.39
Net increase in net asset value from operations 2.43 1.34
DISTRIBUTIONS:
Dividends from net investment income -- ( 0.01)
Distributions from net realized capital gains -- ( 1.72)
Total dividends and distributions -- ( 1.73)
Net asset value, end of period $ 35.77 $ 33.34
TOTAL RETURN 7.29%(c) 4.53%(c)
===========================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 21 $ 13
Ratio of expenses to average net assets 2.05%(b) 1.97%(b)
Ratio of net investment loss to average net assets ( 0.77)%(b) ( 0.58)%(b)
Ratio of expenses to average net assets** 2.09%(b) 1.99%(b)
Ratio of net investment loss to average net assets** ( 0.81)%(b) ( 0.60)%(b)
</TABLE>
* Investor B Shares of Nations Blue Chip Fund were
formerly B Shares of the Pacific Horizon Blue Chip
Fund.
** During the period, certain fees were voluntary
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from July 15, 1998 (date of initial
offering) to February 28, 1999.
(b) Annualized.
(c) Not annualized.
99
<PAGE>
NATIONS BLUE CHIP FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
BLUE CHIP FUND)
<TABLE>
<CAPTION>
INVESTOR C SHARES* Period ended Year ended Year ended Period ended
5/14/99 2/28/99 2/28/98 2/28/97(a)
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 33.24 $ 29.79 $ 25.20 $ 20.38
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ( 0.04) ( 0.06) 0.04 0.07
Net realized and unrealized gain (loss) on
investments 2.49 5.23 7.83 5.35
Net increase in net asset value from operations 2.45 5.17 7.87 5.42
DISTRIBUTIONS:
Dividends from net investment income -- -- ( 0.04) ( 0.07)
Distributions from net realized capital gains -- ( 1.72) ( 3.24) ( 0.53)
Total dividends and distributions -- ( 1.72) ( 3.28) ( 0.60)
Net asset value, end of period $ 35.69 $ 33.24 $ 29.79 $ 25.20
TOTAL RETURN (EXCLUDES SALES CHARGE) 7.37%(c) 17.96% 33.08% 26.96%(c)
================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 15 $ 13 $ 7 $ 1
Ratio of expenses to average net assets 1.80%(b) 1.66% 1.67% 1.92%(b)
Ratio of net investment income to average net
assets ( 0.54)%(b) ( 0.22)% 0.12% 0.45%(b)
Ratio of expenses to average net assets** 2.08%(b) 1.92% 1.69% 2.12%(b)
Ratio of net investment income to average net
assets** ( 0.82)%(b) ( 0.48)% 0.10% 0.25%(b)
</TABLE>
* Investor C Shares of Nations Blue Chip Fund were
formerly K Shares of the Pacific Horizon Blue Chip
Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from July 22, 1996 (inception date) to
February 28, 1997.
(b) Annualized.
(c) Not annualized.
100
<PAGE>
<TABLE>
<CAPTION>
NATIONS MARSICO GROWTH & INCOME
FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Year ended Period ended
INVESTOR A SHARES 3/31/99# 03/31/98*#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value at the beginning of the period $ 12.02 $ 10.00
Net investment income ( 0.03) 0.00 (b)
Net realized and unrealized gain on investments 2.97 2.02
Net increase in net asset value from operations 2.94 2.02
Dividends from net investment income 0.00 0.00
Distributions from net realized capital gains ( 0.01) 0.00
Total dividends and distributions ( 0.01) 0.00
Net asset value, end of the period $ 14.95 $ 12.02
TOTAL RETURN++ 24.38% 20.20%
======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $43,392 $ 1,141
Ratio of operating expenses to average net assets 1.50%(a) 1.34 +(a)
Ratio of net investment income/(loss) to average
net assets ( 0.20)% 0.13 +
Portfolio turnover rate 150% 22%
Ratio of operating expenses to average net assets
without fee waivers and/or expense
reimbursements 1.50%(a) 2.22 +(a)
</TABLE>
* Nations Marsico Growth & Income Fund Investor A
Shares commenced operations on December 31, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(b) Amount represents less than $0.01 per share.
<TABLE>
<CAPTION>
NATIONS MARSICO GROWTH & INCOME
FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Year ended Period ended
INVESTOR B SHARES 3/31/99# 03/31/98*#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.02 $ 10.00
Net investment income ( 0.12) ( 0.02)
Net realized and unrealized gain on investments 2.96 2.04
Net increase in net asset value from operations 2.84 2.02
DISTRIBUTIONS:
Dividends from net investment income 0.00 0.00
Distributions from net realized capital gains ( 0.01) 0.00
Total dividends and distributions ( 0.01) 0.00
Net asset value, end of period $ 14.85 $ 12.02
TOTAL RETURN++ 23.55% 20.20%
=======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $99,257 $7,907
Ratio of operating expenses to average net assets 2.25%(a) 2.09%+(a)
Ratio of net investment income/loss to average net
assets ( 0.95)% ( 0.62)%+
Portfolio turnover rate 150% 22%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.25%(a) 2.97%+(a)
</TABLE>
* Nations Marsico Growth & Income Fund Investor B
Shares commenced operations on December 31, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
101
<PAGE>
<TABLE>
<CAPTION>
NATIONS MARSICO GROWTH & INCOME
FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Year ended Period ended
INVESTOR C SHARES 3/31/99# 03/31/98*#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.02 $ 10.00
Income from investment operations:
Net investment income ( 0.12) ( 0.02)
Net realized and unrealized gain on investments 2.97 2.04
Net increase in net asset value from operations 2.85 2.02
DISTRIBUTIONS:
Dividends from net investment income 0.00 0.00
Distributions from net realized capital gains ( 0.01) 0.00
Total dividends and distributions ( 0.01) 0.00
Net asset value, end of period $ 14.86 $ 12.02
TOTAL RETURN++ 23.63% 20.20%
========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $3,233 $ 518
Ratio of operating expenses to average net assets 2.25%(a) 2.09%+(a)
Ratio of net investment income/loss to average net
assets ( 0.95)% ( 0.62)%+
Portfolio turnover rate 150% 22%
Ratio of expenses to average net assets without
waivers and/or expense reimbursements 2.25%(a) 2.97%+(a)
</TABLE>
* Nations Marsico Growth & Income Fund Investor C
Shares commenced operations on December 31, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS CAPITAL GROWTH FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR A SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.26 $ 11.67
Net investment income/(loss) ( 0.03) ( 0.01)
Net realized and unrealized gain on investments 1.58 5.28
Net increase in net asset value from operations 1.55 5.27
DISTRIBUTIONS:
Dividends from net investment income -- --
Distributions from net realized capital gains ( 2.84) ( 3.68)
Total dividends and distributions ( 2.84) ( 3.68)
Net asset value, end of period $ 11.97 $ 13.26
TOTAL RETURN++ 14.70% 53.83%
====================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $52,987 $43,380
Ratio of operating expenses to average net assets 1.21%(c) 1.20%(c)(d)
Ratio of net investment income/(loss) to average
net assets ( 0.29)% ( 0.12)%
Portfolio turnover rate 39% 113%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.21%(c) 1.20%(c)
<CAPTION>
INVESTOR A SHARES Year ended Period ended Year ended Year ended
03/31/97# 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.41 $ 14.22 $ 11.21 $ 11.06
Net investment income/(loss) 0.02 0.01 0.06 0.07
Net realized and unrealized gain on investments 1.65 0.38 3.28 0.14
Net increase in net asset value from operations 1.67 0.39 3.34 0.21
DISTRIBUTIONS:
Dividends from net investment income ( 0.02) ( 0.01) ( 0.07) ( 0.06)
Distributions from net realized capital gains ( 3.39) ( 1.19) ( 0.26) ( 0.00)(b)
Total dividends and distributions ( 3.41) ( 1.20) ( 0.33) ( 0.06)
Net asset value, end of period $ 11.67 $ 13.41 $ 14.22 $ 11.21
TOTAL RETURN++ 11.58% 3.02% 30.70% 1.93%
=========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $20,465 $18,311 $16,770 $11,038
Ratio of operating expenses to average net assets 1.21%(d) 1.21%+ 1.23% 1.15%
Ratio of net investment income/(loss) to average
net assets 0.14% 0.13%+ 0.46% 0.60%
Portfolio turnover rate 75% 25% 80% 56%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.21% 1.21%+ 1.23% 1.16%
</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 share 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 per share.
(c) The effect of the fees reduced by the credits
allowed by the custodian 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%.
102
<PAGE>
<TABLE>
<CAPTION>
NATIONS CAPITAL GROWTH FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR B SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.83 $ 11.47
Net investment income/(loss) ( 0.11) ( 0.10)
Net realized and unrealized gain on investments 1.51 5.14
Net increase in net asset value from operations 1.40 5.04
DISTRIBUTIONS:
Dividends from net investment income -- --
Distributions from net realized capital gains ( 2.84) ( 3.68)
Total dividends and distributions ( 2.84) ( 3.68)
Net asset value, end of period $ 11.39 $ 12.83
TOTAL RETURN++ 13.86% 52.52%
====================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $66,338 $59,496
Ratio of operating expenses to average net assets 1.96%(c) 1.95%(c)(d)
Ratio of net investment income/(loss) to average
net assets ( 1.04)% ( 0.87)%
Portfolio turnover rate 39% 113%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.96%(c) 1.95%(c)
<CAPTION>
INVESTOR B SHARES Year ended Period ended Year ended Year ended
03/31/97# 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.31 $ 14.15 $ 11.17 $ 11.05
Net investment income/(loss) ( 0.08) ( 0.02) ( 0.03) ( 0.01)
Net realized and unrealized gain on investments 1.63 0.37 3.27 0.13
Net increase in net asset value from operations 1.55 0.35 3.24 0.12
DISTRIBUTIONS:
Dividends from net investment income -- -- -- --
Distributions from net realized capital gains ( 3.39) ( 1.19) ( 0.26) ( 0.00)(b)
Total dividends and distributions ( 3.39) ( 1.19) ( 0.26) ( 0.00)(b)
Net asset value, end of period $ 11.47 $ 13.31 $ 14.15 $ 11.17
TOTAL RETURN++ 10.68% 2.77% 29.80% 1.12%
===========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $41,933 $41,045 $40,868 $23,591
Ratio of operating expenses to average net assets 1.96%(d) 1.96%+ 1.98% 1.90%
Ratio of net investment income/(loss) to average
net assets ( 0.61)% ( 0.62)%+ ( 0.29)% ( 0.15)%
Portfolio turnover rate 75% 25% 80% 56%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.96% 1.96%+ 1.98% 1.91%
</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 share 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 per share.
(c) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(d) The effect of interest expense on the operating
expense ratio was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS CAPITAL GROWTH FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR C SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.92 $ 11.50
Net investment income/(loss) ( 0.11) ( 0.08)
Net realized and unrealized gain on investments 1.51 5.18
Net increase in net asset value from operations 1.40 5.10
DISTRIBUTIONS:
Dividends from net investment income -- --
Distributions from net realized capital gains ( 2.84) ( 3.68)
Total dividends and distributions ( 2.84) ( 3.68)
Net asset value, end of period $ 11.48 $ 12.92
TOTAL RETURN++ 13.76% 53.02%
====================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $3,862 $6,176
Ratio of operating expenses to average net assets 1.96%(c) 1.78%(c)(d)
Ratio of net investment income/(loss) to average
net assets ( 1.04)% ( 0.70)%
Portfolio turnover rate 39% 113%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.96%(c) 1.78%(c)
<CAPTION>
INVESTOR C SHARES Year ended Period ended Year ended Year ended
03/31/97## 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.26 $ 14.09 $ 11.14 $ 11.01
Net investment income/(loss) ( 0.01) 0.00 (b) ( 0.03) ( 0.02)
Net realized and unrealized gain on investments 1.64 0.36 3.24 0.15
Net increase in net asset value from operations 1.63 0.36 3.21 0.13
DISTRIBUTIONS:
Dividends from net investment income -- -- -- --
Distributions from net realized capital gains ( 3.39) ( 1.19) ( 0.26) ( 0.00)(b)
Total dividends and distributions ( 3.39) ( 1.19) ( 0.26) ( 0.00)(b)
Net asset value, end of period $ 11.50 $ 13.26 $ 14.09 $ 11.14
TOTAL RETURN++ 11.39% 2.86% 29.61% 1.22%
===========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $5,752 $3,655 $3,322 $2,394
Ratio of operating expenses to average net assets 1.46%(d) 1.58%+ 1.98% 1.90%
Ratio of net investment income/(loss) to average
net assets ( 0.11)% ( 0.24)%+ ( 0.29)% ( 0.15)%
Portfolio turnover rate 75% 25% 80% 56%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.46% 1.58%+ 1.98% 1.91%
</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 share 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 per share.
(c) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(d) The effect of interest expense on the operating
expense ratio was less than 0.01%.
103
<PAGE>
<TABLE>
<CAPTION>
NATIONS DISCIPLINED EQUITY FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR A SHARES 3/31/99 03/31/98##
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 22.09 $ 18.44
Net investment income/(loss) ( 0.03) 0.02
Net realized and unrealized gain/(loss) on
investments 3.21 7.87
Net increase/(decrease) in net asset value from
operations 3.18 7.89
DISTRIBUTIONS:
Dividends from net investment income -- ( 0.01)
Distributions from net realized capital gains ( 2.04) ( 4.23)
Return of capital -- --
Total dividends and distributions ( 2.04) ( 4.24)
Net asset value, end of period $ 23.23 $ 22.09
TOTAL RETURN++ 15.49% 48.28%
=======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $67,356 $21,725
Ratio of operating expenses to average net assets 1.22%(c)(d) 1.23%(c)(d)
Ratio of net investment income/(loss) to average
net assets ( 0.13)% 0.12%
Portfolio turnover rate 72% 79%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.22%(d) 1.23%(d)
<CAPTION>
INVESTOR A SHARES Year ended Period ended Year ended Period ended Period ended
03/31/97 03/31/96(a) 11/30/95 11/30/94* 04/29/94*
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 17.16 $ 17.04 $ 13.06 $ 13.30 $ 14.94
Net investment income/(loss) 0.08 0.04 0.09 0.00 (b) ( 0.04)
Net realized and unrealized gain/(loss) on
investments 2.80 0.35 3.96 ( 0.23)# 1.35
Net increase/(decrease) in net asset value from
operations 2.88 0.39 4.05 ( 0.23) 1.31
DISTRIBUTIONS:
Dividends from net investment income ( 0.09) ( 0.04) ( 0.07) ( 0.01) --
Distributions from net realized capital gains ( 1.51) ( 0.23) -- -- ( 2.95)
Return of capital -- -- -- ( 0.00)(b) --
Total dividends and distributions ( 1.60) ( 0.27) ( 0.07) ( 0.01) ( 2.95)
Net asset value, end of period $ 18.44 $ 17.16 $ 17.04 $ 13.06 $ 13.30
TOTAL RETURN++ 16.76% 2.35% 31.05% ( 1.71)% 8.31%
========================================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $6,837 $4,722 $3,234 $ 252 $ 165
Ratio of operating expenses to average net assets 1.29%(c) 1.12%+ 1.40% 1.23%+ 1.30%+
Ratio of net investment income/(loss) to average
net assets 0.45% 0.72%+ 0.75% 0.02%+ ( 0.62)%+
Portfolio turnover rate 120% 47% 124% 177% 475%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.29% 1.12%+ 1.40% 1.66%+ 1.74%+
</TABLE>
* The period for Nations Disciplined Equity Investor
A Shares reflects operations from April 30, 1994
through November 30, 1994. The financial information
for the fiscal periods through April 29, 1994 is
based on the financial information for The Capitol
Mutual Funds Special Equity Portfolio Class B
Shares, which were reorganized into Investor A
Shares of Nations Disciplined Equity Fund (then
named Nations Special Equity Fund) as of the close
of business on April 29, 1994. The Capitol Mutual
Funds Special Equity Portfolio Class B Shares
commenced operations on July 26, 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.
# The amount shown at this caption for each share
outstanding throughout the period may not accord
with the change in the aggregate gains and losses in
the portfolio securities for the period because of
the timing of purchases and withdrawals of shares in
relation to the fluctuating market value of the
portfolio.
## Per share net investment income has been
calculated using the monthly average share 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 per share.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(d) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio with and without waivers and/or expense
reimbursements, was less than 0.01%.
104
<PAGE>
<TABLE>
<CAPTION>
NATIONS DISCIPLINED EQUITY FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR B SHARES 3/31/99 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 21.57 $ 18.20
Net investment income/(loss) ( 0.17) ( 0.12)
Net realized and unrealized gain/(loss) on
investments 3.11 7.72
Net increase/(decrease) in net asset value from
operations 2.94 7.60
DISTRIBUTIONS:
Dividends from net investment income -- --
Distributions from net realized capital gains ( 2.04) ( 4.23)
Return of capital -- --
Total dividends and distributions ( 2.04) ( 4.23)
Net asset value, end of period $ 22.47 $ 21.57
TOTAL RETURN++ 14.69% 47.14%
=========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $50,797 $38,079
Ratio of operating expenses to average net assets 1.97%(c)(d) 1.98%(c)(d)
Ratio of net investment income/(loss) to average
net assets ( 0.88)% ( 0.63)%
Portfolio turnover rate 72% 79%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.97%(d) 1.98%(d)
<CAPTION>
INVESTOR B SHARES Year ended Period ended Year ended Period ended
03/31/97 03/31/96(a) 11/30/95 11/30/94*
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 17.00 $ 16.89 $ 13.02 $ 12.77
Net investment income/(loss) ( 0.05) ( 0.01) 0.03 ( 0.02)
Net realized and unrealized gain/(loss) on
investments 2.76 0.35 3.87 0.28
Net increase/(decrease) in net asset value from
operations 2.71 0.34 3.90 0.26
DISTRIBUTIONS:
Dividends from net investment income -- -- ( 0.03) ( 0.01)
Distributions from net realized capital gains ( 1.51) ( 0.23) -- --
Return of capital -- -- -- ( 0.00)(b)
Total dividends and distributions ( 1.51) ( 0.23) ( 0.03) ( 0.01)
Net asset value, end of period $ 18.20 $ 17.00 $ 16.89 $ 13.02
TOTAL RETURN++ 15.86% 2.08% 29.94% 2.02%
========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $20,257 $18,412 $ 16,874 $ 177
Ratio of operating expenses to average net assets 2.04%(c) 2.02%+ 2.30% 2.09%+
Ratio of net investment income/(loss) to average
net assets ( 0.30)% ( 0.18)%+ ( 0.15)% ( 0.84)%+
Portfolio turnover rate 120% 47% 124% 177%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.04% 2.02%+ 2.30% 2.52%+
</TABLE>
* Nations Disciplined Equity Fund Investor B Shares
commenced operations on May 20, 1994.
+ 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 share 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 per share.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(d) The effect of fees reduced by credits allowed by
the custodian on the operating expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS DISCIPLINED EQUITY FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR C SHARES 3/31/99 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 21.92 $ 18.41
Net investment income/(loss) ( 0.17) ( 0.09)
Net realized and unrealized gain/(loss) on
investments 3.15 7.83
Net increase/(decrease) in net asset value from
operations 2.98 7.74
DISTRIBUTIONS:
Dividends from net investment income -- --
Distributions from net realized capital gains ( 2.04) ( 4.23)
Return of capital -- --
Total dividends and distributions ( 2.04) ( 4.23)
Net asset value, end of period $ 22.86 $ 21.92
TOTAL RETURN++ 14.64% 47.38%
===================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,629 $1,199
Ratio of operating expenses to average net assets 1.97%(c)(d) 1.81%(c)(d)
Ratio of net investment income/(loss) to average
net assets ( 0.88)% ( 0.46)%
Portfolio turnover rate 72% 79%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.97%(d) 1.81%(d)
<CAPTION>
INVESTOR C SHARES Year ended Period ended Period ended
03/31/97 03/31/96(a) 11/30/95*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 17.10 $ 16.97 $ 14.08
Net investment income/(loss) 0.04 0.01 0.00 (b)
Net realized and unrealized gain/(loss) on
investments 2.79 0.35 2.92
Net increase/(decrease) in net asset value from
operations 2.83 0.36 2.92
DISTRIBUTIONS:
Dividends from net investment income ( 0.01) -- ( 0.03)
Distributions from net realized capital gains ( 1.51) ( 0.23) --
Return of capital -- -- --
Total dividends and distributions ( 1.52) ( 0.23) ( 0.03)
Net asset value, end of period $ 18.41 $ 17.10 $ 16.97
TOTAL RETURN++ 16.45% 2.19% 20.78%
===========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 446 $ 283 $ 322
Ratio of operating expenses to average net assets 1.54%(c) 1.65%+ 2.30%+
Ratio of net investment income/(loss) to average
net assets 0.20% 0.19%+ ( 0.15)%+
Portfolio turnover rate 120% 47% 124%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.54% 1.65%+ 2.30%+
</TABLE>
* Nations Disciplined Equity Fund Investor C Shares
commenced operations on May 10, 1995.
+ 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 share 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 per share.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(d) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
105
<PAGE>
NATIONS MARSICO FOCUSED EQUITIES
FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year ended Period ended
INVESTOR A SHARES 3/31/99# 03/31/98*#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value at the beginning of the period $ 12.14 $ 10.00
Net investment income/(loss) ( 0.04) ( 0.01)
Net realized and unrealized capital gain on
investments 4.64 2.15
Net increase in net asset value from operations 4.60 2.14
DISTRIBUTIONS:
Dividends from net investment income 0.00 0.00
Distributions from net realized capital gains ( 0.01) 0.00
Total dividends and distributions ( 0.01) 0.00
Net asset value, the end of the period $ 16.73 $ 12.14
TOTAL RETURN++ 37.94% 21.40%
=====================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $238,137 $6,056
Ratio of operating expenses to average net assets 1.31%(a) 1.77%+(a)
Ratio of net investment income/(loss) to average
net assets ( 0.20)% ( 0.55)%+
Portfolio turnover rate 177% 25%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.31%(a) 1.77%+(a)
</TABLE>
* Nations Marsico Focused Equities Fund Investor A
Shares commenced operations on December 31, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
NATIONS MARSICO FOCUSED EQUITIES
FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year ended Period ended
INVESTOR B SHARES 3/31/99# 03/31/98*#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.13 $ 10.00
Net investment income/(loss) ( 0.12) ( 0.04)
Net realized and unrealized gain/(loss) on
investments 4.62 2.17
Net increase/(decrease) in net asset value from
operations 4.50 2.13
DISTRIBUTIONS:
Dividends from net investment income 0.00 0.00
Distributions from net realized capital gains ( 0.01) 0.00
Total dividends and distributions ( 0.01) 0.00
Net asset value, end of period $ 16.62 $ 12.13
TOTAL RETURN ++ 37.15% 21.30%
======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $306,365 $20,446
Ratio of operating expenses to average net assets 2.06%(a) 2.52%+(a)
Ratio of net investment income/(loss) to average
net assets ( 0.95)% ( 1.30)%+
Portfolio turnover rate 177% 25%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.06%(a) 2.52%+(a)
</TABLE>
* Nations Marsico Focused Equities Fund Investor B
Shares commenced operations on December 31, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
106
<PAGE>
NATIONS MARSICO FOCUSED EQUITIES
FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year ended Period ended
INVESTOR C SHARES 3/31/99# 03/31/98*#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 12.13 $ 10.00
Net investment income/(loss) ( 0.14) ( 0.04)
Net realized and unrealized gains on investments 4.69 2.17
Net increase in net asset value from operations 4.55 2.13
DISTRIBUTIONS:
Dividends from net investment income 0.00 0.00
Distributions from net realized capital gains ( 0.01) 0.00
Total dividends and distributions ( 0.01) 0.00
Net asset value, end of period $ 16.67 $ 12.13
TOTAL RETURN++ 37.56% 21.30%
=======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $13,682 $ 469
Ratio of operating expenses to average net assets 2.06%(a) 2.52%+(a)
Ratio of net investment loss to average net assets ( 0.95)% ( 1.30)%+
Portfolio turnover rate 177% 25%
Ratio of expenses to average net assets without
waivers and/or expense reimbursements 2.06%(a) 2.52%+(a)
</TABLE>
* Nations Marsico Focused Equities Fund Investor C
Shares commenced operations on December 31, 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 charge.
# Per share net investment income has been
calculated using the monthly average share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS EMERGING GROWTH FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR A SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 16.30 $ 12.69
Net investment income/(loss) ( 0.07) ( 0.10)
Net realized and unrealized gain/(loss) on
investments ( 0.92) 5.50
Net increase/(decrease) in net asset value from
operations ( 0.99) 5.40
DISTRIBUTIONS:
Distributions from net realized capital gains ( 2.27) ( 1.79)
Total dividends and distributions ( 2.27) ( 1.79)
Net asset value, end of period $ 13.04 $ 16.30
Total return++ ( 7.41)% 44.86%
=====================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $18,042 $21,591
Ratio of operating expenses to average net assets 1.23%(b)(c) 1.23%(b)
Ratio of net investment income/(loss) to average
net assets ( 0.54)% ( 0.67)%
Portfolio turnover rate 43% 76%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursement 1.23%(b) 1.23%(b)
<CAPTION>
INVESTOR A SHARES Year ended Period ended Year ended Year ended
03/31/97# 03/31/96#(a) 11/30/95 11/30/94#
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.91 $ 14.17 $ 11.35 $ 10.85
Net investment income/(loss) ( 0.07) ( 0.01) ( 0.01) ( 0.06)
Net realized and unrealized gain/(loss) on
investments 0.19 1.25 3.23 0.70
Net increase/(decrease) in net asset value from
operations 0.12 1.24 3.22 0.64
DISTRIBUTIONS:
Distributions from net realized capital gains ( 1.34) ( 1.50) ( 0.40) ( 0.14)
Total dividends and distributions ( 1.34) ( 1.50) ( 0.40) ( 0.14)
Net asset value, end of period $ 12.69 $ 13.91 $ 14.17 $ 11.35
Total return++ 0.18% 9.80% 29.65% 5.90%
=======================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $12,126 $7,802 $5,765 $3,234
Ratio of operating expenses to average net assets 1.23%(b) 1.24%+ 1.23% 1.26%
Ratio of net investment income/(loss) to average
net assets ( 0.51)% ( 0.31)%+ ( 0.17)% ( 0.54)%
Portfolio turnover rate 93% 39% 139% 129%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursement 1.23%(b) 1.24%+ 1.23% 1.26%
</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/(loss) has been
calculated using the monthly average share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
107
<PAGE>
<TABLE>
<CAPTION>
NATIONS EMERGING GROWTH FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR B SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 15.58 $ 12.29
Net investment income/(loss) ( 0.15) ( 0.20)
Net realized and unrealized gain/(loss) on
investments ( 0.88) 5.28
Net increase/(decrease) in net asset value from
operations ( 1.03) 5.08
DISTRIBUTIONS:
Distributions from net realized capital gains ( 2.27) ( 1.79)
Total dividends and distributions ( 2.27) ( 1.79)
Net asset value, end of period $ 12.28 $ 15.58
TOTAL RETURN++ ( 8.10)% 43.64%
=======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $33,245 $45,451
Ratio of operating expenses to average net assets 1.98%(b)(c) 1.98%(b)
Ratio of operating expenses to average net assets
including interest expense -- 1.99%
Ratio of net investment income/(loss) to average
net assets ( 1.29)% ( 1.42)%
Portfolio turnover rate 43% 76%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.98%(b) 1.98%(b)
<CAPTION>
INVESTOR B SHARES Year ended Period ended Year ended Year ended
03/31/97# 03/31/96#(a) 11/30/95 11/30/94#
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.61 $ 13.93 $ 11.24 $ 10.82
Net investment income/(loss) ( 0.18) ( 0.05) ( 0.07) ( 0.14)
Net realized and unrealized gain/(loss) on
investments 0.20 1.23 3.16 0.70
Net increase/(decrease) in net asset value from
operations 0.02 1.18 3.09 0.56
DISTRIBUTIONS:
Distributions from net realized capital gains ( 1.34) ( 1.50) ( 0.40) ( 0.14)
Total dividends and distributions ( 1.34) ( 1.50) ( 0.40) ( 0.14)
Net asset value, end of period $ 12.29 $ 13.61 $ 13.93 $ 11.24
TOTAL RETURN++ ( 0.57)% 9.52% 28.75% 5.17%
==========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $33,342 $34,989 $32,349 $15,909
Ratio of operating expenses to average net assets 1.98%(b) 1.99%+ 1.98% 2.01%
Ratio of operating expenses to average net assets
including interest expense -- -- -- --
Ratio of net investment income/(loss) to average
net assets ( 1.26)% ( 1.06)%+ ( 0.92)% ( 1.29)%
Portfolio turnover rate 93% 39% 139% 129%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.98%(b) 1.99%+ 1.98% 2.01%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS EMERGING GROWTH FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR C SHARES 3/31/99# 03/31/98#
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 15.63 $ 12.31
Net investment income/(loss) ( 0.15) ( 0.18)
Net realized and unrealized gain/(loss) on
investments ( 0.88) 5.29
Net increase/(decrease) in net asset value from
operations ( 1.03) 5.11
DISTRIBUTIONS:
Distributions from net realized capital gains ( 2.27) ( 1.79)
Total dividends and distributions ( 2.27) ( 1.79)
Net asset value, end of period $ 12.33 $ 15.63
TOTAL RETURN++ ( 8.08)% 43.80%
==================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,383 $2,266
Ratio of operating expenses to average net assets 1.98%(b)(c) 1.81%(b)
Ratio of operating expenses to average net assets
including interest expense -- 1.82%
Ratio of net investment income/(loss) to average
net assets ( 1.29)% ( 1.25)%
Portfolio turnover rate 43% 76%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.98%(b) 1.81%(b)
<CAPTION>
INVESTOR C SHARES Year ended Period ended Year ended Year ended
03/31/97# 03/31/96#(a) 11/30/95 11/30/94#
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 13.56 $ 13.87 $ 11.20 $ 10.78
Net investment income/(loss) ( 0.10) ( 0.03) ( 0.08) ( 0.14)
Net realized and unrealized gain/(loss) on
investments 0.19 1.22 3.15 0.70
Net increase/(decrease) in net asset value from
operations 0.09 1.19 3.07 0.56
DISTRIBUTIONS:
Distributions from net realized capital gains ( 1.34) ( 1.50) ( 0.40) ( 0.14)
Total dividends and distributions ( 1.34) ( 1.50) ( 0.40) ( 0.14)
Net asset value, end of period $ 12.31 $ 13.56 $ 13.87 $ 11.20
TOTAL RETURN++ ( 0.04)% 9.64% 28.67% 5.19%
=======================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,437 $ 936 $ 805 $ 542
Ratio of operating expenses to average net assets 1.48%(b) 1.61%+ 1.98% 2.01%
Ratio of operating expenses to average net assets
including interest expense -- -- -- --
Ratio of net investment income/(loss) to average
net assets ( 0.76)% ( 0.68)%+ ( 0.92)% ( 1.29)%
Portfolio turnover rate 93% 39% 139% 129%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.48%(b) 1.61%+ 1.98% 2.01%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
108
<PAGE>
NATIONS SMALL COMPANY GROWTH
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INVESTOR A SHARES Year ended Period ended Period ended Period ended
3/31/99# 03/31/98* 05/16/97* 08/31/96*(a)
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of the period $ 15.74 $ 12.05 $ 10.64 $ 10.00
Net investment income ( 0.07) ( 0.02) 0.03 0.05
Net realized and unrealized gain on investments ( 3.11) 4.42 1.46 0.64
Net increase in net asset value from operations ( 3.18) 4.40 1.49 0.69
Dividends from net investment income -- -- ( 0.03) ( 0.05)
Distributions from net realized capital gains ( 1.13) ( 0.71) ( 0.05) --
Total dividends and distributions ( 1.13) ( 0.71) ( 0.08) ( 0.05)
Net asset value, the end of the period $ 11.43 $ 15.74 $ 12.05 $ 10.64
TOTAL RETURN++ (21.32)% 37.02% 13.98% 6.88%
========================================================================================================================
Net assets at end of period (in 000's) $16,143 $6,772 $3,697 $2,611
Ratio of operating expenses to average net assets 1.20%(b) 1.20%+(b) 1.23%+ 1.25%+
Ratio of net investment income/loss to average net
assets ( 0.67)% ( 0.20)%+ 0.30%+ 0.66%+
Portfolio turnover rate 87% 59% 48% 31%
Ratio of expenses to average net assets without
waivers and/or expense reimbursements 1.47%(b) 1.51%+(b) 1.66%+ 1.65%+
</TABLE>
* The financial information for the fiscal periods
prior to May 23, 1997 reflects the financial
information for the Pilot Small Capitalization
Equity Fund's Class A Shares, which were reorganized
into Nations Small Company Growth Fund Investor A
Shares as of the close of business on May 23, 1997.
Prior to May 23, 1997, the investment adviser to
Nations Small Company Growth Fund was Boatmen's
Trust Company. Effective May 23, 1997 the investment
adviser to Nations Small Company Growth Fund is
TradeStreet Investment Associates, Inc.
+ 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 share method.
(a) Represents the period from December 12, 1995
(commencement of operations) to August 31, 1996.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
NATIONS SMALL COMPANY GROWTH
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INVESTOR B SHARES Year ended Period ended Period ended Period ended
3/31/99# 03/31/98* 05/16/97* 08/31/96*(a)
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of the period $ 15.59 $ 12.03 $ 10.65 $ 10.00
Net investment income (loss) ( 0.11) ( 0.08) ( 0.03) 0.01
Net realized and unrealized gain on investments ( 3.12) 4.35 1.46 0.65
Net increase in net asset value from operations ( 3.23) 4.27 1.43 0.66
DISTRIBUTIONS:
Dividends from net investment income -- -- -- ( 0.01)
Distributions from net realized capital gains ( 1.13) ( 0.71) ( 0.05) --
Total dividends and distributions ( 1.13) ( 0.71) ( 0.05) ( 0.01)
Net asset value, end of the period $ 11.23 $ 15.59 $ 12.03 $ 10.65
TOTAL RETURN++ (21.86)% 36.06% 13.43% 6.65%
=======================================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 5,127 $3,384 $2,635 $1,878
Ratio of operating expenses to average net assets 1.95%(b) 1.87%+(a) 1.97%+ 2.01%+
Ratio of net investment income/loss to average net
assets ( 1.42)% ( 0.87)%+ ( 0.45)%+ ( 0.07)%+
Portfolio turnover rate 87% 59% 48% 31%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.22%(b) 2.18%+(b) 2.41%+ 2.44%+
</TABLE>
* The financial information for the fiscal periods
prior to May 23, 1997 reflects the financial
information for the Pilot Small Capitalization
Equity Fund's Class B Shares, which were reorganized
into the Investor B Shares of Nations Small Company
Growth Fund as of May 23, 1997. Prior to May 23,
1997, the investment adviser to Nations Small
Company Growth Fund was Boatman's Trust Company.
Effective May 23, 1997, the investment adviser to
Nations Small Company Growth Fund was TradeStreet
Investment Associates, Inc.
+ 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 charge.
# Per share net investment income has been
calculated using the monthly average share method.
(a) Represents the period from December 12, 1995
(commencement of operations) to August 31, 1996.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
109
<PAGE>
NATIONS SMALL COMPANY GROWTH
FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year ended Period ended
INVESTOR C SHARES 3/31/99# 03/31/98*
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value at the beginning of the period $ 15.74 $ 15.18
Net investment income ( 0.12) ( 0.08)
Net realized and unrealized gain on investments ( 3.11) 1.35
Net increase in net asset value from operations ( 3.23) 1.27
DISTRIBUTIONS:
Dividends from net investment income -- --
Distributions from net realized capital gains ( 1.13) ( 0.71)
Total dividends and distributions ( 1.13) ( 0.71)
Net asset value, end of the period $ 11.38 $ 15.74
TOTAL RETURN ++ (21.66)% 8.75%
========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 1,951 $3,122
Ratio of operating expenses to average net assets 1.70%(a) 1.95%+(a)
Ratio of net investment income/(loss) to average
net assets ( 1.17)% ( 0.95)%+
Portfolio turnover rate 87% 59%
Ratio of expenses to average net assets (assuming
no waivers or expense reimbursements) 2.22%(a) 2.26%+(a)
</TABLE>
* Nations Small Company Growth Investor C Shares
commenced operations on September 22, 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 charge.
# Per share net investment income has been
calculated using the monthly average share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS BALANCED ASSETS FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR A SHARES 3/31/99# 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.47 $ 11.13
Net investment income 0.23 0.27
Net realized and unrealized gain/(loss) on
investments ( 0.38) 2.68
Net increase/(decrease) in net asset value from
operations ( 0.15) 2.95
DISTRIBUTIONS:
Dividends from net investment income ( 0.20) ( 0.27)
Distributions from net realized capital gains ( 0.74) ( 2.34)
Total dividends and distributions ( 0.94) ( 2.61)
Net asset value, end of period $ 10.38 $ 11.47
TOTAL RETURN++ ( 1.36)% 30.13%
========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $20,979 $16,009
Ratio of operating expenses to average net assets 1.25%(b)(c) 1.33%(b)(c)
Ratio of net investment income to average net
assets 2.18% 2.45%
Portfolio turnover rate 126% 276%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.25%(b) 1.33%(b)
<CAPTION>
INVESTOR A SHARES Year ended Period ended Year ended Year ended
03/31/97 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.64 $ 12.66 $ 10.42 $ 10.86
Net investment income 0.34 0.11 0.34 0.22
Net realized and unrealized gain/(loss) on
investments 1.05 0.45 2.23 ( 0.44)
Net increase/(decrease) in net asset value from
operations 1.39 0.56 2.57 ( 0.22)
DISTRIBUTIONS:
Dividends from net investment income ( 0.36) ( 0.17) ( 0.31) ( 0.22)
Distributions from net realized capital gains ( 1.54) ( 1.41) ( 0.02) --
Total dividends and distributions ( 1.90) ( 1.58) ( 0.33) ( 0.22)
Net asset value, end of period $ 11.13 $ 11.64 $ 12.66 $ 10.42
TOTAL RETURN++ 12.18% 4.86% 25.01% ( 2.02)%
========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $9,075 $6,261 $5,276 $4,881
Ratio of operating expenses to average net assets 1.25%(b) 1.25%+ 1.24% 1.23%
Ratio of net investment income to average net
assets 3.06% 2.66%+ 3.00% 2.06%
Portfolio turnover rate 264% 83% 174% 156%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.25%(b) 1.25%+ 1.24% 1.24%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
110
<PAGE>
<TABLE>
<CAPTION>
NATIONS BALANCED ASSETS FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR B SHARES 3/31/99# 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.45 $ 11.11
Net investment income 0.15 0.19
Net realized and unrealized gain/(loss) on
investments ( 0.38) 2.68
Net increase/(decrease) in net asset value from
operations ( 0.23) 2.87
DISTRIBUTIONS:
Dividends from net investment income ( 0.12) ( 0.19)
Distributions from net realized capital gains ( 0.74) ( 2.34)
Total dividends and distributions ( 0.86) ( 2.53)
Net asset value, end of period $ 10.36 $ 11.45
TOTAL RETURN++ ( 2.13)% 29.35%
=====================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $73,735 $78,813
Ratio of operating expenses to average net assets 2.00%(b)(c) 2.00%(b)(c)
Ratio of net investment income to average net
assets 1.43% 1.78%
Portfolio turnover rate 126% 276%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.00%(b) 2.00%(b)
<CAPTION>
INVESTOR B SHARES Year ended Period ended Year ended Year ended
03/31/97 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.62 $ 12.63 $ 10.40 $ 10.85
Net investment income 0.29 0.09 0.28 0.17
Net realized and unrealized gain/(loss) on
investments 1.04 0.45 2.22 ( 0.44)
Net increase/(decrease) in net asset value from
operations 1.33 0.54 2.50 ( 0.27)
DISTRIBUTIONS:
Dividends from net investment income ( 0.30) ( 0.14) ( 0.25) ( 0.18)
Distributions from net realized capital gains ( 1.54) ( 1.41) ( 0.02) --
Total dividends and distributions ( 1.84) ( 1.55) ( 0.27) ( 0.18)
Net asset value, end of period $ 11.11 $ 11.62 $ 12.63 $ 10.40
TOTAL RETURN++ 11.62% 4.69% 24.35% ( 2.51)%
=========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $64,058 $65,764 $65,275 $52,905
Ratio of operating expenses to average net assets 1.75%(b) 1.75%+ 1.74% 1.73%
Ratio of net investment income to average net
assets 2.56% 2.16%+ 2.50% 1.56%
Portfolio turnover rate 264% 83% 174% 156%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.75%(b) 1.75%+ 1.74% 1.74%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS BALANCED ASSETS FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
Year ended Year ended
INVESTOR C SHARES 3/31/99# 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.41 $ 11.08
Net investment income 0.15 0.20
Net realized and unrealized gain/(loss) on
investments ( 0.38) 2.67
Net increase/(decrease) in net asset value from
operations ( 0.23) 2.87
DISTRIBUTIONS:
Dividends from net investment income ( 0.12) ( 0.20)
Distributions from net realized capital gains ( 0.74) ( 2.34)
Total dividends and distributions ( 0.86) ( 2.54)
Net asset value, end of period $ 10.32 $ 11.41
TOTAL RETURN++ ( 2.17)% 29.43%
======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,614 $1,947
Ratio of operating expenses to average net assets 2.00%(b)(c) 1.91%(b)(c)
Ratio of net investment income to average net
assets 1.43% 1.87%
Portfolio turnover rate 126% 276%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.00%(b) 1.91%(b)
<CAPTION>
INVESTOR C SHARES Year ended Period ended Year ended Year ended
03/31/97 03/31/96(a) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.60 $ 12.61 $ 10.38 $ 10.82
Net investment income 0.33 0.09 0.26 0.14
Net realized and unrealized gain/(loss) on
investments 1.02 0.45 2.21 ( 0.43)
Net increase/(decrease) in net asset value from
operations 1.35 0.54 2.47 ( 0.29)
DISTRIBUTIONS:
Dividends from net investment income ( 0.33) ( 0.14) ( 0.22) ( 0.15)
Distributions from net realized capital gains ( 1.54) ( 1.41) ( 0.02) --
Total dividends and distributions ( 1.87) ( 1.55) ( 0.24) ( 0.15)
Net asset value, end of period $ 11.08 $ 11.60 $ 12.61 $ 10.38
TOTAL RETURN++ 11.85% 4.71% 24.03% ( 2.72)%
=========================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,396 $1,187 $ 992 $ 951
Ratio of operating expenses to average net assets 1.50%(b) 1.62%+ 1.99% 1.98%
Ratio of net investment income to average net
assets 2.81% 2.29%+ 2.25% 1.31%
Portfolio turnover rate 264% 83% 174% 156%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.50%(b) 1.62%+ 1.99% 1.99%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
111
<PAGE>
<TABLE>
<CAPTION>
NATIONS ASSET ALLOCATION FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
ASSET ALLOCATION FUND)
INVESTOR A SHARES* Period ended Year ended
5/14/99 2/28/99(b)
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 22.50 $ 21.41
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.10 0.55
Net realized and unrealized gain (loss) on
investments 0.91 2.48
Net increase in net asset value from operations 1.01 3.03
DISTRIBUTIONS:
Dividends from net investment income ( 0.11) ( 0.45)
Distributions from net realized capital gains -- ( 1.49)
Total dividends and distributions ( 0.11) ( 1.94)
Net asset value, end of period $ 23.40 $ 22.50
TOTAL RETURN (EXCLUDES SALES CHARGE) 4.50%(e) 14.72%
==============================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 72 $ 72
Ratio of expenses to average net assets 1.18%(d) 0.94%
Ratio of net investment income (loss) to average net
assets 2.01%(d) 2.64%
Ratio of expenses to average net assets** 1.20%(d) (c)
Ratio of net investment income to average net
assets** 1.99%(d) (c)
Portfolio turnover rate 20%(e) 114%
<CAPTION>
INVESTOR A SHARES* Year ended Year ended Year ended Year ended
2/28/98 2/28/97(a) 2/29/96 2/28/95
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 19.40 $ 17.52 $ 15.15 $ 14.84
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.52 0.48 0.52 0.48
Net realized and unrealized gain (loss) on
investments 3.72 2.50 2.86 0.24
Net increase in net asset value from operations 4.24 2.98 3.38 0.72
DISTRIBUTIONS:
Dividends from net investment income ( 0.47) ( 0.46) ( 0.53) ( 0.41)
Distributions from net realized capital gains ( 1.76) ( 0.64) ( 0.48) --
Total dividends and distributions ( 2.23) ( 1.10) ( 1.01) ( 0.41)
Net asset value, end of period $ 21.41 $ 19.40 $ 17.52 $ 15.15
TOTAL RETURN (EXCLUDES SALES CHARGE) 23.07% 17.64% 22.80% 5.03%
==================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 49 $ 35 $ 22 $ 6
Ratio of expenses to average net assets 1.03% 1.25% 0.62% 0.00%
Ratio of net investment income (loss) to average net
assets 2.67% 2.59% 3.49% 4.25%
Ratio of expenses to average net assets** 1.09% 1.94% 2.92% 7.89%
Ratio of net investment income to average net
assets** 2.61% 1.90% 1.19% ( 3.64%)
Portfolio turnover rate 67% 116% 157% 142%
</TABLE>
* Investor A Shares of Nations Asset Allocation Fund
were formerly A Shares of the Pacific Horizon Asset
Allocation Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) As of July 22, 1996, the Fund designated the
existing series of shares as "A" Shares.
(b) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationBank Corporation.
(c) There were no waivers or expense reimbursements
during the period.
(d) Annualized.
(e) Not annualized.
112
<PAGE>
<TABLE>
<CAPTION>
NATIONS ASSET ALLOCATION FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
ASSET ALLOCATION FUND)
INVESTOR B SHARES* Period ended Period ended
5/14/99 2/28/99(a)(b)
<S> <C> <C>
Net asset value, beginning of period $ 22.45 $ 23.17
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.06 0.22
Net realized and unrealized gain on investments 0.89 0.75
Net increase in net asset value from operations 0.95 0.97
DISTRIBUTIONS:
Dividends from net investment income ( 0.08) ( 0.20)
Distributions from net realized capital gains -- ( 1.49)
Total dividends and distributions ( 0.08) ( 1.69)
Net asset value, end of period $ 23.32 $ 22.45
TOTAL RETURN 4.26%(e) 4.59%(e)
===================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 10 $ 6
Ratio of expenses to average net assets 1.95%(d) 1.74%(d)
Ratio of net investment income to average net
assets 1.26%(d) 1.92%(d)
Ratio of expenses to average net assets** 1.97%(d) (c)
Ratio of net investment income to average net
assets** 1.24%(d) (c)
Portfolio turnover rate 20%(e) 114%
</TABLE>
* Investor B Shares of Nations Asset Allocation Fund
were formerly B Shares of the Pacific Horizon Asset
Allocation Fund.
** During the period, certain fees were voluntarily
reduced and expenses reimbursed. If such voluntary
fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from July 15, 1998 (inception date) to
February 28, 1999.
(b) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationsBank Corporation.
(c) There were no fee waivers or expense
reimbursements during the period.
(d) Annualized.
(e) Not annualized.
113
<PAGE>
<TABLE>
<CAPTION>
NATIONS ASSET ALLOCATION FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
ASSET ALLOCATION FUND)
INVESTOR C SHARES* Period ended Year ended Year ended Period ended
5/14/99 2/28/99(b) 2/28/98 2/28/97(a)
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 22.45 $ 21.36 $ 19.40 $ 17.23
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.44 0.41 0.19
Net realized and unrealized gain/(loss) on
investments 0.92 2.49 3.66 2.80
Net increase in net asset value from operations 0.97 2.93 4.07 2.99
DISTRIBUTIONS:
Dividends from net investment income ( 0.09) ( 0.35) ( 0.36) ( 0.18)
Distributions from net realized capital gains -- ( 1.49) ( 1.75) ( 0.64)
Total dividends and distributions ( 0.09) ( 1.84) ( 2.11) ( 0.82)
Net asset value, end of period $ 23.33 $ 22.45 $ 21.36 $ 19.40
TOTAL RETURN 4.31%(d) 14.23% 22.10% 17.69%(d)
================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 2 $ 2 $ 2 $ 1
Ratio of expenses to average net assets 1.67%(c) 1.44% 1.52% 1.94%(c)
Ratio of net investment income to average net
assets 1.52%(c) 2.14% 2.17% 2.31%(c)
Ratio of expenses to average net assets** 1.96%(c) 1.69% 1.58% 3.26%(c)
Ratio of net investment income to average net
assets** 1.23%(c) 1.89% 2.11% 0.99%(c)
Portfolio turnover rate 20%(d) 114% 67% 116%
</TABLE>
* Investor C Shares of Nations Asset Allocation Fund
were formerly K Shares of the Pacific Horizon Asset
Allocation Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from July 22, 1996 (inception date) to
February 28, 1997.
(b) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationsBank Corporation.
(c) Annualized.
(d) Not annualized.
114
<PAGE>
[GRAPHIC] Terms used in this prospectus
ASSET-BACKED SECURITY - a debt security that gives you an interest in a pool
of assets that is collateralized or "backed" by one or more kinds of assets,
including real property, receivables or mortgages, generally issued by banks,
credit card companies or other lenders. Some securities may be issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities. Asset-backed securities typically make periodic payments,
which may be interest or a combination of interest and a portion of the
principal of the underlying assets.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
CASH EQUIVALENTS - short-term, interest-bearing instruments, including
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities, bank obligations, asset-backed securities, foreign
government securities and commercial paper issued by U.S. and foreign issuers
which, at the time of investment, is rated at least Prime-2 by Moody's
Investor Services, Inc. (Moody's), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
CONVERTIBLE DEBT - a debt security that can be exchanged for common stock (or
another type of security) on a specified basis and date.
CONVERTIBLE SECURITY - a security that can be exchanged for common stock (or
another type of security) at a specified rate. Convertible securities include
convertible debt, rights and warrants.
CROSSING NETWORKS - an electronic system where anonymous parties can match buy
and sell transactions. These transactions don't affect the market, and
transaction costs are extremely low.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
DEPOSITARY RECEIPTS - evidence of the deposit of a security with a custodian
bank. American Depositary Receipts (ADRs), for example, are certificates
traded in U.S. markets representing an interest of a foreign company. They
were created to make it possible for foreign issuers to meet U.S. security
registration requirements. Other examples include ADSs, GDRs and EDRs.
115
<PAGE>
DIVIDEND YIELD - rate of return of dividends paid on a common or preferred
stock. It equals the amount of the annual dividend on a stock expressed as a
percentage of the stock's current market value.
EQUITY SECURITY - an investment that gives you an equity ownership right in a
company. Equity securities (or "equities") include common and preferred stock,
rights and warrants.
FIRST BOSTON CONVERTIBLE INDEX - a widely-used unmanaged index that measures
the performance of convertible securities. The index is not available for
investment.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
FOREIGN SECURITY - a debt or equity security issued by a foreign company or
government.
FUNDAMENTAL ANALYSIS - a method of securities analysis that tries to evaluate
the intrinsic, or "true," value of a particular stock. It includes a study of
the overall economy, industry conditions and the financial condition and
management of a company.
FUTURES CONTRACT - a contract to buy or sell an asset or an index of
securities at a specified price on a specified future date. The price is set
through a futures exchange.
IFC INVESTABLES INDEX - an unmanaged index that tracks more than 1,400 stocks
in 25 emerging markets in Asia, Latin America, Eastern Europe, Africa and
Middle East. The index is weighted by market capitalization.
INVESTMENT GRADE - a debt security that has been given a medium to high credit
rating (Baa or higher by Moody's, BBB or higher by S&P or a comparable rating
by other nationally recognized statistical rating organization NRSROs) based
on the issuer's ability to pay interest and repay principal on time. The
portfolio management team may consider an unrated debt security to be
investment grade if the team believes it is of comparable quality. Please see
the SAI for more information about credit ratings.
LIQUIDITY - a measurement of how easily a security can be bought or sold at a
price that is close to its market value.
MONEY MARKET INSTRUMENT - a short-term debt security that matures in 13 months
or less. Money market instruments include U.S. Treasury obligations, U.S.
government obligations, certificates of deposit, bankers' acceptances,
commercial paper, repurchase agreements and certain municipal securities.
MORTGAGE-BACKED SECURITY OR MORTGAGE-RELATED SECURITY - a debt security that
gives you an interest in, and is backed by, a pool of residential mortgages
issued by the U.S. government or by financial institutions. The underlying
mortgages may be guaranteed by the U.S. government or one of its agencies,
authorities or instrumentalities.
116
<PAGE>
Mortgage-backed securities typically make monthly payments, which are a
combination of interest and a portion of the principal of the underlying
mortgages.
MSCI EAFE INDEX - Morgan Stanley Capital International Europe, Australasia and
Far East Index, an index of over 1,100 stocks from 21 developed markets in
Europe, Australia, New Zealand and Asia. The index reflects the relative size
of each market.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income on these securities
is exempt from federal income taxes and is generally exempt from state taxes
if you live in the state that issued the security. If you live in the
municipality that issued the security, interest income may also be exempt from
local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
OVER-THE-COUNTER MARKET - a market where dealers trade securities through a
telephone or computer network rather than through a public stock exchange.
PREFERRED STOCK - a type of equity security that gives you a limited ownership
right in a company, with certain preferences or priority over common stock.
Preferred stock generally pays a fixed annual dividend. If the company goes
bankrupt, preferred shareholders generally receive their share of the
company's remaining assets before common shareholders and after bondholders
and other creditors.
PRICE-TO-EARNINGS RATIO (P/E RATIO) - the current price of a share divided by
its actual or estimated earnings per share. The P/E ratio is one measure of
the value of a company.
QUANTITATIVE ANALYSIS - an analysis of financial information about a company
or security to identify securities that have the potential for growth or are
otherwise suitable for a fund to buy.
REAL ESTATE INVESTMENT TRUST (REIT) - a portfolio of real estate investments
which may include office buildings, apartment complexes, hotels and shopping
malls, and real-estate-related loans or interests.
RIGHT - a temporary privilege allowing investors who already own a common
stock to buy additional shares directly from the company at a specified price
or formula.
117
<PAGE>
RUSSELL 2000 - an unmanaged index of 2,000 of the smallest stocks representing
approximately 11% of the U.S. equity market. The index is weighted by market
capitalization, and is not available for investment.
S&P 500(1) - Standard & Poor's 500 Composite Stock Price Index, an unmanaged
index of 500 widely held common stocks. It is not available for investment.
S&P MIDCAP 400(1) - an unmanaged index of 400 domestic stocks chosen for market
size, liquidity and industry representation. The index is weighted by market
value, and is not available for investment.
S&P SMALLCAP 600(1) - Standard & Poor's SmallCap 600 Index, an unmanaged index
of 600 common stocks, weighted by market capitalization. It is not available
for investment.
S&P/BARRA SMALLCAP VALUE INDEX*1) - an unmanaged index of a group of stocks
from the S&P SmallCap 600 that have low price-to-book ratios relative to the
S&P SmallCap 600 as a whole. It is weighted by market capitalization, and is
not available for investment.
S&P/BARRA VALUE INDEX(1) - an unmanaged index of a group of stocks from the S&P
500 that have low price-to-book ratios relative to the S&P 500 as a whole. It
is weighted by market capitalization, and is not available for investment.
SENIOR SECURITY - a debt security that allows holders to receive their share
of a company's remaining assets in a bankruptcy before other bondholders,
creditors, and common and preferred shareholders.
SETTLEMENT DATE - The date on which an order is settled either by payment or
delivery of securities.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
WARRANT - a certificate that gives you the right to buy common shares at a
specified price within a specified period of time.
WILSHIRE 5000 EQUITY INDEX - an index that measures the performance of the
equity securities of all companies headquartered in the U.S. that have readily
available price data -- over 7,000 companies. The index is weighted by market
capitalization and is not available for investment.
(1) S&P and BARRA have not reviewed any stock included in the S&P 500, S&P 600,
BARRA Index or BARRA SmallCap Index for its investment merit. S&P and BARRA
determine and calculate their indexes independently of the Funds and are
not a sponsor or affiliate of the Funds. S&P and BARRA give no information
and make no statements about the suitability of investing in the Funds or
the ability of their indexes to track stock market performance. S&P and
BARRA make no guarantees about the indexes, any data included in them and
the suitability of the indexes or their data for any purpose. "Standard and
Poor's," "S&P 500" and "S&P 600" are trademarks of the McGraw-Hill
Companies, Inc.
118
<PAGE>
[GRAPHIC] Where to find more information
You'll find more information about the Equity and Balanced Funds in the
following documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports. The annual report also includes a discussion about the market
conditions and investment strategies that had a significant effect on
each Fund's performance during the period covered.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.321.7854
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file numbers:
Nations Fund Trust, 811-04305
Nations Reserves, 811-6030
Nations Fund, Inc., 811-04614
NF-COMEQPROIX-8/99 Nations Funds
[GRAPHIC OMITTED]
STATE MUNICIPAL BOND FUNDS
PROSPECTUS -- PRIMARY A SHARES
AUGUST 1, 1999
STATE MUNICIPAL BOND FUNDS
NATIONS CALIFORNIA MUNICIPAL BOND FUND
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND
NATIONS FLORIDA MUNICIPAL BOND FUND
NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND
NATIONS GEORGIA MUNICIPAL BOND FUND
NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND
NATIONS MARYLAND MUNICIPAL BOND FUND
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND
NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND
NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND
NATIONS TENNESSEE MUNICIPAL BOND FUND
NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND
NATIONS TEXAS MUNICIPAL BOND FUND
NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
NATIONS VIRGINIA MUNICIPAL BOND FUND
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -----------------
NOT FDIC
INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
- -----------------
NATIONS FUNDS
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 93.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about Nations Funds
State Municipal Bond Funds. Please read it carefully because it contains
information that's designed to help you make informed investment decisions.
ABOUT THE FUNDS
These Funds invest most of their assets in securities issued by one state and
are generally intended for residents of that state.
Each Fund focuses on the potential to earn income that is generally free from
federal and state income tax by investing primarily in MUNICIPAL SECURITIES.
Municipal securities also have the potential to increase in value because when
interest rates fall, the value of these securities tends to rise. When
interest rates rise, however, the value of these securities tends to fall.
Other things can also affect the value of municipal securities. There's always
a risk that you'll lose money, or you may not earn as much as you expect.
Because they invest primarily in securities issued by one state, the Funds are
considered to be NON-DIVERSIFIED. This means the value of a Fund and the
amount of interest it pays could also be affected by the financial conditions
of the state, its public authorities and local governments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The State Municipal Bond Funds may be suitable for you if:
o you're looking for income
o you want to reduce taxes on your investment
o you have longer-term investment goals
They may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with FIXED INCOME SECURITIES
2
<PAGE>
COMPARING THE FUNDS
There are two groups of State Municipal Bond Funds in the Nations Funds
Family: Intermediate Municipal Bond Funds and Municipal Bond Funds. The main
difference between the two groups is their portfolio DURATION -- a measure
used to estimate how much a Fund's securities will fluctuate in response to a
change in interest rates.
The Municipal Bond Funds, which have longer portfolio durations, generally
have the potential to earn more income than the Intermediate Municipal Bond
Funds, but they also have more risk because their prices tend to change more
when interest rates change.
The table below is designed to help you understand the differences between
these two groups of Funds only and their relative income and risk
potential -- you should not use it to compare these Funds with other mutual
funds or other kinds of investments. A Fund's income and risk potential can
change over time.
<TABLE>
<CAPTION>
Income Risk
Duration potential potential
<S> <C> <C> <C>
Intermediate Municipal Bond Funds 3 to 6 yrs moderate moderate
Municipal Bond Funds more than 6 yrs high high
</TABLE>
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 6.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.765.2668 or
contact your financial adviser.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
3
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER
TO EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED A SUB-
ADVISER -- TRADESTREET INVESTMENT ASSOCIATES, INC. (TRADESTREET),
WHICH IS RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT DECISIONS FOR
EACH OF THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAAI AND TRADESTREET
STARTING ON PAGE 75.
* BAAI'S NAME IS EXPECTED TO
BE CHANGED FROM NATIONSBANC ADVISORS, INC. ON OR ABOUT SEPTEMBER
1, 1999.
<TABLE>
[GRAPHIC OMITTED]
<S> <C>
About the State Municipal Bond Funds
State Municipal Bond Funds
NATIONS CALIFORNIA MUNICIPAL BOND FUND 6
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND 10
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS FLORIDA MUNICIPAL BOND FUND 14
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND 18
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS GEORGIA MUNICIPAL BOND FUND 22
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND 26
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS MARYLAND MUNICIPAL BOND FUND 30
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND 34
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND 38
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND 42
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND 46
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND 50
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS TENNESSEE MUNICIPAL BOND FUND 54
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND 58
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS TEXAS MUNICIPAL BOND FUND 62
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 66
Sub-adviser: TradeStreet
- ---------------------------------------------------------
NATIONS VIRGINIA MUNICIPAL BOND FUND 70
Sub-adviser: TradeStreet
- ---------------------------------------------------------
OTHER IMPORTANT INFORMATION 74
- --------------------------------------------------------- ------
HOW THE FUNDS ARE MANAGED 75
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
[GRAPHIC] ABOUT YOUR INVESTMENT
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 78
Distributions and taxes 82
- ---------------------------------------
FINANCIAL HIGHLIGHTS 84
- ---------------------------------------
TERMS USED IN THIS PROSPECTUS 93
- ---------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
5
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] THIS FUND AT A GLANCE
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF CALIFORNIA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS CALIFORNIA MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks as high a level of current interest income free of
federal income tax and California state personal income tax as is
consistent with prudent investment management and preservation of
capital.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE MUNICIPAL SECURITIES that pay interest that is generally free
from federal income tax and the California state personal income
tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
6
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations California Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and California state personal income tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income paid
by other kinds of securities or from realized capital gains is generally
subject to federal, state and local taxes.
7
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPHIC APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
9.34% 6.22% 11.05% 8.56% 12.50% 6.08% 16.50% 3.75% 8.51% 6.54%
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.54%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 6.72%
Worst: 1st quarter 1994: -5.19%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Investor A Shares 6.54% 5.59% 7.53%
Lehman Municipal Bond Index 6.48% 6.22% 8.22%
</TABLE>
8
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.35%
------
Total annual Fund operating expenses 0.85%
Fee waivers and/or reimbursements (0.25)%
------
Total net expenses(2) 0.60%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $61 $246 $447 $1,026
</TABLE>
9
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO FLORIDA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF FLORIDA
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income and
the Florida state intangibles taxes consistent with moderate
fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that
is generally free from federal income tax and the Florida state
intangibles tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
10
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Florida Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and the Florida state intangibles tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income paid
by other kinds of securities or from realized capital gains is generally
subject to federal, state and local taxes.
11
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE.]
1992 1993 1994 1995 1996 1997 1998
-------------------------------------------------------
0.30%* 11.30% -4.12% 14.31% 3.74% 7.21% 5.38%
*Return is from inception (12-11-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.79%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.85%
Worst: 1st quarter 1994: -4.25%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.38% 5.13% 6.13%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 6.62%
</TABLE>
12
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.34%
------
Total annual Fund operating expenses 0.74%
Fee waivers and/or reimbursements (0.24)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $212 $388 $896
</TABLE>
13
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO FLORIDA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF FLORIDA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS FLORIDA MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income and
the Florida state intangibles taxes with the potential for principal
fluctuation associated with investments in long-term MUNICIPAL
SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is generally
free from federal income tax and the Florida state intangibles tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
14
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Florida Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and the Florida state intangibles tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income paid
by other kinds of securities or from realized capital gains is generally
subject to federal, state and local taxes.
15
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE.]
1993 1994 1995 1996 1997 1998
-----------------------------------------------
0.56%* -8.08% 19.89% 3.17% 8.93% 5.84%
* Return is from inception (12-13-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.63%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 8.21%
Worst: 1st quarter 1994: -8.01%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.84% 5.56% 5.62%
Lehman Municipal Bond Index 6.48% 6.22% 6.56%
</TABLE>
16
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.37%
------
Total annual Fund operating expenses 0.87%
Fee waivers and/or reimbursements (0.27)%
------
Total net expenses(2) 0.60%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $61 $251 $456 $1,048
</TABLE>
17
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO GEORGIA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF GEORGIA
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Georgia
state income taxes consistent with moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and Georgia state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
18
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Georgia Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Georgia state income tax, but may be subject to
the federal alternative minimum tax, and other state and local taxes.
Any portion of a distribution that comes from income paid by other kinds
of securities or from realized capital gains is generally subject to
federal, state and local taxes.
19
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE.]
1992 1993 1994 1995 1996 1997 1998
-----------------------------------------------------
8.13%* 11.26% -4.61% 14.30% 3.65% 7.19% 5.59%
* Return is from inception (3-1-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.15%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.57%
Worst: 1st quarter 1994: -4.58%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.59% 5.05% 6.51%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 6.90%
</TABLE>
20
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.35%
------
Total annual Fund operating expenses 0.75%
Fee waivers and/or reimbursements (0.25)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $215 $392 $907
</TABLE>
21
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO GEORGIA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF GEORGIA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS GEORGIA MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Georgia
state income taxes with the potential for principal fluctuation
associated with investments in long-term MUNICIPAL SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term MUNICIPAL SECURITIES that pay interest that is generally
free from federal income tax and Georgia state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
22
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Georgia Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Georgia state income tax, but may be subject to
the federal alternative minimum tax, and other state and local taxes.
Any portion of a distribution that comes from income paid by other kinds
of securities or from realized capital gains is generally subject to
federal, state and local taxes.
23
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
---------------------------------------
-8.98%* 19.67% 3.60% 8.77% 6.49%
*Return is from inception (1-13-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.17%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 7.99%
Worst: 1st quarter 1996: -1.96%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 6.49% 5.54%
Lehman Municipal Bond Index 6.48% 6.22%
</TABLE>
24
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.70%
------
Total annual Fund operating expenses 1.20%
Fee waivers and/or reimbursements (0.60)%
------
Total net expenses(2) 0.60%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $61 $321 $602 $1,401
</TABLE>
25
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO MARYLAND
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF MARYLAND
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Maryland
state income taxes consistent with moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and Maryland state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
26
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Maryland Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Maryland state income tax, but may be subject to
the federal alternative minimum tax, and other state and local taxes.
Any portion of a distribution that comes from income paid by other kinds
of securities or from realized capital gains is generally subject to
federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
27
<PAGE>
[BAR GRAPH APPEARS HERE]
1990 1991 1992 1993 1994 1995 1996 1997 1998
--------------------------------------------------------------------
4.07%* 10.17% 7.15% 10.17% -4.52% 13.84% 3.64% 6.76% 5.30%
* Retrun is from inception (9-1-90) to 12-31-90.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.77%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.62%
Worst: 1st quarter 1994: -4.49%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.30% 4.83% 6.68%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 7.57%
</TABLE>
28
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.36%
------
Total annual Fund operating expenses 0.76%
Fee waivers and/or reimbursements (0.26)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $217 $397 $918
</TABLE>
29
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO MARYLAND
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF MARYLAND
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS MARYLAND MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Maryland
state income taxes with the potential for principal fluctuation
associated with investments in long-term MUNICIPAL SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term MUNICIPAL SECURITIES that pay interest that is generally
free from federal income tax and Maryland state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
30
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Maryland Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Maryland state income tax, but may be subject to
the federal alternative minimum tax, and other state and local taxes.
Any portion of a distribution that comes from income paid by other kinds
of securities or from realized capital gains is generally subject to
federal, state and local taxes.
31
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
-------------------------------------
-2.15%* 19.27% 3.22% 9.21% 5.73%
*Return is from inception (9-20-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.52%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 8.13%
Worst: 1st quarter 1996: -2.15%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 5.73% 8.02%
Lehman Municipal Bond Index 6.48% 8.34%
</TABLE>
32
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.59%
------
Total annual Fund operating expenses 1.09%
Fee waivers and/or reimbursements (0.49)%
------
Total net expenses(2) 0.60%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $61 $298 $553 $1,285
</TABLE>
33
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO NORTH
CAROLINA STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF NORTH CAROLINA
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and North
Carolina state income taxes consistent with moderate fluctuation of
principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and North Carolina state income
tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
34
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations North Carolina Intermediate Municipal Bond Fund has the
following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and North Carolina state income tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income paid
by other kinds of securities or from realized capital gains is generally
subject to federal, state and local taxes.
35
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
----------------------------------------------------
0.41%* 10.45% -4.09% 14.14% 3.85% 7.22% 5.37%
* Return is from inception (12-4-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.03%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.83%
Worst: 1st quarter 1994: -4.03%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.37% 5.13% 6.02%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 6.62%
</TABLE>
36
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.33%
------
Total annual Fund operating expenses 0.73%
Fee waivers and/or reimbursements (0.23)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $210 $383 $885
</TABLE>
37
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO NORTH
CAROLINA STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF NORTH CAROLINA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and North
Carolina state income taxes with the potential for principal
fluctuation associated with investments in long-term MUNICIPAL
SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is generally
free from federal income tax and North Carolina state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
38
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations North Carolina Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and North Carolina state income tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income paid
by other kinds of securities or from realized capital gains is generally
subject to federal, state and local taxes.
39
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
1994 1995 1996 1997 1998
--------------------------------------
-9.37%* 20.38% 2.71% 9.06% 6.17%
*Return is from inception (1-11-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.44%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 8.45%
Worst: 1st quarter 1994: -8.08%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 6.17% 5.38%
Lehman Municipal Bond Index 6.48% 6.22%
</TABLE>
40
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.52%
------
Total annual Fund operating expenses 1.02%
Fee waivers and/or reimbursements (0.42)%
------
Total net expenses(2) 0.60%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
Primary A Shares $61 $283 $522 $1,210
</TABLE>
41
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO SOUTH
CAROLINA STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF SOUTH CAROLINA
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and South
Carolina state income taxes consistent with moderate fluctuation of
principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and South Carolina state income
tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
42
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations South Carolina Intermediate Municipal Bond Fund has the
following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and South Carolina state income tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income paid
by other kinds of securities or from realized capital gains is generally
subject to federal, state and local taxes.
43
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
---------------------------------------------------------
7.46%* 10.11% -2.93% 13.67% 3.96% 6.83% 5.54%
* Return is from inception (1-6-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.80%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.23%
Worst: 1st quarter 1994: -3.47%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.54% 5.28% 6.28%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 6.77%
</TABLE>
44
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
DEDUCTING WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.31%
------
Total annual Fund operating expenses 0.71%
Fee waivers and/or reimbursements (0.21)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $206 $374 $863
</TABLE>
45
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO SOUTH
CAROLINA STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF SOUTH CAROLINA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and South
Carolina state income taxes with the potential for principal
fluctuation associated with investments in long-term MUNICIPAL
SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is generally
free from federal income tax and South Carolina state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
46
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations South Carolina Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and South Carolina state income tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income paid
by other kinds of securities or from realized capital gains is generally
subject to federal, state and local taxes.
47
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
1993 1994 1995 1996 1997 1998
--------------------------------------------
0.16%* -6.06% 19.63% 3.47% 8.65% 5.46%
* Return is from inception (12-27-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.35%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 7.91%
Worst: 1st quarter 1994: -5.64%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.46% 5.91% 5.93%
Lehman Municipal Bond Index 6.48% 6.22% 6.22%
</TABLE>
48
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.70%
------
Total annual Fund operating expenses 1.20%
Fee waivers and/or reimbursements (0.60)%
------
Total net expenses(2) 0.60%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods
indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $61 $321 $602 $1,401
</TABLE>
49
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO TENNESSEE
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF TENNESSEE
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income tax
and the Tennessee Hall Income Tax on unearned income consistent with
moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and the Tennessee Hall Income Tax
on unearned income.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their
maturity date), based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The team
may change the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may
invest in securities with lower credit ratings if it believes that the
potential for a higher yield is substantial compared with the risk
involved, and that the credit quality is stable or improving. Structure
analysis evaluates the characteristics of a security, including its call
features, coupons and expected and timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
50
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Tennessee Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the
Fund and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND
IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF
AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and the Tennessee Hall Income Tax on unearned income,
but may be subject to the federal alternative minimum tax, and other
state and local taxes. Any portion of a distribution that comes from
income paid by other kinds of securities or from realized capital gains
is generally subject to federal, state and local taxes.
51
<PAGE>
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
1993 1994 1995 1996 1997 1998
---------------------------------------------
6.13%* -4.47% 14.15% 3.92% 6.92% 5.41%
* Return is from inception (4-13-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.79%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.82%
Worst: 1st quarter 1994: -4.19%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.41% 5.02% 5.47%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 6.28%
</TABLE>
52
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.47%
------
Total annual Fund operating expenses 0.87%
Fee waivers and/or reimbursements (0.37)%
------
Total net expenses2 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $241 $446 $1,038
</TABLE>
53
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO TENNESSEE
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF TENNESSEE
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Tennessee Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income tax
and the Tennessee Hall Income Tax on unearned income with the potential
for principal fluctuation associated with investments in long-term
MUNICIPAL SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is generally
free from federal income tax and the Tennessee Hall Income Tax on
unearned income.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
54
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Tennessee Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT IN
THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and the Tennessee Hall Income Tax on unearned
income, but may be subject to the federal alternative minimum tax, and
other state and local taxes. Any portion of a distribution that comes
from income paid by other kinds of securities or from realized capital
gains is generally subject to federal, state and local taxes.
55
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
1994 1995 1996 1997 1998
-------------------------------------
-3.67% 19.44% 3.77% 9.26% 5.74%
* Return is from inception (3-2-94) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.54%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 7.98%
Worst: 1st quarter 1996: -1.72%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 5.74% 6.88%
Lehman Municipal Bond Index 6.48% 6.77%
</TABLE>
56
<PAGE>
[GRAPHIC] THRE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES1
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 1.07%
------
Total annual Fund operating expenses 1.57%
Fee waivers and/or reimbursements (0.97)%
------
Total net expenses2 0.60%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $61 $400 $763 $1,785
</TABLE>
57
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO TEXAS
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF TEXAS
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Texas Intermediate Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income tax
consistent with moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change the
allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest in
securities with lower credit ratings if it believes that the potential for a
higher yield is substantial compared with the risk involved, and that the
credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
The team also considers other factors. It reviews public policy issues that
may affect the municipal bond market. Securities with different coupon rates
may also represent good investment opportunities based on supply and demand
conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
58
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Texas Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT IN
THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and is generally free from
federal income tax, but may be subject to the federal alternative
minimum tax, and other state and local taxes. Any portion of a
distribution that comes from income paid by other kinds of securities
or from realized capital gains is generally subject to federal, state
and local taxes.
59
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
1993 1994 1995 1996 1997 1998
---------------------------------------------
9.25%* -3.33% 12.93% 3.65% 7.12% 5.41%
* Return is from inception (1-12-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.06%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 4.94%
Worst: 1st quarter 1994: -3.98%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.41% 5.02% 5.75%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 6.56%
</TABLE>
60
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.30%
------
Total annual Fund operating expenses 0.70%
Fee waivers and/or reimbursements (0.20)%
------
Total net expenses(2) 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $204 $370 $852
</TABLE>
61
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO TEXAS
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF TEXAS
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Texas Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income tax
with the potential for principal fluctuation associated with
investments in long-term MUNICIPAL SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is generally
free from federal income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change the
allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest in
securities with lower credit ratings if it believes that the potential for a
higher yield is substantial compared with the risk involved, and that the
credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
The team also considers other factors. It reviews public policy issues that
may affect the municipal bond market. Securities with different coupon rates
may also represent good investment opportunities based on supply and demand
conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
62
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Texas Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT IN
THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax, but may be subject to the federal alternative
minimum tax, and other state and local taxes. Any portion of a
distribution that comes from income paid by other kinds of securities
or from realized capital gains is generally subject to federal, state
and local taxes.
63
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
1994 1995 1996 1997 1998
-------------------------------------
-9.44% 19.83% 3.80% 9.03% 6.39%
* Return is from inception (2-3-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.69%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 8.02%
Worst: 1st quarter 1996: -1.77%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 6.39% 5.60%
Lehman Municipal Bond Index 6.48% 6.09%
</TABLE>
64
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.77%
------
Total annual Fund operating expenses 1.27%
Fee waivers and/or reimbursements (0.67)%
------
Total net expenses2 0.60%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $61 $336 $633 $1,475
</TABLE>
65
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO VIRGINIA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF VIRGINIA
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Virginia Intermediate Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Virginia
state income taxes consistent with moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and Virginia state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change the
allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest in
securities with lower credit ratings if it believes that the potential for a
higher yield is substantial compared with the risk involved, and that the
credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
The team also considers other factors. It reviews public policy issues that
may affect the municipal bond market. Securities with different coupon rates
may also represent good investment opportunities based on supply and demand
conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
66
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Virginia Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT IN
THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Virginia state income tax, but may be subject
to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by
other kinds of securities or from realized capital gains is generally
subject to federal, state and local taxes.
67
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
-----------------------------------------------------------------------------
1.75%* 7.55% 9.66% 6.96% 10.08% -4.29% 13.39% 3.82% 6.83% 5.46%
</TABLE>
* Return is from inception (9-20-89) to 12-31-89.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.98%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.24%
Worst: 1st quarter 1994: -4.07%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Primary A Shares 5.46% 4.89% 6.50%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 7.38%**
</TABLE>
** Index return is from inception (1-1-96) to 12-31-98.
68
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40%
Other expenses 0.32%
------
Total annual Fund operating expenses 0.72%
Fee waivers and/or reimbursements (0.22)%
------
Total net expenses2 0.50%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $51 $208 $379 $874
</TABLE>
69
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 77.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO VIRGINIA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF VIRGINIA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Virginia Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Virginia
state income taxes with the potential for principal fluctuation
associated with investments in long-term MUNICIPAL SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term MUNICIPAL SECURITIES that pay interest that is generally
free from federal income tax and Virginia state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change the
allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest in
securities with lower credit ratings if it believes that the potential for a
higher yield is substantial compared with the risk involved, and that the
credit quality is stable or improving. Structure analysis evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
The team also considers other factors. It reviews public policy issues that
may affect the municipal bond market. Securities with different coupon rates
may also represent good investment opportunities based on supply and demand
conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
70
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 74 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Virginia Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT IN
THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY
BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of fixed income securities will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Virginia state income tax, but may be subject
to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by
other kinds of securities or from realized capital gains is generally
subject to federal, state and local taxes.
71
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.765.2668 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR GRAPH APPEARS HERE]
1994 1995 1996 1997 1998
-------------------------------------
-9.77%* 19.80% 3.70% 9.47% 5.92%
* Return is from inception (1-11-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.20%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 8.19%
Worst: 1st quarter 1996: -1.97%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with maturities of 10 years or
more. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year inception
<S> <C> <C>
Primary A Shares 5.92% 5.41%
Lehman Municipal Bond Index 6.48% 6.22%
</TABLE>
72
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Primary A
(Fees paid directly from your investment) Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50%
Other expenses 0.63%
------
Total annual Fund operating expenses 1.13%
Fee waivers and/or reimbursements (0.53)%
------
Total net expenses2 0.60%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figure shown here is after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of those
periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Primary A Shares $61 $306 $571 $1,327
</TABLE>
73
<PAGE>
[GRAPHIC] Other important information
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 6. The following are
some other risks and information you should consider before you invest:
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund can be changed without
shareholder approval. Other investment policies may be changed only with
shareholder approval.
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments that
aren't part of their principal investment strategies. Please refer to the
SAI for more information. The portfolio managers or management team can
also choose not to invest in specific securities described in this
prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn or
because of political or other conditions. A Fund may not achieve its
investment objective while it is investing defensively.
o PORTFOLIO TURNOVER - A Fund that replaces -- or turns over -- more than
100% of its investments in a year is considered to trade frequently.
Frequent trading can result in larger distributions of short-term CAPITAL
GAINS to shareholders. These gains are taxable at higher rates than
long-term capital gains. Frequent trading can also mean higher brokerage
and other transaction costs, which could reduce the Fund's returns. The
Funds generally buy securities for capital appreciation, investment
income, or both, and don't engage in short- term trading. You'll find the
portfolio turnover rate for each Fund in FINANCIAL HIGHLIGHTS.
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer systems
that cannot read a four-digit year may not be able to calculate and
process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they have
been working to make the necessary changes to their systems, and that
they expect them to be adapted in time. There is no guarantee, however,
that their computer systems will be ready by the year 2000. If their
computer systems are not ready in time, there could be a negative effect
on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer systems of
foreign issuers, governments or other entities may not be ready for the
year 2000.
74
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] How the Funds are managed
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in the
Nations Funds family, including the State Municipal Bond Funds described in
this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation. Nations Funds
pays BAAI an annual fee for its investment advisory services. The fee is
calculated daily based on the average net assets of each Fund and is paid
monthly. BAAI uses part of this money to pay investment sub-advisers for the
services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
75
<PAGE>
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee(1) fiscal year
<S> <C> <C>
Nations California Municipal Bond Fund 0.50% 0.30%
Nations Florida Intermediate Municipal Bond Fund 0.40% 0.30%
Nations Florida Municipal Bond Fund 0.50% 0.37%
Nations Georgia Intermediate Municipal Bond Fund 0.40% 0.29%
Nations Georgia Municipal Bond Fund 0.50% 0.04%
Nations Maryland Intermediate Municipal Bond Fund 0.40% 0.28%
Nations Maryland Municipal Bond Fund 0.50% 0.15%
Nations North Carolina Intermediate Municipal Bond Fund 0.40% 0.31%
Nations North Carolina Municipal Bond Fund 0.50% 0.22%
Nations South Carolina Intermediate Municipal Bond Fund 0.40% 0.33%
Nations South Carolina Municipal Bond Fund 0.50% 0.04%
Nations Tennessee Intermediate Municipal Bond Fund 0.40% 0.17%
Nations Tennessee Municipal Bond Fund 0.50% 0.00%
Nations Texas Intermediate Municipal Bond Fund 0.40% 0.34%
Nations Texas Municipal Bond Fund 0.50% 0.00%
Nations Virginia Intermediate Municipal Bond Fund 0.40% 0.32%
Nations Virginia Municipal Bond Fund 0.50% 0.11%
</TABLE>
(1)These fees are the current contract levels, which have been reduced from the
contract levels that were in effect during the last fiscal year.
76
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in the
Nations Funds family. TradeStreet takes a team approach to investment
management. Each team has access to the latest technology and analytical
resources.
TradeStreet is the investment sub-adviser to the Funds. TradeStreet's
Municipal Fixed Income Management Team is responsible for making the
day-to-day investment decisions for each Fund.
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.22% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
77
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] Buying, selling and exchanging shares
This prospectus offers Primary A Shares of the Funds. Here are some general
rules about this class of shares:
o Primary A Shares are available to certain financial institutions and
intermediaries for their own accounts, and for certain client accounts for
which they act as a fiduciary, agent or custodian. These include:
o Bank of America and certain of its affiliates
o certain other financial institutions and intermediaries, including
financial planners and investment advisers
o institutional investors
o endowments
o other Funds in the Nations Funds Family
o The minimum initial investment is $250,000. Financial institutions or
intermediaries can total the investments they make on behalf of their
clients to meet the minimum initial investment amount.
o There is no minimum amount for additional investments.
o There are no sales charges for buying, selling or exchanging these shares.
You'll find more information about buying, selling and exchanging Primary A
Shares on the pages that follow. You should also ask your financial
institution or intermediary about its limits, fees and policies for buying,
selling and exchanging shares, which may be different from those described
here, and about its related programs or services.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. Please contact your
investment professional, or call us at 1.800.765.2668 if you have any
questions, or you need help placing an order.
78
<PAGE>
[GRAPHIC] A BUSINESS DAY IS ANY DAY THAT THE NEW YORK STOCK EXCHANGE (NYSE)
IS OPEN. A BUSINESS DAY ENDS AT THE CLOSE OF REGULAR TRADING ON
THE NYSE, USUALLY AT 4:00 P.M. EASTERN TIME. IF THE NYSE CLOSES
EARLY, THE BUSINESS DAY ENDS AS OF THE TIME THE NYSE CLOSES.
THE NYSE IS CLOSED ON WEEKENDS AND ON THE FOLLOWING NATIONAL
HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY, PRESIDENTS'
DAY, GOOD FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY,
THANKSGIVING DAY AND CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share for each class of each
Fund at the end of each business day. First, we calculate the net asset value
for each class of a Fund by determining the value of the Fund's assets in the
class and then subtracting its liabilities. Next, we divide this amount by the
number of shares that investors are holding in the class.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. The prices reported on stock exchanges and securities
markets around the world are usually used to value securities in a Fund. If
prices aren't readily available, we'll base the price of a security on its
fair market value. We use the amortized cost method, which approximates market
value, to value short-term investments maturing in 60 days or less.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents before the end of a business
day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will
receive that day's net asset value per share. Orders received after the end of
a business day will receive the next business day's net asset value per share.
The business day that applies to your order is also called the TRADE DATE. We
may refuse any order to buy or exchange shares. If this happens, we'll return
any money we've received.
79
<PAGE>
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Primary A Shares at net asset value per share.
o If we don't receive payment within three business days of receiving
an order, we'll refuse the order. We'll return any payment received
for orders that we refuse.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for ensuring that we receive
payment on time.
o Shares purchased are recorded on the books of the Fund. We don't
issue certificates.
o Financial institutions and intermediaries are responsible for
recording the beneficial ownership of the shares of their clients,
and for reporting this ownership on account statements they send to
their clients.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire to
investors within three business days after Stephens, First Data or
their agents receive the order.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold for at least 15
days after the trade date of the purchase, or until the check has
cleared.
o Financial institutions and intermediaries are responsible for
sending us orders for their clients and for depositing the sale
proceeds to their accounts on time.
o Under certain circumstances allowed under the Investment Company Act
of 1940 (1940 Act), we can pay investors in securities or other
property when they sell shares, or delay payment of the sale
proceeds for up to seven days.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 60 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the
shares for a client under arrangements it has made with its clients
o under certain other circumstances allowed under the 1940 Act
80
<PAGE>
[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another Nations
Fund. This is called an exchange, and may be appropriate if investment
goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Primary A Shares of a Fund for Primary A
Shares of any other Nations Fund. In some cases, the only Money
Market Fund option is Trust Class Shares of Nations Reserves Money
Market Funds.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
81
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] Distributions and taxes
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends
paid on COMMON STOCKS.
o A fund can also have CAPITAL GAIN if the value of its investments
increases. If a fund sells an investment at a gain, the gain is realized.
If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gain to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gain to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
All of the Funds distribute any net realized capital gain at least once a
year. The Funds declare distributions of net investment income daily and pay
them monthly.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses. Each time a distribution is made,
the net asset value per share of the share class is reduced by the amount of
the distribution.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover or by calling us
at 1.800.765.2668.
We generally pay cash distributions within five business days after the end of
the month, quarter or year in which the distribution was made. If you sell all
of your shares, we'll pay any distribution that applies to those shares in
cash within five business days after the sale was made.
If you buy shares of a Fund shortly before it makes a distribution, you will,
in effect, receive part of your purchase back in the distribution, which maybe
subject to tax. Similarly, if you buy shares of a Fund that holds securities
with unrealized capital gain, you will, in effect, receive part of your
purchase back if and when the Fund sells those securities and distributes the
gain. This distribution is subject to tax. Some Funds have built up, or have
the potential to build up, high levels of unrealized capital gain.
82
<PAGE>
[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions that come from a Fund's tax-exempt interest income are generally
free from federal income tax. These distributions are generally not subject to
state income tax (or other applicable state tax, like the Florida intangible
personal property tax) if a Fund invests primarily in securities from that
state and its subdivisions. For example, you generally won't be subject to
California state personal income tax on distributions that come from Nations
California Municipal Bond Fund's investments in California state and municipal
debt obligations. You may, however, be subject to other state and local taxes
on these distributions. A portion of these distributions may also be subject
to the federal alternative minimum tax. Texas doesn't impose state income tax.
Any distributions that come from taxable income or realized capital gain are
generally subject to tax. Distributions that come from taxable income and any
net short-term capital gain (generally the excess of net short-term capital
gain over net long-term capital loss) generally are taxable to you as ordinary
income. Distributions of net capital gain (generally the excess of net
long-term capital gain over net short-term capital loss) generally are taxable
to you as net capital gain. Corporate shareholders will not be able to deduct
any distributions from a Fund when determining their taxable income.
In general, any taxable distributions are taxable to you when paid, whether
they are paid in cash or automatically reinvested in additional shares of a
Fund. However, any distributions declared in October, November or December of
one year and distributed in January of the following year will be taxable as
if they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any taxable
distributions and redemption proceeds paid to you (including amounts deemed to
be paid for "in kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you're otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
83
<PAGE>
TAXATION OF REDEMPTIONS AND EXCHANGES
Your redemptions (including redemptions "in kind") and exchanges of Fund
shares will usually result in a taxable capital gain or loss, depending on the
amount you receive for your shares (or are deemed to receive in the case of
exchanges) and the amount you paid (or are deemed to have paid) for them.
[GRAPHIC] Financial highlights
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. Financial highlights for Primary A
Shares of Nations California Municipal Bond Fund are not provided because this
class of shares had not yet commenced operations during the period indicated.
The total investment return line indicates how much an investment in the Fund
would have earned, assuming all dividends and distributions had been
reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The
independent accountant's report and Nations Funds financial statements are
incorporated by reference into the SAI. Please see the back cover to find out
how you can get a copy.
84
<PAGE>
NATIONS FLORIDA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.77 $ 10.40 $ 10.46
Net investment income 0.50 0.50 0.49
Net realized and unrealized gain/(loss) on
investments 0.02 0.37 ( 0.06)
Net increase/(decrease) in net asset value from
operations 0.52 0.87 0.43
DISTRIBUTIONS:
Dividends from net investment income ( 0.50) ( 0.50) ( 0.49)
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.50) ( 0.50) ( 0.49)
Net asset value, end of period $ 10.79 $ 10.77 $ 10.40
TOTAL RETURN++ 4.95% 8.55% 4.22%
=============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $234,530 $203,710 $51,748
Ratio of operating expenses to average net assets 0.50% 0.50%(a) 0.50%(a)
Ratio of net investment income to average net
assets 4.65% 4.74% 4.72%
Portfolio turnover rate 14% 13% 16%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.72% 0.76% 0.81%
<CAPTION>
Period ended Year ended Year ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.63 $ 9.61 $ 10.50
Net investment income 0.17 0.48 0.45
Net realized and unrealized gain/(loss) on
investments ( 0.17) 1.02 ( 0.88)
Net increase/(decrease) in net asset value from
operations 0.00 1.50 ( 0.43)
DISTRIBUTIONS:
Dividends from net investment income ( 0.17) ( 0.48) ( 0.45)#
Distributions from net realized capital gains -- -- ( 0.01)
Total dividends and distributions ( 0.17) ( 0.48) ( 0.46)
Net asset value, end of period $ 10.46 $ 10.63 $ 9.61
TOTAL RETURN++ ( 0.06)% 15.92% ( 4.26)%
=================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $44,988 $44,038 $42,717
Ratio of operating expenses to average net assets 0.50%+(a) 0.55%(a) 0.55%(a)
Ratio of net investment income to average net
assets 4.66%+ 4.70% 4.44%
Portfolio turnover rate 18% 27% 34%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.86%+ 0.81% 0.76%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS FLORIDA MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.99 $ 9.48 $ 9.47
Net investment income 0.48 0.48 0.48
Net realized and unrealized gain/(loss) on
investments 0.00 0.51 0.01
Net increase/(decrease) in net asset value from
operations 0.48 0.99 0.49
DISTRIBUTIONS:
Dividends from net investment income (0.48) (0.48) (0.48)
Net asset value, end of period $ 9.99 $ 9.99 $ 9.48
TOTAL RETURN++ 4.90% 10.60% 5.29%
==============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN 000'S) $77,197 $27,378 $16,702
Ratio of operating expenses to average net assets 0.60%(a) 0.60%(a) 0.60%(a)
Ratio of net investment income to average net
assets 4.80% 4.85% 5.07%
Portfolio turnover rate 16% 19% 23%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.85% 0.90% 0.93%
<CAPTION>
Period ended Year ended Period ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.76 $ 8.40 $ 9.93
Net investment income 0.16 0.51 0.49
Net realized and unrealized gain/(loss) on
investments (0.29) 1.36 ( 1.53)
Net increase/(decrease) in net asset value from
operations (0.13) 1.87 ( 1.04)
DISTRIBUTIONS:
Dividends from net investment income (0.16) (0.51) ( 0.49)
Net asset value, end of period $ 9.47 $ 9.76 $ 8.40
TOTAL RETURN++ (1.33)% 22.69% (10.70)%
=================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN 000'S) $13,044 $11,219 $ 4,258
Ratio of operating expenses to average net assets 0.60%+(a) 0.39%(a) 0.21%+(a)
Ratio of net investment income to average net
assets 5.03%+ 5.44% 5.55%+
Portfolio turnover rate 7% 13% 46%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.96%+ 0.95% 0.91%+
</TABLE>
* Nations Florida Municipal Bond Fund Primary A
Shares commenced operations on December 13, 1993.
+ Annualized.
++ Total return represents aggregate total return
for the period indicated, assumes reinvestment of
all distributions, and does not reflect the
deduction of any applicable sales charges.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
85
<PAGE>
NATIONS GEORGIA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.92 $ 10.58
Net investment income 0.49 0.49
Net realized and unrealized gain/(loss) on
investments 0.07 0.38
Net increase/(decrease) in net asset value from
operations 0.56 0.87
DISTRIBUTIONS:
Dividends from net investment income ( 0.50) ( 0.49)
Distributions from net realized capital gains ( 0.04) ( 0.04)
Total dividends and distributions ( 0.54) ( 0.53)
Net asset value, end of period $ 10.94 $ 10.92
TOTAL RETURN++ 5.20% 8.45%
==============================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $132,016 $125,654
Ratio of operating expenses to average net assets 0.50% 0.50%
Ratio of operating expenses to average net assets
including interest expense (a) (a)
Ratio of net investment income to average net
assets 4.51% 4.54%
Portfolio turnover rate 14% 25%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.73% 0.75%
<CAPTION>
Year ended Period ended Year ended Year ended
PRIMARY A SHARES 03/31/97 03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.63 $ 10.81 $ 9.82 $ 10.82
Net investment income 0.50 0.17 0.50 0.49
Net realized and unrealized gain/(loss) on
investments ( 0.05) ( 0.18) 0.99 ( 0.98)
Net increase/(decrease) in net asset value from
operations 0.45 ( 0.01) 1.49 ( 0.49)
DISTRIBUTIONS:
Dividends from net investment income ( 0.50) ( 0.17) ( 0.50) ( 0.49)#
Distributions from net realized capital gains -- -- -- ( 0.02)
Total dividends and distributions ( 0.50) ( 0.17) ( 0.50) ( 0.51)
Net asset value, end of period $ 10.58 $ 10.63 $ 10.81 $ 9.82
TOTAL RETURN++ 4.33% ( 0.13)% 15.42% ( 4.70)%
======================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $43,470 $38,222 $40,383 $33,111
Ratio of operating expenses to average net assets 0.50% 0.50%+ 0.55% 0.54%
Ratio of operating expenses to average net assets
including interest expense (a) (a) (a) 0.55%
Ratio of net investment income to average net
assets 4.72% 4.67%+ 4.76% 4.74%
Portfolio turnover rate 9% 3% 17% 22%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.80% 0.83%+ 0.80% 0.75%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS GEORGIA MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 9.50 $ 9.48
Net investment income 0.46 0.47 0.47
Net realized and unrealized gain/(loss) on
investments 0.12 0.50 0.02
Net increase/(decrease) in net asset value from
operations 0.58 0.97 0.49
DISTRIBUTIONS:
Dividends from net investment income ( 0.46) ( 0.47) (0.47)
Net asset value, end of period $ 10.12 $ 10.00 $ 9.50
TOTAL RETURN++ 5.89% 10.43% 5.29%
==========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $9,719 $8,138 $5,550
Ratio of operating expenses to average net assets 0.60% 0.60%(a) 0.60%(a)
Ratio of net investment income to average net
assets 4.53% 4.82% 4.96%
Portfolio turnover rate 17% 30% 19%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.18% 1.02% 1.05%
<CAPTION>
Period ended Year ended Period ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.72 $ 8.38 $ 10.02
Net investment income 0.16 0.51 0.46
Net realized and unrealized gain/(loss) on
investments (0.24) 1.34 ( 1.64)
Net increase/(decrease) in net asset value from
operations (0.08) 1.85 ( 1.18)
DISTRIBUTIONS:
Dividends from net investment income (0.16) (0.51) ( 0.46)
Net asset value, end of period $ 9.48 $ 9.72 $ 8.38
TOTAL RETURN++ (0.84)% 22.48% (12.07)%
==================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,068 $2,628 $ 232
Ratio of operating expenses to average net assets 0.60%+(a) 0.40%(a) 0.21%+(a)
Ratio of net investment income to average net
assets 4.96%+ 5.42% 5.60%+
Portfolio turnover rate 7% 26% 35%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.14%+ 1.09% 1.04%+
</TABLE>
* Nations Georgia Municipal Bond Fund Primary A
Shares commenced operations on January 13, 1994.
+ Annualized.
++ Total return represents aggregate total return
for the period indicated, assumes reinvestment of
all distributions, and does not reflect the
deduction of any applicable sales charges.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
86
<PAGE>
NATIONS MARYLAND INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.01 $ 10.70 $ 10.80
Net investment income 0.50 0.51 0.51
Net realized and unrealized gain/(loss) on
investments 0.06 0.31 ( 0.10)
Net increase/(decrease) in net asset value from
operations 0.56 0.82 0.41
DISTRIBUTIONS:
Dividends from net investment income ( 0.50) ( 0.51) ( 0.51)
Distributions from net realized capital gains -- -- --
Distributions in excess of net realized capital
gains -- -- --
Total dividends and distributions ( 0.50) ( 0.51) ( 0.51)
Net asset value, end of period $ 11.07 $ 11.01 $ 10.70
TOTAL RETURN++ 5.17% 7.83% 3.83%
=====================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $183,356 $84,715 $63,549
Ratio of operating expenses to average net
assets 0.50% 0.50% 0.50%(a)
Ratio of net investment income to average net
assets 4.51% 4.63% 4.70%
Portfolio turnover rate 22% 12% 10%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.74% 0.80% 0.78%
<CAPTION>
Period ended Year ended Year ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.95 $ 10.00 $ 11.09
Net investment income 0.17 0.51 0.50
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.98 ( 0.99)
Net increase/(decrease) in net asset value from
operations 0.02 1.49 ( 0.49)
DISTRIBUTIONS:
Dividends from net investment income ( 0.17) ( 0.51) ( 0.50)
Distributions from net realized capital gains -- ( 0.03) ( 0.10)
Distributions in excess of net realized capital
gains -- -- ( 0.00)#
Total dividends and distributions ( 0.17) ( 0.54) ( 0.60)
Net asset value, end of period $ 10.80 $ 10.95 $ 10.00
TOTAL RETURN++ 0.16% 15.16% ( 4.64)%
==============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $61,337 $62,460 $61,349
Ratio of operating expenses to average net
assets 0.50%+(a) 0.55%(a) 0.53%(a)
Ratio of net investment income to average net
assets 4.62%+ 4.76% 4.73%
Portfolio turnover rate 4% 11% 22%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.81%+ 0.80% 0.73%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS MARYLAND MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.94 $ 9.41 $ 9.39
Net investment income 0.43 0.45 0.46
Net realized and unrealized gain/(loss) on
investments 0.05 0.53 0.02
Net increase/(decrease) in net asset value from
operations 0.48 0.98 0.48
DISTRIBUTIONS:
Dividends from net investment income (0.43) (0.45) (0.46)
Distributions from net realized capital gains (0.00)# -- --
Total dividends and distributions (0.43) (0.45) (0.46)
Net asset value, end of period $ 9.99 $ 9.94 $ 9.41
TOTAL RETURN++ 4.92% 10.62% 5.20%
======================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $17,033 $9,049 $4,596
Ratio of operating expenses to average net assets 0.60% 0.60% 0.60%
Ratio of net investment income to average net
assets 4.29% 4.61% 4.88%
Portfolio turnover rate 22% 17% 18%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.07% 1.07% 1.12%
<CAPTION>
Period ended Year ended Period ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.63 $ 8.37 $ 8.90
Net investment income 0.15 0.48 0.11
Net realized and unrealized gain/(loss) on
investments (0.24) 1.26 (0.53)
Net increase/(decrease) in net asset value from
operations (0.09) 1.74 (0.42)
DISTRIBUTIONS:
Dividends from net investment income (0.15) (0.48) (0.11)
Distributions from net realized capital gains -- -- --
Total dividends and distributions (0.15) (0.48) (0.11)
Net asset value, end of period $ 9.39 $ 9.63 $ 8.37
TOTAL RETURN++ (0.95)% 21.23% (4.89)%
========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,788 $2,595 $ 39
Ratio of operating expenses to average net assets 0.60%+ 0.40% 0.21%+(a)
Ratio of net investment income to average net
assets 4.72%+ 5.14% 5.48%+
Portfolio turnover rate 7% 11% 39%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.23%+ 1.26% 1.30%+
</TABLE>
* Nations Maryland Municipal Bond Fund Primary A
Shares commenced operations on September 20, 1994.
+ Annualized.
++ Total return represents aggregate total return
for the period indicated, assumes reinvestment of
all distributions, and does not reflect the
deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
87
<PAGE>
NATIONS NORTH CAROLINA
INTERMEDIATE MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.70 $ 10.34 $ 10.36
Net investment income 0.49 0.49 0.47
Net realized and unrealized gain/(loss) on
investments 0.04 0.36 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.53 0.85 0.45
DISTRIBUTIONS:
Dividends from net investment income ( 0.49) ( 0.49) ( 0.47)
Distributions from net realized capital gains ( 0.03) -- --
Total dividends and distributions ( 0.52) ( 0.49) ( 0.47)
Net asset value, end of period $ 10.71 $ 10.70 $ 10.34
TOTAL RETURN++ 5.03% 8.39% 4.45%
============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $193,398 $179,729 $25,855
Ratio of operating expenses to average net assets 0.50% 0.50%(a) 0.50%(a)
Ratio of net investment income to average net
assets 4.57% 4.69% 4.57%
Portfolio turnover rate 16% 21% 26%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.71% 0.76% 0.82%
<CAPTION>
Period ended Year ended Year ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.51 $ 9.53 $ 10.46
Net investment income 0.16 0.45 0.44
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.99 ( 0.88)
Net increase/(decrease) in net asset value from
operations 0.01 1.44 ( 0.44)
DISTRIBUTIONS:
Dividends from net investment income ( 0.16) ( 0.45)# ( 0.44)
Distributions from net realized capital gains -- ( 0.01) ( 0.05)
Total dividends and distributions ( 0.16) ( 0.46) ( 0.49)
Net asset value, end of period $ 10.36 $ 10.51 $ 9.53
TOTAL RETURN++ 0.05% 15.41% ( 4.34)%
===============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $21,161 $20,916 $14,148
Ratio of operating expenses to average net assets 0.50%+ 0.57%(a) 0.55%(a)
Ratio of net investment income to average net
assets 4.47%+ 4.47% 4.38%
Portfolio turnover rate 3% 57% 37%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.87%+ 0.84% 0.82%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS NORTH CAROLINA MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.01 $ 9.47 $ 9.49
Net investment income 0.45 0.47 0.47
Net realized and unrealized gain/(loss) on
investments 0.08 0.54 (0.02)
Net increase/(decrease) in net asset value from
operations 0.53 1.01 0.45
DISTRIBUTIONS:
Dividends from net investment income ( 0.46) ( 0.47) (0.47)
Net asset value, end of period $ 10.08 $ 10.01 $ 9.47
TOTAL RETURN++ 5.39% 10.86% 4.84%
================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $16,293 $6,452 $3,095
Ratio of operating expenses to average net assets 0.60%(a) 0.60%(a) 0.60%(a)
Ratio of net investment income to average net
assets 4.57% 4.78% 4.95%
Portfolio turnover rate 11% 20% 28%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.00% 0.93% 0.94%
<CAPTION>
Period ended Year ended Period ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.73 $ 8.36 $ 10.06
Net investment income 0.16 0.50 0.45
Net realized and unrealized gain/(loss) on
investments (0.24) 1.37 ( 1.70)
Net increase/(decrease) in net asset value from
operations (0.08) 1.87 ( 1.25)
DISTRIBUTIONS:
Dividends from net investment income (0.16) (0.50) ( 0.45)
Net asset value, end of period $ 9.49 $ 9.73 $ 8.36
TOTAL RETURN++ (0.87)% 22.87% (12.65)%
================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,593 $1,293 $ 531
Ratio of operating expenses to average net assets 0.60%+ 0.38%(a) 0.21%+(a)
Ratio of net investment income to average net
assets 4.86%+ 5.43% 5.53%+
Portfolio turnover rate 22% 40% 29%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.99%+ 0.96% 0.92%+
</TABLE>
* Nations North Carolina Municipal Bond Fund Primary
A Shares commenced operations on January 11, 1994.
+ Annualized.
++ Total return represents aggregate total return
for the period indicated, assumes reinvestment of
all distributions, and does not reflect the
deduction of any applicable sales charges.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
88
<PAGE>
NATIONS SOUTH CAROLINA
INTERMEDIATE MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.79 $ 10.50 $ 10.52
Net investment income 0.51 0.52 0.51
Net realized and unrealized gain/(loss) on
investments 0.04 0.29 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.55 0.81 0.49
DISTRIBUTIONS:
Dividends from net investment income ( 0.51) ( 0.52) ( 0.51)
Distributions from net realized capital gains ( 0.04) ( 0.00)(c) --
Total dividends and distributions ( 0.55) ( 0.52) ( 0.51)
Net asset value, end of period $ 10.79 $ 10.79 $ 10.50
TOTAL RETURN++ 5.22% 7.88% 4.71%
=================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $239,195 $253,090 $48,918
Ratio of operating expenses to average net assets 0.50%(a) 0.50%(a) 0.50%(a)
Ratio of net investment income to average net
assets 4.75% 4.86% 4.80%
Portfolio turnover rate 9% 16% 13%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.69% 0.75% 0.79%
<CAPTION>
Period ended Year ended Year ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.69 $ 9.76 $ 10.61
Net investment income 0.17 0.51 0.50
Net realized and unrealized gain/(loss) on
investments ( 0.17) 0.93 ( 0.84)
Net increase/(decrease) in net asset value from
operations 0.00 1.44 ( 0.34)
DISTRIBUTIONS:
Dividends from net investment income ( 0.17) ( 0.51) ( 0.50)#
Distributions from net realized capital gains -- -- ( 0.01)
Total dividends and distributions ( 0.17) ( 0.51) ( 0.51)
Net asset value, end of period $ 10.52 $ 10.69 $ 9.76
TOTAL RETURN++ 0.00%## 15.02% ( 3.37)%
=================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $41,817 $45,255 $49,030
Ratio of operating expenses to average net assets 0.50%+(a) 0.55%(a) 0.54%(a)
Ratio of net investment income to average net
assets 4.81%+ 4.92% 4.82%
Portfolio turnover rate 6% 11% 30%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.82%+ 0.75% 0.75%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
## Amount represents less than 0.01%.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Amount represents less than $0.01 per share.
NATIONS SOUTH CAROLINA
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.26 $ 9.79 $ 9.77
Net investment income 0.49 0.49 0.49
Net realized and unrealized gain/(loss) on
investments 0.03 0.47 0.02
Net increase/(decrease) in net asset value from
operations 0.52 0.96 0.51
DISTRIBUTIONS:
Dividends from net investment income ( 0.48) ( 0.49) (0.49)
Distributions from net realized capital gains -- ( 0.00)# --
Total dividends and distributions ( 0.48) ( 0.49) (0.49)
Net asset value, end of period $ 10.30 $ 10.26 $ 9.79
TOTAL RETURN++ 5.13% 10.04% 5.32%
=============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $12,793 $9,455 $5,113
Ratio of operating expenses to average net assets 0.60% 0.60%(a) 0.60%(a)
Ratio of net investment income to average net
assets 4.62% 4.79% 4.99%
Portfolio turnover rate 3% 9% 30%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.18% 0.99% 1.00%
<CAPTION>
Period ended Year ended Period ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.99 $ 8.65 $ 10.02
Net investment income 0.17 0.52 0.48
Net realized and unrealized gain/(loss) on
investments (0.22) 1.34 ( 1.37)
Net increase/(decrease) in net asset value from
operations (0.05) 1.86 ( 0.89)
DISTRIBUTIONS:
Dividends from net investment income (0.17) (0.52) ( 0.48)
Distributions from net realized capital gains -- -- --
Total dividends and distributions (0.17) (0.52) ( 0.48)
Net asset value, end of period $ 9.77 $ 9.99 $ 8.65
TOTAL RETURN++ (0.57)% 21.99% ( 9.12)%
====================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,058 $1,782 $ 400
Ratio of operating expenses to average net assets 0.60%+(a) 0.40%(a) 0.21%+(a)
Ratio of net investment income to average net
assets 4.96%+ 5.44% 5.48%+
Portfolio turnover rate 20% 13% 14%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.13%+ 1.08% 1.12%+
</TABLE>
* Nations South Carolina Municipal Bond Fund Primary
A Shares commenced operations on December 27, 1993.
+ Annualized.
++ Total return represents aggregate total return
for the period indicated, assumes reinvestment of
all distributions, and does not reflect the
deduction of any applicable sales charges.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
89
<PAGE>
NATIONS TENNESSEE INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.40 $ 10.08 $ 10.09
Net investment income 0.47 0.47 0.46
Net realized and unrealized gain/(loss) on
investments 0.06 0.32 ( 0.01)
Net increase/(decrease) in net asset value from
operations 0.53 0.79 0.45
DISTRIBUTIONS:
Dividends from net investment income ( 0.47) ( 0.47) ( 0.46)
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.47) ( 0.47) ( 0.46)
Net asset value, end of period $ 10.46 $ 10.40 $ 10.08
TOTAL RETURN++ 5.18% 7.99% 4.54%
========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $42,826 $39,091 $8,869
Ratio of operating expenses to average net assets 0.50% 0.50% 0.50%
Ratio of operating expenses to average net assets
including interest expense -- (a) (a)
Ratio of net investment income to average net
assets 4.48% 4.58% 4.55%
Portfolio turnover rate 22% 38% 28%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.85% 0.84% 0.93%
<CAPTION>
Period ended Year ended Year ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.23 $ 9.30 $ 10.18
Net investment income 0.15 0.46 0.45
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.93 ( 0.87)
Net increase/(decrease) in net asset value from
operations 0.01 1.39 ( 0.42)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.46) ( 0.45)#
Distributions from net realized capital gains -- -- ( 0.01)
Total dividends and distributions ( 0.15) ( 0.46) ( 0.46)
Net asset value, end of period $ 10.09 $ 10.23 $ 9.30
TOTAL RETURN++ 0.12% 15.22% ( 4.24)%
=========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $8,408 $7,160 $4,116
Ratio of operating expenses to average net assets 0.50%+ 0.57% 0.52%
Ratio of operating expenses to average net assets
including interest expense -- (a) 0.53%
Ratio of net investment income to average net
assets 4.51%+ 4.65% 4.56%
Portfolio turnover rate 3% 34% 41%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.02%+ 0.92% 0.89%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS TENNESSEE MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.22 $ 9.70 $ 9.68
Net investment income 0.48 0.48 0.48
Net realized and unrealized gain/(loss) on
investments 0.08 0.52 0.02
Net increase/(decrease) in net asset value from
operations 0.56 1.00 0.50
DISTRIBUTIONS:
Dividends from net investment income ( 0.48) ( 0.48) (0.48)
Net asset value, end of period $ 10.30 $ 10.22 $ 9.70
TOTAL RETURN++ 5.53% 10.45% 5.23%
========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $5,762 $4,559 $2,594
Ratio of operating expenses to average net assets 0.60% 0.60% 0.60%
Ratio of operating expenses to average net assets
including interest expense -- (a) (a)
Ratio of net investment income to average net
assets 4.61% 4.74% 4.91%
Portfolio turnover rate 40% 19% 31%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.55% 1.20% 1.24%
<CAPTION>
Period ended Year ended Period ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.87 $ 8.58 $ 9.59
Net investment income 0.16 0.52 0.39
Net realized and unrealized gain/(loss) on
investments (0.19) 1.29 (1.01)
Net increase/(decrease) in net asset value from
operations (0.03) 1.81 (0.62)
DISTRIBUTIONS:
Dividends from net investment income (0.16) (0.52) (0.39)
Net asset value, end of period $ 9.68 $ 9.87 $ 8.58
TOTAL RETURN++ (0.30)% 21.52% (6.66)%
==========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 975 $ 768 $ 311
Ratio of operating expenses to average net assets 0.60%+ 0.40% 0.21%+
Ratio of operating expenses to average net assets
including interest expense 0.61%+ (a) (a)
Ratio of net investment income to average net
assets 4.92%+ 5.49% 5.56%+
Portfolio turnover rate 2% 45% 38%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.47%+ 1.27% 1.20%+
</TABLE>
* Nations Tennessee Municipal Bond Fund Primary A
Shares commenced operations on March 2, 1994.
+ Annualized.
++ Total return represents aggregate total return
for the period indicated, assumes reinvestment of
all distributions, and does not reflect the
deduction of any applicable sales charges.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
90
<PAGE>
NATIONS TEXAS INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.50 $ 10.18 $ 10.21
Net investment income 0.49 0.49 0.47
Net realized and unrealized gain/(loss) on
investments 0.02 0.32 ( 0.03)
Net increase/(decrease) in net asset value from
operations 0.51 0.81 0.44
DISTRIBUTIONS:
Dividends from net investment income ( 0.49) ( 0.49) ( 0.47)
Distributions from net realized capital gains ( 0.04) -- --
Total dividends and distributions ( 0.53) ( 0.49) ( 0.47)
Net asset value, end of period $ 10.48 $ 10.50 $ 10.18
TOTAL RETURN++ 4.98% 8.09% 4.37%
=========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $391,431 $385,770 $24,764
Ratio of operating expenses to average net assets 0.50% 0.50% 0.50%
Ratio of net investment income to average net
assets 4.66% 4.74% 4.59%
Portfolio turnover rate 22% 19% 34%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.68% 0.75% 0.84%
<CAPTION>
Period ended Year ended Year ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.36 $ 9.53 $ 10.35
Net investment income 0.16 0.46 0.44
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.83 ( 0.79)
Net increase/(decrease) in net asset value from
operations 0.01 1.29 ( 0.35)
DISTRIBUTIONS:
Dividends from net investment income ( 0.16) ( 0.46) ( 0.44)#
Distributions from net realized capital gains -- -- ( 0.03)
Total dividends and distributions ( 0.16) ( 0.46) ( 0.47)
Net asset value, end of period $ 10.21 $ 10.36 $ 9.53
TOTAL RETURN++ 0.05% 13.83% ( 3.48)%
==============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $27,176 $26,382 $24,066
Ratio of operating expenses to average net assets 0.50%+ 0.57%(a) 0.55%(a)
Ratio of net investment income to average net
assets 4.52%+ 4.62% 4.40%
Portfolio turnover rate 11% 64% 61%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.89%+ 0.83% 0.78%
</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.
# Amount includes distributions in excess of net
investment income which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS TEXAS MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98(c) 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.04 $ 9.48 $ 9.49
Net investment income 0.46 0.48 0.48
Net realized and unrealized gain/(loss) on
investments 0.07 0.56 (0.01)
Net increase/(decrease) in net asset value from
operations 0.53 1.04 0.47
DISTRIBUTIONS:
Dividends from net investment income ( 0.46) ( 0.48) (0.48)
Net asset value, end of period $ 10.11 $ 10.04 $ 9.48
TOTAL RETURN++ 5.41% 11.12% 5.00%
===========================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $9,393 $7,615 $5,675
Ratio of operating expenses to average net assets 0.60% 0.60%(a) 0.60%(a)
Ratio of net investment income to average net
assets 4.59% 4.83% 4.99%
Portfolio turnover rate 34% 33% 52%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.25% 1.07% 1.03%
<CAPTION>
Period ended Year ended Period ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.70 $ 8.39 $ 10.01
Net investment income 0.16 0.50 0.42
Net realized and unrealized gain/(loss) on
investments (0.21) 1.31 ( 1.62)
Net increase/(decrease) in net asset value from
operations (0.05) 1.81 ( 1.20)
DISTRIBUTIONS:
Dividends from net investment income (0.16) (0.50) ( 0.42)
Net asset value, end of period $ 9.49 $ 9.70 $ 8.39
TOTAL RETURN++ (0.55)% 22.09% (12.21)%
=============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $5,138 $4,613 $ 2,285
Ratio of operating expenses to average net assets 0.60%+ 0.39%(a) 0.22%+(a)
Ratio of net investment income to average net
assets 4.92%+ 5.45% 5.52%+
Portfolio turnover rate 6% 50% 107%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.11%+ 1.05% 1.06%+
</TABLE>
* Nations Texas Municipal Bond Fund Primary A Shares
commenced operations on February 3, 1994.
+ Annualized.
++ Total return represents aggregate total return
for the period indicated, assumes reinvestment of
all distributions, and does not reflect the
deduction of any applicable sales charges.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average shares method.
91
<PAGE>
NATIONS VIRGINIA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.92 $ 10.59 $ 10.69
Net investment income 0.50 0.51 0.51
Net realized and unrealized gain/(loss) on
investments 0.06 0.33 ( 0.10)
Net increase/(decrease) in net asset value from
operations 0.56 0.84 0.41
DISTRIBUTIONS:
Dividends from net investment income ( 0.50) ( 0.51) ( 0.51)
Distributions from net realized capital gains -- -- --
Distributions in excess of net realized capital gains -- -- --
Total dividends and distributions ( 0.50) ( 0.51) ( 0.51)
Net asset value, end of period $ 10.98 $ 10.92 $ 10.59
TOTAL RETURN++ 5.21% 8.12% 3.92%
======================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $227,299 $170,969 $148,701
Ratio of operating expenses to average net assets 0.50%(a) 0.50%(a) 0.50%(a)
Ratio of net investment income to average net
assets 4.54% 4.77% 4.79%
Portfolio turnover rate 5% 21% 20%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.70% 0.74% 0.74%
<CAPTION>
Period ended Year ended Year ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.83 $ 9.94 $ 10.99
Net investment income 0.17 0.51 0.50
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.89 ( 0.96)
Net increase/(decrease) in net asset value from
operations 0.03 1.40 ( 0.46)
DISTRIBUTIONS:
Dividends from net investment income ( 0.17) ( 0.51) ( 0.50)
Distributions from net realized capital gains -- ( 0.00)# ( 0.09)
Distributions in excess of net realized capital gains -- -- ( 0.00)#
Total dividends and distributions ( 0.17) ( 0.51) ( 0.59)
Net asset value, end of period $ 10.69 $ 10.83 $ 9.94
TOTAL RETURN++ 0.27% 14.39% ( 4.35)%
=====================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $155,464 $157,252 $167,405
Ratio of operating expenses to average net assets 0.50%+(a) 0.56%(a) 0.61%(a)
Ratio of net investment income to average net
assets 4.72%+ 4.87% 4.76%
Portfolio turnover rate 2% 22% 14%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.76%+ 0.74% 0.73%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS VIRGINIA MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Year ended Year ended Year ended
PRIMARY A SHARES 3/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.95 $ 9.40 $ 9.38
Net investment income 0.47 0.47 0.48
Net realized and unrealized gain/(loss) on
investments 0.04 0.55 0.02
Net increase/(decrease) in net asset value from
operations 0.51 1.02 0.50
DISTRIBUTIONS:
Dividends from net investment income (0.47) (0.47) (0.48)
Net asset value, end of period $ 9.99 $ 9.95 $ 9.40
TOTAL RETURN++ 5.18% 11.11% 5.44%
============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $12,992 $11,026 $5,726
Ratio of operating expenses to average net assets 0.60% 0.59% 0.60%
Ratio of operating expenses to average net assets
including interest expense (a) (a) (a)
Ratio of net investment income to average net assets 4.66% 4.86% 5.10%
Portfolio turnover rate 11% 9% 37%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.11% 0.96% 0.98%
<CAPTION>
Period ended Year ended Period ended
PRIMARY A SHARES 03/31/96(b) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.62 $ 8.29 $ 10.00
Net investment income 0.16 0.51 0.45
Net realized and unrealized gain/(loss) on
investments (0.24) 1.33 ( 1.71)
Net increase/(decrease) in net asset value from
operations (0.08) 1.84 ( 1.26)
DISTRIBUTIONS:
Dividends from net investment income (0.16) (0.51) ( 0.45)
Net asset value, end of period $ 9.38 $ 9.62 $ 8.29
TOTAL RETURN++ (0.84)% 22.63% (12.86)%
============================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $3,296 $3,527 $ 432
Ratio of operating expenses to average net assets 0.60%+ 0.39% 0.21%+
Ratio of operating expenses to average net assets
including interest expense 0.61%+ (a) (a)
Ratio of net investment income to average net assets 5.06%+ 5.51% 5.52%+
Portfolio turnover rate 8% 16% 61%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.07%+ 1.04% 0.99%+
</TABLE>
* Nations Virginia Municipal Bond Fund Primary A
Shares commenced operations on January 11, 1994.
+ Annualized.
++ Total return represents aggregate total return
for the period indicated, assumes reinvestment of
all distributions, and does not reflect the
deduction of any applicable sales charges.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
92
<PAGE>
[GRAPHIC] Terms used in this prospectus
ASSET-BACKED SECURITY - a debt security that gives you an interest in a pool
of assets that is collateralized or "backed" by one or more kinds of assets,
including real property, receivables or mortgages, generally issued by banks,
credit card companies or other lenders. Some securities may be issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities. Asset-backed securities typically make periodic payments,
which may be interest or a combination of interest and a portion of the
principal of the underlying assets.
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
CASH EQUIVALENTS - short-term, interest-bearing instruments, including
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities, bank obligations, asset-backed securities, foreign
government securities and commercial paper issued by U.S. and foreign issuers
which, at the time of investment, is rated at least Prime-2 by Moody's
Investor Services, Inc. (Moody's), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).
COLLATERALIZED MORTGAGE OBLIGATION (CMO) - a debt security that is backed by
real estate mortgages. CMO payment obligations are covered by interest and/or
principal payments from a pool of mortgages. In addition, the underlying
assets of a CMO are typically separated into classes, called tranches, based
on maturity. Each tranche pays a different rate of interest. CMOs are not
generally issued by the U.S. government, its agencies or instrumentalities.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
CONVERTIBLE SECURITY - a security that can be exchanged for common stock (or
another type of security) at a specified rate. Convertible securities include
convertible debt, rights and warrants.
CORPORATE OBLIGATION - a money market instrument issued by a corporation or
commercial bank.
93
<PAGE>
DEBT SECURITY - when you invest in a debt security, you are typically
lending your money to a governmental body or company (the issuer) to
help fund their operations or major projects. The issuer pays interest
at a specified rate on a specified date or dates, and repays the
principal when the security matures. Short-term debt securities include
money market instruments such as treasury bills. Long-term debt
securities include fixed income securities such as government and
corporate bonds, and mortgage-backed and asset-backed securities.
DEPOSITARY RECEIPTS - evidence of the deposit of a security with a
custodian bank. American Depositary Receipts (ADRs), for example, are
certificates traded in U.S. markets representing an interest of a
foreign company. They were created to make it possible for foreign
issuers to meet U.S. security registration requirements. Other examples
include ADSs, GDRs and EDRs.
DOLLAR ROLL TRANSACTION - the sale by a Fund of mortgage-backed or
other asset-backed securities, together with a commitment to buy
similar, but not identical, securities at a future date.
DURATION - a measure used to estimate how much a mutual fund's share
price will fluctuate in response to a change in interest rates. For
example, if interest rates rise by one percentage point, the share
price of a fund with a duration of five years would decline by about
5%. If interest rates fall by one percentage point, the fund's share
price would rise
by about 5%.
EQUITY SECURITY - an investment that gives you an equity ownership
right in a company. Equity securities (or "equities") include common
and preferred stock, rights and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt
security that is an eligible investment for money market funds and has
the highest short-term rating from a nationally recognized statistical
rating organization (NRSRO), or if unrated, is determined by the fund's
portfolio management team to be of comparable quality, or is a money
market fund issued by a registered investment company, or is a
government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
FOREIGN SECURITY - a debt or equity security issued by a foreign
company or government.
FUTURES CONTRACT - a contract to buy or sell an asset or an index of
securities at a specified price on a specified future date. The price
is set through a futures exchange.
94
<PAGE>
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
INVESTMENT GRADE - a debt security that has been given a medium to high credit
rating (Baa or higher by Moody's, BBB or higher by S&P or a comparable rating
by other NRSROs) based on the issuer's ability to pay interest and repay
principal on time. The portfolio management team may consider an unrated debt
security to be investment grade if the team believes it is of comparable
quality. Please see the SAI for more information about credit ratings.
LEHMAN 3-YEAR MUNICIPAL BOND INDEX - a broad-based, unmanaged index of
investment grade bonds with maturities of two to four years. All dividends are
reinvested.
LEHMAN 7-YEAR MUNICIPAL BOND INDEX - a broad-based, unmanaged index of
investment grade bonds with maturities of seven to eight years. All dividends
are reinvested.
LEHMAN AGGREGATE BOND INDEX - an index made up of the Lehman
Government/Corporate Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index. These indexes include U.S. government agency
and U.S. Treasury securities, corporate bonds and mortgage-backed securities.
All dividends are reinvested.
LEHMAN GOVERNMENT BOND INDEX - an index of government bonds with an average
maturity of approximately nine years. All dividends are reinvested.
LEHMAN GOVERNMENT/CORPORATE BOND INDEX - an index of U.S. government, U.S.
Treasury and agency securities, and corporate and Yankee bonds. All dividends
are reinvested.
LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX - an index of U.S. government agency
and U.S. Treasury securities. All dividends are reinvested.
LEHMAN INTERMEDIATE TREASURY INDEX - an index of U.S. Treasury securities with
maturities of three to 10 years. All dividends are reinvested.
95
<PAGE>
LEHMAN MUNICIPAL BOND INDEX - a broad-based, unmanaged index of 8,000
investment grade bonds with long-term maturities. All dividends are
reinvested.
LIQUIDITY - a measurement of how easily a security can be bought or sold at a
price that is close to its market value.
MERRILL LYNCH 1-3 YEAR TREASURY INDEX - an index of U.S. Treasury bonds with
maturities of 1 to 3 years. All dividends are reinvested.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MORTGAGE-BACKED SECURITY OR MORTGAGE-RELATED SECURITY - a debt security that
gives you an interest in, and is backed by, a pool of residential mortgages
issued by the U.S. government or by financial institutions. The underlying
mortgages may be guaranteed by the U.S. government or one of its agencies,
authorities or instrumentalities. Mortgage-backed securities typically make
monthly payments, which are a combination of interest and a portion of the
principal of the underlying mortgages.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRE-REFUNDED BOND - a bond that is repaid before its maturity date. The
repayment is generally financed by a new issue. Issuers generally pre-refund
bonds during periods of lower interest rates to reduce their interest costs.
96
<PAGE>
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
REAL ESTATE INVESTMENT TRUST (REIT) - a portfolio of real estate investments
which may include office buildings, apartment complexes, hotels and shopping
malls, and real-estate-related loans or interests.
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SALOMON BROTHERS MORTGAGE INDEX - an index of 30-year and 15-year GNMA, FNMA
and FHLMC securities, and FNMA and FHLMC balloon mortgages.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
ZERO-COUPON BOND - a bond that makes no periodic interest payments. Zero
coupon bonds are sold at a deep discount to their face value and mature at
face value. The difference between the face value at maturity and the purchase
price represents the return.
97
<PAGE>
[GRAPHIC] Where to find more information
You'll find more information about the State Municipal Bond Funds in the
following documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports. The annual report also includes a discussion about the market
conditions and investment strategies that had a significant effect on
each Fund's performance during the period covered.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.765.2668
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file numbers:
Nations Fund Trust, 811-04305
Nations Institutional Reserves, 811-6030 Nations Funds
NF-SMBPROPA-8/99
[GRAPHIC]
STATE MUNICIPAL BOND FUNDS
PROSPECTUS -- INVESTOR A, B AND C SHARES
AUGUST 1, 1999
STATE MUNICIPAL BOND FUNDS
NATIONS CALIFORNIA MUNICIPAL BOND FUND
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND
NATIONS FLORIDA MUNICIPAL BOND FUND
NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND
NATIONS GEORGIA MUNICIPAL BOND FUND
NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND
NATIONS MARYLAND MUNICIPAL BOND FUND
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND
NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND
NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND
NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND
NATIONS TENNESSEE MUNICIPAL BOND FUND
NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND
NATIONS TEXAS MUNICIPAL BOND FUND
NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND
NATIONS VIRGINIA MUNICIPAL BOND FUND
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ---------------------
NOT FDIC
INSURED
- ---------------------
May Lose Value
- ---------------------
No Bank Guarantee
- ---------------------
NATIONS FUND
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 144.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N. A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about Nations Funds
State Municipal Bond Funds. Please read it carefully because it contains
information that's designed to help you make informed investment decisions.
ABOUT THE FUNDS
These Funds invest most of their assets in securities issued by one state and
are generally intended for residents of that state.
Each Fund focuses on the potential to earn income that is generally free from
federal and state income tax by investing primarily in MUNICIPAL SECURITIES.
Municipal securities also have the potential to increase in value because when
interest rates fall, the value of these securities tends to rise. When
interest rates rise, however, the value of these securities tends to fall.
Other things can also affect the value of municipal securities. There's always
a risk that you'll lose money, or you may not earn as much as you expect.
Because they invest primarily in securities issued by one state, the Funds are
considered to be NON-DIVERSIFIED. This means the value of a Fund and the
amount of interest it pays could also be affected by the financial conditions
of the state, its public authorities and local governments.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The State Municipal Bond Funds may be suitable for you if:
o you're looking for income
o you want to reduce taxes on your investment
o you have longer-term investment goals
They may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with FIXED INCOME SECURITIES
2
<PAGE>
COMPARING THE FUNDS
There are two groups of State Municipal Bond Funds in the Nations Funds
Family: Intermediate Municipal Bond Funds and Municipal Bond Funds. The main
difference between the two groups is their portfolio DURATION -- a measure
used to estimate how much a Fund's securities will fluctuate in response to a
change in interest rates.
The Municipal Bond Funds, which have longer portfolio durations, generally
have the potential to earn more income than the Intermediate Municipal Bond
Funds, but they also have more risk because their prices tend to change more
when interest rates change.
The table below is designed to help you understand the differences between
these two groups of Funds only and their relative income and risk
potential -- you should not use it to compare these Funds with other mutual
funds or other kinds of investments. A Fund's income and risk potential can
change over time.
<TABLE>
<CAPTION>
Income Risk
Duration potential potential
<S> <C> <C> <C>
Intermediate Municipal Bond Funds 3 to 6 yrs moderate moderate
Municipal Bond Funds more than 6 yrs high high
</TABLE>
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 6.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.321.7854 or
contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
3
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER
TO EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED A SUB-
ADVISER -- TRADESTREET INVESTMENT ASSOCIATES, INC. (TRADESTREET),
WHICH IS RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT DECISIONS FOR
EACH OF THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT BAAI AND TRADESTREET STARTING ON PAGE 92.
*BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC ADVISORS,
INC. ON OR ABOUT SEPTEMBER 1, 1999.
<TABLE>
[GRAPHIC]
<S> <C>
About the State Municipal Bond Funds
NATIONS CALIFORNIA MUNICIPAL BOND FUND 6
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS FLORIDA INTERMEDIATE MUNICIPAL BOND FUND 11
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS FLORIDA MUNICIPAL BOND FUND 16
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS GEORGIA INTERMEDIATE MUNICIPAL BOND FUND 21
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS GEORGIA MUNICIPAL BOND FUND 26
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS MARYLAND INTERMEDIATE MUNICIPAL BOND FUND 31
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS MARYLAND MUNICIPAL BOND FUND 36
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND 41
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS NORTH CAROLINA MUNICIPAL BOND FUND 46
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS SOUTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND 51
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS SOUTH CAROLINA MUNICIPAL BOND FUND 56
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS TENNESSEE INTERMEDIATE MUNICIPAL BOND FUND 61
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS TENNESSEE MUNICIPAL BOND FUND 66
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND 71
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS TEXAS MUNICIPAL BOND FUND 76
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS VIRGINIA INTERMEDIATE MUNICIPAL BOND FUND 81
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
NATIONS VIRGINIA MUNICIPAL BOND FUND 86
Sub-adviser: TradeStreet
- ------------------------------------------------------------------
OTHER IMPORTANT INFORMATION 91
- ------------------------------------------------------------------
HOW THE FUNDS ARE MANAGED 92
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
[GRAPHIC] About your investment
INFORMATION FOR INVESTORS
Choosing a share class 94
Buying, selling and exchanging shares 104
How selling and servicing agents are paid 112
Distributions and taxes 114
- ----------------------------------------------------------
FINANCIAL HIGHLIGHTS 116
- ----------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 144
- ----------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
5
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] THIS FUND AT A GLANCE
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF CALIFORNIA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC]
DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations California Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks as high a level of current interest income free of
federal income tax and California state personal income tax as is
consistent with prudent investment management and preservation of
capital.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE MUNICIPAL SECURITIES that pay interest that is generally free
from federal income tax and the California state personal income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
6
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN THIS FUND
STARTING ON PAGE 91 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations California Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-DIVERSIFIED
because it invests most of its assets in securities that pay
interest that is free from income tax in one state. The value of the Fund
and the amount of interest it pays could also be affected by the
financial conditions of the state, its public authorities and local
governments. Although the Fund tries to maintain a share price of $1.00,
an investment in the Fund could lose money. AN INVESTMENT IN THIS FUND IS
NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF AMERICA,
THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and California state personal income tax, but may be
subject to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by other
kinds of securities or from realized capital gains is generally subject
to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
7
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Percentile 9.34% 6.22% 11.05% 8.56% 12.50% -6.08% 16.50% 3.75% 8.51% 6.54%
</TABLE>
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.54%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 6.72%
Worst: 1st quarter 1994: -5.19%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998*
The table shows the Fund's average annual total return for each period, compared
with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged index of 8,000
investment grade bonds with long-term maturities. All dividends are reinvested.
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Investor A Shares 0.47% 4.35% 6.90%
Lehman Municipal Bond Index 6.48% 6.22% 8.22%
</TABLE>
*Investor B and C Shares have been in operation for less than a full calendar
year, so no performance information for these classes of shares has been
included in this prospectus.
8
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 4.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none none none
ANNUAL FUND OPERATING EXPENSES(4)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50% 0.50%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses 0.35% 0.35% 0.35%
------ -------- --------
Total annual Fund operating expenses 1.10% 1.85% 1.85%
Fee waivers and/or reimbursements (0.30)% (0.40)% (0.25)%
------ -------- --------
Total net expenses5 0.80% 1.45% 1.60%
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 99 for details.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(5)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
9
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of the
Fund for the time periods indicated and then sell all of your shares at
the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $553 $780 $1,026 $1,728
Investor B Shares $648 $843 $1,163 $1,940
Investor C Shares $263 $557 $ 977 $2,149
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $148 $543 $963 $1,940
Investor C Shares $163 $557 $977 $2,149
</TABLE>
10
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO FLORIDA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF FLORIDA
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO WILL
FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Florida Intermediate Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income and the
Florida state intangibles taxes consistent with moderate fluctuation of
principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and the Florida state
intangibles tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
11
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Florida Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and the Florida state intangibles tax, but may be
subject to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by other
kinds of securities or from realized capital gains is generally subject
to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
12
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR GRAPH APPEARS BELOW]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Percentile 0.38%* 11.13% -4.30% 14.08% 3.53% 6.99% 5.16%
</TABLE>
*Return is from inception (2-14-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.89%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.80%
Worst: 1st quarter 1994: -4.29%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to eight
years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 1.77% 4.23% 5.37%
Investor B Shares 1.44% 4.50% 5.04%
Investor C Shares 3.53% 4.51% 5.50%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 6.56%**
</TABLE>
**From inception of Investor A Shares. The inception dates for the
classes shown may vary.
13
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40% 0.40% 0.40%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses 0.34% 0.34% 0.34%
------ -------- --------
Total annual Fund operating expenses 0.99% 1.74% 1.74%
Fee waivers and/or reimbursements (0.24)% (0.24)% (0.24)%
------ -------- --------
Total net expenses(6) 0.75% 1.50% 1.50%
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 98 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
14
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $399 $607 $832 $1,479
Investor B Shares $453 $725 $921 $1,833
Investor C Shares $253 $525 $921 $2,032
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $153 $525 $921 $1,833
Investor C Shares $153 $525 $921 $2,032
</TABLE>
15
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO FLORIDA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF FLORIDA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Florida Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income and the Florida
state intangibles taxes with the potential for principal fluctuation associated
with investments in long-term MUNICIPAL
SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT GRADE
long-term municipal securities that pay interest that is generally free from
federal income tax and the Florida state intangibles tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
16
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Florida Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-DIVERSIFIED
because it invests most of its assets in securities that pay interest
that is free from income tax in one state. The value of the Fund and the
amount of interest it pays could also be affected by the financial
conditions of the state, its public authorities and local governments.
Although the Fund tries to maintain a share price of $1.00, an investment
in the Fund could lose money. AN INVESTMENT IN THIS FUND IS NOT A BANK
DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR
ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities with
longer terms tend to fall more in value when interest rates rise than
fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the securities
the Fund holds. It is not guaranteed and will change. Changes in the
value of the securities, however, generally should not affect the amount
of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are not
available. Any uninvested cash the Fund holds does not earn income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and the Florida state intangibles tax, but may be
subject to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by other
kinds of securities or from realized capital gains is generally subject
to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
17
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR GRAPH APPEARS BELOW]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Percentile -0.03%* -8.23% 19.65% 2.96% 8.72% 5.63%
</TABLE>
*Return is from inception (12-10-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.73%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 8.16%
Worst: 1st quarter 1994: -8.00%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period, compared
with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged index of 8,000
investment grade bonds with long-term maturities. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 0.60% 4.33% 4.28%
Investor B Shares 0.95% 4.58% 4.64%
Investor C Shares 3.96% -- 8.98%
Lehman Municipal Bond Index 6.48% 6.22% 7.11%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
18
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 4.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES5
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50% 0.50%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses 0.37% 0.37% 0.37%
------ -------- -------
Total annual Fund operating expenses 1.12% 1.87% 1.87%
Fee waivers and/or reimbursements (0.27)% (0.27)% (0.27)%
------ -------- -------
Total net expenses(6) 0.85% 1.60% 1.60%
====== ======== =======
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 98 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
19
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of the
Fund for the time periods indicated and then sell all of your shares at
the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $558 $789 $1,039 $1,753
Investor B Shares $663 $862 $1,186 $1,972
Investor C Shares $263 $562 $ 986 $2,168
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the following
expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $163 $562 $986 $1,972
Investor C Shares $163 $562 $986 $2,168
</TABLE>
20
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO GEORGIA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF GEORGIA
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Georgia Intermediate Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Georgia
state income taxes consistent with moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is generally
free from federal income tax and Georgia state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
21
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Georgia Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Georgia state income tax, but may be subject
to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by
other kinds of securities or from realized capital gains is
generally subject to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
22
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR GRAPH APPEARS BELOW]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Percentile 7.46%* 10.88% -4.79% 14.07% 3.45% 6.97% 5.38%
*Return is from inception (5-4-92) to 12-31-92.
</TABLE>
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.25%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.52%
Worst: 1st quarter 1994: -4.62%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of investment grade bonds with maturities of seven to eight years. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 1.94% 4.15% 5.84 %
Investor B Shares 1.75% 4.44% 5.00 %
Investor C Shares 3.75% 4.42% 5.70 %
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 7.00%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
23
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40% .40% 0.40%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses 0.35% 0.35% 0.35%
------ -------- --------
Total annual Fund operating expenses 1.00% 1.75% 1.75%
Fee waivers and/or reimbursements (0.25)% (0.25)% (0.25)%
------ -------- --------
Total net expenses(6) 0.75% 1.50% 1.50%
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 98 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
24
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $399 $609 $837 $1,489
Investor B Shares $453 $727 $926 $1,843
Investor C Shares $253 $527 $926 $2,042
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the following
expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $153 $527 $926 $1,843
Investor C Shares $153 $527 $926 $2,042
</TABLE>
25
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO GEORGIA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF GEORGIA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Georgia Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Georgia
state income taxes with the potential for principal fluctuation
associated with investments in long-term MUNICIPAL SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is
generally free from federal income tax and Georgia state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
26
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Georgia Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Georgia state income tax, but may be subject
to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by
other kinds of securities or from realized capital gains is
generally subject to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
27
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR GRAPH APPEARS BELOW]
YEAR 1994 1995 1996 1997 1998
PERCENTILE -8.61% 19.44% 3.19% 8.55% 6.27%
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.27%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 7.95%
Worst: 1st quarter 1994: -7.42%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 1.27% 4.35% 4.35%
Investor B Shares 1.59% 4.62% 4.75%
Investor C Shares 4.57% - 9.15%
Lehman Municipal Bond Index 6.48% 6.22% 6.22%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes shown
may vary.
28
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 4.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50% 0.50%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses 0.70% 0.70% 0.70%
------ -------- --------
Total annual Fund operating expenses 1.45% 2.20% 2.20%
Fee waivers and/or reimbursements (0.60)% (0.60)% (0.60)%
------ -------- --------
Total net expenses(6) 0.85% 1.60% 1.60%
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 99 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
29
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $558 $856 $1,176 $2,082
Investor B Shares $663 $931 $1,325 $2,296
Investor C Shares $263 $631 $1,125 $2,487
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $163 $631 $1,125 $2,296
Investor C Shares $163 $631 $1,125 $2,487
</TABLE>
30
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO MARYLAND
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF MARYLAND
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Maryland Intermediate Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Maryland
state income taxes consistent with moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and Maryland state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
31
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 91 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Maryland Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Maryland state income tax, but may be subject
to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by
other kinds of securities or from realized capital gains is
generally subject to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
32
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR GRAPH APPEARS BELOW]
<TABLE>
<CAPTION>
YEAR 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENTILE 4.07%* 10.17% 7.05% 10.01% -4.70% 13.61% 3.43% 6.55% 5.09%
</TABLE>
*Return is from inception (4-1-90) to 12-30-90.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.87%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.57%
Worst: 1st quarter 1994: -4.53%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to eight
years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 1.68% 3.95% 6.10%
Investor B Shares 1.46% 4.22% 4.74%
Investor C Shares 3.46% 4.21% 5.22%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 7.57%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
33
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40% 0.40% 0.40%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses 0.36% 0.36% 0.36%
------ -------- --------
Total annual Fund operating expenses 1.01% 1.76% 1.76%
Fee waivers and/or reimbursements (0.26)% (0.26)% (0.26)%
------ -------- --------
Total net expenses(6) 0.75% 1.50% 1.50%
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 98 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
34
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $399 $611 $841 $1,500
Investor B Shares $453 $729 $930 $1,853
Investor C Shares $253 $529 $930 $2,052
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $153 $529 $930 $1,853
Investor C Shares $153 $529 $930 $2,052
</TABLE>
35
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO MARYLAND
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF MARYLAND
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Maryland Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Maryland
state income taxes with the potential for principal fluctuation associated with
investments in long-term MUNICIPAL SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is
generally free from federal income tax and Maryland state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
36
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Maryland Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Maryland state income tax, but may be subject
to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by
other kinds of securities or from realized capital gains is
generally subject to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
37
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR GRAPH APPEARS BELOW]
YEAR 1993 1994 1995 1996 1997 1998
PERCENTILE 2.54%* -9.25% 19.04% 3.02% 9.00% 5.52%
*Return is from inception (11-4-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.61%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 8.08%
Worst: 1st quarter 1994: -7.92%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 0.47% 4.04% 4.42%
Investor B Shares 0.84% 4.28% 4.37%
Investor C Shares 3.87% - 8.74%
Lehman Municipal Bond Index 6.48% 6.22% 6.26%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
38
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 4.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50% 0.50%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses 0.59% 0.59% 0.59%
------ -------- --------
Total annual Fund operating expenses 1.34% 2.09% 2.09%
Fee waivers and/or reimbursements (0.49)% (0.49)% (0.49)%
------ -------- --------
Total net expenses(6) 0.85% 1.60% 1.60%
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 99 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
39
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $558 $834 $1,131 $1,973
Investor B Shares $663 $908 $1,279 $2,189
Investor C Shares $263 $608 $1,079 $2,382
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the following
expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $163 $608 $1,079 $2,189
Investor C Shares $163 $608 $1,079 $2,382
</TABLE>
40
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO NORTH
CAROLINA STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF NORTH CAROLINA
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations North Carolina Intermediate Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and North Carolina state
income taxes consistent with moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and North Carolina state income
tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
41
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON PAGE 91 AND IN THE SAI.
[GRAPHIC]
MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations North Carolina Intermediate Municipal Bond Fund has the
following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and North Carolina state income tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income
paid by other kinds of securities or from realized capital gains is
generally subject to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
42
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR GRAPH APPEARS BELOW]
YEAR 1992 1993 1994 1995 1996 1997 1998
PERCENTILE 0.29%* 10.29% -4.27% 13.91% 3.64% 7.01% 5.16%
*Return is from inception (12-14-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.12%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 5.78%
Worst: 1st quarter 1994: -4.07%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 1.75% 4.24% 5.22 %
Investor B Shares 1.53% 4.52% 4.96 %
Investor C Shares 3.53% 4.51% 5.37 %
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 6.62%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
43
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40% 0.40% 0.40%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses 0.33% 0.33% 0.33%
------ -------- --------
Total annual Fund operating expenses 0.98% 1.73% 1.73%
Fee waivers and/or reimbursements (0.23)% (0.23)% (0.23)%
------ -------- --------
Total net expenses(6) 0.75% 1.50% 1.50%
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior the August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 98 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
44
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor A Shares $399 $605 $828 $1,469
Investor B Shares $453 $723 $917 $1,823
Investor C Shares $253 $523 $917 $2,022
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $153 $523 $917 $1,823
Investor C Shares $153 $523 $917 $2,022
</TABLE>
45
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO NORTH
CAROLINA STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF NORTH CAROLINA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations North Carolina Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and North
Carolina state income taxes with the potential for principal
fluctuation associated with investments in long-term MUNICIPAL
SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is
generally free from federal income tax and North Carolina state income
tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
46
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations North Carolina Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when it's
due. Credit risk usually applies to most fixed income securities, but
is generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid by
the securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should not
affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and North Carolina state income tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income
paid by other kinds of securities or from realized capital gains is
generally subject to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
47
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR GRAPH APPEARS HERE]
YEAR 1993 1994 1995 1996 1997 1998
PERCENTILE 1.55%* -9.22% 20.14% 20.50% 8.84% 5.96%
*Return is from inception (11-1-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.54%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 1st quarter 1995: 8.40%
Worst: 1st quarter 1994: -7.79%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 0.92% 4.20% 4.37%
Investor B Shares 1.29% 4.44% 4.67%
Investor C Shares 4.27% - 9.07%
Lehman Municipal Bond Index 6.48% 6.22% 6.26%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
48
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 4.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50% 0.50%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses 0.52% 0.52% 0.52%
------ -------- --------
Total annual Fund operating expenses 1.27% 2.02% 2.02%
Fee waivers and/or reimbursements (0.42)% (0.42)% (0.42)%
------ -------- --------
Total net expenses(6) 0.85% 1.60% 1.60%
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 99 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
49
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
1 year 3 years 5 years 10 years
Investor A Shares $558 $820 $1,102 $1,904
Investor B Shares $663 $893 $1,249 $2,121
Investor C Shares $263 $593 $1,049 $2,314
</TABLE>
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Investor B Shares $163 $593 $1,049 $2,121
Investor C Shares $163 $593 $1,049 $2,314
</TABLE>
50
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO SOUTH
CAROLINA STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF SOUTH CAROLINA
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations South Carolina Intermediate Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and South
Carolina state income taxes consistent with moderate fluctuation of
principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and South Carolina state income
tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
51
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations South Carolina Intermediate Municipal Bond Fund has the
following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and South Carolina state income tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income
paid by other kinds of securities or from realized capital gains is
generally subject to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
52
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
5.96%* 9.84% -3.11% 13.45% 3.76% 6.62% 5.33%
*Return is from inception (5-5-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.90%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 1st quarter 1995: 5.18%
Worst: 1st quarter 1994: -3.50%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 1.94% 4.38% 5.65 %
Investor B Shares 1.70% 4.67% 5.06 %
Investor C Shares 3.70% 4.65% 5.59 %
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 7.00%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
53
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40% 0.40 % 0.40 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.31% 0.31 % 0.31 %
------ -------- --------
Total annual Fund operating expenses 0.96% 1.71 % 1.71 %
Fee waivers and/or reimbursements (0.21)% (0.21) % (0.21) %
------ -------- --------
Total net expenses(6) 0.75% 1.50 % 1.50 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 98 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
54
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $399 $601 $819 $1,448
Investor B Shares $453 $718 $909 $1,803
Investor C Shares $253 $518 $909 $2,002
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $153 $518 $909 $1,803
Investor C Shares $153 $518 $909 $2,002
55
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO SOUTH
CAROLINA STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF SOUTH CAROLINA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations South Carolina Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and South
Carolina state income taxes with the potential for principal
fluctuation associated with investments in long-term MUNICIPAL
SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is
generally free from federal income tax and South Carolina state income
tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
56
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations South Carolina Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and South Carolina state income tax, but may be
subject to the federal alternative minimum tax, and other state and
local taxes. Any portion of a distribution that comes from income
paid by other kinds of securities or from realized capital gains is
generally subject to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
57
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
2.39%* -6.24% 19.39% 3.26% 8.43% 5.25%
*Return is from inception (11-8-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.45%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 1st quarter 1995: 7.86%
Worst: 1st quarter 1994: -5.68%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
Since
1 year 5 years inception
Investor A Shares 0.28% 4.67% 5.02%
Investor B Shares 0.57% 4.93% 5.12%
Investor C Shares 3.57% 0.00% 8.80%
Lehman Municipal Bond Index 6.48% 6.22% 6.26%**
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
58
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 4.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50 % 0.50 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.70% 0.70 % 0.70 %
------ -------- --------
Total annual Fund operating expenses 1.45% 2.20 % 2.20 %
Fee waivers and/or reimbursements (0.60)% (0.60) % (0.60) %
------ -------- --------
Total net expenses(6) 0.85% 1.60 % 1.60 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 99 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
59
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $558 $856 $1,176 $2,082
Investor B Shares $663 $931 $1,325 $2,296
Investor C Shares $263 $631 $1,125 $2,487
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $163 $631 $1,125 $2,296
Investor C Shares $163 $631 $1,125 $2,487
60
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO TENNESSEE
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF TENNESSEE
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Tennessee Intermediate Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income tax and
the Tennessee Hall Income Tax on unearned income consistent with
moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and the Tennessee Hall Income
Tax on unearned income.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
61
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Tennessee Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and the Tennessee Hall Income Tax on unearned
income, but may be subject to the federal alternative minimum tax,
and other state and local taxes. Any portion of a distribution that
comes from income paid by other kinds of securities or from realized
capital gains is generally subject to federal, state and local
taxes.
[GRAPHIC]
A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
62
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
6.72%* -4.64% 13.93% 3.72% 6.71% 5.20%
*Return is from inception (4-2-93) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.89%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 1st quarter 1995: 5.76%
Worst: 1st quarter 1994: -4.23%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 1.78% 4.12% 4.75%
Investor B Shares 1.57% 4.41% 4.92%
Investor C Shares 3.52% - 6.92%
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 6.28%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
63
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40% 0.40 % 0.40 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.47% 0.47 % 0.47 %
------ -------- --------
Total annual Fund operating expenses 1.12% 1.87 % 1.87 %
Fee waivers and/or reimbursements (0.37)% (0.37) % (0.37) %
------ -------- --------
Total net expenses(6) 0.75% 1.50 % 1.50 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999.Please see page 97 for details.
(2)This charge decreases over time. Please see page 98 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
64
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $399 $634 $888 $1,614
Investor B Shares $453 $752 $977 $1,964
Investor C Shares $253 $552 $977 $2,160
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $153 $552 $977 $1,964
Investor C Shares $153 $552 $977 $2,160
65
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO TENNESSEE
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF TENNESSEE
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS TENNESSEE MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income tax and
the Tennessee Hall Income Tax on unearned income with the potential for
principal fluctuation associated with investments in long-term
MUNICIPAL SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is
generally free from federal income tax and the Tennessee Hall Income
Tax on unearned income.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
66
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Tennessee Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and the Tennessee Hall Income Tax on unearned
income, but may be subject to the federal alternative minimum tax,
and other state and local taxes. Any portion of a distribution that
comes from income paid by other kinds of securities or from realized
capital gains is generally subject to federal, state and local
taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
67
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
1.75%* -6.68% 19.21% 3.56% 9.04% 5.53%
*Return is from inception (11-22-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.64%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 1st quarter 1995: 7.93%
Worst: 1st quarter 1994: -6.40%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
Since
1 year 5 years inception
Investor A Shares 0.53% 4.77% 4.98 %
Investor B Shares 0.85% 5.03% 5.09 %
Investor C Shares 3.85% - 9.09 %
Lehman Municipal Bond Index 6.48% 6.22% 7.45%**
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
68
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 4.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50 % 0.50 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 1.07% 1.07 % 1.07 %
------ -------- --------
Total annual Fund operating expenses 1.82% 2.57 % 2.57 %
Fee waivers and/or reimbursements (0.97)% (0.97) % (0.97) %
------ -------- --------
Total net expenses(6) 0.85% 1.60 % 1.60 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 99 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
69
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $558 $ 931 $1,329 $2,439
Investor B Shares $663 $1,007 $1,478 $2,648
Investor C Shares $263 $ 707 $1,278 $2,833
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $163 $707 $1,278 $2,648
Investor C Shares $163 $707 $1,278 $2,833
70
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO TEXAS
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF TEXAS
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS TEXAS INTERMEDIATE MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income tax
consistent with moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
71
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Texas Intermediate Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and is generally free from
federal income tax, but may be subject to the federal alternative
minimum tax, and other state and local taxes. Any portion of a
distribution that comes from income paid by other kinds of
securities or from realized capital gains is generally subject to
federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
72
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
7.13%* -3.52% 12.71% 3.44% 6.91% 5.20%
*Return is from inception (2-4-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.16%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 1st quarter 1995: 4.88%
Worst: 1st quarter 1994: -4.02%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 1.81% 4.12% 4.70 %
Investor B Shares 1.57% 4.49% 4.73 %
Investor C Shares 3.57% -- 6.73 %
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 5.68%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
73
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40% 0.40 % 0.40 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.30% 0.30 % 0.30 %
------ -------- --------
Total annual Fund operating expenses 0.95% 1.70 % 1.70 %
Fee waivers and/or reimbursements (0.20)% (0.20) % (0.20) %
------ -------- --------
Total net expenses(6) 0.75% 1.50 % 1.50 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 98 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
74
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $399 $599 $815 $1,437
Investor B Shares $453 $716 $904 $1,793
Investor C Shares $253 $516 $904 $1,992
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $153 $516 $904 $1,793
Investor C Shares $153 $516 $904 $1,992
75
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO TEXAS
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF TEXAS
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS TEXAS MUNICIPAL BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal income tax with
the potential for principal fluctuation associated with investments in
long-term MUNICIPAL SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is
generally free from federal income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
76
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Texas Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax, but may be subject to the federal alternative
minimum tax, and other state and local taxes. Any portion of a
distribution that comes from income paid by other kinds of
securities or from realized capital gains is generally subject to
federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
77
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
0.27%* -8.43% 19.60% 3.59% 8.82% 6.18%
*Return is from inception (12-17-93) to 12-31-93.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.79
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 1st quarter 1995: 7.97%
Worst: 1st quarter 1994: -7.26%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
Since
1 year 5 years inception
Investor A Shares 1.13% 4.53% 4.57%
Investor B Shares 1.49% 4.79% 4.77%
Investor C Shares 4.49% -- 9.17%
Lehman Municipal Bond Index 6.48% 6.22% 6.56%**
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
78
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 4.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50 % 0.50 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.77% 0.77 % 0.77 %
------ -------- --------
Total annual Fund operating expenses 1.52% 2.27 % 2.27 %
Fee waivers and/or reimbursements (0.67)% (0.67) % (0.67) %
------ -------- --------
Total net expenses(6) 0.85% 1.60 % 1.60 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 99 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
79
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $558 $871 $1,205 $2,150
Investor B Shares $663 $945 $1,354 $2,364
Investor C Shares $263 $645 $1,154 $2,553
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $163 $645 $1,154 $2,364
Investor C Shares $163 $645 $1,154 $2,553
80
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO VIRGINIA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF VIRGINIA
o DURATION: 3 TO 6 YEARS
o INCOME POTENTIAL: MODERATE
o RISK POTENTIAL: MODERATE
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Virginia Intermediate Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Virginia
state income taxes consistent with moderate fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE intermediate-term MUNICIPAL SECURITIES that pay interest that is
generally free from federal income tax and Virginia state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between three
and 10 years, and its DURATION will be between three and six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
81
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Virginia Intermediate Municipal Bond Fund has the following
risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Virginia state income tax, but may be subject
to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by
other kinds of securities or from realized capital gains is
generally subject to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
82
<PAGE>
[GRAPHIC]
THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
0.28%* 7.55% 9.66% 6.85% 9.91% -4.47% 13.16% 3.62% 6.63% 5.62%
*Return is from inception (12-2-89) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.08%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 1st quarter 1995: 5.19%
Worst: 1st quarter 1994: -4.10%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN 7-YEAR MUNICIPAL BOND INDEX, a broad-based,
unmanaged index of investment grade bonds with maturities of seven to
eight years. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 1.81% 3.99% 5.95 %
Investor B Shares 1.62% 4.28% 4.77 %
Investor C Shares 3.62% 4.26% 5.28 %
Lehman 7-Year Municipal Bond Index 5.92% 6.80% 7.45%**
</TABLE>
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
83
<PAGE>
[GRAPHIC]
THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC]
WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none1 3.00%2 1.00%3
Redemption fee, as a % of the amount sold none4 none none
ANNUAL FUND OPERATING EXPENSES5
(Expenses that are deducted from the Fund's assets)
Management fees 0.40% 0.40 % 0.40 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.32% 0.32 % 0.32 %
------ -------- --------
Total annual Fund operating expenses 0.97% 1.72 % 1.72 %
Fee waivers and/or reimbursements (0.22)% (0.22) % (0.22) %
------ -------- --------
Total net expenses(6) 0.75% 1.50 % 1.50 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 98 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
84
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $399 $603 $824 $1,458
Investor B Shares $453 $720 $913 $1,813
Investor C Shares $253 $520 $913 $2,012
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $153 $520 $913 $1,813
Investor C Shares $153 $520 $913 $2,012
85
<PAGE>
ABOUT THE STATE MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S MUNICIPAL
FIXED INCOME MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT
DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 93.
[GRAPHIC] COMPARING THE FUNDS
THIS INFORMATION IS DESIGNED TO HELP YOU COMPARE THE TWO VIRGINIA
STATE MUNICIPAL BOND FUNDS.
o WHO SHOULD CONSIDER INVESTING: RESIDENTS OF VIRGINIA
o DURATION: MORE THAN 6 YEARS
o INCOME POTENTIAL: HIGH
o RISK POTENTIAL: HIGH
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Virginia Municipal Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income exempt from federal and Virginia
state income taxes with the potential for principal fluctuation
associated with investments in long-term MUNICIPAL SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 80% of its assets in INVESTMENT
GRADE long-term municipal securities that pay interest that is
generally free from federal income tax and Virginia state income tax.
The Fund may invest up to 20% of its assets in DEBT SECURITIES that are
taxable, including securities that are subject to the federal alternative
minimum tax.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than seven
years, and its DURATION will be more than six years.
When selecting individual investments, the portfolio management team:
o looks at a security's potential to generate both income and price
appreciation
o allocates assets among revenue bonds, general obligation bonds, insured
bonds and PRE-REFUNDED BONDS (bonds that are repaid before their maturity
date), based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
The team also considers other factors. It reviews public policy issues
that may affect the municipal bond market. Securities with different
coupon rates may also represent good investment opportunities based on
supply and demand conditions for bonds
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
86
<PAGE>
[GRAPHIC]
YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING
IN THIS FUND STARTING ON
PAGE 91 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Virginia Municipal Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - This Fund is considered to be NON-
DIVERSIFIED because it invests most of its assets in securities that
pay interest that is free from income tax in one state. The value of
the Fund and the amount of interest it pays could also be affected by
the financial conditions of the state, its public authorities and
local governments. Although the Fund tries to maintain a share price
of $1.00, an investment in the Fund could lose money. AN INVESTMENT
IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
o INTEREST RATE RISK - The prices of FIXED INCOME SECURITIES will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o HOLDING CASH - The Fund may hold cash while it's waiting to make an
investment, as a temporary defensive strategy, or if the portfolio
management team believes that attractive tax-exempt investments are
not available. Any uninvested cash the Fund holds does not earn
income.
o TAX CONSIDERATIONS - Most of the distributions paid by the Fund come
from interest on municipal securities, and are generally free from
federal income tax and Virginia state income tax, but may be subject
to the federal alternative minimum tax, and other state and local
taxes. Any portion of a distribution that comes from income paid by
other kinds of securities or from realized capital gains is
generally subject to federal, state and local taxes.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
87
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
RETURNS SHOWN FOR THE INDEX DO NOT REFLECT SALES CHARGES.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1993 1994 1995 1996 1997 1998
2.07%* -9.53% 19.56% 3.49% 9.25% 5.71%
*Return is from inception (9-22-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.30%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 1st quarter 1995: 8.14%
Worst: 1st quarter 1994: -8.44%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN MUNICIPAL BOND INDEX, a broad-based, unmanaged
index of 8,000 investment grade bonds with long-term maturities. All
dividends are reinvested.
Since
1 year 5 years inception
Investor A Shares 0.65% 4.24% 4.54 %
Investor B Shares 1.03% 4.49% 4.58 %
Investor C Shares 3.97% -- 9.16 %
Lehman Municipal Bond Index 6.48% 6.22% 6.26%**
**From inception of Investor A Shares. The inception dates for classes
shown may vary.
88
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES --
SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL FUND OPERATING EXPENSES
THAT ARE DEDUCTED FROM A FUND'S ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed
on purchases, as a % of offering price 4.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a % of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50 % 0.50 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.63% 0.63 % 0.63 %
------ -------- --------
Total annual Fund operating expenses 1.38% 2.13 % 2.13 %
Fee waivers and/or reimbursements (0.53)% (0.53) % (0.53) %
------ -------- --------
Total net expenses(6) 0.85% 1.60 % 1.60 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 97 for details.
(2)This charge decreases over time. Please see page 99 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 100 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
89
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $558 $842 $1,147 $2,013
Investor B Shares $663 $916 $1,296 $2,228
Investor C Shares $263 $616 $1,096 $2,420
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $163 $616 $1,096 $2,228
Investor C Shares $163 $616 $1,096 $2,420
90
<PAGE>
[GRAPHIC] Other important information
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 6. The following are
some other risks and information you should consider before you invest:
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund can be changed without
shareholder approval. Other investment policies may be changed only
with shareholder approval.
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments that
aren't part of their principal investment strategies. Please refer
to the SAI for more information. The portfolio managers or
management team can also choose not to invest in specific securities
described in this prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn
or because of political or other conditions. A Fund may not achieve
its investment objective while it is investing defensively.
o PORTFOLIO TURNOVER - A Fund that replaces -- or turns over -- more than
100% of its investments in a year is considered to trade frequently.
Frequent trading can result in larger distributions of short-term
CAPITAL GAINS to shareholders. These gains are taxable at higher
rates than long-term capital gains. Frequent trading can also mean
higher brokerage and other transaction costs, which could reduce the
Fund's returns. The Funds generally buy securities for capital
appreciation, investment income, or both, and don't engage in short-
term trading. You'll find the portfolio turnover rate for each Fund
in FINANCIAL HIGHLIGHTS.
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and
that they expect them to be adapted in time. There is no guarantee,
however, that their computer systems will be ready by the year 2000.
If their computer systems are not ready in time, there could be a
negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
91
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] How the Funds are managed
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in the
Nations Funds family, including the State Municipal Bond Funds described in
this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation. Nations Funds
pays BAAI an annual fee for its investment advisory services. The fee is
calculated daily based on the average net assets of each Fund and is paid
monthly. BAAI uses part of this money to pay investment sub-advisers for the
services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after this date.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum
advisory Actual fee paid
fee1 last fiscal year
<S> <C> <C>
Nations California Municipal Bond Fund 0.50% 0.30%
Nations Florida Intermediate Municipal Bond Fund 0.40% 0.30%
Nations Florida Municipal Bond Fund 0.50% 0.37%
Nations Georgia Intermediate Municipal Bond Fund 0.40% 0.29%
Nations Georgia Municipal Bond Fund 0.50% 0.04%
Nations Maryland Intermediate Municipal Bond Fund 0.40% 0.28%
Nations Maryland Municipal Bond Fund 0.50% 0.15%
Nations North Carolina Intermediate Municipal Bond Fund 0.40% 0.31%
Nations North Carolina Municipal Bond Fund 0.50% 0.22%
Nations South Carolina Intermediate Municipal Bond Fund 0.40% 0.33%
Nations South Carolina Municipal Bond Fund 0.50% 0.04%
Nations Tennessee Intermediate Municipal Bond Fund 0.40% 0.17%
Nations Tennessee Municipal Bond Fund 0.50% 0.00%
Nations Texas Intermediate Municipal Bond Fund 0.40% 0.34%
Nations Texas Municipal Bond Fund 0.50% 0.00%
Nations Virginia Intermediate Municipal Bond Fund 0.40% 0.32%
Nations Virginia Municipal Bond Fund 0.50% 0.11%
</TABLE>
(1)These fees are the current contract levels, which in most cases have been
reduced from the contract levels that were in effect during the last fiscal
year.
92
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser, TradeStreet
Investment Associates, Inc., to provide day-to-day portfolio management for
the Funds. TradeStreet functions under the supervision of BAAI and the Boards
of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in the
Nations Funds family. TradeStreet takes a team approach to investment
management. Each team has access to the latest technology and analytical
resources.
TradeStreet is the investment sub-adviser to the Funds. TradeStreet's
Municipal Fixed Income Management Team is responsible for making the
day-to-day investment decisions for each Fund.
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay commissions, distribution (12b-1) and
shareholder servicing fees, and/or other compensation to companies for selling
shares and providing services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.22% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
93
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WE'VE USED THE TERM, INVESTMENT PROFESSIONAL, TO REFER TO THE
PERSON WHO HAS ASSISTED YOU WITH BUYING NATIONS FUNDS. SELLING
AGENT or SERVICING AGENT (SOMETIMES REFERRED TO AS A SELLING
AGENT) MEANS THE COMPANY THAT EMPLOYS YOUR INVESTMENT
PROFESSIONAL. SELLING AND SERVICING AGENTS INCLUDE BANKS,
BROKERAGE FIRMS, MUTUAL FUND DEALERS AND OTHER FINANCIAL
INSTITUTIONS, INCLUDING AFFILIATES OF BANK OF AMERICA.
[GRAPHIC] FOR MORE INFORMATION
ABOUT HOW TO CHOOSE A
SHARE CLASS, CONTACT YOUR
INVESTMENT PROFESSIONAL OR
CALL US AT 1.800.321.7854.
BEFORE YOU INVEST, PLEASE NOTE THAT OVER TIME, DISTRIBUTION
(12B-1) AND SHAREHOLDER SERVICING FEES WILL INCREASE THE COST OF
YOUR INVESTMENT, AND MAY COST YOU MORE THAN ANY SALES CHARGES YOU
MAY PAY. FOR MORE INFORMATION, SEE HOW SELLING AND SERVICING
AGENTS ARE PAID.
[GRAPHIC] Choosing a share class
Before you can invest in the Funds, you'll need to choose a share class. There
are three classes of shares for each Fund offered by this prospectus. Each
class has its own sales charges and fees. The table below compares the charges
and fees of the share classes.
<TABLE>
<CAPTION>
Intermediate
Municipal Bond Funds
Investor A Shares Bond Funds Municipal
<S> <C> <C>
Maximum amount you can buy no limit no limit
Maximum front-end sales charge 3.25% 4.75%
Maximum deferred sales charge1 none none
Redemption fee2 none none
Maximum annual distribution 0.25% distribution 0.25% distribution
and shareholder servicing fees (12b-1)/service fee (12b-1)/service fee
Conversion feature none none
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen months of
buying them. Different charges may apply to purchases made prior to August
1, 1999. Please see page 97 for details.
(2)A 1.00% redemption fee applies to investors who bought $1 million or more of
Investor A Shares of certain Funds between July 31, 1997 and November 15,
1998 and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 97 for details.
<TABLE>
<S> <C> <C>
Investor B Shares
Maximum amount you can buy $250,000 $250,000
Maximum front-end sales charge none none
Maximum deferred sales charge1 3.00% 5.00%
Redemption fee none none
Maximum annual distribution 0.75% distribution 0.75% distribution
and shareholder servicing fees (12b-1) fee (12b-1) fee
0.25% service fee 0.25% service fee
Conversion feature yes yes
</TABLE>
(1)This charge decreases over time. Please see page 98 for details. Different
charges apply to Investor B Shares of certain Funds bought before January 1,
1996 and after July 31, 1997. Please see page 98 for details.
94
<PAGE>
<TABLE>
<CAPTION>
Intermediate
Municipal Bond Funds
Investor C Shares Bond Funds Municipal
<S> <C> <C>
Maximum amount you can buy no limit no limit
Maximum front-end sales charge none none
Maximum deferred sales charge1 1.00% 1.00%
Redemption fee none none
Maximum annual distribution 0.75% distribution 0.75% distribution
and shareholder servicing fees (12b-1) fee (12b-1) fee
0.25% service fee 0.25% service fee
Conversion feature none none
</TABLE>
(1) This charge applies to investors who buy Investor C Shares and sell them
within one year of buying them. Please see page 100 for details.
The share class you choose will depend on how much you're investing, how long
you're planning to stay invested, and how you prefer to pay the sales charge.
The total cost of your investment over the time you expect to hold your shares
will be affected by the distribution (12b-1) and shareholder servicing fees,
as well as by the amount of any front-end sales charge or contingent deferred
sales charge (CDSC) that applies and when you're required to pay the charge.
You should think about these things carefully before you invest.
Investor A Shares have a front-end sales charge, which is deducted when you
buy your shares. This means that a smaller amount is invested in the Funds,
unless you qualify for a waiver or reduction of the sales charge. However,
Investor A Shares have lower ongoing distribution (12b-1) and shareholder
servicing fees than Investor B and Investor C Shares. This means that Investor
A Shares can be expected to pay relatively higher dividends per share.
Investor B Shares have limits on how much you can invest. When you buy
Investor B or Investor C Shares, the full amount is invested in the Funds.
However, you may pay a CDSC when you sell your shares. Over time, Investor B
and Investor C Shares can incur distribution (12b-1) and shareholder servicing
fees that are equal to or more than the front-end sales charge, and the
distribution (12b-1) and shareholder servicing fees you would pay for Investor
A Shares. Although the full amount of your purchase is invested in the Funds,
any positive investment return on this money may be partially or fully offset
by the expected higher annual expenses of Investor B and Investor C Shares.
You should also consider the conversion feature for Investor B Shares, which
is described in ABOUT INVESTOR B SHARES.
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<PAGE>
[GRAPHIC] THE OFFERING PRICE PER SHARE IS THE NET ASSET VALUE PER SHARE PLUS
ANY SALES CHARGE THAT APPLIES.
THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED
BY A FUND EVERY BUSINESS DAY.
[GRAPHIC] ABOUT INVESTOR A SHARES
There is no limit to the amount you can invest in Investor A Shares.
You generally will pay a front-end sales charge when you buy your
shares, or in some cases, a CDSC when you sell your shares.
FRONT-END SALES CHARGE
You'll pay a front-end sales charge when you buy Investor A Shares,
unless:
o you qualify for a waiver of the sales charge. You can find out if you
qualify for a waiver in the section, WHEN YOU MIGHT NOT HAVE TO PAY
A SALES CHARGE
o you're reinvesting distributions
The sales charge you'll pay depends on the Fund you're buying, and the
amount you're investing -- the larger the investment, the smaller the
sales charge.
<TABLE>
<CAPTION>
by selling agents
Sales charge Sales charge as a % of the
as a % of the as a % of the offering price
offering price net asset value Amount retained
Amount you bought per share per share per share
INTERMEDIATE MUNICIPAL
BOND FUNDS
<S> <C> <C> <C>
$ 0-$99,999 3.25% 3.36% 3.00 %
$ 100,000-$249,999 2.50% 2.56% 2.25 %
$ 250,000-$499,999 2.00% 2.04% 1.75 %
$ 500,000-$999,999 1.50% 1.53% 1.25 %
$1,000,000 or more 0.00% 0.00% 1.00%1
MUNICIPAL BOND FUNDS
$ 0-$49,999 4.75% 4.99% 4.25 %
$ 50,000-$99,999 4.50% 4.71% 4.00 %
$ 100,000-$249,999 3.50% 3.63% 3.00 %
$ 250,000-$499,999 2.50% 2.56% 2.25 %
$ 500,000-$999,999 2.00% 2.04% 1.75 %
$1,000,000 or more 0.00% 0.00% 1.00%1
</TABLE>
(1)1.00% on the first $3,000,000, 0.50% on the next $47,000,000, 0.25% on
amounts over $50,000,000. Stephens pays the amount retained by selling
agents on investments of $1,000,000 or more, but may be reimbursed
when a CDSC is deducted if the shares are sold within eighteen months
from the time they were bought. Please see HOW SELLING AND SERVICING
AGENTS ARE PAID for more information.
96
<PAGE>
CONTINGENT DEFERRED SALES CHARGE
If you own or buy $1,000,000 or more of Investor A Shares, there are
two situations when you'll pay a CDSC:
o If you bought your shares before August 1, 1999, and you sell them:
o during the first year you own them, you'll pay a CDSC of 1.00%
o during the second year you own them, you'll pay a CDSC of 0.50%
o If you buy your shares on or after August 1, 1999 and sell them within
18 months of buying them, you'll pay a CDSC of 1.00%.
The CDSC is calculated from the day your purchase is accepted (the
TRADE DATE). We deduct the CDSC from the market value or purchase price
of the shares, whichever is lower.
You won't pay a CDSC on any increase in net asset value since you
bought your shares, or on any shares you receive from reinvested
distributions. We'll sell any shares that aren't subject to the CDSC
first. We'll then sell shares that result in the lowest CDSC.
REDEMPTION FEE
We'll charge a 1% redemption fee on the sale of Investor A Shares if
you bought $1,000,000 or more Investor A Shares between July 31, 1997
and November 15, 1998 and sell them within 18 months of buying them.
The fee is deducted from the amount sold and is paid to the Fund. The
Fund can reduce or cancel the fee at any time. This fee doesn't apply
to Nations California Municipal Bond Fund.
97
<PAGE>
[GRAPHIC] ABOUT INVESTOR B SHARES
You can buy up to $250,000 of Investor B Shares at a time. You don't
pay a sales charge when you buy Investor B Shares, but you may have to
pay a CDSC when you sell them.
CONTINGENT DEFERRED SALES CHARGE
You'll pay a CDSC when you sell your Investor B Shares, unless:
o you bought the shares on or after January 1, 1996 and before August 1,
1997
o you received the shares from reinvested distributions
o you qualify for a waiver of the CDSC. You can find out how to qualify
for a waiver on page 103
The CDSC you pay depends on the Fund you bought, when you bought your
shares, how much you bought in some cases, and how long you held them.
<TABLE>
<CAPTION>
Intermediate Municipal Bond Funds
If you sell your shares
during the following year: You'll pay a CDSC of:
- ---------------------------------- --------------------------------------------------------------------
Shares
you bought
Shares on or after 1/1/1996
you bought Shares you bought between 1/1/1996 Shares
after 8/1/1997 and 11/15/1998 and before you
11/15/1998 in the following amounts: 8/1/1997 bought
------------ -------------------------- ------------ before
$500,000-
$0-$499,999 $999,999
<S> <C> <C> <C> <C> <C>
the first year you own them 3.0% 3.0% 2.0% none 4.0%
the second year you own them 3.0% 2.0% 1.0% none 3.0%
the third year you own them 2.0% 1.0% none none 3.0%
the fourth year you own them 1.0% none none none 2.0%
the fifth year you own them none none none none 2.0%
the sixth year you own them none none none none 1.0%
after six years of owning them none none none none none
</TABLE>
98
<PAGE>
<TABLE>
<CAPTION>
Municipal Bond Funds
If you sell your shares
during the following year: You'll pay a CDSC of:
- ---------------------------------- -----------------------------------------------------------------------
Shares
you bought
Shares on or after 1/1/1996
you bought Shares you bought between 1/1/1996 Shares
after 8/1/1997 and 11/15/1998 and before you
11/15/1998 in the following amounts: 8/1/1997 bought
------------ ----------------------------------- ------------ before
$250,000- $500,000-
$0-$249,999 $499,999 $999,999
<S> <C> <C> <C> <C> <C> <C>
the first year you own them 5.0% 4.0% 3.0% 2.0% none 5.0%
the second year you own them 4.0% 3.0% 2.0% 1.0% none 4.0%
the third year you own them 3.0% 3.0% 1.0% none none 3.0%
the fourth year you own them 3.0% 2.0% none none none 2.0%
the fifth year you own them 2.0% 1.0% none none none 2.0%
the sixth year you own them 1.0% none none none none 1.0%
after six years of owning them none none none none none none
</TABLE>
The CDSC is calculated from the trade date of your purchase. We deduct
the CDSC from the market value or purchase price of the shares,
whichever is lower. We'll sell any shares that aren't subject to the
CDSC first. We'll then sell shares that result in the lowest CDSC.
Your selling agent receives compensation when you buy Investor B
Shares. Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more
information.
ABOUT THE CONVERSION FEATURE
Investor B Shares generally convert automatically to Investor A Shares
according to the following schedule:
<TABLE>
<CAPTION>
Intermediate Municipal Bond Funds
Will convert to Investor A Shares
Investor B Shares you bought after you've owned them for
<S> <C>
after November 15, 1998 eight years
between August 1, 1997
and November 15, 1998
$ 0-$499,999 six years
$ 500,000-$999,999 five years
before August 1, 1997 six years
Municipal Bond Funds
Investor B Shares you bought Will convert to Investor A Shares
after you've owned them for
after November 15, 1998 eight years
between August 1, 1997
and November 15, 1998
$ 0-$249,999 nine years
$ 0-$499,999 six years
$ 500,000-$999,999 five years
before August 1, 1997 nine years
</TABLE>
99
<PAGE>
The conversion feature allows you to benefit from the lower operating
costs of Investor A Shares, which can help increase total returns.
Here's how the conversion works:
o We won't convert your shares if you tell your investment professional,
selling agent or the transfer agent within 90 days before the
conversion date that you don't want your shares to be converted.
Remember, it's in your best interest to convert your shares because
Investor A Shares have lower expenses.
o Shares are converted at the end of the month in which they become
eligible for conversion. Any shares you received from reinvested
distributions on these shares will convert to Investor A Shares at
the same time.
o You'll receive the same dollar value of Investor A Shares as the
Investor B Shares that were converted. No sales charge or other
charges apply.
o Investor B Shares that you received from an exchange of Investor B
Shares of another Nations Fund will convert based on the day you
bought the original shares. Your conversion date may be later if you
exchanged to or from a Nations Funds Money Market Fund.
o Conversions are free from federal tax.
[GRAPHIC] ABOUT INVESTOR C SHARES
There is no limit to the amount you can invest in Investor C Shares.
You don't pay a sales charge when you buy Investor C Shares, but you
may pay a CDSC when you sell them.
CONTINGENT DEFERRED SALES CHARGE
You'll pay a CDSC of 1.00% when you sell Investor C Shares within one
year of buying them, unless:
o you received the shares from reinvested distributions
o you qualify for a waiver of the CDSC. You can find out how to qualify
for a waiver on page 103
The CDSC is calculated from the trade date of your purchase. We deduct
the CDSC from the market value or purchase price of the shares,
whichever is lower. We'll sell any shares that aren't subject to the
CDSC first. We'll then sell shares that result in the lowest CDSC.
Your selling agent receives compensation when you buy Investor C
Shares. Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more
information.
100
<PAGE>
[GRAPHIC] PLEASE CONTACT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION
ABOUT REDUCTIONS AND WAIVERS OF SALES CHARGES.
YOU SHOULD TELL YOUR INVESTMENT PROFESSIONAL THAT YOU MAY QUALIFY
FOR A REDUCTION OR A WAIVER BEFORE BUYING SHARES.
WE CAN CHANGE OR CANCEL THESE TERMS AT ANY TIME. ANY CHANGE OR
CANCELLATION APPLIES ONLY TO FUTURE PURCHASES.
WHEN YOU MIGHT NOT HAVE TO PAY A SALES CHARGE
FRONT-END SALES CHARGES
(Investor A Shares)
There are three ways you can lower the front-end sales charge you pay
on Investor A Shares:
o COMBINE PURCHASES YOU'VE ALREADY MADE
Rights of accumulation allow you to combine the value of Investor A,
Investor B and Investor C Shares you already own with Investor A
Shares you're buying to calculate the sales charge. The sales charge
is based on the total value of the shares you already own, or the
original purchase cost, whichever is higher, plus the value of the
shares you're buying. Index Funds and Money Market Funds, except
Investor B and Investor C Shares of Nations Reserves Money Market
Funds, don't qualify for rights of accumulation.
o COMBINE PURCHASES YOU PLAN TO MAKE
By signing a letter of intent, you can combine the value of shares
you already own with the value of shares you plan to buy over a
13-month period to calculate the sales charge.
o You can choose to start the 13-month period up to 90 days before you
sign the letter of intent.
o Each purchase you make will receive the sales charge that applies to
the total amount you plan to buy.
o If you don't buy as much as you planned within the period, you must pay
the difference between the charges you've paid and the charges
that actually apply to the shares you've bought.
o Your first purchase must be at least 5% of the minimum amount for the
sales charge level that applies to the total amount you plan to
buy.
o If the purchase you've made later qualifies for a reduced sales charge
through the 90-day backdating provisions, we'll make an adjustment
for the lower charge when the letter of intent expires. Any
adjustment will be used to buy additional shares at the reduced
sales charge.
o COMBINE PURCHASES WITH FAMILY MEMBERS
You can receive a quantity discount by combining purchases of
Investor A Shares that you, your spouse and children under age 21
make on the same day. Some distributions or payments from the
dissolution of certain qualified plans also qualify for the quantity
discount. Index Funds and Money Market Funds, except Investor B and
Investor C Shares of Nations Reserves Money Market Funds, don't
qualify.
101
<PAGE>
The following investors can buy Investor A Shares without paying a
front-end sales charge:
o full-time employees and retired employees of Bank of America Corporation
(and its predecessors), its affiliates and subsidiaries and the
immediate families of these people
o banks, trust companies and thrift institutions, acting as fiduciaries
o individuals receiving a distribution from a Bank of America trust or
other fiduciary account may use the proceeds of that distribution to
buy Investor A Shares without paying a front-end sales charge, as
long as the proceeds are invested through a trust account
established with certain trustees and invested in the Funds within
90 days
o Nations Funds' Trustees, Directors and employees of its investment
sub-advisers
o registered broker/dealers that have entered into a Nations Funds dealer
agreement with Stephens may buy Investor A Shares without paying a
front-end sales charge for their investment account only
o registered personnel and employees of these broker/dealers may buy
Investor A Shares without paying a front-end sales charge according
to the internal policies and procedures of their employer as long as
these purchases are made for their own investment purposes
o employees or partners of any service provider to the Funds
o investors who buy through accounts established with certain fee-based
investment advisers or financial planners, including Nations Funds
Personal Investment Planner accounts, wrap fee accounts and other
managed agency/asset allocation accounts
o shareholders of certain funds that reorganized into the Nations Funds
who were entitled to buy shares at net asset value
You can also buy Investor A Shares without paying a sales charge if you
buy the shares within 120 days of selling the same Fund. This is called
the reinstatement privilege. You can invest up to the amount of the
sale proceeds. We'll credit your account with any CDSC paid when you
sold the shares. The reinstatement privilege does not apply to any
shares you bought through a previous reinstatement. First Data,
Stephens or their agents must receive your written request within 120
days after you sell your shares.
Stephens may pay selling agents up to 1.00% of the net asset value of
Investor A Shares bought without a sales charge. Stephens may be
reimbursed through any CDSC that applies.
102
<PAGE>
CONTINGENT DEFERRED SALES CHARGES
(Investor A, Investor B and Investor C Shares)
You won't pay a CDSC on the following transactions:
o shares sold following the death or disability (as defined in the
Internal Revenue Code of 1986, as amended (the tax code)) of a
shareholder, including a registered joint owner
o payments made to pay medical expenses which exceed 7.5% of income, and
distributions made to pay for insurance by an individual who has
separated from employment and who has received unemployment
compensation under a federal or state program for at least 12 weeks
o shares sold under our right to liquidate a shareholder's account,
including instances where the aggregate net asset value of Investor
A, Investor B or Investor C Shares held in the account is less than
the minimum account size
o withdrawals made under the Automatic Withdrawal Plan described in
BUYING, SELLING AND EXCHANGING SHARES, if the total withdrawals of
Investor A, Investor B or Investor C Shares made in a year are less
than 12% of the total value of those shares in your account. A CDSC
may only apply to Investor A Shares if you bought more than
$1,000,000
We'll also waive the CDSC on the sale of Investor A or Investor C
Shares bought before September 30, 1994 by current or retired employees
of Bank of America and its affiliates, or by current or former trustees
or directors of the Nations Funds or other management companies managed
by Bank of America.
You won't pay a CDSC on the sale of Investor B or Investor C Shares if
you reinvest any of the proceeds in the same Fund within 120 days of
the sale. This is called the reinstatement privilege. You can invest up
to the amount of the sale proceeds. We'll credit your account with any
CDSC paid when you sold the shares. The reinstatement privilege does
not apply to any shares you bought through a previous reinstatement.
First Data, Stephens or their agents must receive your written request
within 120 days after you sell your shares.
103
<PAGE>
[GRAPHIC] WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
BUYING THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] Buying, selling and exchanging shares
You can invest in the Funds through your selling agent or directly from
Nations Funds.
We encourage you to consult with an investment professional who can open an
account for you with a selling agent and help you with your investment
decisions. Once you have an account, you can buy, sell and exchange shares by
contacting your investment professional or selling agent. They will look after
any paperwork that's needed to complete a transaction and send your order to
us.
You should also ask your selling agent about its limits, fees and policies for
buying, selling and exchanging shares, which may be different from those
described here, and about its related programs or services.
The table on the next page summarizes some key information about buying,
selling and exchanging shares. You'll find sales charges and other fees that
apply to these transactions in CHOOSING A SHARE CLASS.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. Please contact your
investment professional, or call us at 1.800.321.7854 if you have any
questions or you need help placing an order.
104
<PAGE>
<TABLE>
<CAPTION>
Ways to
buy, sell or
exchange
-----------------
<S> <C>
Buying shares In a lump sum
Using our
Systematic
Investment Plan
-----------------
Selling shares In a lump sum
Using our
Automatic
Withdrawal Plan
-----------------
Exchanging shares In a lump sum
Using our
Automatic
Exchange
Feature
<CAPTION>
How much you can buy,
sell or exchange Other things to know
--------------------------------------- ------------------------------------------------------
<S> <C> <C>
Buying shares minimum initial investment: There is no limit to the amount you can invest
o $1,000 for regular accounts in Investor A and C Shares. You can invest up to
o $250 for certain fee-based $250,000 in Investor B Shares at a time.
investment accounts
minimum additional investment:
o $100 for all accounts
minimum initial investment: You can buy shares monthly, twice a month or
o $100 quarterly, using automatic transfers from your
minimum additional investment: bank account.
o $50
-------
Selling shares o you can sell up to $50,000 of your We'll deduct any CDSC from the amount you're
shares by telephone, otherwise selling and send you or your selling agent the
there are no limits to the amount balance, usually within three business days of
you can sell receiving your order.
o other restrictions may apply to If you paid for your shares with a check that
withdrawals from retirement plan wasn't certified, we'll hold the sale proceeds
accounts when you sell those shares for at least 15 days
after the trade date of the purchase, or until the
check has cleared.
o minimum $25 per withdrawal Your account balance must be at least $10,000
- -------------------- ---------------------------------------
to set up the plan. You can make withdrawals
monthly, twice a month or quarterly. We'll send
your money by check or deposit it directly to
your bank account. No CDSC is deducted if you
withdraw 12% or less of the value of your
shares in a class.
------------------------------------------------------
Exchanging shares o minimum $1,000 per exchange You can exchange your Investor A Shares for
Investor A Shares of any other Nations Fund,
except Index Funds. You won't pay a front-end
sales charge, CDSC or redemption fee on the
shares you're exchanging.
You can exchange your Investor B Shares for:
o Investor B Shares of any other Nations Fund,
except Nations Funds Money Market Funds
o Investor C Shares of Nations Funds Money
Market Funds (before October 1, 1999)
o Investor B Shares of Nations Reserves
Money Market Funds (on or after October 1,
1999)
You won't pay a CDSC on the shares you're
exchanging.
You can exchange your Investor C Shares for:
o Investor C Shares of any other Nations Fund,
except Nations Funds Money Market Funds
o Daily Shares of Nations Funds Money Market
Funds (before October 1, 1999)
o Investor C Shares of Nations Reserves
Money Market Funds (on or after October 1,
1999)
If you received Investor C Shares of a Fund from
an exchange of Investor A Shares of a Managed
Index Fund, you can also exchange these
shares for Investor A Shares of an Index Fund.
You won't pay a CDSC on the shares you're
exchanging.
o minimum $25 per exchange This feature is not available for Investor B
Shares. You must already have an investment
in the Funds you want to exchange. You can
make exchanges monthly or quarterly.
</TABLE>
105
<PAGE>
[GRAPHIC] A BUSINESS DAY IS ANY DAY THAT THE NEW YORK STOCK EXCHANGE (NYSE)
IS OPEN. A BUSINESS DAY ENDS AT THE CLOSE OF REGULAR TRADING ON
THE NYSE, USUALLY AT 4:00 P.M. EASTERN TIME. IF THE NYSE CLOSES
EARLY, THE BUSINESS DAY ENDS AS OF THE TIME THE NYSE CLOSES.
THE NYSE IS CLOSED ON WEEKENDS AND ON THE FOLLOWING NATIONAL
HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY, PRESIDENTS'
DAY, GOOD FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY,
THANKSGIVING DAY AND CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share for each class of each
Fund at the end of each business day. First, we calculate the net asset value
for each class of a Fund by determining the value of the Fund's assets in the
class and then subtracting its liabilities. Next, we divide this amount by the
number of shares that investors are holding in the class.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. The prices reported on stock exchanges and securities
markets around the world are usually used to value securities in a Fund. If
prices aren't readily available, we'll base the price of a security on its
fair market value. We use the amortized cost method, which approximates market
value, to value short-term investments maturing in 60 days or less.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents before the end of a business
day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will
receive that day's net asset value per share. Orders received after the end of
a business day will receive the next business day's net asset value per share.
The business day that applies to your order is also called the TRADE DATE. We
may refuse any order to buy or exchange shares. If this happens, we'll return
any money we've received to your selling agent.
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone if you complete the
telephone authorization section of our account application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account, you
must have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be
responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions are
genuine. For example, we require proof of your identification before
we will act on instructions received by telephone and may record
telephone conversations. If we and our service providers don't take
these steps, we may be liable for any losses from unauthorized or
fraudulent instructions.
o Telephone orders may be difficult to complete during periods of
significant economic or market change.
106
<PAGE>
[GRAPHIC]
THE OFFERING PRICE PER SHARE IS THE NET ASSET VALUE PER SHARE PLUS
ANY SALES CHARGE THAT APPLIES.
THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED
BY A FUND EVERY BUSINESS DAY.
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o You buy Investor A Shares at the offering price per share. You buy
Investor B and Investor C Shares at net asset value per share.
o If we don't receive your money within three business days of
receiving your order, we'll refuse the order.
o Selling agents are responsible for sending orders to us and
ensuring we your money on time.
o Shares you buy are recorded on the books of the Fund. We don't
issue certificates unless you ask for them in writing, and we
don't issue certificates for fractions of shares.
MINIMUM INITIAL INVESTMENT
The minimum initial amount you can buy is usually $1,000.
If you're buying shares through one of the following accounts or plans,
the minimum initial amount you can buy is:
o $250 for accounts set up with some fee-based investment advisers
or financial planners, including wrap fee accounts and other
managed accounts
o $100 using our Systematic Investment Plan
MINIMUM ADDITIONAL INVESTMENT
You can make additional purchases of $100, or $50 if you use our
Systematic Investment Plan.
SYSTEMATIC INVESTMENT PLAN
You can make regular purchases of $50 or more using automatic transfers from
your bank account to the Funds you choose. You can contact your investment
professional or us to set up the plan.
Here's how the plan works:
o You can buy shares twice a month, monthly or quarterly.
o You can choose to have us transfer your money on or about the 15th or
the last day of the month.
o Some exceptions may apply to employees of Bank of America and its
affiliates, and to plans set up before August 1, 1997. For details,
please contact your investment professional.
107
<PAGE>
[GRAPHIC] FOR MORE INFORMATION
ABOUT TELEPHONE ORDERS,
SEE PAGE 106.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We'll deduct any CDSC from the amount you're selling and send you
the balance.
o If you're selling your shares through a selling agent, we'll
normally send the sale proceeds by federal funds wire within
three business days after Stephens, First Data or their agents
receive your order. Your selling agent is responsible for
depositing the sale proceeds to your account on time.
o If you're selling your shares directly through us, we'll send the
sale proceeds by mail or wire them to your bank account within
three business days after the Fund receives your order.
o You can sell up to $50,000 of shares by telephone if you qualify
for telephone orders.
o If you paid for your shares with a check that wasn't certified,
we'll hold the sale proceeds when you sell those shares for at
least 15 days after the trade date of the purchase, or until the
check has cleared.
o If you hold any shares in certificate form, you must sign the
certificates (or send a signed stock power with them) and send
them to First Data. Your signature must be guaranteed unless
you've made other arrangements with us. We may ask for any other
information we need to prove that the order is properly
authorized.
o Under certain circumstances allowed under the Investment Company
Act of 1940 (1940 Act), we can pay you in securities or other
property when you sell your shares, or delay payment of the sale
proceeds for up to seven days.
We may sell your shares:
o if the value of your account falls below $500. We'll give you 60
days notice in writing if we're going to do this
o if your selling agent tells us to sell your shares under
arrangements made between the selling agent and its customers
o under certain other circumstances allowed under the 1940 Act
108
<PAGE>
[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan lets you withdraw $25 or more every month, every
quarter or every year. You can contact your investment professional or us to
set up the plan.
Here's how the plan works:
o Your account balance must be at least $10,000 to set up the plan.
o If you set up the plan after you've opened your account, your
signature must be guaranteed.
o You can choose to have us transfer your money on or about the 15th
or the 25th of the month.
o You won't pay a CDSC on Investor A, Investor B or Investor C Shares
if you withdraw 12% or less of the value of those shares in a
year. Otherwise, we'll deduct any CDSC from the withdrawals.
o We'll send you a check or deposit the money directly to your bank
account.
o You can cancel the plan by giving your selling agent or us 30 days
notice in writing.
It's important to remember that if you withdraw more than your investment in
the Fund is earning, you'll eventually use up your original investment.
[GRAPHIC] EXCHANGING SHARES
You can sell shares of a Fund to buy shares of another Nations Fund.
This is called an exchange. You might want to do this if your
investment goals or tolerance for risk changes.
Here's how exchanges work:
o You must exchange at least $1,000, or $25 if you use our Automatic
Exchange Feature.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o You may only make an exchange into a Fund that is legally sold in
your state of residence.
o You generally may only make an exchange into a Fund that is
accepting investments.
o We may limit the number of exchanges you can make within a
specified period of time.
o We may change or cancel your right to make an exchange by giving
the amount of notice required by regulatory authorities
(generally 60 days for a material change or cancellation).
109
<PAGE>
o You cannot exchange any shares you own in certificate form until
First Data has received the certificate and deposited the shares
to your account.
EXCHANGING INVESTOR A SHARES
You can exchange Investor A Shares of a Fund for Investor A Shares of
any other Nations Fund, except Index Funds.
Here are some rules for exchanging Investor A Shares:
o You won't pay a front-end sales charge on the shares of the Fund
you're exchanging.
o You won't pay a CDSC on the shares you're exchanging. Any CDSC will
be deducted later on when you sell the shares you received from
the exchange. The CDSC at that time will be based on the period
from when you bought the original shares until when you sold the
shares you received from the exchange.
o You won't pay a redemption fee on the shares you're exchanging. Any
redemption fee will be deducted later on when you sell the shares
you received from the exchange. Any redemption fee will be paid
to the original Fund.
EXCHANGING INVESTOR B SHARES
You can exchange Investor B Shares of a Fund for:
o Investor B Shares of any other Nations Fund, except Nations Funds Money
Market Funds
o Investor C Shares of Nations Funds Money Market Funds (before October
1, 1999)
o Investor B Shares of Nations Reserves Money Market Funds (on or after
October 1, 1999)
You won't pay a CDSC on the shares you're exchanging. Any CDSC will be
deducted later on when you sell the shares you received from the
exchange. The CDSC will be based on the period from when you bought the
original shares until you sold the shares you received from the
exchange.
If you received Investor C Shares of a Nations Funds Money Market Fund
through an exchange of Investor B Shares of a Fund before October 1,
1999, a CDSC may apply when you sell your Investor C Shares. The CDSC
will be based on the period from when you bought the original shares
until you exchanged them.
110
<PAGE>
EXCHANGING INVESTOR C SHARES
You can exchange Investor C Shares of a Fund for:
o Investor C Shares of any other Nations Fund, except Nations Funds Money
Market Funds
o Daily Shares of Nations Funds Money Market Funds (before October 1,
1999)
o Investor C Shares of Nations Reserves Money Market Funds (on or after
October 1, 1999)
If you received Investor C Shares of a Fund from an exchange of
Investor A Shares of a Managed Index Fund, you can also exchange these
shares for Investor A Shares of an Index Fund.
You won't pay a CDSC on the shares you're exchanging. Any CDSC will be
deducted later on when you sell the shares you received from the
exchange. The CDSC will be based on the period from when you bought the
original shares until you sold the shares you received from the
exchange.
If you received Daily Shares of a Nations Funds Money Market Fund
through an exchange of Investor C Shares of a Fund before October 1,
1999, a CDSC may apply when you sell your Daily Shares. The CDSC will
be based on the period from when you bought the original shares until
you exchanged them.
AUTOMATIC EXCHANGE FEATURE
The Automatic Exchange Feature lets you exchange $25 or more of Investor A or
Investor C Shares every month or every quarter. You can contact your
investment professional or us to set up the plan.
Here's how automatic exchanges work:
o Send your request to First Data in writing or call 1.800.321.7854.
o You must already have an investment in the Funds you want to exchange.
o You can choose to have us transfer your money on or about the 15th or the
last day of the month.
o The rules for making exchanges apply to automatic exchanges.
111
<PAGE>
[GRAPHIC] THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED AS TO AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE BECAUSE
IT'S PAID THROUGH A PLAN APPROVED UNDER RULE 12B-1 UNDER THE 1940
ACT.
YOUR SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
[GRAPHIC]
How selling and servicing agents are paid
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
COMMISSIONS
Your selling agent may receive an up-front commission (reallowance) when you
buy shares of a Fund. The amount of this commission depends on which share
class you choose:
o up to 4.25% of the offering price per share of Investor A Shares. The
commission is paid from the sales charge we deduct when you buy your
shares
o up to 4.00% of the net asset value per share of Investor B Shares. The
commission is not deducted from your purchase -- we pay your selling
agent directly
o up to 1.00% of the net asset value per share of Investor C Shares. The
commission is not deducted from your purchase -- we pay your selling
agent directly
If you buy Investor B or Investor C Shares you will be subject to higher
distribution (12b-1) and shareholder servicing fees and may be subject to a
CDSC when you sell your shares.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES
Stephens and selling and servicing agents may be compensated for selling
shares and providing services to investors under distributions and shareholder
and servicing plans.
The amount of the fee depends on the class of shares you own:
<TABLE>
<CAPTION>
Maximum annual distribution (12b-1)
and shareholder servicing fees
(as an annual % of average daily net assets)
<S> <C>
Investor A Shares 0.25% combined distribution (12b-1) and shareholder servicing fee
Investor B Shares 0.75% distribution (12b-1) fee, 0.25% shareholder servicing fee
Investor C Shares 0.75% distribution (12b-1) fee, 0.25% shareholder servicing fee
</TABLE>
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Funds' assets on an ongoing basis, they will increase the cost of
your investment over time, and may cost you more than any sales charges you
may pay.
The Funds pay these fees to Stephens and to eligible selling and servicing
agents for as long as the plans continue. We may reduce or discontinue
payments at any time.
112
<PAGE>
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale, promotion
and marketing of the Funds
o additional amounts on all sales of shares:
o up to 1.00% of the offering price per share of Investor A Shares
o up to 1.00% of the net asset value per share of Investor B Shares
o up to 1.00% of the net asset value per share of Investor C Shares
o non-cash compensation like trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other
entertainment, opportunities to participate in golf or other outings and
gift certificates for meals or merchandise
This compensation, which is not paid by the Funds, is discretionary and may be
available only to selected selling and servicing agents. For example, Stephens
sometimes sponsors promotions involving Banc of America Investments, Inc., an
affiliate of BAAI, and certain other selling or servicing agents. Selected
selling and servicing agents also may receive compensation for opening a
minimum number of accounts.
BAAI also may pay amounts from its own assets to Stephens or to selling or
servicing agents for services they provide.
113
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] Distributions and taxes
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends
paid on COMMON STOCKS.
o A fund can also have CAPITAL GAIN if the value of its investments
increases. If a fund sells an investment at a gain, the gain is
realized. If a fund continues to hold the investment, any gain is
unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gain to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gain to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
All of the Funds distribute any net realized capital gain at least once a
year. The Funds declare distributions of net investment income daily and pay
them monthly.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses. Each time a distribution is made,
the net asset value per share of the share class is reduced by the amount of
the distribution.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover or by calling us
at 1.800.321.7854.
We generally pay cash distributions within five business days after the end of
the month, quarter or year in which the distribution was made. If you sell all
of your shares, we'll pay any distribution that applies to those shares in
cash within five business days after the sale was made.
If you buy shares of a Fund shortly before it makes a distribution, you will,
in effect, receive part of your purchase back in the distribution, which may
be subject to tax. Similarly, if you buy shares of a Fund that holds
securities with unrealized capital gain, you will, in effect, receive part of
your purchase back if and when the Fund sells those securities and distributes
the gain. This distribution is subject to tax. Some Funds have built up, or
have the potential to build up, high levels of unrealized capital gain.
114
<PAGE>
[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT
TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions that come from a Fund's tax-exempt interest income are generally
free from federal income tax. These distributions are generally not subject to
state income tax (or other applicable state tax, like the Florida intangible
personal property tax) if a Fund primarily invests in securities from that
state and its subdivisions. For example, you generally won't be subject to
California state personal income tax on distributions that come from Nations
California Municipal Bond Fund's investments in California state and municipal
debt obligations. You may, however, be subject to other state and local taxes
on these distributions. A portion of these distributions may also be subject
to the federal alternative minimum tax. Texas doesn't impose state income tax.
Any distributions that come from taxable income or realized capital gain are
generally subject to tax. Distributions that come from taxable income and any
net short-term capital gain (generally the excess of net short-term capital
gain over net long-term capital loss) generally are taxable to you as ordinary
income. Distributions of net capital gain (generally the excess of net
long-term capital gain over net short-term capital loss) generally are taxable
to you as net capital gain. Corporate shareholders will not be able to deduct
any distributions from a Fund when determining their taxable income.
In general, any taxable distributions are taxable to you when paid, whether
they are paid in cash or automatically reinvested in additional shares of the
Fund. However, any distributions declared in October, November or December of
one year and distributed in January of the following year will be taxable as
if they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any taxable
distributions and redemption proceeds paid to you (including amounts deemed to
be paid for "in kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you're otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
115
<PAGE>
TAXATION OF REDEMPTIONS AND EXCHANGES
Your redemptions (including redemptions "in kind") and exchanges of Fund
shares will usually result in a taxable capital gain or loss, depending on the
amount you receive for your shares (or are deemed to receive in the case of
exchanges) and the amount you paid (or are deemed to have paid) for them.
[GRAPHIC] Financial highlights
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. The total investment return line
indicates how much an investment in the Fund would have earned, assuming all
dividends and distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The
independent accountant's report and Nations Funds financial statements are
incorporated by reference into the SAI. Financial Highlights for Investor C
Shares of Nations California Municipal Bond Fund are not provided because this
class of shares had not yet commenced operations during the period indicated.
Please see the back cover to find out how you can get a copy.
116
<PAGE>
NATIONS CALIFORNIA MUNICIPAL
BOND FUND (SUCCESSOR TO THE PACIFIC HORIZON CALIFORNIA MUNICIPAL BOND FUND)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INVESTOR A SHARES* PERIOD ENDED YEAR ENDED
05/14/99 02/28/99(D)
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 7.60 $ 7.64
Net investment income 0.07 0.34
Net realized and unrealized gain (loss) on
investments (0.10) 0.10
Net increase in net asset value from operations (0.03) 0.44
DISTRIBUTIONS:
Dividends from net investment income (0.07) (0.34)
Distributions from net realized capital gains -- (0.14)
Total dividends and distributions (0.07) (0.48)
Net asset value, end of period $ 7.50 $ 7.60
TOTAL RETURN (EXCLUDES SALES CHARGE) (0.42)%(c) 5.94%
================================================= ======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 206 $ 219
Ratio of expenses to average net assets 0.93%(b) 0.93%
Ratio of net investment income to average net
assets 4.40%(b) 4.42%
Ratio of expenses to average net assets** 0.96%(b) 0.93%(e)****
Ratio of net investment income to average net
assets** 4.37%(b) 4.42%(e)****
Portfolio turnover rate 1%(c) 42%
<CAPTION>
INVESTOR A SHARES* YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
02/28/98 02/28/97(A) 02/29/96 02/28/95 02/28/94
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 7.35 $ 7.45 $ 7.12 $ 7.49 $ 7.51
Net investment income 0.35 0.36 0.37 0.38 0.38
Net realized and unrealized gain (loss) on
investments 0.29 (0.05) 0.33 (0.37) 0.04
Net increase in net asset value from operations 0.64 0.31 0.70 0.01 0.42
DISTRIBUTIONS:
Dividends from net investment income (0.35) (0.36) (0.37) (0.38) (0.38)
Distributions from net realized capital gains -- (0.05) -- -- (0.06)
Total dividends and distributions (0.35) (0.41) (0.37) (0.38) (0.44)
Net asset value, end of period $ 7.64 $ 7.35 $ 7.45 $ 7.12 $ 7.49
TOTAL RETURN (EXCLUDES SALES CHARGE) 9.18 % 4.29 % 10.12 % 0.36% 5.65%
================================================= ======== ======== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 214 $ 221 $ 221 $ 195 $ 245
Ratio of expenses to average net assets 0.90 % 0.90 % 0.94 % 0.95% 0.96%
Ratio of net investment income to average net
assets 4.74 % 4.88 % 5.11 % 5.43% 4.96%
Ratio of expenses to average net assets** 1.06%*** 1.10%*** 1.14%*** 1.15% 1.11%
Ratio of net investment income to average net
assets** 4.58 % 4.68 % 4.91 % 5.23% 4.81%
Portfolio turnover rate 28% 34% 57% 20% 15%
</TABLE>
* Investor A Shares of Nations California Municipal
Bond Fund were formerly A Shares of the Pacific
Horizon California Municipal Bond Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
*** During the years ended February 28, 1998 and
1997 and February 29, 1996, the Portfolio received
credits from its custodian for interest earned on
uninvested balances which were used to offset
custodian fees and expenses. If such credits had not
occurred, the expense ratios would have been as
indicated. The ratio of net investment income was
not affected.
**** Fees paid to third parties had no effect on the
ratios.
(a) As of July 22, 1996, the Fund designated the
existing series of shares as "A" Shares.
(b) Annualized.
(c) Not annualized.
(d) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationsBank Corporation.
(e) There were no fee waivers or expense
reimbursements during the year.
117
<PAGE>
NATIONS CALIFORNIA MUNICIPAL
BOND FUND (SUCCESSOR TO THE PACIFIC HORIZON CALIFORNIA MUNICIPAL BOND FUND)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INVESTOR B SHARES* PERIOD ENDED PERIOD ENDED
05/14/99 02/28/99(A)(B)
<S> <C> <C>
Net asset value, beginning of period $ 7.61 $ 7.61
Net investment income 0.06 0.16
Net realized and unrealized gain (loss) on
investments (0.10) 0.14
Net increase (decrease) in net asset value from
operations (0.04) 0.30
DISTRIBUTIONS:
Dividends from net investment income (0.06) (0.16)
Distributions from net realized capital gains -- (0.14)
Total dividends and distributions (0.06) (0.30)
Net asset value, end of period $ 7.51 $ 7.61
TOTAL RETURN (EXCLUDES SALES CHARGE) (0.57)%(e) 4.09 %(e)
================================================ ======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (millions) $ 3 $ 2
Ratio of expenses to average net assets 1.66%(d) 1.70 %(c)(d)
Ratio of net investment income to average net
assets 3.63%(d) 3.67 %(c)(d)
Ratio of expenses to average net assets** 1.69%(d) 1.71%***(c)(d)
Ratio of net investment income to average net
assets** 3.60%(d) 3.67%***(c)(d)
Portfolio turnover rate 1%(e) 42%
</TABLE>
* Investor B Shares of Nations California Municipal
Bond Fund were formerly B Shares of the Pacific
Horizon California Municipal Bond Fund.
** During the period, certain fees were voluntarily
reduced and/or reimbursed. If such voluntary fee
reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
*** During the period ended February 28, 1999, the
Portfolio received credits from its custodian for
interest earned on uninvested balances which were
used to offset custodian fees and expenses. If such
credits had not occurred, the expense ratios would
have been as indicated. The ratio of net investment
income was not affected.
(a) Period from July 15, 1998 (inception date) to
February 28, 1999.
(b) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationsBank Corporation.
(c) There were no fee waivers or expense
reimbursements during the year.
(d) Annualized.
(e) Not annualized.
118
<PAGE>
NATIONS FLORIDA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.77 $ 10.40 $ 10.46
Net investment income 0.48 0.48 0.47
Net realized and unrealized gain/(loss) on
investments 0.02 0.37 ( 0.06)
Net increase/(decrease) in net asset value from
operations 0.50 0.85 0.41
DISTRIBUTIONS:
Dividends from net investment income ( 0.48) ( 0.48) ( 0.47)
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.48) ( 0.48) ( 0.47)
Net asset value, end of period $ 10.79 $ 10.77 $ 10.40
TOTAL RETURN++ 4.74% 8.34% 4.01%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $12,783 $7,205 $2,142
Ratio of operating expenses to average net assets 0.70% 0.70%(a) 0.70%(a)
Ratio of net investment income to average net
assets 4.45% 4.54% 4.52%
Portfolio turnover rate 14% 13% 16%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.97% 0.96% 1.01%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.63 $ 9.61 $ 10.50
Net investment income 0.16 0.46 0.43
Net realized and unrealized gain/(loss) on
investments ( 0.17) 1.02 ( 0.88)
Net increase/(decrease) in net asset value from
operations ( 0.01) 1.48 ( 0.45)
DISTRIBUTIONS:
Dividends from net investment income ( 0.16) ( 0.46) ( 0.43)#
Distributions from net realized capital gains -- -- ( 0.01)
Total dividends and distributions ( 0.16) ( 0.46) ( 0.44)
Net asset value, end of period $ 10.46 $ 10.63 $ 9.61
TOTAL RETURN++ ( 0.13)% 15.68% ( 4.43)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,029 $2,292 $2,114
Ratio of operating expenses to average net assets 0.70%+(a) 0.75%(a) 0.73%(a)
Ratio of net investment income to average net
assets 4.46%+ 4.50% 4.26%
Portfolio turnover rate 18% 27% 34%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.06%+ 1.01% 0.94%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS FLORIDA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.77 $ 10.40 $ 10.46
Net investment income 0.42 0.43 0.44
Net realized and unrealized gain/(loss) on
investments 0.02 0.37 ( 0.06)
Net increase/(decrease) in net asset value from
operations 0.44 0.80 0.38
DISTRIBUTIONS:
Dividends from net investment income ( 0.42) ( 0.43) ( 0.44)
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.42) ( 0.43) ( 0.44)
Net asset value, end of period $ 10.79 $ 10.77 $ 10.40
TOTAL RETURN++ 4.11% 7.80% 3.70%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $5,090 $3,606 $3,488
Ratio of operating expenses to average net assets 1.30% 1.20%(a) 1.00%(a)
Ratio of net investment income to average net
assets 3.85% 4.04% 4.22%
Portfolio turnover rate 14% 13% 16%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.72% 1.46% 1.31%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.63 $ 9.61 $ 10.50
Net investment income 0.15 0.43 0.40
Net realized and unrealized gain/(loss) on
investments ( 0.17) 1.02 ( 0.88)
Net increase/(decrease) in net asset value from
operations ( 0.02) 1.45 ( 0.48)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.43) ( 0.40)#
Distributions from net realized capital gains -- -- ( 0.01)
Total dividends and distributions ( 0.15) ( 0.43) ( 0.41)
Net asset value, end of period $ 10.46 $ 10.63 $ 9.61
TOTAL RETURN++ ( 0.23)% 15.34% ( 4.73)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $4,001 $4,775 $4,691
Ratio of operating expenses to average net assets 1.00%+(a) 1.05%(a) 1.05%(a)
Ratio of net investment income to average net
assets 4.16%+ 4.20% 3.94%
Portfolio turnover rate 18% 27% 34%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.36%+ 1.31% 1.26%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
119
<PAGE>
NATIONS FLORIDA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INVESTOR C SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99 03/31/98(C) 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.77 $ 10.40 $ 10.46
Net investment income 0.41 0.43 0.44
Net realized and unrealized gain/(loss) on
investments 0.03 0.37 ( 0.06)
Net increase/(decrease) in net asset value from
operations 0.44 0.80 0.38
DISTRIBUTIONS:
Dividends from net investment income ( 0.42) ( 0.43) ( 0.44)
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.42) ( 0.43) ( 0.44)
Net asset value, end of period $ 10.79 $ 10.77 $ 10.40
TOTAL RETURN++ 4.10% 7.80% 3.71%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,416 $ 188 $ 272
Ratio of operating expenses to average net assets 1.36% 1.20%(a) 1.00%(a)
Ratio of net investment income to average net
assets 3.79% 4.04% 4.22%
Portfolio turnover rate 14% 13% 16%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.72% 1.46% 1.31%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.63 $ 9.61 $ 10.50
Net investment income 0.15 0.43 0.39
Net realized and unrealized gain/(loss) on
investments ( 0.17) 1.02 ( 0.88)
Net increase/(decrease) in net asset value from
operations ( 0.02) 1.45 ( 0.49)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.43) ( 0.39)#
Distributions from net realized capital gains -- -- ( 0.01)
Total dividends and distributions ( 0.15) ( 0.43) ( 0.40)
Net asset value, end of period $ 10.46 $ 10.63 $ 9.61
TOTAL RETURN++ ( 0.23)% 15.34% ( 4.81)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 275 $ 277 $ 614
Ratio of operating expenses to average net assets 1.00%+(a) 1.05%(a) 1.13%(a)
Ratio of net investment income to average net
assets 4.16%+ 4.20% 3.86%
Portfolio turnover rate 18% 27% 34%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.36%+ 1.31% 1.34%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
120
<PAGE>
NATIONS FLORIDA MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.99 $ 9.48 $ 9.47
Net investment income 0.46 0.46 0.46
Net realized and unrealized gain/(loss) on
investments 0.00 0.51 0.01
Net increase/(decrease) in net asset value from
operations 0.46 0.97 0.47
DISTRIBUTIONS:
Dividends from net investment income (0.46) (0.46) (0.46)
Net asset value, end of period $ 9.99 $ 9.99 $ 9.48
TOTAL RETURN++ 4.69% 10.38% 5.09%
=================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $65,373 $2,027 $1,781
Ratio of operating expenses to average net assets 0.80%(a) 0.80%(a) 0.80%(a)
Ratio of net investment income to average net
assets 4.60% 4.65% 4.87%
Portfolio turnover rate 16% 19% 23%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.10% 1.10% 1.13%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.76 $ 8.40 $ 9.98
Net investment income 0.15 0.49 0.47
Net realized and unrealized gain/(loss) on
investments (0.29) 1.36 ( 1.58)
Net increase/(decrease) in net asset value from
operations (0.14) 1.85 ( 1.11)
DISTRIBUTIONS:
Dividends from net investment income (0.15) (0.49) ( 0.47)
Net asset value, end of period $ 9.47 $ 9.76 $ 8.40
TOTAL RETURN++ (1.40)% 22.45% (11.35)%
=================================================== ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,836 $1,787 $ 1,024
Ratio of operating expenses to average net assets 0.80%+(a) 0.59%(a) 0.39%+(a)
Ratio of net investment income to average net
assets 4.83%+ 5.24% 5.37%+
Portfolio turnover rate 7% 13% 46%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.16%+ 1.15% 1.09%+
</TABLE>
* Nations Florida Municipal Bond Fund Investor A
Shares commenced operations on December 10, 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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS FLORIDA MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.99 $ 9.48 $ 9.47
Net investment income 0.40 0.40 0.41
Net realized and unrealized gain/(loss) on
investments 0.00 0.51 0.01
Net increase/(decrease) in net asset value from
operations 0.40 0.91 0.42
DISTRIBUTIONS:
Dividends from net investment income (0.40) (0.40) (0.41)
Net asset value, end of period $ 9.99 $ 9.99 $ 9.48
TOTAL RETURN++ 4.01% 9.71% 4.52%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $15,435 $17,048 $19,751
Ratio of operating expenses to average net assets 1.45%(a) 1.42%(a) 1.35%(a)
Ratio of net investment income to average net
assets 3.95% 4.03% 4.32%
Portfolio turnover rate 16% 19% 23%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.85% 1.72% 1.68%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.76 $ 8.40 $ 9.73
Net investment income 0.14 0.44 0.45
Net realized and unrealized gain/(loss) on
investments (0.29) 1.36 (1.33)
Net increase/(decrease) in net asset value from
operations (0.15) 1.80 (0.88)
DISTRIBUTIONS:
Dividends from net investment income (0.14) (0.44) (0.45)
Net asset value, end of period $ 9.47 $ 9.76 $ 8.40
TOTAL RETURN++ (1.58)% 21.78% (9.37)%
==================================================== ======== ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $23,947 $25,398 $19,868
Ratio of operating expenses to average net assets 1.35%+(a) 1.14%(a) 0.96%(a)
Ratio of net investment income to average net
assets 4.28%+ 4.69% 4.80%
Portfolio turnover rate 7% 13% 46%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.71%+ 1.70% 1.66%
</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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
121
<PAGE>
NATIONS FLORIDA MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INVESTOR C SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99(C) 03/31/98(C) 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.99 $ 9.48 $ 9.47
Net investment income 0.37 0.41 0.44
Net realized and unrealized gain/(loss) on
investments 0.03 0.51 0.01
Net increase/(decrease) in net asset value from
operations 0.40 0.92 0.45
DISTRIBUTIONS:
Dividends from net investment income (0.40) (0.41) (0.44)
Net asset value, end of period $ 9.99 $ 9.99 $ 9.48
TOTAL RETURN++ 4.01% 9.83% 4.78%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 23 $ 3 $ 40
Ratio of operating expenses to average net assets 1.53%(a) 1.33%(a) 1.10%(a)
Ratio of net investment income to average net
assets 3.87% 4.12% 4.57%
Portfolio turnover rate 16% 19% 23%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.85% 1.63% 1.43%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.76 $ 8.40 $ 8.47
Net investment income 0.14 0.44 0.03
Net realized and unrealized gain/(loss) on
investments (0.29) 1.36 (0.07)
Net increase/(decrease) in net asset value from
operations (0.15) 1.80 (0.04)
DISTRIBUTIONS:
Dividends from net investment income (0.14) (0.44) (0.03)
Net asset value, end of period $ 9.47 $ 9.76 $ 8.40
TOTAL RETURN++ (1.52)% 21.80% (0.43)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 38 $ 38 $ 2
Ratio of operating expenses to average net assets 1.15%+(a) 1.14%(a) 0.96%+(a)
Ratio of net investment income to average net
assets 4.48%+ 4.69% 4.80%+
Portfolio turnover rate 7% 13% 46%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.51%+ 1.70% 1.66%+
</TABLE>
* Nations Florida Municipal Bond Fund Investor C
Shares commenced operations on November 3, 1994.
+ 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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
NATIONS GEORGIA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.92 $ 10.58
Net investment income 0.47 0.47
Net realized and unrealized gain/(loss) on
investments 0.06 0.38
Net increase/(decrease) in net asset value from
operations 0.53 0.85
DISTRIBUTIONS:
Dividends from net investment income ( 0.47) ( 0.47)
Distributions from net realized capital gains ( 0.04) ( 0.04)
Total dividends and distributions ( 0.51) ( 0.51)
Net asset value, end of period $ 10.94 $ 10.92
TOTAL RETURN++ 4.99% 8.24%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $19,674 $ 9,446
Ratio of operating expenses to average net assets 0.70% 0.70%
Ratio of operating expenses to average net assets
including interest expense (a) (a)
Ratio of net investment income to average net
assets 4.31% 4.34%
Portfolio turnover rate 14% 25%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.98% 0.95%
<CAPTION>
INVESTOR A SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.63 $ 10.81 $ 9.82 $ 10.82
Net investment income 0.48 0.16 0.48 0.47
Net realized and unrealized gain/(loss) on
investments ( 0.05) ( 0.18) 0.99 ( 0.98)
Net increase/(decrease) in net asset value from
operations 0.43 ( 0.02) 1.47 ( 0.51)
DISTRIBUTIONS:
Dividends from net investment income ( 0.48) ( 0.16) ( 0.48) ( 0.47)#
Distributions from net realized capital gains -- -- -- ( 0.02)
Total dividends and distributions ( 0.48) ( 0.16) ( 0.48) ( 0.49)
Net asset value, end of period $ 10.58 $ 10.63 $ 10.81 $ 9.82
TOTAL RETURN++ 4.12% ( 0.19)% 15.20% ( 4.87)%
==================================================== ======= ======== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 8,810 $ 8,625 $9,175 $10,401
Ratio of operating expenses to average net assets 0.70% 0.70%+ 0.75% 0.72%
Ratio of operating expenses to average net assets
including interest expense (a) (a) (a) 0.73%
Ratio of net investment income to average net
assets 4.52% 4.47%+ 4.56% 4.56%
Portfolio turnover rate 9% 3% 17% 22%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.00% 1.03%+ 1.00% 0.93%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
122
<PAGE>
NATIONS GEORGIA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.92 $ 10.58
Net investment income 0.41 0.42
Net realized and unrealized gain/(loss) on
investments 0.06 0.38
Net increase/(decrease) in net asset value from
operations 0.47 0.80
DISTRIBUTIONS:
Dividends from net investment income ( 0.41) ( 0.42)
Distributions from net realized capital gains ( 0.04) ( 0.04)
Total dividends and distributions ( 0.45) ( 0.46)
Net asset value, end of period $ 10.94 $ 10.92
TOTAL RETURN++ 4.37% 7.70%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 8,310 $ 7,378
Ratio of operating expenses to average net assets 1.30% 1.20%
Ratio of operating expenses to average net assets
including interest expense (a) (a)
Ratio of net investment income to average net
assets 3.71% 3.84%
Portfolio turnover rate 14% 25%
Ratio of operating expenses to average net assets
without waivers and/or expense reimburements 1.73% 1.45%
<CAPTION>
INVESTOR B SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.63 $ 10.81 $ 9.82 $ 10.82
Net investment income 0.45 0.15 0.45 0.44
Net realized and unrealized gain/(loss) on
investments ( 0.05) ( 0.18) 0.99 ( 0.98)
Net increase/(decrease) in net asset value from
operations 0.40 ( 0.03) 1.44 ( 0.54)
DISTRIBUTIONS:
Dividends from net investment income ( 0.45) ( 0.15) ( 0.45) ( 0.44)#
Distributions from net realized capital gains -- -- -- ( 0.02)
Total dividends and distributions ( 0.45) ( 0.15) ( 0.45) ( 0.46)
Net asset value, end of period $ 10.58 $ 10.63 $ 10.81 $ 9.82
TOTAL RETURN++ 3.81% ( 0.29)% 14.85% ( 5.17)%
==================================================== ======= ======== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 7,601 $ 8,098 $8,160 $7,269
Ratio of operating expenses to average net assets 1.00% 1.00%+ 1.05% 1.04%
Ratio of operating expenses to average net assets
including interest expense (a) (a) (a) 1.05%
Ratio of net investment income to average net
assets 4.22% 4.17%+ 4.26% 4.24%
Portfolio turnover rate 9% 3% 17% 22%
Ratio of operating expenses to average net assets
without waivers and/or expense reimburements 1.30% 1.33%+ 1.30% 1.25%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS GEORGIA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INVESTOR C SHARES YEAR ENDED YEAR ENDED
03/31/99 03/31/98(C)
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.92 $ 10.58
Net investment income 0.41 0.42
Net realized and unrealized gain/(loss) on
investments 0.05 0.38
Net increase/(decrease) in net asset value from
operations 0.46 0.80
DISTRIBUTIONS:
Dividends from net investment income ( 0.40) ( 0.42)
Distributions from net realized capital gains ( 0.04) ( 0.04)
Total dividends and distributions ( 0.44) ( 0.46)
Net asset value, end of period $ 10.94 $ 10.92
TOTAL RETURN++ 4.35% 7.70%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 886 $1,034
Ratio of operating expenses to average net assets 1.31% 1.20%
Ratio of operating expenses to average net assets
including interest expense (a) (a)
Ratio of net investment income to average net
assets 3.70% 3.84%
Portfolio turnover rate 14% 25%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.73% 1.45%
<CAPTION>
INVESTOR C SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.63 $ 10.81 $ 9.82 $ 10.82
Net investment income 0.45 0.15 0.45 0.43
Net realized and unrealized gain/(loss) on
investments ( 0.05) ( 0.18) 0.99 ( 0.98)
Net increase/(decrease) in net asset value from
operations 0.40 ( 0.03) 1.44 ( 0.55)
DISTRIBUTIONS:
Dividends from net investment income ( 0.45) ( 0.15) ( 0.45) ( 0.43)#
Distributions from net realized capital gains -- -- -- ( 0.02)
Total dividends and distributions ( 0.45) ( 0.15) ( 0.45) ( 0.45)
Net asset value, end of period $ 10.58 $ 10.63 $ 10.81 $ 9.82
TOTAL RETURN++ 3.81% ( 0.29)% 14.85% ( 5.25)%
==================================================== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,983 $2,445 $2,606 $2,397
Ratio of operating expenses to average net assets 1.00% 1.00%+ 1.05% 1.12%
Ratio of operating expenses to average net assets
including interest expense (a) (a) (a) 1.13%
Ratio of net investment income to average net
assets 4.22% 4.17%+ 4.26% 4.16%
Portfolio turnover rate 9% 3% 17% 22%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.30% 1.33%+ 1.30% 1.33%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
123
<PAGE>
NATIONS GEORGIA MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 9.50 $ 9.48
Net investment income 0.44 0.45 0.45
Net realized and unrealized gain/(loss) on
investments 0.12 0.50 0.02
Net increase/(decrease) in net asset value from
operations 0.56 0.95 0.47
DISTRIBUTIONS:
Dividends from net investment income ( 0.44) ( 0.45) (0.45)
Net asset value, end of period $ 10.12 $ 10.00 $ 9.50
TOTAL RETURN++ 5.68% 10.22% 5.05%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,611 $ 483 $ 208
Ratio of operating expenses to average net assets 0.80% 0.80%(a) 0.80%(a)
Ratio of net investment income to average net
assets 4.33% 4.62% 4.76%
Portfolio turnover rate 17% 30% 19%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.43% 1.22% 1.25%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.72 $ 8.38 $ 9.99
Net investment income 0.14 0.49 0.47
Net realized and unrealized gain/(loss) on
investments (0.24) 1.34 ( 1.61)
Net increase/(decrease) in net asset value from
operations (0.10) 1.83 ( 1.14)
DISTRIBUTIONS:
Dividends from net investment income (0.14) (0.49) ( 0.47)
Net asset value, end of period $ 9.48 $ 9.72 $ 8.38
TOTAL RETURN++ (1.08)% 22.25% (11.71)%
==================================================== ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 7 $ 7 $ 6
Ratio of operating expenses to average net assets 0.80%+(a) 0.60%(a) 0.39%+(a)
Ratio of net investment income to average net
assets 4.76%+ 5.22% 5.42%+
Portfolio turnover rate 7% 26% 35%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.34%+ 1.29% 1.22%+
</TABLE>
* Nations Georgia Municipal Bond Fund Investor A
Shares commenced operations on December 30, 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.
(a) The effect of interest expense on the operating
ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS GEORGIA MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 9.50 $ 9.48
Net investment income 0.37 0.39 0.40
Net realized and unrealized gain/(loss) on
investments 0.12 0.50 0.02
Net increase/(decrease) in net asset value from
operations 0.49 0.89 0.42
DISTRIBUTIONS:
Dividends from net investment income ( 0.37) ( 0.39) (0.40)
Net asset value, end of period $ 10.12 $ 10.00 $ 9.50
TOTAL RETURN++ 5.00% 9.54% 4.50%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $11,348 $10,052 $10,182
Ratio of operating expenses to average net assets 1.45% 1.42%(a) 1.35%(a)
Ratio of net investment income to average net
assets 3.68% 4.00% 4.21%
Portfolio turnover rate 17% 30% 19%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.18% 1.84% 1.80%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.72 $ 8.38 $ 9.81
Net investment income 0.14 0.44 0.45
Net realized and unrealized gain/(loss) on
investments (0.24) 1.34 ( 1.43)
Net increase/(decrease) in net asset value from
operations (0.10) 1.78 ( 0.98)
DISTRIBUTIONS:
Dividends from net investment income (0.14) (0.44) ( 0.45)
Net asset value, end of period $ 9.48 $ 9.72 $ 8.38
TOTAL RETURN++ (1.09)% 21.58% (10.28)%
==================================================== ======== ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $12,254 $13,017 $ 9,500
Ratio of operating expenses to average net assets 1.35%+(a) 1.15%(a) 0.96%(a)
Ratio of net investment income to average net
assets 4.21%+ 4.67% 4.85%
Portfolio turnover rate 7% 26% 35%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.89%+ 1.84% 1.79%
</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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
124
<PAGE>
NATIONS GEORGIA MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INVESTOR C SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99 03/31/98(C) 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.00 $ 9.50 $ 9.48
Net investment income 0.37 0.40 0.42
Net realized and unrealized gain/(loss) on
investments 0.12 0.50 0.02
Net increase/(decrease) in net asset value from
operations 0.49 0.90 0.44
DISTRIBUTIONS:
Dividends from net investment income ( 0.37) ( 0.40) (0.42)
Net asset value, end of period $ 10.12 $ 10.00 $ 9.50
TOTAL RETURN++ 4.97% 9.64% 4.77%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3 $ 27 $ 72
Ratio of operating expenses to average net assets 1.49% 1.33%(a) 1.10%(a)
Ratio of net investment income to average net
assets 3.64% 4.09% 4.46%
Portfolio turnover rate 17% 30% 19%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.18% 1.75% 1.55%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.72 $ 8.38 $ 8.45
Net investment income 0.14 0.44 0.03
Net realized and unrealized gain/(loss) on
investments (0.24) 1.34 (0.07)
Net increase/(decrease) in net asset value from
operations (0.10) 1.78 (0.04)
DISTRIBUTIONS:
Dividends from net investment income (0.14) (0.44) (0.03)
Net asset value, end of period $ 9.48 $ 9.72 $ 8.38
TOTAL RETURN++ (1.03)% 21.59% (0.44)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 69 $ 69 $ 2
Ratio of operating expenses to average net assets 1.16%+(a) 1.15%(a) 0.96%+(a)
Ratio of net investment income to average net
assets 4.40%+ 4.67% 4.85%+
Portfolio turnover rate 7% 26% 35%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.70%+ 1.84% 1.79%+
</TABLE>
* Nations Georgia Municipal Bond Fund Investor C
Shares commenced operations on November 3, 1994.
+ 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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
NATIONS MARYLAND INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.01 $ 10.70 $ 10.80
Net investment income 0.48 0.49 0.48
Net realized and unrealized gain/(loss) on
investments 0.06 0.31 ( 0.10)
Net increase/(decrease) in net asset value from
operations 0.54 0.80 0.38
DISTRIBUTIONS:
Dividends from net investment income ( 0.48) ( 0.49) ( 0.48)
Distributions from net realized capital gains -- -- --
Distributions in excess of net realized capital
gains -- -- --
Total dividends and distributions ( 0.48) ( 0.49) ( 0.48)
Net asset value, end of period $ 11.07 $ 11.01 $ 10.70
TOTAL RETURN++ 4.96% 7.61% 3.62%
================================================= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $17,166 $15,558 $14,988
Ratio of operating expenses to average net
assets 0.70% 0.70% 0.70%(a)
Ratio of net investment income to average net
assets 4.31% 4.43% 4.50%
Portfolio turnover rate 22% 12% 10%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 0.99% 1.00% 0.98%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.95 $ 10.00 $ 11.09
Net investment income 0.16 0.48 0.48
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.98 ( 0.99)
Net increase/(decrease) in net asset value from
operations 0.01 1.46 ( 0.51)
DISTRIBUTIONS:
Dividends from net investment income ( 0.16) ( 0.48) ( 0.48)
Distributions from net realized capital gains -- ( 0.03) ( 0.10)
Distributions in excess of net realized capital
gains -- -- ( 0.00)#
Total dividends and distributions ( 0.16) ( 0.51) ( 0.58)
Net asset value, end of period $ 10.80 $ 10.95 $ 10.00
TOTAL RETURN++ 0.09% 14.94% ( 4.82)%
================================================= ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $19,456 $21,208 $22,145
Ratio of operating expenses to average net
assets 0.70%+(a) 0.75%(a) 0.71%(a)
Ratio of net investment income to average net
assets 4.42%+ 4.56% 4.55%
Portfolio turnover rate 4% 11% 22%
Ratio of operating expenses to average net
assets without waivers and/or expense
reimbursements 1.01%+ 1.00% 0.91%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
125
<PAGE>
NATIONS MARYLAND INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.01 $ 10.70 $ 10.80
Net investment income 0.41 0.43 0.45
Net realized and unrealized gain/(loss) on
investments 0.06 0.31 ( 0.10)
Net increase/(decrease) in net asset value from
operations 0.47 0.74 0.35
DISTRIBUTIONS:
Dividends from net investment income ( 0.41) ( 0.43) ( 0.45)
Distributions from net realized capital gains -- -- --
Distributions in excess of net realized capital gains -- -- --
Total dividends and distributions ( 0.41) ( 0.43) ( 0.45)
Net asset value, end of period $ 11.07 $ 11.01 $ 10.70
TOTAL RETURN++ 4.33% 7.07% 3.31%
======================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $5,989 $4,804 $4,299
Ratio of operating expenses to average net assets 1.30% 1.20% 1.00%(a)
Ratio of net investment income to average net
assets 3.71% 3.93% 4.20%
Portfolio turnover rate 22% 12% 10%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.74% 1.50% 1.28%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.95 $ 10.00 $ 11.09
Net investment income 0.15 0.45 0.45
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.98 ( 0.99)
Net increase/(decrease) in net asset value from
operations 0.00 1.43 ( 0.54)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.45) ( 0.45)
Distributions from net realized capital gains -- ( 0.03) ( 0.10)
Distributions in excess of net realized capital gains -- -- ( 0.00)#
Total dividends and distributions ( 0.15) ( 0.48) ( 0.55)
Net asset value, end of period $ 10.80 $ 10.95 $ 10.00
TOTAL RETURN++ ( 0.01)% 14.59% ( 5.12)%
======================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $4,500 $4,485 $4,368
Ratio of operating expenses to average net assets 1.00%+(a) 1.05%(a) 1.03%(a)
Ratio of net investment income to average net
assets 4.12%+ 4.26% 4.23%
Portfolio turnover rate 4% 11% 22%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.31%+ 1.30% 1.23%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS MARYLAND INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR C SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 11.01 $ 10.70 $ 10.80
Net investment income 0.41 0.43 0.45
Net realized and unrealized gain/(loss) on
investments 0.06 0.31 ( 0.10)
Net increase/(decrease) in net asset value from
operations 0.47 0.74 0.35
DISTRIBUTIONS:
Dividends from net investment income ( 0.41) ( 0.43) ( 0.45)
Distributions from net realized capital gains -- -- --
Distributions in excess of net realized capital gains -- -- --
Total dividends and distributions ( 0.41) ( 0.43) ( 0.45)
Net asset value, end of period $ 11.07 $ 11.01 $ 10.70
TOTAL RETURN++ 4.31% 7.07% 3.31%
======================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 561 $ 840 $2,017
Ratio of operating expenses to average net assets 1.32% 1.20% 1.00%(a)
Ratio of net investment income to average net
assets 3.69% 3.93% 4.20%
Portfolio turnover rate 22% 12% 10%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.74% 1.50% 1.28%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.95 $ 10.00 $ 11.09
Net investment income 0.15 0.45 0.44
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.98 ( 0.99)
Net increase/(decrease) in net asset value from
operations 0.00 1.43 ( 0.55)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.45) ( 0.44)
Distributions from net realized capital gains -- ( 0.03) ( 0.10)
Distributions in excess of net realized capital gains -- -- ( 0.00)#
Total dividends and distributions ( 0.15) ( 0.48) ( 0.54)
Net asset value, end of period $ 10.80 $ 10.95 $ 10.00
TOTAL RETURN++ ( 0.01)% 14.59% ( 5.20)%
======================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,900 $2,808 $2,570
Ratio of operating expenses to average net assets 1.00%+(a) 1.05%(a) 1.11%(a)
Ratio of net investment income to average net
assets 4.12%+ 4.26% 4.15%
Portfolio turnover rate 4% 11% 22%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.31%+ 1.30% 1.31%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
126
<PAGE>
NATIONS MARYLAND MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.94 $ 9.41 $ 9.39
Net investment income 0.41 0.43 0.44
Net realized and unrealized gain/(loss) on
investments 0.05 0.53 0.02
Net increase/(decrease) in net asset value from
operations 0.46 0.96 0.46
DISTRIBUTIONS:
Dividends from net investment income (0.41) (0.43) (0.44)
Distributions from net realized capital gains (0.00)# -- --
Total dividends and distributions (0.41) (0.43) (0.44)
Net asset value, end of period $ 9.99 $ 9.94 $ 9.41
TOTAL RETURN++ 4.71% 10.40% 4.99%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,751 $1,902 $1,409
Ratio of operating expenses to average net assets 0.80% 0.80% 0.80%
Ratio of net investment income to average net
assets 4.09% 4.41% 4.68%
Portfolio turnover rate 22% 17% 18%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.32% 1.27% 1.32%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.63 $ 8.37 $ 9.77
Net investment income 0.14 0.46 0.49
Net realized and unrealized gain/(loss) on
investments (0.24) 1.26 (1.40)
Net increase/(decrease) in net asset value from
operations (0.10) 1.72 (0.91)
DISTRIBUTIONS:
Dividends from net investment income (0.14) (0.46) (0.49)
Distributions from net realized capital gains -- -- --
Total dividends and distributions (0.14) (0.46) (0.49)
Net asset value, end of period $ 9.39 $ 9.63 $ 8.37
TOTAL RETURN++ (1.01)% 20.99% (9.59)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,086 $1,031 $ 9
Ratio of operating expenses to average net assets 0.80%+ 0.60% 0.39%(a)
Ratio of net investment income to average net
assets 4.52%+ 4.94% 5.30%
Portfolio turnover rate 7% 11% 39%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.43%+ 1.46% 1.48%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS MARYLAND MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.94 $ 9.41 $ 9.39
Net investment income 0.35 0.37 0.39
Net realized and unrealized gain/(loss) on
investments 0.05 0.53 0.02
Net increase/(decrease) in net asset value from
operations 0.40 0.90 0.41
DISTRIBUTIONS:
Dividends from net investment income (0.35) (0.37) (0.39)
Distributions from net realized capital gains (0.00)# -- --
Total dividends and distributions (0.35) (0.37) (0.39)
Net asset value, end of period $ 9.99 $ 9.94 $ 9.41
TOTAL RETURN++ 4.03% 9.72% 4.42%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $16,124 $11,071 $8,099
Ratio of operating expenses to average net assets 1.45% 1.42% 1.35%
Ratio of net investment income to average net
assets 3.44% 3.79% 4.13%
Portfolio turnover rate 22% 17% 18%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.07% 1.89% 1.87%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.63 $ 8.37 $ 9.77
Net investment income 0.13 0.41 0.44
Net realized and unrealized gain/(loss) on
investments (0.24) 1.26 ( 1.40)
Net increase/(decrease) in net asset value from
operations (0.11) 1.67 ( 0.96)
DISTRIBUTIONS:
Dividends from net investment income (0.13) (0.41) ( 0.44)
Distributions from net realized capital gains -- -- --
Total dividends and distributions (0.13) (0.41) ( 0.44)
Net asset value, end of period $ 9.39 $ 9.63 $ 8.37
TOTAL RETURN++ (1.19)% 20.33% (10.11)%
==================================================== ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $9,662 $10,002 $ 4,819
Ratio of operating expenses to average net assets 1.35%+ 1.15% 0.96%(a)
Ratio of net investment income to average net
assets 3.97%+ 4.39% 4.73%
Portfolio turnover rate 7% 11% 39%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.98%+ 2.01% 2.05%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
127
<PAGE>
NATIONS MARYLAND MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR C SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.94 $ 9.41 $ 9.39
Net investment income 0.34 0.39 0.42
Net realized and unrealized gain/(loss) on
investments 0.05 0.53 0.02
Net increase/(decrease) in net asset value from
operations 0.39 0.92 0.44
DISTRIBUTIONS:
Dividends from net investment income (0.34) (0.39) (0.42)
Distributions from net realized capital gains (0.00)# -- --
Total dividend and distributions (0.34) (0.39) (0.42)
Net asset value, end of period $ 9.99 $ 9.94 $ 9.41
TOTAL RETURN++ 4.01% 9.88% 4.73%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3 $ 3 $ 2
Ratio of operating expenses to average net assets 1.47% 1.33% 1.10%
Ratio of net investment income to average net
assets 3.42% 3.88% 4.38%
Portfolio turnover rate 22% 17% 18%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.07% 1.80% 1.62%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.63 $ 8.37 $ 8.44
Net investment income 0.13 0.41 0.03
Net realized and unrealized gain/(loss) on
investments (0.24) 1.26 (0.07)
Net increase/(decrease) in net asset value from
operations (0.11) 1.67 (0.04)
DISTRIBUTIONS:
Dividends from net investment income (0.13) (0.41) (0.03)
Distributions from net realized capital gains -- -- --
Total dividend and distributions (0.13) (0.41) (0.03)
Net asset value, end of period $ 9.39 $ 9.63 $ 8.37
TOTAL RETURN++ (1.13)% 20.29% (0.45)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2 $ 2 $ 2
Ratio of operating expenses to average net assets 1.16%+ 1.15% 0.96%+(a)
Ratio of net investment income to average net
assets 4.16%+ 4.39% 4.73%+
Portfolio turnover rate 7% 11% 39%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.79%+ 2.01% 2.05%+
</TABLE>
* Nations Maryland Municipal Bond Fund Investor C
Shares commenced operations on November 3, 1994.
+ 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 $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.70 $ 10.34 $ 10.36
Net investment income 0.47 0.47 0.45
Net realized and unrealized gain/(loss) on
investments 0.04 0.36 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.51 0.83 0.43
DISTRIBUTIONS:
Dividends from net investment income ( 0.47) ( 0.47) ( 0.45)
Distributions from net realized capital gains ( 0.03) -- --
Total dividends and distributions ( 0.50) ( 0.47) ( 0.45)
Net asset value, end of period $ 10.71 $ 10.70 $ 10.34
TOTAL RETURN++ 4.82% 8.17% 4.25%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $10,099 $8,572 $5,723
Ratio of operating expenses to average net assets 0.70% 0.70%(a) 0.70%(a)
Ratio of net investment income to average net
assets 4.37% 4.49% 4.37%
Portfolio turnover rate 16% 21% 26%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.96% 0.96% 1.02%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.51 $ 9.53 $ 10.46
Net investment income 0.15 0.43 0.42
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.99 ( 0.88)
Net increase/(decrease) in net asset value from
operations 0.00 1.42 ( 0.46)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.43)# ( 0.42)
Distributions from net realized capital gains -- ( 0.01) ( 0.05)
Total dividends and distributions ( 0.15) ( 0.44) ( 0.47)
Net asset value, end of period $ 10.36 $ 10.51 $ 9.53
TOTAL RETURN++ ( 0.01)% 15.18% ( 4.51)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $7,672 $8,525 $8,896
Ratio of operating expenses to average net assets 0.70%+ 0.77%(a) 0.73%(a)
Ratio of net investment income to average net
assets 4.27%+ 4.27% 4.20%
Portfolio turnover rate 3% 57% 37%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.07%+ 1.04% 1.00%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
128
<PAGE>
<TABLE>
<CAPTION>
NATIONS NORTH CAROLINA INTERMEDIATE MUNICIPAL FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
BOND FUND YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.70 $ 10.34 $ 10.36
Net investment income 0.40 0.42 0.42
Net realized and unrealized gain/(loss) on
investments 0.04 0.36 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.44 0.78 0.40
DISTRIBUTIONS:
Dividends from net investment income ( 0.40) ( 0.42) ( 0.42)
Distributions from net realized capital gains ( 0.03) -- --
Total dividends and distributions ( 0.43) ( 0.42) ( 0.42)
Net asset value, end of period $ 10.71 $ 10.70 $ 10.34
TOTAL RETURN++ 4.20% 7.64% 3.94%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $6,671 $6,859 $6,796
Ratio of operating expenses to average net assets 1.30% 1.20%(a) 1.00%(a)
Ratio of net investment income to average net
assets 3.77% 3.99% 4.07%
Portfolio turnover rate 16% 21% 26%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.71% 1.46% 1.32%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.51 $ 9.53 $ 10.46
Net investment income 0.14 0.40 0.39
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.99 ( 0.88)
Net increase/(decrease) in net asset value from
operations ( 0.01) 1.39 ( 0.49)
DISTRIBUTIONS:
Dividends from net investment income ( 0.14) ( 0.40)# ( 0.39)
Distributions from net realized capital gains -- ( 0.01) ( 0.05)
Total dividends and distributions ( 0.14) ( 0.41) ( 0.44)
Net asset value, end of period $ 10.36 $ 10.51 $ 9.53
TOTAL RETURN++ ( 0.12)% 14.84% ( 4.82)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $8,102 $7,848 $5,706
Ratio of operating expenses to average net assets 1.00%+ 1.07%(a) 1.05%(a)
Ratio of net investment income to average net
assets 3.97%+ 3.97% 3.88%
Portfolio turnover rate 3% 57% 37%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.37%+ 1.34% 1.32%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
<TABLE>
<CAPTION>
NATIONS NORTH CAROLINA
INTERMEDIATE MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR C SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.70 $ 10.34 $ 10.36
Net investment income 0.42 0.42 0.42
Net realized and unrealized gain/(loss) on
investments 0.02 0.36 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.44 0.78 0.40
DISTRIBUTIONS:
Dividends from net investment income ( 0.40) ( 0.42) ( 0.42)
Distributions from net realized capital gains ( 0.03) -- --
Total dividends and distributions ( 0.43) ( 0.42) ( 0.42)
Net asset value, end of period $ 10.71 $ 10.70 $ 10.34
TOTAL RETURN++ 4.18% 7.64% 3.94%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 109 $ 822 $1,364
Ratio of operating expenses to average net assets 1.31% 1.20%(a) 1.00%(a)
Ratio of net investment income to average net
assets 3.76% 3.99% 4.07%
Portfolio turnover rate 16% 21% 26%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.71% 1.46% 1.32%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.51 $ 9.53 $ 10.46
Net investment income 0.14 0.40 0.38
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.99 ( 0.88)
Net increase/(decrease) in net asset value from
operations ( 0.01) 1.39 ( 0.50)
DISTRIBUTIONS:
Dividends from net investment income ( 0.14) ( 0.40)# ( 0.38)
Distributions from net realized capital gains -- ( 0.01) ( 0.05)
Total dividends and distributions ( 0.14) ( 0.41) ( 0.43)
Net asset value, end of period $ 10.36 $ 10.51 $ 9.53
TOTAL RETURN++ ( 0.12)% 14.84% ( 4.89)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,379 $1,366 $1,486
Ratio of operating expenses to average net assets 1.00%+ 1.07%(a) 1.13%(a)
Ratio of net investment income to average net
assets 3.97%+ 3.97% 3.80%
Portfolio turnover rate 3% 57% 37%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.37%+ 1.34% 1.40%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
129
<PAGE>
<TABLE>
<CAPTION>
NATIONS NORTH CAROLINA MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.01 $ 9.47
Net investment income 0.43 0.45
Net realized and unrealized gain/(loss) on
investments 0.08 0.54
Net increase/(decrease) in net asset value from
operations 0.51 0.99
DISTRIBUTIONS:
Dividends from net investment income ( 0.44) ( 0.45)
Net asset value, end of period $ 10.08 $ 10.01
TOTAL RETURN++ 5.20% 10.64%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,028 $ 609
Ratio of operating expenses to average net assets 0.80%(a) 0.80%(a)
Ratio of net investment income to average net
assets 4.37% 4.58%
Portfolio turnover rate 11% 20%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.25% 1.13%
<CAPTION>
INVESTOR A SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.49 $ 9.73 $ 8.36 $ 9.85
Net investment income 0.45 0.15 0.49 0.50
Net realized and unrealized gain/(loss) on
investments (0.02) (0.24) 1.37 ( 1.49)
Net increase/(decrease) in net asset value from
operations 0.43 (0.09) 1.86 ( 0.99)
DISTRIBUTIONS:
Dividends from net investment income (0.45) (0.15) (0.49) ( 0.50)
Net asset value, end of period $ 9.47 $ 9.49 $ 9.73 $ 8.36
TOTAL RETURN++ 4.62% (0.94)% 22.63% (10.41)%
==================================================== ======= ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 594 $ 448 $ 347 $ 1,161
Ratio of operating expenses to average net assets 0.80%(a) 0.80%+ 0.58%(a) 0.39%(a)
Ratio of net investment income to average net
assets 4.75% 4.66%+ 5.23% 5.35%
Portfolio turnover rate 28% 22% 40% 29%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.14% 1.19%+ 1.16% 1.10%
</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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
<TABLE>
<CAPTION>
NATIONS NORTH CAROLINA MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.01 $ 9.47
Net investment income 0.38 0.39
Net realized and unrealized gain/(loss) on
investments 0.07 0.54
Net increase/(decrease) in net asset value from
operations 0.45 0.93
DISTRIBUTIONS:
Dividends from net investment income ( 0.38) ( 0.39)
Net asset value, end of period $ 10.08 $ 10.01
TOTAL RETURN++ 4.53% 9.96%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $24,656 $25,187
Ratio of operating expenses to average net assets 1.45%(a) 1.42%(a)
Ratio of net investment income to average net
assets 3.72% 3.96%
Portfolio turnover rate 11% 20%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.00% 1.75%
<CAPTION>
INVESTOR B SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.49 $ 9.73 $ 8.36 $ 9.85
Net investment income 0.40 0.13 0.43 0.45
Net realized and unrealized gain/(loss) on
investments (0.02) (0.24) 1.37 ( 1.49)
Net increase/(decrease) in net asset value from
operations 0.38 (0.11) 1.80 ( 1.04)
DISTRIBUTIONS:
Dividends from net investment income (0.40) (0.13) (0.43) ( 0.45)
Net asset value, end of period $ 9.47 $ 9.49 $ 9.73 $ 8.36
TOTAL RETURN++ 4.06% (1.12)% 21.96% (10.92)%
==================================================== ======= ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $23,863 $28,298 $30,048 $23,659
Ratio of operating expenses to average net assets 1.35%(a) 1.35%+ 1.13%(a) 0.96%(a)
Ratio of net investment income to average net
assets 4.20% 4.11%+ 4.68% 4.78%
Portfolio turnover rate 28% 22% 40% 29%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.69% 1.74%+ 1.71% 1.67%
</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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
130
<PAGE>
<TABLE>
<CAPTION>
NATIONS NORTH CAROLINA MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR C SHARES YEAR ENDED YEAR ENDED
03/31/99 03/31/98(C)
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.01 $ 9.47
Net investment income 0.37 0.40
Net realized and unrealized gain/(loss) on
investments 0.07 0.54
Net increase/(decrease) in net asset value from
operations 0.44 0.94
DISTRIBUTIONS:
Dividends from net investment income ( 0.37) ( 0.40)
Net asset value, end of period $ 10.08 $ 10.01
TOTAL RETURN++ 4.50% 10.07%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3 $ 3
Ratio of operating expenses to average net assets 1.47%(a) 1.33%(a)
Ratio of net investment income to average net
assets 3.70% 4.05%
Portfolio turnover rate 11% 20%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.00% 1.66%
<CAPTION>
INVESTOR C SHARES YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.49 $ 9.73 $ 8.36 $ 8.45
Net investment income 0.42 0.14 0.43 0.03
Net realized and unrealized gain/(loss) on
investments (0.02) (0.24) 1.37 (0.09)
Net increase/(decrease) in net asset value from
operations 0.40 (0.10) 1.80 (0.06)
DISTRIBUTIONS:
Dividends from net investment income (0.42) (0.14) (0.43) (0.03)
Net asset value, end of period $ 9.47 $ 9.49 $ 9.73 $ 8.36
TOTAL RETURN++ 4.32% (1.04)% 21.93% (0.67)%
==================================================== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 18 $ 17 $ 2 $ 2
Ratio of operating expenses to average net assets 1.10%(a) 1.14%+ 1.13%(a) 0.96%+(a)
Ratio of net investment income to average net
assets 4.45% 4.32%+ 4.68% 4.78%+
Portfolio turnover rate 28% 22% 40% 29%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.44% 1.53%+ 1.71% 1.67%+
</TABLE>
* Nations North Carolina Municipal Bond Fund
Investor C Shares commenced operations on November
3, 1994.
+ 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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
<TABLE>
<CAPTION>
NATIONS SOUTH CAROLINA
INTERMEDIATE MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.79 $ 10.50 $ 10.52
Net investment income 0.49 0.50 0.49
Net realized and unrealized gain/(loss) on
investments 0.04 0.29 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.53 0.79 0.47
DISTRIBUTIONS:
Dividends from net investment income ( 0.49) ( 0.50) ( 0.49)
Distributions from net realized capital gains ( 0.04) ( 0.00)(c) --
Total dividends and distributions ( 0.53) ( 0.50) ( 0.49)
Net asset value, end of period $ 10.79 $ 10.79 $ 10.50
TOTAL RETURN++ 5.01% 7.67% 4.51%
==================================================== ======= ======== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $18,729 $13,945 $10,465
Ratio of operating expenses to average net assets 0.70%(a) 0.70%(a) 0.70%(a)
Ratio of net investment income to average net
assets 4.55% 4.66% 4.60%
Portfolio turnover rate 9% 16% 13%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.94% 0.95% 0.99%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.69 $ 9.76 $ 10.61
Net investment income 0.16 0.49 0.48
Net realized and unrealized gain/(loss) on
investments ( 0.17) 0.93 ( 0.84)
Net increase/(decrease) in net asset value from
operations ( 0.01) 1.42 ( 0.36)
DISTRIBUTIONS:
Dividends from net investment income ( 0.16) ( 0.49) ( 0.48)#
Distributions from net realized capital gains -- -- ( 0.01)
Total dividends and distributions ( 0.16) ( 0.49) ( 0.49)
Net asset value, end of period $ 10.52 $ 10.69 $ 9.76
TOTAL RETURN++ ( 0.07)% 14.79% ( 3.54)%
==================================================== ======== ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $14,288 $14,452 $16,378
Ratio of operating expenses to average net assets 0.70%+(a) 0.75%(a) 0.72%(a)
Ratio of net investment income to average net
assets 4.61%+ 4.72% 4.64%
Portfolio turnover rate 6% 11% 30%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.02%+ 0.95% 0.93%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Amount represents less than $0.01 per share.
131
<PAGE>
<TABLE>
<CAPTION>
NATIONS SOUTH CAROLINA
INTERMEDIATE MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.79 $ 10.50 $ 10.52
Net investment income 0.43 0.44 0.45
Net realized and unrealized gain/(loss) on
investments 0.04 0.29 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.47 0.73 0.43
DISTRIBUTIONS:
Dividends from net investment income ( 0.43) ( 0.44) ( 0.45)
Distributions from net realized capital gains ( 0.04) ( 0.00)(c) --
Total dividends and distributions ( 0.47) ( 0.44) ( 0.45)
Net asset value, end of period $ 10.79 $ 10.79 $ 10.50
TOTAL RETURN++ 4.39% 7.13% 4.19%
==================================================== ======= ======== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $8,542 $6,819 $5,738
Ratio of operating expenses to average net assets 1.30%(a) 1.20%(a) 1.00%(a)
Ratio of net investment income to average net
assets 3.95% 4.16% 4.30%
Portfolio turnover rate 9% 16% 13%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.69% 1.45% 1.29%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.69 $ 9.76 $ 10.61
Net investment income 0.15 0.46 0.45
Net realized and unrealized gain/(loss) on
investments ( 0.17) 0.93 ( 0.84)
Net increase/(decrease) in net asset value from
operations ( 0.02) 1.39 ( 0.39)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.46) ( 0.45)#
Distributions from net realized capital gains -- -- ( 0.01)
Total dividends and distributions ( 0.15) ( 0.46) ( 0.46)
Net asset value, end of period $ 10.52 $ 10.69 $ 9.76
TOTAL RETURN++ ( 0.17)% 14.45% ( 3.85)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $6,968 $6,457 $5,740
Ratio of operating expenses to average net assets 1.00%+(a) 1.05%(a) 1.04%(a)
Ratio of net investment income to average net
assets 4.31%+ 4.42% 4.32%
Portfolio turnover rate 6% 11% 30%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.32%+ 1.25% 1.25%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Amount represents less than $0.01 per share.
<TABLE>
<CAPTION>
NATIONS SOUTH CAROLINA
INTERMEDIATE MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR C SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.79 $ 10.50 $ 10.52
Net investment income 0.42 0.44 0.45
Net realized and unrealized gain/(loss) on
investments 0.04 0.29 ( 0.02)
Net increase/(decrease) in net asset value from
operations 0.46 0.73 0.43
DISTRIBUTIONS:
Dividends from net investment income ( 0.42) ( 0.44) ( 0.45)
Distributions from net realized capital gains ( 0.04) ( 0.00)(c) --
Total dividends and distributions ( 0.46) ( 0.44) ( 0.45)
Net asset value, end of period $ 10.79 $ 10.79 $ 10.50
TOTAL RETURN++ 4.36% 7.13% 4.20%
==================================================== ======= ======== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $3,102 $2,698 $5,089
Ratio of operating expenses to average net assets 1.32%(a) 1.20%(a) 1.00%(a)
Ratio of net investment income to average net
assets 3.93% 4.16% 4.30%
Portfolio turnover rate 9% 16% 13%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.69% 1.45% 1.29%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.69 $ 9.76 $ 10.61
Net investment income 0.15 0.46 0.44
Net realized and unrealized gain/(loss) on
investments ( 0.17) 0.93 ( 0.84)
Net increase/(decrease) in net asset value from
operations ( 0.02) 1.39 ( 0.40)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.46) ( 0.44)#
Distributions from net realized capital gains -- -- ( 0.01)
Total dividends and distributions ( 0.15) ( 0.46) ( 0.45)
Net asset value, end of period $ 10.52 $ 10.69 $ 9.76
TOTAL RETURN++ ( 0.17)% 14.45% ( 3.94)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $5,409 $5,527 $6,167
Ratio of operating expenses to average net assets 1.00%+(a) 1.05%(a) 1.12%(a)
Ratio of net investment income to average net
assets 4.31%+ 4.42% 4.24%
Portfolio turnover rate 6% 11% 30%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.32%+ 1.25% 1.33%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Amount represents less than $0.01 per share.
132
<PAGE>
<TABLE>
<CAPTION>
NATIONS SOUTH CAROLINA MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.26 $ 9.79 $ 9.77
Net investment income 0.44 0.47 0.47
Net realized and unrealized gain/(loss) on
investments 0.06 0.47 0.02
Net increase/(decrease) in net asset value from
operations 0.50 0.94 0.49
DISTRIBUTIONS:
Dividends from net investment income ( 0.46) ( 0.47) (0.47)
Distributions from net realized capital gains -- ( 0.00)# --
Total dividends and distributions ( 0.46) ( 0.47) (0.47)
Net asset value, end of period $ 10.30 $ 10.26 $ 9.79
TOTAL RETURN++ 4.92% 9.82% 5.12%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,060 $1,517 $ 811
Ratio of operating expenses to average net assets 0.80% 0.80%(a) 0.80%(a)
Ratio of net investment income to average net
assets 4.42% 4.59% 4.79%
Portfolio turnover rate 3% 9% 30%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.43% 1.19% 1.20%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.99 $ 8.65 $ 9.86
Net investment income 0.16 0.50 0.50
Net realized and unrealized gain/(loss) on
investments (0.22) 1.34 (1.21)
Net increase/(decrease) in net asset value from
operations (0.06) 1.84 (0.71)
DISTRIBUTIONS:
Dividends from net investment income (0.16) (0.50) (0.50)
Distributions from net realized capital gains -- -- --
Total dividends and distributions (0.16) (0.50) (0.50)
Net asset value, end of period $ 9.77 $ 9.99 $ 8.65
TOTAL RETURN++ (0.64)% 21.74% (7.45)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,219 $1,238 $ 140
Ratio of operating expenses to average net assets 0.80%+(a) 0.60%(a) 0.39%(a)
Ratio of net investment income to average net
assets 4.76%+ 5.24% 5.30%
Portfolio turnover rate 20% 13% 14%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.33%+ 1.28% 1.30%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
<TABLE>
<CAPTION>
NATIONS SOUTH CAROLINA MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.26 $ 9.79 $ 9.77
Net investment income 0.39 0.40 0.42
Net realized and unrealized gain/(loss) on
investments 0.04 0.47 0.02
Net increase/(decrease) in net asset value from
operations 0.43 0.87 0.44
DISTRIBUTIONS:
Dividends from net investment income ( 0.39) ( 0.40) (0.42)
Distributions from net realized capital gains -- ( 0.00)# --
Total dividends and distributions ( 0.39) ( 0.40) (0.42)
Net asset value, end of period $ 10.30 $ 10.26 $ 9.79
TOTAL RETURN++ 4.25% 9.15% 4.54%
==================================================== ======= ======== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $10,905 $10,394 $12,104
Ratio of operating expenses to average net assets 1.44% 1.42%(a) 1.35%(a)
Ratio of net investment income to average net
assets 3.78% 3.97% 4.24%
Portfolio turnover rate 3% 9% 30%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.18% 1.81% 1.75%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.99 $ 8.65 $ 9.86
Net investment income 0.14 0.45 0.45
Net realized and unrealized gain/(loss) on
investments (0.22) 1.34 (1.21)
Net increase/(decrease) in net asset value from
operations (0.08) 1.79 (0.76)
DISTRIBUTIONS:
Dividends from net investment income (0.14) (0.45) (0.45)
Distributions from net realized capital gains -- -- --
Total dividends and distributions (0.14) (0.45) (0.45)
Net asset value, end of period $ 9.77 $ 9.99 $ 8.65
TOTAL RETURN++ (0.82)% 21.08% (7.97)%
==================================================== ======== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $12,991 $12,670 $8,263
Ratio of operating expenses to average net assets 1.35%+(a) 1.15%(a) 0.96%(a)
Ratio of net investment income to average net
assets 4.21%+ 4.69% 4.73%
Portfolio turnover rate 20% 13% 14%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.88%+ 1.83% 1.87%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
133
<PAGE>
<TABLE>
<CAPTION>
NATIONS SOUTH CAROLINA MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR C SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99(C) 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.26 $ 9.79 $ 9.77
Net investment income 0.39 0.42 0.44
Net realized and unrealized gain/(loss) on
investments 0.04 0.47 0.02
Net increase/(decrease) in net asset value from
operations 0.43 0.89 0.46
DISTRIBUTIONS:
Dividends from net investment income ( 0.39) ( 0.42) (0.44)
Distributions from net realized capital gains -- ( 0.00)# --
Total dividends and distributions ( 0.39) ( 0.42) (0.44)
Net asset value, end of period $ 10.30 $ 10.26 $ 9.79
TOTAL RETURN++ 4.23% 9.29% 4.80%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 77 $ 28 $ 247
Ratio of operating expenses to average net assets 1.44% 1.33%(a) 1.10%(a)
Ratio of net investment income to average net
assets 3.78% 4.06% 4.49%
Portfolio turnover rate 3% 9% 30%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.18% 1.72% 1.50%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.99 $ 8.65 $ 8.73
Net investment income 0.15 0.45 0.03
Net realized and unrealized gain/(loss) on
investments (0.22) 1.34 (0.08)
Net increase/(decrease) in net asset value from
operations (0.07) 1.79 (0.05)
DISTRIBUTIONS:
Dividends from net investment income (0.15) (0.45) (0.03)
Distributions from net realized capital gains -- -- --
Total dividends and distributions (0.15) (0.45) (0.03)
Net asset value, end of period $ 9.77 $ 9.99 $ 8.65
TOTAL RETURN++ (0.76)% 21.01% (0.52)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 264 $ 20 $ 2
Ratio of operating expenses to average net assets 1.17%+(a) 1.15%(a) 0.96%+(a)
Ratio of net investment income to average net
assets 4.39%+ 4.69% 4.73%+
Portfolio turnover rate 20% 13% 14%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.70%+ 1.83% 1.87%+
</TABLE>
* Nations South Carolina Municipal Bond Fund
Investor C Shares commenced operations on November
3, 1994.
+ 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 $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
<TABLE>
<CAPTION>
NATIONS TENNESSEE INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.40 $ 10.08
Net investment income 0.45 0.45
Net realized and unrealized gain/(loss) on
investments 0.06 0.32
Net increase/(decrease) in net asset value from
operations 0.51 0.77
DISTRIBUTIONS:
Dividends from net investment income ( 0.45) ( 0.45)
Distributions from net realized capital gains -- --
Total dividends and distributions ( 0.45) ( 0.45)
Net asset value, end of period $ 10.46 $ 10.40
TOTAL RETURN++ 4.97% 7.77%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $9,242 $ 8,061
Ratio of operating expenses to average net assets 0.70% 0.70%
Ratio of operating expenses to average net assets
including interest expense -- (a)
Ratio of net investment income to average net
assets 4.28% 4.38%
Portfolio turnover rate 22% 38%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.10% 1.04%
<CAPTION>
INVESTOR A SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.09 $ 10.23 $ 9.30 $ 10.18
Net investment income 0.44 0.15 0.44 0.43
Net realized and unrealized gain/(loss) on
investments ( 0.01) ( 0.14) 0.93 ( 0.87)
Net increase/(decrease) in net asset value from
operations 0.43 0.01 1.37 ( 0.44)
DISTRIBUTIONS:
Dividends from net investment income ( 0.44) ( 0.15) ( 0.44) ( 0.43)#
Distributions from net realized capital gains -- -- -- ( 0.01)
Total dividends and distributions ( 0.44) ( 0.15) ( 0.44) ( 0.44)
Net asset value, end of period $ 10.08 $ 10.09 $ 10.23 $ 9.30
TOTAL RETURN++ 4.33% 0.06% 15.00% ( 4.41)%
==================================================== ======= ======== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 6,840 $ 7,439 $7,573 $7,831
Ratio of operating expenses to average net assets 0.70% 0.70%+ 0.77% 0.70%
Ratio of operating expenses to average net assets
including interest expense (a) -- (a) 0.71%
Ratio of net investment income to average net
assets 4.35% 4.31%+ 4.45% 4.38%
Portfolio turnover rate 28% 3% 34% 41%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.13% 1.22%+ 1.12% 1.07%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
134
<PAGE>
<TABLE>
<CAPTION>
NATIONS TENNESSEE INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.40 $ 10.08
Net investment income 0.38 0.40
Net realized and unrealized gain/(loss) on
investments 0.06 0.32
Net increase/(decrease) in net asset value from
operations 0.44 0.72
DISTRIBUTIONS:
Dividends from net investment income ( 0.38) ( 0.40)
Distributions from net realized capital gains -- --
Total dividends and distributions ( 0.38) ( 0.40)
Net asset value, end of period $ 10.46 $ 10.40
TOTAL RETURN++ 4.34% 7.24%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $3,007 $ 2,924
Ratio of operating expenses to average net assets 1.30% 1.20%
Ratio of operating expenses to average net assets
including interest expense -- (a)
Ratio of net investment income to average net
assets 3.68% 3.88%
Portfolio turnover rate 22% 38%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.85% 1.54%
<CAPTION>
INVESTOR B SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.09 $ 10.23 $ 9.30 $ 10.18
Net investment income 0.41 0.14 0.41 0.40
Net realized and unrealized gain/(loss) on
investments ( 0.01) ( 0.14) 0.93 ( 0.87)
Net increase/(decrease) in net asset value from
operations 0.40 0.00 1.34 ( 0.47)
DISTRIBUTIONS:
Dividends from net investment income ( 0.41) ( 0.14) ( 0.41) ( 0.40)#
Distributions from net realized capital gains -- -- -- ( 0.01)
Total dividends and distributions ( 0.41) ( 0.14) ( 0.41) ( 0.41)
Net asset value, end of period $ 10.08 $ 10.09 $ 10.23 $ 9.30
TOTAL RETURN++ 4.02% ( 0.04)% 14.65% ( 4.72)%
==================================================== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3,050 $3,528 $3,573 $3,368
Ratio of operating expenses to average net assets 1.00% 1.00%+ 1.07% 1.02%
Ratio of operating expenses to average net assets
including interest expense (a) -- (a) 1.03%
Ratio of net investment income to average net
assets 4.05% 4.01%+ 4.15% 4.06%
Portfolio turnover rate 28% 3% 34% 41%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.43% 1.52%+ 1.42% 1.39%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
<TABLE>
<CAPTION>
NATIONS TENNESSEE INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR C SHARES 03/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.40 $ 10.08
Net investment income 0.39 0.40
Net realized and unrealized gain/(loss) on
investments 0.05 0.32
Net increase/(decrease) in net asset value from
operations 0.44 0.72
DISTRIBUTIONS:
Dividends from net investment income ( 0.39) ( 0.40)
Distributions from net realized capital gains -- --
Total dividends and distributions ( 0.39) ( 0.40)
Net asset value, end of period $ 10.45 $ 10.40
TOTAL RETURN++ 4.28% 7.29%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 33 $ 3
Ratio of operating expenses to average net assets 1.11% 1.20%
Ratio of operating expenses to average net assets
including interest expense -- (a)
Ratio of net investment income to average net
assets 3.87% 3.88%
Portfolio turnover rate 22% 38%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.85% 1.54%
<CAPTION>
INVESTOR C SHARES YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.09 $ 10.23 $ 9.30 $ 9.38
Net investment income 0.42 0.14 0.41 0.03
Net realized and unrealized gain/(loss) on
investments ( 0.01) ( 0.14) 0.93 (0.08)
Net increase/(decrease) in net asset value from
operations 0.41 0.00 1.34 (0.05)
DISTRIBUTIONS:
Dividends from net investment income ( 0.42) ( 0.14) ( 0.41) (0.03)
Distributions from net realized capital gains -- -- -- --
Total dividends and distributions ( 0.42) ( 0.14) ( 0.41) (0.03)
Net asset value, end of period $ 10.08 $ 10.09 $ 10.23 $ 9.30
TOTAL RETURN++ 4.08% ( 0.02)% 14.62% (0.53)%
==================================================== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 2 $ 2 $ 2 $ 2
Ratio of operating expenses to average net assets 1.00% 1.00%+ 1.07% 1.02%+
Ratio of operating expenses to average net assets
including interest expense (a) -- (a) 1.03%+
Ratio of net investment income to average net
assets 4.05% 4.01%+ 4.15% 4.06%+
Portfolio turnover rate 28% 3% 34% 41%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.43% 1.52%+ 1.42% 1.39%+
</TABLE>
* Nations Tennessee Intermediate Municipal Bond Fund
Investor C Shares commenced operations on November
3, 1994.
+ 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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
135
<PAGE>
<TABLE>
<CAPTION>
NATIONS TENNESSEE MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR A SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99(C) 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.22 $ 9.70 $ 9.68
Net investment income 0.43 0.46 0.46
Net realized and unrealized gain/(loss) on
investments 0.11 0.52 0.02
Net increase/(decrease) in net asset value from
operations 0.54 0.98 0.48
DISTRIBUTIONS:
Dividends from net investment income ( 0.46) ( 0.46) (0.46)
Net asset value, end of period $ 10.30 $ 10.22 $ 9.70
TOTAL RETURN++ 5.32% 10.23% 5.02%
==================================================== ======= ======= ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 484 $1,440 $1,018
Ratio of operating expenses to average net assets 0.80% 0.80% 0.80%
Ratio of operating expenses to average net assets
including interest expense -- (a) (a)
Ratio of net investment income to average net
assets 4.41% 4.54% 4.71%
Portfolio turnover rate 40% 19% 31%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.80% 1.40% 1.44%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.87 $ 8.58 $ 9.80
Net investment income 0.15 0.50 0.50
Net realized and unrealized gain/(loss) on
investments (0.19) 1.29 (1.22)
Net increase/(decrease) in net asset value from
operations (0.04) 1.79 (0.72)
DISTRIBUTIONS:
Dividends from net investment income (0.15) (0.50) (0.50)
Net asset value, end of period $ 9.68 $ 9.87 $ 8.58
TOTAL RETURN++ (0.37)% 21.28% (7.58)%
==================================================== ======= ====== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 973 $ 203 $ 43
Ratio of operating expenses to average net assets 0.80%+ 0.60% 0.39%
Ratio of operating expenses to average net assets
including interest expense 0.81%+ (a) (a)
Ratio of net investment income to average net
assets 4.72%+ 5.29% 5.38%
Portfolio turnover rate 2% 45% 38%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.67%+ 1.47% 1.38%
</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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
<TABLE>
<CAPTION>
NATIONS TENNESSEE MUNICIPAL
BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR B SHARES YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/99 03/31/98 03/31/97 03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.22 $ 9.70 $ 9.68 $ 9.87 $ 8.58 $ 9.80
Net investment income 0.39 0.40 0.40 0.14 0.45 0.45
Net realized and unrealized gain/(loss) on
investments 0.08 0.52 0.02 (0.19) 1.29 (1.22)
Net increase/(decrease) in net asset value from
operations 0.47 0.92 0.42 (0.05) 1.74 (0.77)
DISTRIBUTIONS:
Dividends from net investment income ( 0.39) ( 0.40) (0.40) (0.14) (0.45) (0.45)
Net asset value, end of period $ 10.30 $ 10.22 $ 9.70 $ 9.68 $ 9.87 $ 8.58
TOTAL RETURN++ 4.64% 9.56% 4.45% (0.55)% 20.63% (8.10)%
==================================================== ======= ======= ====== ======= ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $4,718 $4,915 $5,319 $6,761 $6,619 $5,504
Ratio of operating expenses to average net assets 1.45% 1.42% 1.35% 1.35%+ 1.15% 0.96%
Ratio of operating expenses to average net assets
including interest expense -- (a) (a) 1.36%+ (a) (a)
Ratio of net investment income to average net
assets 3.76% 3.92% 4.16% 4.17%+ 4.74% 4.81%
Portfolio turnover rate 40% 19% 31% 2% 45% 38%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.55% 2.02% 1.99% 2.22%+ 2.02% 1.95%
</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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
136
<PAGE>
<TABLE>
<CAPTION>
NATIONS TENNESSEE MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR C SHARES YEAR ENDED YEAR ENDED
03/31/99(C) 03/31/98(C)
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.22 $ 9.70
Net investment income 0.38 0.40
Net realized and unrealized gain/(loss) on
investments 0.09 0.52
Net increase/(decrease) in net asset value resulting
from operations 0.47 0.92
DISTRIBUTIONS:
Dividends from net investment income ( 0.39) ( 0.40)
Net asset value, end of period $ 10.30 $ 10.22
TOTAL RETURN++ 4.62% 9.65%
===================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 68 $ 42
Ratio of operating expenses to average net assets 1.46% 1.33%
Ratio of operating expenses to average net assets
including interest expenses -- (a)
Ratio of net investment income to average net
assets 3.75% 4.01%
Portfolio turnover rate 40% 19%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.55% 1.93%
<CAPTION>
INVESTOR C SHARES YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.68 $ 9.87 $ 8.58 $ 8.62
Net investment income 0.43 0.14 0.45 0.03
Net realized and unrealized gain/(loss) on
investments 0.02 (0.19) 1.29 (0.04)
Net increase/(decrease) in net asset value resulting
from operations 0.45 (0.05) 1.74 (0.01)
DISTRIBUTIONS:
Dividends from net investment income (0.43) (0.14) (0.45) (0.03)
Net asset value, end of period $ 9.70 $ 9.68 $ 9.87 $ 8.58
TOTAL RETURN++ 4.71% (0.49)% 20.62% (0.07)%
===================================================== ====== ======= ====== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 38 $ 37 $ 64 $ 2
Ratio of operating expenses to average net assets 1.10% 1.18%+ 1.15% 0.96%+
Ratio of operating expenses to average net assets
including interest expenses (a) 1.18%+ (a) (a)
Ratio of net investment income to average net
assets 4.41% 4.34%+ 4.74% 4.81%+
Portfolio turnover rate 31% 2% 45% 38%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.74% 2.05%+ 2.02% 1.95%+
</TABLE>
* Nations Tennessee Municipal Bond Fund Investor C
Shares commenced operations on November 3, 1994.
+ 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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
<TABLE>
<CAPTION>
NATIONS TEXAS INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR A SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.50 $ 10.18 $ 10.21
Net investment income 0.47 0.47 0.45
Net realized and unrealized gain/(loss) on
investments 0.02 0.32 ( 0.03)
Net increase/(decrease) in net asset value from
operations 0.49 0.79 0.42
DISTRIBUTIONS:
Dividends from net investment income ( 0.47) ( 0.47) ( 0.45)
Distributions from net realized capital gains ( 0.04) -- --
Total dividends and distributions ( 0.51) ( 0.47) ( 0.45)
Net asset value, end of period $ 10.48 $ 10.50 $ 10.18
TOTAL RETURN++ 4.77% 7.87% 4.17%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $6,909 $2,666 $ 909
Ratio of operating expenses to average net assets 0.70% 0.70% 0.70%
Ratio of net investment income to average net
assets 4.46% 4.54% 4.39%
Portfolio turnover rate 22% 19% 34%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.93% 0.95% 1.04%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.36 $ 9.53 $ 10.35
Net investment income 0.15 0.44 0.42
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.83 ( 0.79)
Net increase/(decrease) in net asset value from
operations 0.00 1.27 ( 0.37)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.44) ( 0.42)#
Distributions from net realized capital gains -- -- ( 0.03)
Total dividends and distributions ( 0.15) ( 0.44) ( 0.45)
Net asset value, end of period $ 10.21 $ 10.36 $ 9.53
TOTAL RETURN++ ( 0.02)% 13.60% ( 3.66)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 801 $ 806 $ 718
Ratio of operating expenses to average net assets 0.70%+ 0.77%(a) 0.73%(a)
Ratio of net investment income to average net
assets 4.32%+ 4.42% 4.22%
Portfolio turnover rate 11% 64% 61%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.09%+ 1.03% 0.96%
</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.
# Amount includes distributions in excess of net
investment income which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
137
<PAGE>
<TABLE>
<CAPTION>
NATIONS TEXAS INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED
INVESTOR B SHARES 03/31/99 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.50 $ 10.18 $ 10.21
Net investment income 0.41 0.42 0.42
Net realized and unrealized gain/(loss) on
investments 0.02 0.32 ( 0.03)
Net increase/(decrease) in net asset value from
operations 0.43 0.74 0.39
DISTRIBUTIONS:
Dividends from net investment income ( 0.41) ( 0.42) ( 0.42)
Distributions from net realized capital gains ( 0.04) -- --
Total dividends and distributions ( 0.45) ( 0.42) ( 0.42)
Net asset value, end of period $ 10.48 $ 10.50 $ 10.18
TOTAL RETURN++ 4.15% 7.34% 3.87%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,137 $2,184 $2,182
Ratio of operating expenses to average net assets 1.30% 1.20% 1.00%
Ratio of net investment income to average net
assets 3.86% 4.04% 4.09%
Portfolio turnover rate 22% 19% 34%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.68% 1.45% 1.34%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.36 $ 9.53 $ 10.35
Net investment income 0.14 0.41 0.39
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.83 ( 0.79)
Net increase/(decrease) in net asset value from
operations ( 0.01) 1.24 ( 0.40)
DISTRIBUTIONS:
Dividends from net investment income ( 0.14) ( 0.41) ( 0.39)#
Distributions from net realized capital gains -- -- ( 0.03)
Total dividends and distributions ( 0.14) ( 0.41) ( 0.42)
Net asset value, end of period $ 10.21 $ 10.36 $ 9.53
TOTAL RETURN++ ( 0.12)% 13.27% ( 3.96)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,845 $3,136 $2,774
Ratio of operating expenses to average net assets 1.00%+ 1.07%(a) 1.05%(a)
Ratio of net investment income to average net
assets 4.02%+ 4.12% 3.90%
Portfolio turnover rate 11% 64% 61%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.39%+ 1.33% 1.28%
</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.
# Amount includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
<TABLE>
<CAPTION>
NATIONS TEXAS INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR C SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99(C) 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.50 $ 10.18 $ 10.21
Net investment income 0.40 0.42 0.42
Net realized and unrealized gain/(loss) on
investments 0.02 0.32 ( 0.03)
Net increase/(decrease) in net asset value from
operations 0.42 0.74 0.39
DISTRIBUTIONS:
Dividends from net investment income ( 0.40) ( 0.42) ( 0.42)
Distributions from net realized capital gains ( 0.04) -- --
Total dividends and distributions ( 0.44) ( 0.42) ( 0.42)
Net asset value, end of period $ 10.48 $ 10.50 $ 10.18
TOTAL RETURN++ 4.14% 7.34% 3.87%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3 $ 293 $ 591
Ratio of operating expenses to average net assets 1.33% 1.20% 1.00%
Ratio of net investment income to average net
assets 3.83% 4.04% 4.09%
Portfolio turnover rate 22% 19% 34%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.68% 1.45% 1.34%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.36 $ 9.53 $ 9.55
Net investment income 0.14 0.41 0.03
Net realized and unrealized gain/(loss) on
investments ( 0.15) 0.83 (0.02)
Net increase/(decrease) in net asset value from
operations ( 0.01) 1.24 0.01
DISTRIBUTIONS:
Dividends from net investment income ( 0.14) ( 0.41) (0.03)#
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.14) ( 0.41) (0.03)
Net asset value, end of period $ 10.21 $ 10.36 $ 9.53
TOTAL RETURN++ ( 0.12)% 13.27% 0.08%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 569 $ 570 $ 2
Ratio of operating expenses to average net assets 1.00%+ 1.07%(a) 1.05%+(a)
Ratio of net investment income to average net
assets 4.02%+ 4.12% 3.90%+
Portfolio turnover rate 11% 64% 61%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.39%+ 1.33% 1.28%+
</TABLE>
* Nations Texas Intermediate Municipal Bond Fund
Investor C Shares commenced operations on November
3, 1994.
+ 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 includes distributions in excess of net
investment income, which were less than $0.01 per
share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
138
<PAGE>
<TABLE>
<CAPTION>
NATIONS TEXAS MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR A SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99 03/31/98(C) 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.04 $ 9.48 $ 9.49
Net investment income 0.44 0.46 0.46
Net realized and unrealized gain/(loss) on
investments 0.07 0.56 (0.01)
Net increase/(decrease) in net asset value from
operations 0.51 1.02 0.45
DISTRIBUTIONS:
Dividends from net investment income ( 0.44) ( 0.46) (0.46)
Net asset value, end of period $ 10.11 $ 10.04 $ 9.48
TOTAL RETURN++ 5.20% 10.90% 4.78%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 401 $ 419 $ 371
Ratio of operating expenses to average net assets 0.80% 0.80%(a) 0.80%(a)
Ratio of net investment income to average net
assets 4.39% 4.63% 4.79%
Portfolio turnover rate 34% 33% 52%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.50% 1.27% 1.23%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.70 $ 8.39 $ 9.92
Net investment income 0.15 0.49 0.47
Net realized and unrealized gain/(loss) on
investments (0.21) 1.31 ( 1.53)
Net increase/(decrease) in net asset value from
operations (0.06) 1.80 ( 1.06)
DISTRIBUTIONS:
Dividends from net investment income (0.15) (0.49) ( 0.47)
Net asset value, end of period $ 9.49 $ 9.70 $ 8.39
TOTAL RETURN++ (0.62)% 21.85% (10.98)%
==================================================== ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 317 $ 351 $ 55
Ratio of operating expenses to average net assets 0.80%+ 0.59%(a) 0.40%+(a)
Ratio of net investment income to average net
assets 4.72%+ 5.25% 5.34%+
Portfolio turnover rate 6% 50% 107%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.31%+ 1.25% 1.24%+
</TABLE>
* Nations Texas Municipal Bond Fund Investor A
Shares commenced operations on December 17, 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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
<TABLE>
<CAPTION>
NATIONS TEXAS MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR B SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99 03/31/98(C) 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.04 $ 9.48 $ 9.49
Net investment income 0.38 0.39 0.40
Net realized and unrealized gain/(loss) on
investments 0.07 0.56 (0.01)
Net increase/(decrease) in net asset value from
operations 0.45 0.95 0.39
DISTRIBUTIONS:
Dividends from net investment income ( 0.38) ( 0.39) (0.40)
Net asset value, end of period $ 10.11 $ 10.04 $ 9.48
TOTAL RETURN++ 4.53% 10.23% 4.21%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $6,828 $8,804 $10,090
Ratio of operating expenses to average net assets 1.45% 1.42%(a) 1.35%(a)
Ratio of net investment income to average net
assets 3.74% 4.01% 4.24%
Portfolio turnover rate 34% 33% 52%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.25% 1.89% 1.78%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.70 $ 8.39 $ 9.78
Net investment income 0.13 0.43 0.44
Net realized and unrealized gain/(loss) on
investments (0.21) 1.31 (1.39)
Net increase/(decrease) in net asset value from
operations (0.08) 1.74 (0.95)
DISTRIBUTIONS:
Dividends from net investment income (0.13) (0.43) (0.44)
Net asset value, end of period $ 9.49 $ 9.70 $ 8.39
TOTAL RETURN++ (0.80)% 21.19% (9.98)%
==================================================== ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $11,838 $12,587 $10,812
Ratio of operating expenses to average net assets 1.35%+ 1.14%(a) 0.97%(a)
Ratio of net investment income to average net
assets 4.17%+ 4.70% 4.77%
Portfolio turnover rate 6% 50% 107%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.86%+ 1.80% 1.81%
</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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
139
<PAGE>
<TABLE>
<CAPTION>
NATIONS TEXAS MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR C SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99 03/31/98(C) 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.04 $ 9.48 $ 9.49
Net investment income 0.38 0.40 0.43
Net realized and unrealized gain/(loss) on
investments 0.07 0.56 (0.01)
Net increase/(decrease) in net asset value from
operations 0.45 0.96 0.42
DISTRIBUTIONS:
Dividends from net investment income ( 0.38) ( 0.40) (0.43)
Net asset value, end of period $ 10.11 $ 10.04 $ 9.48
TOTAL RETURN++ 4.51% 10.31% 4.47%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 84 $ 80 $ 73
Ratio of operating expenses to average net assets 1.46% 1.33%(a) 1.10%(a)
Ratio of net investment income to average net
assets 3.73% 4.10% 4.49%
Portfolio turnover rate 34% 33% 52%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.25% 1.80% 1.53%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.70 $ 8.39 $ 8.46
Net investment income 0.14 0.43 0.03
Net realized and unrealized gain/(loss) on
investments (0.21) 1.31 (0.07)
Net increase/(decrease) in net asset value from
operations (0.07) 1.74 (0.04)
DISTRIBUTIONS:
Dividends from net investment income (0.14) (0.43) (0.03)
Net asset value, end of period $ 9.49 $ 9.70 $ 8.39
TOTAL RETURN++ (0.74)% 21.15% (0.43)%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 70 $ 70 $ 2
Ratio of operating expenses to average net assets 1.16%+ 1.14%(a) 0.97%+(a)
Ratio of net investment income to average net
assets 4.36%+ 4.70% 4.77%+
Portfolio turnover rate 6% 50% 107%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.67%+ 1.80% 1.81%+
</TABLE>
* Nations Texas Municipal Bond Fund Investor C
Shares commenced operations on November 3, 1994.
+ 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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
<TABLE>
<CAPTION>
NATIONS VIRGINIA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR A SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99(C) 03/31/98 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.92 $ 10.59 $ 10.69
Net investment income 0.47 0.49 0.49
Net realized and unrealized gain/(loss) on
investments 0.07 0.33 ( 0.10)
Net increase/(decrease) in net asset value from
operations 0.54 0.82 0.39
DISTRIBUTIONS:
Dividends from net investment income ( 0.48) ( 0.49) ( 0.49)
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.48) ( 0.49) ( 0.49)
Net asset value, end of period $ 10.98 $ 10.92 $ 10.59
TOTAL RETURN++ 5.00% 7.91% 3.71%
==================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $56,733 $54,080 $55,791
Ratio of operating expenses to average net assets 0.70%(a) 0.70%(a) 0.70%(a)
Ratio of net investment income to average net
assets 4.34% 4.57% 4.59%
Portfolio turnover rate 5% 21% 20%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.95% 0.94% 0.94%
<CAPTION>
INVESTOR A SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.83 $ 9.94 $ 10.99
Net investment income 0.16 0.49 0.48
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.89 ( 0.96)
Net increase/(decrease) in net asset value from
operations 0.02 1.38 ( 0.48)
DISTRIBUTIONS:
Dividends from net investment income ( 0.16) ( 0.49) ( 0.48)
Distributions from net realized capital gains -- ( 0.00)# ( 0.09)
Total dividends and distributions ( 0.16) ( 0.49) ( 0.57)
Net asset value, end of period $ 10.69 $ 10.83 $ 9.94
TOTAL RETURN++ 0.20% 14.16% ( 4.52)%
==================================================== ======= ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $68,003 $73,253 $79,412
Ratio of operating expenses to average net assets 0.70%+(a) 0.76%(a) 0.79%(a)
Ratio of net investment income to average net
assets 4.52%+ 4.67% 4.58%
Portfolio turnover rate 2% 22% 14%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 0.96%+ 0.94% 0.91%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
140
<PAGE>
<TABLE>
<CAPTION>
NATIONS VIRGINIA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR B SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99 03/31/98(C) 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.92 $ 10.59 $ 10.69
Net investment income 0.41 0.44 0.46
Net realized and unrealized gain/(loss) on
investments 0.06 0.33 ( 0.10)
Net increase/(decrease) in net asset value from
operations 0.47 0.77 0.36
DISTRIBUTIONS:
Dividends from net investment income ( 0.41) ( 0.44) ( 0.46)
Distributions from net realized capital gains -- -- --
Total dividends and distributions ( 0.41) ( 0.44) ( 0.46)
Net asset value, end of period $ 10.98 $ 10.92 $ 10.59
TOTAL RETURN++ 4.38% 7.37% 3.40%
=================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $10,296 $9,643 $10,516
Ratio of operating expenses to average net assets 1.30%(a) 1.20%(a) 1.00%(a)
Ratio of net investment income to average net
assets 3.74% 4.07% 4.29%
Portfolio turnover rate 5% 21% 20%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.70% 1.44% 1.24%
<CAPTION>
INVESTOR B SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.83 $ 9.94 $ 10.99
Net investment income 0.15 0.46 0.45
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.89 ( 0.96)
Net increase/(decrease) in net asset value from
operations 0.01 1.35 ( 0.51)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.46) ( 0.45)
Distributions from net realized capital gains -- ( 0.00)# ( 0.09)
Total dividends and distributions ( 0.15) ( 0.46) ( 0.54)
Net asset value, end of period $ 10.69 $ 10.83 $ 9.94
TOTAL RETURN++ 0.10% 13.82% ( 4.82)%
=================================================== ======= ======== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $11,926 $12,163 $9,690
Ratio of operating expenses to average net assets 1.00%+(a) 1.06%(a) 1.11%(a)
Ratio of net investment income to average net
assets 4.22%+ 4.37% 4.26%
Portfolio turnover rate 2% 22% 14%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.26%+ 1.24% 1.23%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
<TABLE>
<CAPTION>
NATIONS VIRGINIA INTERMEDIATE
MUNICIPAL BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR C SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99(C) 03/31/98(C) 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.92 $ 10.59 $ 10.69
Net investment income 0.39 0.44 0.46
Net realized and unrealized gain/(loss) on
investments 0.08 0.33 ( 0.10)
Net increase/(decrease) in net asset value from
operations 0.47 0.77 0.36
DISTRIBUTIONS:
Dividends from net investment income ( 0.41) ( 0.44) ( 0.46)
Distributions from net realized capital gains -- -- --
Distributions in excess of net realized capital gains -- -- --
Total dividends and distributions ( 0.41) ( 0.44) ( 0.46)
Net asset value, end of period $ 10.98 $ 10.92 $ 10.59
TOTAL RETURN++ 4.36% 7.37% 3.40%
======================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,100 $1,949 $6,463
Ratio of operating expenses to average net assets 1.34%(a) 1.20%(a) 1.00%(a)
Ratio of net investment income to average net assets 3.70% 4.07% 4.29%
Portfolio turnover rate 5% 21% 20%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.70% 1.44% 1.24%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.83 $ 9.94 $ 10.99
Net investment income 0.15 0.46 0.44
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.89 ( 0.96)
Net increase/(decrease) in net asset value from
operations 0.01 1.35 ( 0.52)
DISTRIBUTIONS:
Dividends from net investment income ( 0.15) ( 0.46) ( 0.44)
Distributions from net realized capital gains -- ( 0.00)# ( 0.09)
Distributions in excess of net realized capital gains -- -- ( 0.00)#
Total dividends and distributions ( 0.15) ( 0.46) ( 0.53)
Net asset value, end of period $ 10.69 $ 10.83 $ 9.94
TOTAL RETURN++ 0.10% 13.82% ( 4.90)%
======================================================== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $6,909 $7,152 $8,372
Ratio of operating expenses to average net assets 1.00%+(a) 1.06%(a) 1.19%(a)
Ratio of net investment income to average net assets 4.22%+ 4.37% 4.18%
Portfolio turnover rate 2% 22% 14%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.26%+ 1.24% 1.31%
</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.
# Amount represents less than $0.01 per share.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
141
<PAGE>
<TABLE>
<CAPTION>
NATIONS VIRGINIA MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR A SHARES YEAR ENDED YEAR ENDED
03/31/99(C) 03/31/98(C)
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.95 $ 9.40
Net investment income 0.45 0.45
Net realized and unrealized gain/(loss) on
investments 0.04 0.55
Net increase/(decrease) in net asset value from
operations 0.49 1.00
DISTRIBUTIONS:
Dividends from net investment income (0.45) (0.45)
Net asset value, end of period $ 9.99 $ 9.95
TOTAL RETURN++ 4.98% 10.88%
==================================================== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 965 $1,222
Ratio of operating expenses to average net assets 0.80% 0.79%
Ratio of operating expenses to average net assets
including interest expense (a) (a)
Ratio of net investment income to average net
assets 4.46% 4.66%
Portfolio turnover rate 11% 9%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.36% 1.16%
<CAPTION>
INVESTOR A SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.38 $ 9.62 $ 8.29 $ 9.77
Net investment income 0.46 0.16 0.49 0.49
Net realized and unrealized gain/(loss) on
investments 0.02 (0.24) 1.33 ( 1.48)
Net increase/(decrease) in net asset value from
operations 0.48 (0.08) 1.82 ( 0.99)
DISTRIBUTIONS:
Dividends from net investment income (0.46) (0.16) (0.49) ( 0.49)
Net asset value, end of period $ 9.40 $ 9.38 $ 9.62 $ 8.29
TOTAL RETURN++ 5.23% (0.91)% 22.39% (10.44)%
==================================================== ====== ======= ====== =========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 726 $ 661 $ 650 $ 168
Ratio of operating expenses to average net assets 0.80% 0.80%+ 0.59% 0.39%
Ratio of operating expenses to average net assets
including interest expense (a) 0.81%+ (a) (a)
Ratio of net investment income to average net
assets 4.90% 4.86%+ 5.31% 5.34%
Portfolio turnover rate 37% 8% 16% 61%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.18% 1.27%+ 1.24% 1.17%
</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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
<TABLE>
<CAPTION>
NATIONS VIRGINIA MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR B SHARES YEAR ENDED YEAR ENDED
03/31/99 03/31/98(C)
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.95 $ 9.40
Net investment income 0.38 0.39
Net realized and unrealized gain/(loss) on
investments 0.04 0.55
Net increase/(decrease) in net asset value from
operations 0.42 0.94
DISTRIBUTIONS:
Dividends from net investment income (0.38) (0.39)
Net asset value, end of period $ 9.99 $ 9.95
TOTAL RETURN++ 4.30% 10.21%
==================================================== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $13,499 $13,082
Ratio of operating expenses to average net assets 1.45% 1.41%
Ratio of operating expenses to average net assets
including interest expense (a) (a)
Ratio of net investment income to average net
assets 3.81% 4.04%
Portfolio turnover rate 11% 9%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.11% 1.78%
<CAPTION>
INVESTOR B SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97 03/31/96(B) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.38 $ 9.62 $ 8.29 $ 9.77
Net investment income 0.41 0.14 0.44 0.44
Net realized and unrealized gain/(loss) on
investments 0.02 (0.24) 1.33 ( 1.48)
Net increase/(decrease) in net asset value from
operations 0.43 (0.10) 1.77 ( 1.04)
DISTRIBUTIONS:
Dividends from net investment income (0.41) (0.14) (0.44) ( 0.44)
Net asset value, end of period $ 9.40 $ 9.38 $ 9.62 $ 8.29
TOTAL RETURN++ 4.65% (1.09)% 21.72% (10.95)%
==================================================== ====== ======= ====== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $13,972 $15,938 $16,489 $12,738
Ratio of operating expenses to average net assets 1.35% 1.35%+ 1.14% 0.96%
Ratio of operating expenses to average net assets
including interest expense (a) 1.36%+ (a) (a)
Ratio of net investment income to average net
assets 4.35% 4.31%+ 4.76% 4.77%
Portfolio turnover rate 37% 8% 16% 61%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.73% 1.82%+ 1.79% 1.74%
</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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
142
<PAGE>
<TABLE>
<CAPTION>
NATIONS VIRGINIA MUNICIPAL BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR C SHARES YEAR ENDED YEAR ENDED YEAR ENDED
03/31/99 03/31/98(C) 03/31/97
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.95 $ 9.40 $ 9.38
Net investment income 0.37 0.40 0.43
Net realized and unrealized gain/(loss) on
investments 0.04 0.55 0.02
Net increase/(decrease) in net asset value from
operations 0.41 0.95 0.45
DISTRIBUTIONS:
Dividends from net investment income (0.37) (0.40) (0.43)
Net asset value, end of period $ 9.99 $ 9.95 $ 9.40
TOTAL RETURN++ 4.21% 10.31% 4.92%
======================================================= ====== ====== ======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 3 $ 3 $ 45
Ratio of operating expenses to average net assets 1.45% 1.32% 1.10%
Ratio of operating expenses to net assets including
interest expense (a) (a) (a)
Ratio of net investment income to average net assets 3.81% 4.13% 4.60%
Portfolio turnover rate 11% 9% 37%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 2.11% 1.69% 1.48%
<CAPTION>
INVESTOR C SHARES PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/96(B) 11/30/95 11/30/94*
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.62 $ 8.29 $ 8.38
Net investment income 0.14 0.44 0.03
Net realized and unrealized gain/(loss) on
investments (0.24) 1.33 (0.09)
Net increase/(decrease) in net asset value from
operations (0.10) 1.77 (0.06)
DISTRIBUTIONS:
Dividends from net investment income (0.14) (0.44) (0.03)
Net asset value, end of period $ 9.38 $ 9.62 $ 8.29
TOTAL RETURN++ (1.03)% 21.71% (0.67)%
======================================================= ======= ====== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 43 $ 34 $ 2
Ratio of operating expenses to average net assets 1.16%+ 1.14% 0.96%+
Ratio of operating expenses to net assets including
interest expense 1.17%+ (a) (a)
Ratio of net investment income to average net assets 4.50%+ 4.76% 4.77%+
Portfolio turnover rate 8% 16% 61%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.63%+ 1.79% 1.74%+
</TABLE>
* Nations Virginia Municipal Bond Fund Investor C
Shares commenced operations on November 3, 1994.
+ 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.
(a) The effect of interest expense on the operating
expense ratio was less than 0.01%.
(b) Fiscal year ended changed to March 31. Prior to
this, the fiscal year end was November 30.
(c) Per share net investment income has been
calculated using the monthly average share method.
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<PAGE>
[GRAPHIC] Terms used in this prospectus
ASSET-BACKED SECURITY - a debt security that gives you an interest in a pool
of assets that is collateralized or "backed" by one or more kinds of assets,
including real property, receivables or mortgages, generally issued by banks,
credit card companies or other lenders. Some securities may be issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities. Asset-backed securities typically make periodic payments,
which may be interest or a combination of interest and a portion of the
principal of the underlying assets.
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
CASH EQUIVALENTS - short-term, interest-bearing instruments, including
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities, bank obligations, asset-backed securities, foreign
government securities and commercial paper issued by U.S. and foreign issuers
which, at the time of investment, is rated at least Prime-2 by Moody's
Investor Services, Inc. (Moody's), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).
COLLATERALIZED MORTGAGE OBLIGATION (CMO) - a debt security that is backed by
real estate mortgages. CMO payment obligations are covered by interest and/or
principal payments from a pool of mortgages. In addition, the underlying
assets of a CMO are typically separated into classes, called tranches, based
on maturity. Each tranche pays a different rate of interest. CMOs are not
generally issued by the U.S. government, its agencies or instrumentalities.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
CONVERTIBLE SECURITY - a security that can be exchanged for common stock (or
another type of security) at a specified rate. Convertible securities include
convertible debt, rights and warrants.
CORPORATE OBLIGATION - a money market instrument issued by a corporation or
commercial bank.
144
<PAGE>
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
DEPOSITARY RECEIPTS - evidence of the deposit of a security with a custodian
bank. American Depositary Receipts (ADRs), for example, are certificates
traded in U.S. markets representing an interest of a foreign company. They
were created to make it possible for foreign issuers to meet U.S. security
registration requirements. Other examples include ADSs, GDRs and EDRs.
DOLLAR ROLL TRANSACTION - the sale by a Fund of mortgage-backed or other
asset-backed securities, together with a commitment to buy similar, but not
identical, securities at a future date.
DURATION - a measure used to estimate a security's or portfolio's sensitivity
to changes in interest rates. For example, if interest rates rise by one
percentage point, the share price of a fund with a duration of five years
would decline by about 5%. If interest rates fall by one percentage point, the
fund's share price would rise by about 5%.
EQUITY SECURITY - an investment that gives you an equity ownership right in a
company. Equity securities (or "equities") include common and preferred stock,
rights and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
FOREIGN SECURITY - a debt or equity security issued by a foreign company or
government.
FUTURES CONTRACT - a contract to buy or sell an asset or an index of
securities at a specified price on a specified future date. The price is set
through a futures exchange.
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
145
<PAGE>
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
INVESTMENT GRADE - a debt security that has been given a medium to high credit
rating (Baa or higher by Moody's, BBB or higher by S&P or a comparable rating
by other NRSROs) based on the issuer's ability to pay interest and repay
principal on time. The portfolio management team may consider an unrated debt
security to be investment grade if the team believes it is of comparable
quality. Please see the SAI for more information about credit ratings.
LEHMAN 3-YEAR MUNICIPAL BOND INDEX - a broad-based, unmanaged index of
investment grade bonds with maturities of two to four years. All dividends are
reinvested.
LEHMAN 7-YEAR MUNICIPAL BOND INDEX - a broad-based, unmanaged index of
investment grade bonds with maturities of seven to eight years. All dividends
are reinvested.
LEHMAN AGGREGATE BOND INDEX - an index made up of the Lehman
Government/Corporate Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index. These indexes include U.S. government agency
and U.S. Treasury securities, corporate bonds and mortgage-backed securities.
All dividends are reinvested.
LEHMAN GOVERNMENT BOND INDEX - an index of government bonds with an average
maturity of approximately nine years. All dividends are reinvested.
LEHMAN GOVERNMENT/CORPORATE BOND INDEX - an index of U.S. government, U.S.
Treasury and agency securities, and corporate and Yankee bonds. All dividends
are reinvested.
LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX - an index of U.S. government agency
and U.S. Treasury securities. All dividends are reinvested.
LEHMAN INTERMEDIATE TREASURY INDEX - an index of U.S. Treasury securities with
maturities of three to 10 years. All dividends are reinvested.
LEHMAN MUNICIPAL BOND INDEX - a broad-based, unmanaged index of 8,000
investment grade bonds with long-term maturities. All dividends are
reinvested.
LIQUIDITY - a measurement of how easily a security can be bought or sold at a
price that is close to its market value.
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<PAGE>
MERRILL LYNCH 1-3 YEAR TREASURY INDEX - an index of U.S. Treasury bonds with
maturities of 1 to 3 years. All dividends are reinvested.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MORTGAGE-BACKED SECURITY OR MORTGAGE-RELATED SECURITY - a debt security that
gives you an interest in, and is backed by, a pool of residential mortgages
issued by the U.S. government or by financial institutions. The underlying
mortgages may be guaranteed by the U.S. government or one of its agencies,
authorities or instrumentalities. Mortgage-backed securities typically make
monthly payments, which are a combination of interest and a portion of the
principal of the underlying mortgages.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income is exempt from
federal income taxes and is generally exempt from state taxes if you live in
the state that issued the security. If you live in the municipality that
issued the security, interest income may also be exempt from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRE-REFUNDED BOND - a bond that is repaid before its maturity date. The
repayment is generally financed by a new issue. Issuers generally pre-refund
bonds during periods of lower interest rates to reduce their interest costs.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
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<PAGE>
REAL ESTATE INVESTMENT TRUST (REIT) - a portfolio of real estate investments
which may include office buildings, apartment complexes, hotels and shopping
malls, and real-estate-related loans or interests.
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SALOMON BROTHERS MORTGAGE INDEX - an index of 30-year and 15-year GNMA, FNMA
and FHLMC securities, and FNMA and FHLMC balloon mortgages.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
ZERO-COUPON BOND - a bond that makes no periodic interest payments. Zero
coupon bonds are sold at a deep discount to their face value and mature at
face value. The difference between the face value at maturity and the purchase
price represents the return.
148
<PAGE>
[GRAPHIC] Where to find more information
You'll find more information about the State Municipal Bond Funds in the
following documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports. The annual report also includes a discussion about the market
conditions and investment strategies that had a significant effect on
each Fund's performance during the period covered.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.321.7854
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file number:
Nations Fund Trust, 811-04305
NF-SMBPROIX-8/99
NATIONS FUNDS
[GRAPHIC]
FIXED INCOME FUNDS
PROSPECTUS -- INVESTOR A, B AND C SHARES
AUGUST 1, 1999
Fixed Income Funds
NATIONS SHORT-TERM INCOME FUND
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
NATIONS INTERMEDIATE BOND FUND
NATIONS STRATEGIC FIXED INCOME FUND
NATIONS GOVERNMENT SECURITIES FUND
NATIONS U.S. GOVERNMENT BOND FUND
NATIONS DIVERSIFIED INCOME FUND
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------
NOT FDIC
INSURED
- ------------------------
MAY LOSE VALUE
- ------------------------
NO BANK GUARANTEE
- ------------------------
NATIONS FUNDS
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 72.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N. A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about some of the
Nations Funds Fixed Income Funds. Please read it carefully, because it
contains information that's designed to help you make informed investment
decisions.
ABOUT THE FUNDS
The Fixed Income Funds focus on the potential to earn income by investing
primarily in FIXED INCOME SECURITIES.
Fixed income securities have the potential to increase in value because when
interest rates fall, the value of these securities tends to rise. When
interest rates rise, however, the value of these securities tends to fall.
Other things can also affect the value of fixed income securities. There's
always a risk that you'll lose money or you may not earn as much as you
expect.
ARE THESE FUNDS RIGHT FOR YOU?
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Fixed Income Funds may be suitable for you if:
o you're looking for income
o you have longer-term investment goals
They may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated
with fixed income securities
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 4.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.321.7854 or
contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
2
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER
TO EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED SUB-ADVISERS, WHICH ARE
RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT DECISIONS FOR EACH OF
THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAAI AND THE SUB-ADVISERS
STARTING ON PAGE 34.
* BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC ADVISORS,
INC. ON OR ABOUT SEPTEMBER 1, 1999.
[GRAPHIC] About the Fixed Income Funds
NATIONS SHORT-TERM INCOME FUND 4
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------------
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND 8
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------------
NATIONS INTERMEDIATE BOND FUND 12
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------------
NATIONS STRATEGIC FIXED INCOME FUND 17
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------------
NATIONS GOVERNMENT SECURITIES FUND 21
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------------
NATIONS U.S. GOVERNMENT BOND FUND 25
Sub-adviser: Boatmen's Capital Management, Inc.
- ---------------------------------------------------------------------
NATIONS DIVERSIFIED INCOME FUND 29
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------------
OTHER IMPORTANT INFORMATION 33
- ---------------------------------------------------------------------
HOW THE FUNDS ARE MANAGED 34
[GRAPHIC] About your investment
INFORMATION FOR INVESTORS
Choosing a share class 37
Buying, selling and exchanging shares 48
How selling and servicing agents are paid 57
Distributions and taxes 59
- --------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 61
- --------------------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 72
- --------------------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
3
<PAGE>
ABOUT THE FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S FIXED INCOME
MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 35.
[GRAPHIC] CORPORATE FIXED INCOME SECURITIES
THIS FUND FOCUSES ON FIXED INCOME SECURITIES ISSUED BY
CORPORATIONS. CORPORATE FIXED INCOME SECURITIES HAVE THE POTENTIAL
TO PAY HIGHER INCOME THAN U.S. TREASURY SECURITIES WITH SIMILAR
MATURITIES.
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Short-Term Income Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income consistent with minimal
fluctuations of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 65% of its total assets in
INVESTMENT GRADE FIXED INCOME SECURITIES. The portfolio management team
may choose unrated securities if it believes they are of comparable
quality to investment grade securities at the time of investment.
The Fund may invest in:
o corporate DEBT SECURITIES, including bonds, notes and debentures
o MORTGAGE-RELATED SECURITIES issued by governments
o ASSET-BACKED SECURITIES
o U.S. GOVERNMENT OBLIGATIONS
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be five years or
less, and its DURATION will be three years or less.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o allocates assets among U.S. government obligations, including securities
issued by government agencies, MORTGAGE-BACKED SECURITIES and U.S.
Treasury securities; ASSET-BACKED SECURITIES and corporate securities,
based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
o tries to manage risk by diversifying the Fund's investments in securities
of many different issuers
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
4
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON PAGE 33
AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Short-Term Income Fund has the following risks:
o INVESTMENT STRATEGY RISK - There is a risk that the value of the
investments that the portfolio management team chooses will not rise
as high as the team expects, or will fall.
o INTEREST RATE RISK - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o DERIVATIVES RISK - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns,
increase transaction costs or increase the Fund's volatility.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed securities that have lower yields.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
- -0.86%* 7.33% -0.48% 11.08% 4.68% 5.82% 6.08%
*Return is from inception (10-2-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 1.40%
5
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
INVESTOR B SHARES OF THIS FUND ARE NO LONGER AVAILABLE FOR
INVESTMENT.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1995: 3.47%
Worst: 1st quarter 1994: -1.00%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the MERRILL LYNCH 1-3 YEAR TREASURY INDEX, an index of
U.S. Treasury bonds with maturities of one to three years. All
dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 5.01% 5.16% 5.15 %
Investor B Shares 0.93% 4.89% 5.14 %
Investor C Shares 4.93% 5.20% 5.13 %
Merrill Lynch 1-3 Year Treasury Index 7.00% 5.99% 5.68%**
</TABLE>
**From inception of Investor A Shares. The inception dates for the
other classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases
as a % of offering price per share 1.00% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) none 1.00%(2
Redemption fee, as a %
of the amount sold none(3) none none
ANNUAL FUND OPERATING EXPENSES(4)
(Expenses that are deducted from the Fund's assets)
Management fees 0.30% 0.30% 0.30 %
Distribution (12b-1) and shareholder
servicing fees(5) 0.25% 1.00% 1.00 %
Other expenses 0.32% 0.32% 0.32 %
------ ------ --------
Total annual Fund operating expenses 0.87% 1.62% 1.62 %
Fee waivers and/or reimbursements (0.10)% (0.10)% (0.10) %
------ ------ --------
Total net expenses(6) 0.77% 1.52% 1.52 %
====== ====== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 41 for details.
6
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
(2)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 44 for details.
(3)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 41 for details.
(4)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(5)Distribution (12b-1) fees of 0.65% are voluntarily waived on Investor
B Shares; however, there is no guarantee that these waivers will
continue for any specified period of time. These waivers are not
reflected in the table above.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $178 $365 $568 $1,153
Investor B Shares $155 $501 $872 $1,713
Investor C Shares $255 $501 $872 $1,914
If you bought Investor C Shares, you would pay the following expenses
if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor C Shares $155 $501 $872 $1,914
7
<PAGE>
ABOUT THE FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC]
ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S FIXED INCOME
MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 35.
[GRAPHIC] U.S. GOVERNMENT SECURITIES
THIS FUND INVESTS MOST OF ITS
ASSETS IN SECURITIES THAT ARE
U.S. GOVERNMENT ISSUED OR GUARANTEED. THIS MEANS THE FUND IS
GENERALLY NOT SUBJECT TO CREDIT RISK, BUT IT COULD EARN LESS
INCOME THAN FUNDS THAT INVEST IN OTHER KINDS OF FIXED INCOME
SECURITIES.
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Short-Intermediate Government Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income consistent with modest fluctuation
of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund invests most of its assets in U.S. GOVERNMENT OBLIGATIONS and
REPURCHASE AGREEMENTS relating to these obligations. It may invest in
MORTGAGE-RELATED SECURITIES issued or backed by the U.S. government or
corporations.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be five years or
less, and its DURATION will be four years or less.
When selecting individual investments, the portfolio management team:
o looks at a FIXED INCOME SECURITY'S potential to generate both income and
price appreciation
o allocates assets primarily among U.S. government obligations, including
securities issued by government agencies, MORTGAGE-BACKED SECURITIES and
U.S. Treasury securities, based on how they have performed in the past,
and on how they are expected to perform under current market conditions.
The team may change the allocations when market conditions change
o selects securities using structure analysis, which evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
8
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON PAGE 33
AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Short-Intermediate Government Fund has the following risks:
o INVESTMENT STRATEGY RISK - There is a risk that the value of the
investments that the portfolio management team chooses will not rise
as high as the team expects, or will fall.
o INTEREST RATE RISK - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o DERIVATIVES RISK - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns,
increase transaction costs or increase the Fund's volatility.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed securities that have lower yields.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
9.25%* 5.69% 7.84% -2.59% 12.22% 2.98% 7.03% 6.39%
*Return is from inception (8-1-91) to 12-31-91.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.94%
9
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 4th quarter 1991: 4.77%
Worst: 1st quarter 1994: -1.78%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX, an index of
U.S. government agency and U.S. Treasury securities. All dividends are
reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 2.89% 4.41% 6.06 %
Investor B Shares 2.76% 4.61% 4.70 %
Investor C Shares 4.92% 4.72% 5.17 %
Lehman Intermediate Government Bond Index 8.49% 6.45% 7.22%**
</TABLE>
**From inception of Investor A Shares. The inception dates for the
other classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases
as a % of offering price per share 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.30% 0.30 % 0.30 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.30% 0.30 % 0.30 %
------ -------- --------
Total annual Fund operating expenses 0.85% 1.60 % 1.60 %
====== ======== ========
Fee waivers and/or reimbursements (0.05)% (0.00) % (0.00) %
------ -------- --------
Total net expenses(6) 0.80% 1.60 % 1.60 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 41 for details.
(2)This charge decreases over time. Please see page 42 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997. Please see page 41 for details.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 44 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 41 for details.
10
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)Nations Short-Intermediate Government Fund's investment adviser and/or
some of its other service providers have agreed to limit total annual
operating expenses to 0.80% for Investor A Shares, 1.60% for Investor
B Shares, and 1.60% for Investor C Shares until May 2000. There is no
guarantee that these limitations will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire May 2000 and are
not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $404 $583 $777 $1,336
Investor B Shares $463 $705 $871 $1,699
Investor C Shares $263 $505 $871 $1,900
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $163 $505 $871 $1,699
Investor C Shares $163 $505 $871 $1,900
11
<PAGE>
ABOUT THE FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
THE FUND DOES NOT HAVE ITS
OWN INVESTMENT ADVISER OR SUB-ADVISER BECAUSE IT'S A "FEEDER"
FUND. A FEEDER FUND TYPICALLY INVESTS ALL OF ITS ASSETS IN ANOTHER
FUND, WHICH IS CALLED A "MASTER PORTFOLIO." MASTER PORTFOLIO AND
FUND ARE SOMETIMES USED INTERCHANGEABLY.
BAAI IS THE MASTER PORTFOLIO'S INVESTMENT ADVISER, AND TRADESTREET
IS ITS SUB-ADVISER. TRADESTREET'S FIXED INCOME MANAGEMENT TEAM
MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE MASTER
PORTFOLIO.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 35.
[GRAPHIC] INTERMEDIATE-TERM SECURITIES
THE PORTFOLIO MANAGEMENT TEAM FOCUSES ON FIXED INCOME SECURITIES
WITH INTERMEDIATE TERMS. WHILE THESE SECURITIES GENERALLY WON'T
EARN AS MUCH INCOME AS SECURITIES WITH LONGER TERMS, THEY TEND TO
BE LESS SENSITIVE TO CHANGES IN INTEREST RATES.
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations Intermediate Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to obtain interest income and capital appreciation.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund invests all of its assets in Nations Intermediate Bond Master
Portfolio (the Master Portfolio). The Master Portfolio has the same
investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in
intermediate and longer-term FIXED INCOME SECURITIES that are INVESTMENT
GRADE. The Master Portfolio can invest up to 35% of its assets in
MORTGAGE-BACKED SECURITIES, including COLLATERALIZED MORTGAGE OBLIGATIONS
(CMOs), that are backed by the U.S. government or one of its agencies or
instrumentalities.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Master Portfolio's AVERAGE DOLLAR-WEIGHTED MATURITY will be
between three and six years. Its DURATION generally will be the same as the
LEHMAN BROTHERS INTERMEDIATE/CORPORATE BOND INDEX.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o allocates assets among U.S. corporate securities and mortgage-backed
securities, based on how they have performed in the past, and on how they
are expected to perform under current market conditions. The team may
change the allocations when market conditions change
o selects securities using structure analysis, which evaluates the
characteristics of a security, including its call features, coupons, and
expected timing of cash flows
o tries to maintain a duration that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
o tries to manage risk by diversifying the Fund's investments in securities
of many different issuers
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
12
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 33 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Intermediate Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - There is a risk that the value of the
investments that the portfolio management team chooses for the
Master Portfolio will not rise as high as the team expects, or will
fall.
o INTEREST RATE RISK - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Master Portfolio could lose money if the issuer of a
fixed income security is unable to pay interest or repay principal
when it's due. Credit risk usually applies to most fixed income
securities, but is generally not a factor for U.S. government
obligations.
o DERIVATIVES RISK - The Master Portfolio may invest in derivatives. There
is a risk that these investments could result in losses, reduce
returns, increase transaction costs or increase the Master
Portfolio's volatility.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed or other securities that have lower yields.
o INVESTING IN THE MASTER PORTFOLIO - Other mutual funds and eligible
investors can buy shares in the Master Portfolio. For example, the
World Horizon U.S. Bond Fund, which is also managed by BAAI, invests
all of its assets in the Master Portfolio.
All investors in the Master Portfolio invest under the same terms and
conditions as the Fund and pay a proportionate share of the Master
Portfolio's expenses. Other feeder funds that invest in the Master
Portfolio may have different share prices and returns than the Fund
because different feeder funds typically have varying sales charges,
and ongoing administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio
if it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses
could increase. The Fund might also have to pay brokerage, tax or
other charges.
13
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor C Shares are different because they have
their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
- -2.02%* 14.54% 3.14% 6.54% 7.32%
*Return is from inception (1-24-94) to 12-31-94.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.91%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1995: 4.50%
Worst: 1st quarter 1996: -1.06%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998*
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX, an index
of U.S. government and agency securities and U.S. Treasury securities.
All dividends are reinvested.
Since
1 year inception
Investor A Shares 1.14% 4.58 %
Investor C Shares 6.18% 6.17 %
Lehman Intermediate Government Bond Index 8.49% 6.35%***
**Investor B Shares have been in operation for less than a full
calendar year, so no performance information for this class of shares
has been included in this prospectus.
***From inception of Investor A Shares. The inception dates for the
other classes shown may vary.
14
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES - SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases
as a % of offering price per share 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none none none
ANNUAL FUND OPERATING EXPENSES(4)
(Expenses that are deducted from the Fund's assets)(5)
Management fees 0.40% 0.40 % 0.40 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.56% 0.56 % 0.56 %
------ -------- --------
Total annual Fund operating expenses 1.21% 1.96 % 1.96 %
Fee waivers and/or reimbursements (0.15)% (0.15) % (0.15) %
------ -------- --------
Total net expenses(6) 1.06% 1.81 % 1.81 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 41 for details.
(2)This charge decreases over time. Please see page 42 for details.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 44 for details.
(4)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(5)These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
May 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
15
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire May 2000 and are
not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $430 $683 $ 955 $1,732
Investor B Shares $484 $801 $1,043 $2,079
Investor C Shares $284 $601 $1,043 $2,273
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $184 $601 $1,043 $2,079
Investor C Shares $184 $601 $1,043 $2,273
16
<PAGE>
ABOUT THE FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S FIXED INCOME
MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 35.
[GRAPHIC] MORE INVESTMENT OPPORTUNITIES
THIS FUND CAN INVEST IN A WIDE RANGE OF FIXED INCOME SECURITIES AS
LONG AS THEY'RE INVESTMENT GRADE. THIS ALLOWS THE PORTFOLIO
MANAGEMENT TEAM TO FOCUS ON SECURITIES THAT OFFER THE POTENTIAL
FOR HIGHER RETURNS.
Nations Strategic Fixed Income Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks total return by investing in INVESTMENT GRADE FIXED
INCOME SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 65% of its assets in investment
grade fixed income securities. The portfolio management team may choose
unrated securities if it believes they are of comparable quality to
investment grade securities at the time of investment.
The Fund may invest in:
o corporate DEBT SECURITIES, including bonds, notes and debentures
o U.S. GOVERNMENT OBLIGATIONS
o foreign debt securities denominated in U.S. dollars
o MORTGAGE-RELATED SECURITIES issued by governments
o ASSET-BACKED SECURITIES
o MUNICIPAL SECURITIES
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be 10 years or less
and will never be more than 15 years.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o allocates assets primarily among U.S. government obligations, including
securities issued by government agencies, MORTGAGE-BACKED SECURITIES and
U.S. Treasury securities; and corporate securities, based on how they
have performed in the past, and on how they are expected to perform under
current market conditions. The team may change the allocations when
market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
o tries to manage risk by diversifying the Fund's investments in securities
of many different issuers
17
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 33 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
[GRAPHIC]
RISKS AND OTHER THINGS TO CONSIDER
Nations Strategic Fixed Income Fund has the following risks:
o INVESTMENT STRATEGY RISK - There is a risk that the value of the
investments that the portfolio management team chooses will not rise
as high as the team expects, or will fall.
o INTEREST RATE RISK - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o DERIVATIVES RISK - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns,
increase transaction costs or increase the Fund's volatility.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed securities that have lower yields.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
18
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY,
AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
1.11%* 10.61% -3.51% 17.05% 1.92% 8.26% 6.94%
*Return is from inception (11-19-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -1.60%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1995: 5.90%
Worst: 1st quarter 1994: -2.85%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN AGGREGATE BOND INDEX, an index made up of the
LEHMAN GOVERNMENT/CORPORATE INDEX, the Asset-Backed Securities Index
and the Mortgage-Backed Securities Index. These indexes include U.S.
government agency and U.S. Treasury securities, corporate bonds and
mortgage-backed securities. All dividends are reinvested.
Since
1 year 5 years inception
Investor A Shares 3.45% 5.22% 6.16 %
Investor B Shares 3.31% 5.40% 5.59 %
Investor C Shares 5.46% 5.53% 6.35 %
Lehman Aggregate Bond Index 8.69% 7.27% 7.85%**
**From inception of Investor A Shares. The inception dates for the
other classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases
as a % of offering price 3.25% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 3.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.40% 0.40 % 0.40 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.30% 0.30 % 0.30 %
----- -------- --------
Total annual Fund operating expenses 0.95% 1.70 % 1.70 %
===== ======== ========
</TABLE>
19
<PAGE>
[GRAPHIC]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 41 or details.
(2)This charge decreases over time. Please see page 42 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997. Please see page 41 for details.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 44 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 41 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $419 $618 $834 $1,455
Investor B Shares $473 $736 $923 $1,810
Investor C Shares $273 $536 $923 $2,009
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $173 $536 $923 $1,810
Investor C Shares $173 $536 $923 $2,009
20
<PAGE>
ABOUT THE FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S FIXED INCOME
MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 35.
[GRAPHIC] MORTGAGE-BACKED SECURITIES
THIS FUND INVESTS IN MORTGAGE-
BACKED SECURITIES. MORTGAGE-BACKED SECURITIES TEND TO PAY HIGHER
INCOME THAN U.S. TREASURY BONDS AND OTHER GOVERNMENT-BACKED BONDS
WITH SIMILAR MATURITIES, BUT ALSO HAVE SPECIFIC RISKS ASSOCIATED
WITH THEM. THEY PAY A MONTHLY AMOUNT THAT INCLUDES A PORTION OF
THE PRINCIPAL ON THE UNDERLYING MORTGAGES, AS WELL AS INTEREST.
Nations Government Securities Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks high current income consistent with moderate
fluctuation of principal.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund invests at least 65% of its assets in intermediate-term U.S.
GOVERNMENT OBLIGATIONS.
It may invest in:
o MORTGAGE-RELATED SECURITIES issued by governments or corporations
o ASSET-BACKED SECURITIES or MUNICIPAL SECURITIES rated INVESTMENT GRADE at
the time of investment, or unrated if the portfolio management team
believes they are of comparable quality to investment grade securities at
the time of investment
o corporate DEBT SECURITIES, including bonds, notes and debentures rated
investment grade at the time of investment, or unrated if the portfolio
management team believes they are of comparable quality to investment
grade securities at the time of investment
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between five and
30 years.
When selecting individual investments, the portfolio management team:
o looks at a FIXED INCOME SECURITY'S potential to generate both income and
price appreciation
o allocates assets primarily among U.S. government obligations, including
securities issued by government agencies, MORTGAGE-BACKED SECURITIES and
U.S. Treasury securities, based on how they have performed in the past,
and on how they are expected to perform under current market conditions.
The team may change the allocations when market conditions change
o selects securities using structure analysis, which evaluates the
characteristics of a security, including its call features, coupons and
expected timing of cash flows
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
21
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 33 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Government Securities Fund has the following risks:
o INVESTMENT STRATEGY RISK - There is a risk that the value of the
investments that the portfolio management team chooses will not rise
as high as the team expects, or will fall.
o INTEREST RATE RISK - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations.
o DERIVATIVES RISK - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns,
increase transaction costs or increase the Fund's volatility.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed securities that have lower yields.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1991 1992 1993 1994 1995 1996 1997 1998
11.49%* 5.08% 7.61% -5.32% 14.99% 2.28% 8.29% 8.16%
*Return is from inception (4-17-91) to 12-31-91.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -2.99%
22
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEXES' RETURNS DO NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 3rd quarter 1991: 5.16%
Worst: 1st quarter 1994: -3.04%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN INTERMEDIATE TREASURY INDEX and the SALOMON
BROTHERS MORTGAGE INDEX. The Lehman Intermediate Treasury Index is an
index of U.S. Treasury securities with maturities of three to 10 years.
All dividends are reinvested. The Salomon Brothers Mortgage Index is an
index of 30-year and 15-year GNMA, FNMA and FHLMC securities, and FNMA
and FHLMC balloon mortgages.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 3.06% 4.44% 5.99 %
Investor B Shares 3.52% 4.81% 4.99 %
Investor C Shares 6.52% 4.98% 5.19 %
Lehman Intermediate Government Bond Index 8.49% 6.45% 7.55%**
Salomon Brothers Mortgage Index 6.98% 7.23% 8.07%**
</TABLE>
**From inception of Investor A Shares. The inception dates for the
other classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases
as a % of offering price per share 4.75% none none
Maximum deferred sales charge (load)
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50 % 0.50 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.36% 0.36 % 0.36 %
------ -------- --------
Total annual Fund operating expenses 1.11% 1.86 % 1.86 %
Fee waivers and/or reimbursements (0.10)% (0.10) % (0.10) %
------ -------- --------
Total net expenses(6) 1.01% 1.76 % 1.76 %
====== ======== ========
</TABLE>
23
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 41 for details.
(2)This charge decreases over time. Please see page 42 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997. Please see page 41 for details.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 44 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 41 for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)Nations Government Securities Fund's investment adviser and/or some of
its other service providers have agreed to limit total annual
operating expenses to 1.10% for Investor A Shares, 1.85% for Investor
B Shares, and 1.85% for Investor C Shares until May 2000. The figures
shown here are after waivers and/or reimbursements. There is no
guarantee that these waivers and/or reimbursements will continue after
this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire May 2000 and are
not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $573 $802 $1,049 $1,756
Investor B Shares $679 $875 $1,197 $1,975
Investor C Shares $279 $575 $ 997 $2,172
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $179 $575 $997 $1,975
Investor C Shares $179 $575 $997 $2,172
24
<PAGE>
ABOUT THE FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
BOATMEN'S CAPITAL MANAGEMENT, INC. (BOATMEN'S) IS THIS FUND'S
SUB-ADVISER. BOATMEN'S FIXED INCOME COMMITTEE MAKES THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT BOATMEN'S ON PAGE 35.
[GRAPHIC] LONGER-TERM SECURITIES
THIS FUND INVESTS IN SECURITIES WITH TERMS OF MORE THAN FIVE
YEARS. THESE SECURITIES OFFER THE POTENTIAL FOR HIGHER INCOME THAN
SECURITIES WITH SHORTER TERMS, BUT THEY ARE ALSO MORE SENSITIVE TO
CHANGES IN INTEREST RATES.
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
Nations U.S. Government Bond Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks total return and preservation of capital by investing
in U.S. government securities and REPURCHASE AGREEMENTS collateralized
by such securities.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 65% of its assets in U.S.
government securities and repurchase agreements secured by these
securities.
The Fund may also invest in:
o MORTGAGE-BACKED SECURITIES
o ZERO COUPON BONDS
o corporate DEBT SECURITIES rated INVESTMENT GRADE at the time of investment,
or unrated if the portfolio management team believes they are of
comparable quality to investment grade securities at the time of
investment
o foreign debt securities denominated in U.S. dollars.
o DOLLAR ROLL TRANSACTIONS
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be between five and
30 years.
When selecting individual investments, the portfolio management team uses a
disciplined, prudent approach, based on its analysis of economic trends. The
team:
o looks at a FIXED INCOME SECURITY'S potential to generate both income and
price appreciation
o emphasizes securities with a longer DURATION when it believes that the
economy is in a period of stable inflation
o emphasizes securities with a shorter duration when it expects a period of
rising inflation
o uses a variety of other techniques to help manage risk
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
25
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 33 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations U.S. Government Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - There is a risk that the value of the
investments that the portfolio management team chooses will not rise
as high as the team expects, or will fall.
o INTEREST RATE RISK - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. GOVERNMENT OBLIGATIONS.
o DERIVATIVES RISK - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns,
increase transaction costs or increase the Fund's volatility.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's MORTGAGE-
BACKED SECURITIES can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed securities that have lower yields.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
[BAR CHART APPEARS HERE]
1995 1996 1997 1998
17.06%* 1.76% 8.05% 8.11%
*Return is from inception (2-7-95) to 12-31-95.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -3.29%
26
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1995: 7.21%
Worst: 1st quarter 1996: -2.85%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN GOVERNMENT BOND INDEX, an index of government
bonds with an average maturity of approximately nine years. All
dividends are reinvested.
Since
1 year inception
Investor A Shares 2.97% 7.51 %
Investor B Shares 3.49% 9.02 %
Investor C Shares 6.68% 8.31 %
Lehman Government Bond Index 9.85% 9.71%**
**From inception of Investor A Shares. The inception dates for the
other classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases,
as a % of offering price 4.75% none none
Maximum deferred sales charge
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50 % 0.50 %
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.39% 0.39 % 0.39 %
------ -------- --------
Total annual Fund operating expenses 1.14% 1.89 % 1.89 %
Fee waivers and/or reimbursements (0.10)% (0.10) % (0.10) %
------ -------- --------
Total net expenses(6) 1.04% 1.79 % 1.79 %
====== ======== ========
</TABLE>
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 41 for details.
27
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
(2)This charge decreases over time. Please see page 42 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997. Please see page 41 for details.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 44 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 41
for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
July 31, 2000. The figures shown here are after waivers and/or
reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire July 31, 2000 and
are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $576 $811 $1,065 $1,789
Investor B Shares $682 $884 $1,212 $2,008
Investor C Shares $282 $584 $1,012 $2,203
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $182 $584 $1,012 $2,008
Investor C Shares $182 $584 $1,012 $2,203
28
<PAGE>
ABOUT THE FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
TRADESTREET IS THIS FUND'S SUB-ADVISER. TRADESTREET'S FIXED INCOME
MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT TRADESTREET ON PAGE 35.
[GRAPHIC] HIGH YIELD BONDS
ALTHOUGH THIS FUND INVESTS PRIMARILY IN INVESTMENT GRADE
SECURITIES, IT CAN INVEST UP TO 35% OF ITS ASSETS IN HIGH YIELD
BONDS. HIGH YIELD BONDS OFFER THE POTENTIAL FOR HIGHER INCOME THAN
OTHER KINDS OF BONDS WITH SIMILAR MATURITIES, BUT THEY ALSO HAVE
HIGHER CREDIT RISK.
THE FUND TRIES TO MANAGE THIS RISK BY HOLDING A LARGE PART OF ITS
ASSETS IN INVESTMENT GRADE DEBT SECURITIES. THIS ALLOWS THE FUND
TO MAINTAIN AN AVERAGE QUALITY WELL WITHIN THE INVESTMENT GRADE
CATEGORY.
Nations Diversified Income Fund
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks total return with an emphasis on current income by
investing in a diversified portfolio of FIXED INCOME SECURITIES.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
This Fund normally invests at least 65% of its assets in INVESTMENT
GRADE DEBT SECURITIES.
The Fund may invest in:
o corporate debt securities
o U.S. GOVERNMENT OBLIGATIONS
o foreign debt securities denominated in U.S. dollars or foreign currencies
o MORTGAGE-RELATED SECURITIES issued by governments and non-government
issuers
The Fund may invest up to 35% of its assets in lower-quality fixed income
securities ("junk bonds" or "high yield bonds") rated "B" or better by Moody's
or S&P. The portfolio management team may choose unrated securities if it
believes they are of comparable quality at the time of investment.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
Normally, the Fund's AVERAGE DOLLAR-WEIGHTED MATURITY will be more than five
years.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income and
price appreciation
o allocates assets primarily among U.S. government obligations and U.S.
corporate securities, including high yield corporate bonds. The
allocation is structured to provide the potential for the best return,
based on how they have performed in the past, and on how they are
expected to perform under current market conditions. The team may change
the allocations when market conditions change
o selects securities using credit and structure analysis. Credit analysis
evaluates the creditworthiness of individual issuers. The team may invest
in securities with lower credit ratings if it believes that the potential
for a higher yield is substantial compared with the risk involved, and
that the credit quality is stable or improving. Structure analysis
evaluates the characteristics of a security, including its call features,
coupons, and expected timing of cash flows
o tries to maintain a DURATION that is similar to the duration of the Fund's
benchmark. This can help manage interest rate risk
o tries to manage risk by diversifying the Fund's investments in securities
of many different issuers
29
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 33 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.321.7854 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Diversified Income Fund has the following risks:
o INVESTMENT STRATEGY RISK - There is a risk that the value of the
investments that the portfolio management team chooses will not rise
as high as the team expects, or will fall.
o INTEREST RATE RISK - The prices of fixed income securities will tend to
fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates
rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed income
security is unable to pay interest or repay principal when it's due.
Credit risk usually applies to most fixed income securities, but is
generally not a factor for U.S. government obligations. Fixed income
securities with the lowest investment grade rating or that aren't
investment grade are more speculative in nature than securities with
higher ratings, and they tend to be more sensitive to credit risk,
particularly during a downturn in the economy.
o DERIVATIVES RISK - This Fund may invest in derivatives. There is a risk
that these investments could result in losses, reduce returns,
increase transaction costs or increase the Fund's volatility.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income distributions
paid by the Fund depends on the amount of income paid by the
securities the Fund holds. It is not guaranteed and will change.
Changes in the value of the securities, however, generally should
not affect the amount of income they pay.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's MORTGAGE-
BACKED SECURITIES can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed securities that have lower yields.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN FOR INVESTOR A SHARES (%) AS OF DECEMBER 31
EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, and would be lower if they
did. Returns for Investor B and Investor C Shares are different because
they have their own expenses, pricing and sales charges.
30
<PAGE>
[GRAPHIC] THE FUND'S RETURNS IN THIS TABLE REFLECT SALES CHARGES. THE
INDEX'S RETURN DOES NOT REFLECT SALES CHARGES.
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[BAR CHART APPEARS HERE]
1992 1993 1994 1995 1996 1997 1998
1.38%* 15.62% -2.74% 20.61% 2.21% 8.32% 7.27%
*Return is from inception (11-25-92) to 12-31-92.
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -2.27%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
Best: 2nd quarter 1995: 7.42%
Worst: 1st quarter 1996: -3.24%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN GOVERNMENT/CORPORATE BOND INDEX, an index of
U.S. government, U.S. Treasury and agency securities, and corporate and
Yankee bonds. All dividends are reinvested.
<TABLE>
<CAPTION>
Since
1 year 5 years inception
<S> <C> <C> <C>
Investor A Shares 1.14% 5.60% 7.33 %
Investor B Shares 1.63% 5.98% 6.60 %
Investor C Shares 5.62% 6.37% 7.99 %
Lehman Government/Corporate Bond Index 8.49% 6.45% 6.87%**
</TABLE>
**From inception of Investor A Shares. The inception dates for the
other classes shown may vary.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy
and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases,
as a % of offering price 4.75% none none
Maximum deferred sales charge
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none(4) none none
ANNUAL FUND OPERATING EXPENSES(5)
(Expenses that are deducted from the Fund's assets)
Management fees 0.50% 0.50 % 0.50 %
Distribution (12b-1) and shareholder servicing fees 0.25% 1.00 % 1.00 %
Other expenses 0.32% 0.32 % 0.32 %
------ -------- --------
Total annual Fund operating expenses 1.07% 1.82 % 1.82 %
Fee waivers and/or reimbursements (0.10)% (0.10) % (0.10) %
------ -------- --------
Total net expenses(6) 0.97% 1.72 % 1.72 %
====== ======== ========
</TABLE>
31
<PAGE>
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen
months of buying them. Different charges may apply to purchases made
prior to August 1, 1999. Please see page 41 for details.
(2)This charge decreases over time. Please see page 42 for details.
Different charges apply to Investor B Shares bought before January 1,
1996 and after July 31, 1997. Please see page 41 for details.
(3)This charge applies to investors who buy Investor C Shares and sell
them within one year of buying them. Please see page 44 for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or
more of Investor A Shares between July 31, 1997 and November 15, 1998
and sell them within 18 months of buying them. The fee is paid to the
Fund. Please see page 41
for details.
(5)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(6)Nations Diversified Income Fund's investment adviser and/or some of
its other service providers have agreed to limit total annual
operating expenses to 0.97% for Investor A Shares, 1.72% for Investor
B Shares, and 1.72% for Investor C Shares until May 2000. The figures
shown here are after waivers and/or reimbursements. There is no
guarantee that these waivers and/or reimbursements will continue after
this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of
the Fund for the time periods indicated and then sell all of your
shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire May 2000 and are
not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 year 3 years 5 years 10 years
Investor A Shares $569 $790 $1,029 $1,712
Investor B Shares $675 $863 $1,176 $1,932
Investor C Shares $275 $563 $ 976 $2,129
If you bought Investor B or Investor C Shares, you would pay the
following expenses if you didn't sell your shares:
1 year 3 years 5 years 10 years
Investor B Shares $175 $563 $976 $1,932
Investor C Shares $175 $563 $976 $2,129
32
<PAGE>
[GRAPHIC] Other important information
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 4. The following are
some other risks and information you should consider before you invest:
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective
and certain investment policies of any Fund can be changed without
shareholder approval. Other investment policies may be changed only
with shareholder approval.
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments that
aren't part of their principal investment strategies. Please refer
to the SAI for more information. The portfolio managers or
management team can also choose not to invest in specific securities
described in this prospectus and in the SAI.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that are
not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn
or because of political or other conditions. A Fund may not achieve
its investment objective while it is investing defensively.
o PORTFOLIO TURNOVER - A Fund that replaces -- or turns over -- more than
100% of its investments in a year is considered to trade frequently.
Frequent trading can result in larger distributions of short-term
CAPITAL GAINS to shareholders. These gains are taxable at higher
rates than long-term capital gains. Frequent trading can also mean
higher brokerage and other transaction costs, which could reduce the
Fund's returns. The Funds generally buy securities for capital
appreciation, investment income, or both, and don't engage in short-
term trading. You'll find the portfolio turnover rate for each Fund
in FINANCIAL HIGHLIGHTS.
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems, and
that they expect them to be adapted in time. There is no guarantee,
however, that their computer systems will be ready by the year 2000.
If their computer systems are not ready in time, there could be a
negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
33
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] How the Funds are managed
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in the
Nations Funds family, including the Fixed Income Funds described in this
prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation. Nations Funds
pays BAAI an annual fee for its investment advisory services. The fee is
calculated daily based on the average net assets of each Fund and is paid
monthly. BAAI uses part of this money to pay investment sub-advisers for the
services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until May 2000 or July 31, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after these dates.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
Maximum Actual fee
advisory paid last
fee(1) fiscal year
Nations Short-Term Income Fund 0.30% 0.30%
Nations Short-Intermediate Government Fund 0.30% 0.40%
Nations Intermediate Bond Fund(2) 0.40% 0.21%
Nations Strategic Fixed Income Fund 0.40% 0.50%
Nations Government Securities Fund 0.50% 0.50%
Nations U.S. Government Bond Fund 0.50% 0.32%
Nations Diversified Income Fund 0.50% 0.50%
(1)These fees are the current contract levels, which in most cases have been
reduced from the contract levels in effect during the last fiscal year.
(2)This Fund doesn't have its own investment adviser because it invests in
Nations Intermediate Bond Master Portfolio. BAAI is the investment adviser
to the Master Portfolio.
34
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] BOATMEN'S CAPITAL
MANAGEMENT, INC.
100 NORTH BROADWAY
ST. LOUIS, MISSOURI 63102
INVESTMENT SUB-ADVISERS
Nations Funds and BAAI have engaged investment sub-advisers to provide day-
to-day portfolio management for the Funds. These sub-advisers function under
the supervision of BAAI and the Boards of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES, and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in the
Nations Funds family. TradeStreet takes a team approach to investment
management. Each team has access to the latest technology and analytical
resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table also tells you which internal TradeStreet asset management
team is responsible for making the day-to-day investment decisions for each
Fund.
Fund TradeStreet Team
Nations Short-Term Income Fund Fixed Income Management Team
Nations Short-Intermediate Government Fund Fixed Income Management Team
Nations Intermediate Bond Fund(1) Fixed Income Management Team
Nations Strategic Fixed Income Fund Fixed Income Management Team
Nations Government Securities Fund Fixed Income Management Team
Nations Diversified Income Fund Fixed Income Management Team
(1)Nations Intermediate Bond Fund doesn't have its own investment sub-adviser
because it invests in Nations Intermediate Bond Master Portfolio.
TradeStreet is the investment sub-adviser to the Master Portfolio.
BOATMEN'S CAPITAL MANAGEMENT, INC.
Boatmen's is a wholly-owned subsidiary of Bank of America. Boatmen's is the
investment sub-adviser to Nations U.S. Government Bond Fund. Boatmen's Fixed
Income Committee is responsible for making the day-to-day investment decisions
for the Fund.
35
<PAGE>
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay commissions, distribution (12b-1) and
shareholder servicing fees, and/or other compensation to companies for selling
shares and providing services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee of 0.22% for their services, plus certain out-of-pocket expenses.
The fee is calculated as an annual percentage of the average daily net assets
of the Funds, and is paid monthly.
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
36
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WE'VE USED THE TERM, INVESTMENT PROFESSIONAL, TO REFER TO THE
PERSON WHO HAS ASSISTED YOU WITH BUYING NATIONS FUNDS. SELLING
AGENT OR SERVICING AGENT (SOMETIMES REFERRED TO AS A SELLING
AGENT) MEANS THE COMPANY THAT EMPLOYS YOUR INVESTMENT
PROFESSIONAL. SELLING AND SERVICING AGENTS INCLUDE BANKS,
BROKERAGE FIRMS, MUTUAL FUND DEALERS AND OTHER FINANCIAL
INSTITUTIONS, INCLUDING AFFILIATES OF BANK OF AMERICA.
[GRAPHIC] FOR MORE INFORMATION
ABOUT HOW TO CHOOSE A
SHARE CLASS, CONTACT YOUR
INVESTMENT PROFESSIONAL OR
CALL US AT 1.800.321.7854.
[GRAPHIC] BEFORE YOU INVEST,
PLEASE NOTE THAT OVER
TIME, DISTRIBUTION (12B-1)
AND SHAREHOLDER SERVICING
FEES WILL INCREASE THE COST
OF YOUR INVESTMENT, AND MAY
COST YOU MORE THAN ANY SALES
CHARGES YOU MAY PAY. FOR
MORE INFORMATION, SEE
HOW SELLING AND SERVICING
AGENTS ARE PAID.
[GRAPHIC] Choosing a share class
Before you can invest in the Funds, you'll need to choose a share class. There
are three classes of shares for each Fund offered by this prospectus except
Nations Short-Term Income Fund, which doesn't offer Investor B Shares.
Each class has its own sales charges and fees. The table below compares the
charges and fees of the share classes.
<TABLE>
<CAPTION>
Nations Nations
Short-Intermediate Government
Government Fund, Securities Fund,
Nations Nations
Intermediate U.S. Government
Nations Bond Fund, Bond Fund,
Short-Term Nations Strategic Nations Diversified
Investor A Shares Income Fund Fixed Income Fund Income Fund
<S> <C> <C> <C>
Maximum amount you no limit no limit no limit
can buy
Maximum front-end 1.00% 3.25% 4.75%
sales charge
Maximum deferred none none none
sales charge(1)
Redemption fee(2) none none none
Maximum annual 0.25% 0.25% 0.25%
distribution distribution (12b-1)/ distribution (12b-1)/ distribution (12b-1)/
and shareholder service fee(3) service fee service fee
servicing fees
Conversion feature none none none
</TABLE>
(1) A 1.00% maximum deferred sales charge applies to investors who buy $1
million or more of Investor A Shares and sell them within eighteen months of
buying them. Different charges may apply to purchases made prior to August
1, 1999. Please see page 41 for details.
(2) A 1.00% redemption fee applies to investors who bought $1 million or more of
Investor A Shares between July 31, 1997 and November 15, 1998 and sell them
within 18 months of buying them. The fee is paid to the Fund. Please see
page 41 for details.
(3) Nations Short-Term Income Fund pays this fee under a separate servicing
plan.
37
<PAGE>
<TABLE>
<CAPTION>
Nations Nations
Short-Intermediate Government
Government Fund, Securities Fund,
Nations Nations
Intermediate U.S. Government
Nations Bond Fund, Bond Fund,
Short-Term Nations Strategic Nations Diversified
Investor A Shares Income Fund Fixed Income Fund Income Fund
<S> <C> <C> <C>
Maximum $250,000 $250,000 $250,000
amount you can
buy
Maximum none none none
front-end sales
charge
Maximum none 3.00%(1) 5.00%(1)
deferred sales
charge
Redemption fee none none none
Maximum annual 0.75% 0.75 % 0.75 %
distribution and distribution distribution distribution
shareholder (12b-1) fee (12b-1) fee (12b-1) fee
servicing fees 0.25% service fee 0.25% service fee 0.25% service fee
Conversion yes yes yes
feature
</TABLE>
(1)This charge decreases over time. Please see page 42 for details. Different
charges apply to Investor B Shares of certain funds bought before January 1,
1996 and after July 31, 1997. Please see page 41 for details.
<TABLE>
<CAPTION>
Nations Nations
Short-Intermediate Government
Government Fund, Securities Fund,
Nations Nations
Intermediate U.S. Government
Nations Bond Fund, Bond Fund,
Short-Term Nations Strategic Nations Diversified
Investor A Shares Income Fund Fixed Income Fund Income Fund
<S> <C> <C> <C>
Maximum amount no limit no limit no limit
you can buy
Maximum none none none
front-end sales
charge
Maximum deferred 1.00% 1.00% 1.00%
sales charge(1)
Redemption fee none none none
Maximum annual 0.75% 0.75% 0.75%
distribution and distribution distribution distribution
shareholder (12b-1) fee (12b-1) fee (12b-1) fee
servicing fees 0.25% service fee 0.25% service fee 0.25% service fee
Conversion feature none none none
</TABLE>
(1)This charge applies to investors who buy Investor C Shares and sell them
within one year of buying them. Please see page 44 for details.
The share class you choose will depend on how much you're investing, how long
you're planning to stay invested, and how you prefer to pay the sales charge.
38
<PAGE>
[GRAPHIC] THE OFFERING PRICE PER SHARE IS THE NET ASSET VALUE PER SHARE PLUS
ANY SALES CHARGE THAT APPLIES.
THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED
BY A FUND EVERY BUSINESS DAY.
The total cost of your investment over the time you expect to hold your shares
will be affected by the distribution (12b-1) and shareholder servicing fees,
as well as by the amount of any front-end sales charge or contingent deferred
sales charge (CDSC) that applies, and when you're required to pay the charge.
You should think about these things carefully before you invest.
Investor A Shares have a front-end sales charge, which is deducted when you
buy your shares. This means that a smaller amount is invested in the Funds,
unless you qualify for a waiver or reduction of the sales charge. However,
Investor A Shares have lower ongoing distribution (12b-1) and/or shareholder
servicing fees than Investor B and Investor C Shares. This means that Investor
A Shares can be expected to pay relatively higher dividends per share.
Investor B Shares have limits on how much you can invest. When you buy
Investor B or Investor C Shares, the full amount is invested in the Funds.
However, you may pay a CDSC when you sell your shares. Over time, Investor B
and Investor C Shares can incur distribution (12b-1) and shareholder servicing
fees that are equal to or more than the front-end sales charge, and the
distribution (12b-1) and shareholder servicing fees you would pay for Investor
A Shares. Although the full amount of your purchase is invested in the Funds,
any positive investment return on this money may be partially or fully offset
by the expected higher annual expenses of Investor B and Investor C Shares.
You should also consider the conversion feature for Investor B Shares, which
is described in ABOUT INVESTOR B SHARES.
[GRAPHIC] ABOUT INVESTOR A SHARES
There is no limit to the amount you can invest in Investor A Shares.
You generally will pay a front-end sales charge when you buy your
shares, or in some cases, a CDSC when you sell your shares.
FRONT-END SALES CHARGE
You'll pay a front-end sales charge when you buy Investor A Shares,
unless:
o you qualify for a waiver of the sales charge. You can find out if you
qualify for a waiver in the section, WHEN YOU MIGHT NOT HAVE TO PAY
A SALES CHARGE
o you're reinvesting distributions
The sales charge you'll pay depends on the Fund you're buying, and the
amount you're investing -- the larger the investment, the smaller the
sales charge.
39
<PAGE>
<TABLE>
<CAPTION>
Nations Short-Term Income Fund
<S> <C> <C> <C>
Amount
retained
by selling
Amount you bought Sales charge Sales charge agents
as a % of the as a % of the as a % of the
offering price net asset value offering price
per share per share per share
$ 0-$99,999 1.00% 1.01% 0.75 %
$ 100,000-$249,999 0.75% 0.76% 0.50 %
$ 250,000-$999,999 0.50% 0.50% 0.40 %
$1,000,000 or more 0.00% 0.00% 1.00%(1)
</TABLE>
<TABLE>
<CAPTION>
Nations Short-Intermediate Government Fund
Nations Intermediate Bond Fund
Nations Strategic Fixed Income Fund
<S> <C> <C> <C>
Amount
retained
by selling
Amount you bought Sales charge Sales charge agents
as a % of the as a % of the as a % of the
offering price net asset value offering price
per share per share per share
$ 0-$99,999 3.25% 3.36% 3.00 %
$100,000- $249,999 2.50% 2.56% 2.25 %
$250,000- $499,999 2.00% 2.04% 1.75 %
$500,000- $999,999 1.50% 1.53% 1.25 %
$1,000,000 or more 0.00% 0.00% 1.00%(1)
</TABLE>
<TABLE>
<CAPTION>
Nations Government Securities Fund
Nations U.S. Government Bond Fund
Nations Diversified Income Fund
<S> <C> <C> <C>
Amount
retained
by selling
Amount you bought Sales charge Sales charge agents
as a % of the as a % of the as a % of the
offering price net asset value offering price
per share per share per share
$ 0-$49,999 4.75% 4.99% 4.25 %
$ 50,000-$99,999 4.50% 4.71% 4.00 %
$ 100,000-$249,999 3.50% 3.63% 3.00 %
$ 250,000-$499,999 2.50% 2.56% 2.25 %
$ 500,000-$999,999 2.00% 2.04% 1.75 %
$1,000,000 or more 0.00% 0.00% 1.00%(1)
</TABLE>
(1) 1.00% on the first $3,000,000, 0.50% on the next $47,000,000, 0.25%
on amounts over $50,000,000. Stephens pays the amount retained by
selling agents on investments of $1,000,000 or more, but may be
reimbursed when a CDSC is deducted if the shares are sold within
eighteen months from the time they were bought. Please see HOW SELLING
AND SERVICING AGENTS ARE PAID for more information.
40
<PAGE>
CONTINGENT DEFERRED SALES CHARGE
If you own or buy $1,000,000 or more of Investor A Shares, there are
two situations when you'll pay a CDSC:
o If you bought your shares before August 1, 1999, and you sell them:
o during the first year you own them, you'll pay a CDSC of 1.00%
o during the second year you own them, you'll pay a CDSC of 0.50%
o If you buy your shares on or after August 1, 1999 and sell them
within 18 months of buying them, you'll pay a CDSC of 1.00%.
The CDSC is calculated from the day your purchase is accepted (the
TRADE DATE). We deduct the CDSC from the market value or purchase price
of the shares, whichever is lower.
You won't pay a CDSC on any increase in net asset value since you
bought your shares, or on any shares you receive from reinvested
distributions. We'll sell any shares that aren't subject to the CDSC
first. We'll then sell shares that result in the lowest CDSC.
REDEMPTION FEE
There are two situations when we'll charge a 1% redemption fee on the
sale of Investor A Shares:
o if you bought $1,000,000 or more Investor A Shares between July 31, 1997
and November 15, 1998 and sell them within 18 months of buying them
o if an employee benefit plan made its initial investment in Investor A
Shares between July 31, 1997 and November 15, 1998 and sold those
shares within 18 months of buying them because the plan sold all of
its Nations Funds holdings
The fee is deducted from the amount sold and is paid to the Fund. The
Fund can reduce or cancel the fee at any time. This fee doesn't apply
to Nations Intermediate Bond Fund.
[GRAPHIC] ABOUT INVESTOR B SHARES
You can buy up to $250,000 of Investor B Shares at a time. You don't
pay a sales charge when you buy Investor B Shares, but you may have to
pay a CDSC when you sell them. Investor B Shares are not available for
Nations Short-Term Income Fund.
CONTINGENT DEFERRED SALES CHARGE
You'll pay a CDSC when you sell your Investor B Shares, unless:
o you bought the shares on or after January 1, 1996 and before August 1,
1997
o you received the shares from reinvested distributions
o you qualify for a waiver of the CDSC. You can find out how to qualify
for a waiver on page 46
The CDSC you pay depends on the Fund you bought, when you bought your
shares, how much you bought in some cases, and how long you held them.
41
<PAGE>
<TABLE>
<CAPTION>
Nations Short-Intermediate Government Fund
Nations Intermediate Bond Fund
Nations Strategic Fixed Income Fund
If you sell your shares
during the following year: You'll pay a CDSC of:
- --------------------------------- --------------------------------------------------------------------
Shares
you
bought Shares
Shares on or after you
you bought Shares you bought between 1/1/1996 bought
after 8/1/1997 and 11/15/1998 and before before
11/15/1998 in the following amounts: 8/1/1997 1/1/1996
------------ -------------------------- ------------ ---------
$500,000-
$0-$499,999 $999,999
<S> <C> <C> <C> <C> <C>
the first year you own them 3.0% 3.0% 2.0% none 4.0%
the second year you own them 3.0% 2.0% 1.0% none 3.0%
the third year you own them 2.0% 1.0% none none 3.0%
the fourth year you own them 1.0% none none none 2.0%
the fifth year you own them none none none none 2.0%
the sixth year you own them none none none none 1.0%
after six years of owning them none none none none none
</TABLE>
<TABLE>
<CAPTION>
Nations Government Securities Fund
Nations U.S. Government Bond Fund
Nations Diversified Income Fund
If you sell your shares
during the following year: You'll pay a CDSC of:
- --------------------------------- -----------------------------------------------------------------------
Shares
you
bought Shares
Shares on or after you
you bought Shares you bought between 1/1/1996 bought
after 8/1/1997 and 11/15/1998 and before before
11/15/1998 in the following amounts: 8/1/1997 1/1/1996
------------ ----------------------------------- ------------ ---------
$250,000- $500,000-
$0-$249,999 $499,999 $999,999
<S> <C> <C> <C> <C> <C> <C>
the first year you own them 5.0% 4.0% 3.0% 2.0% none 5.0%
the second year you own them 4.0% 3.0% 2.0% 1.0% none 4.0%
the third year you own them 3.0% 3.0% 1.0% none none 3.0%
the fourth year you own them 3.0% 2.0% none none none 2.0%
the fifth year you own them 2.0% 1.0% none none none 2.0%
the sixth year you own them 1.0% none none none none 1.0%
after six years of owning them none none none none none none
</TABLE>
The CDSC is calculated from the trade date of your purchase. We deduct
the CDSC from the market value or purchase price of the shares,
whichever is lower. We'll sell any shares that aren't subject to the
CDSC first. We'll then sell shares that result in the lowest CDSC.
Your selling agent receives compensation when you buy Investor B
Shares. Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more
information.
42
<PAGE>
ABOUT THE CONVERSION FEATURE
Investor B Shares generally convert automatically to Investor A Shares
according to the following schedule:
<TABLE>
<CAPTION>
Nations Short-Intermediate Government Fund
Nations Intermediate Bond Fund
Nations Strategic Fixed Income Fund
Will convert to Investor A Shares
Investor B Shares you bought after you've owned them for
<S> <C>
after November 15, 1998 eight years
between August 1, 1997
and November 15, 1998
$ 0-$249,999 six years
$ 250,000-$499,999 six years
$ 500,000-$999,999 five years
before August 1, 1997 six years
</TABLE>
<TABLE>
<CAPTION>
Nations Government Securities Fund
Nations Diversified Income Fund
Nations U.S. Government Bond Fund
Will convert to Investor A Shares
Investor B Shares you bought after you've owned them for
<S> <C>
after November 15, 1998 eight years
between August 1, 1997
and November 15, 1998
$ 0-$249,999 nine years
$ 250,000-$499,999 six years
$ 500,000-$999,999 five years
before August 1, 1997 eight years
</TABLE>
The conversion feature allows you to benefit from the lower operating
costs of Investor A Shares, which can help increase total returns.
Here's how the conversion works:
o We won't convert your shares if you tell your investment professional,
selling agent or the transfer agent within 90 days before the
conversion date that you don't want your shares to be converted.
Remember, it's in your best interest to convert your shares because
Investor A Shares have lower expenses.
o Shares are converted at the end of the month in which they become
eligible for conversion. Any shares you received from reinvested
distributions on these shares will convert to Investor A Shares at
the same time.
o You'll receive the same dollar value of Investor A Shares as the
Investor B Shares that were converted. No sales charge or other
charges apply.
o Investor B Shares that you received from an exchange of Investor B
Shares of another Nations Fund will convert based on the day you
bought the original shares. Your conversion date may be later if you
exchanged to or from a Nations Funds Money Market Fund.
o Conversions are free from federal tax.
43
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[GRAPHIC] PLEASE CONTACT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION
ABOUT REDUCTIONS AND WAIVERS OF SALES CHARGES.
YOU SHOULD TELL YOUR INVESTMENT PROFESSIONAL THAT YOU MAY QUALIFY
FOR A REDUCTION OR A WAIVER BEFORE BUYING SHARES.
WE CAN CHANGE OR CANCEL THESE TERMS AT ANY TIME. ANY CHANGE OR
CANCELLATION APPLIES ONLY TO FUTURE PURCHASES.
[GRAPHIC] ABOUT INVESTOR C SHARES
There is no limit to the amount you can invest in Investor C Shares.
You don't pay a sales charge when you buy Investor C Shares, but you
may pay a CDSC when you sell them.
CONTINGENT DEFERRED SALES CHARGE
You'll pay a CDSC of 1.00% when you sell Investor C Shares within one
year of buying them, unless:
o you received the shares from reinvested distributions
o you qualify for a waiver of the CDSC. You can find out how to qualify
for a waiver on page 46
The CDSC is calculated from the trade date of your purchase. We deduct
the CDSC from the market value or purchase price of the shares,
whichever is lower. We'll sell any shares that aren't subject to the
CDSC first. We'll then sell shares that result in the lowest CDSC.
Your selling agent receives compensation when you buy Investor C
Shares. Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more
information.
WHEN YOU MIGHT NOT HAVE TO PAY A SALES CHARGE
FRONT-END SALES CHARGES
(Investor A Shares)
There are three ways you can lower the front-end sales charge you pay
on Investor A Shares:
o COMBINE PURCHASES YOU'VE ALREADY MADE
Rights of accumulation allow you to combine the value of Investor A,
Investor B and Investor C Shares you already own with Investor A
Shares you're buying to calculate the sales charge. The sales charge
is based on the total value of the shares you already own, or the
original purchase cost, whichever is higher, plus the value of the
shares you're buying. Index Funds and Money Market Funds, except
Investor B and Investor C Shares of Nations Reserves Money Market
Funds, don't qualify for rights of accumulation.
o COMBINE PURCHASES YOU PLAN TO MAKE
By signing a letter of intent, you can combine the value of shares
you already own with the value of shares you plan to buy over a
13-month period to calculate the sales charge.
o You can choose to start the 13-month period up to 90 days before you
sign the letter of intent.
o Each purchase you make will receive the sales charge that applies to
the total amount you plan to buy.
44
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o If you don't buy as much as you planned within the period, you must
pay the difference between the charges you've paid and the charges
that actually apply to the shares you've bought.
o Your first purchase must be at least 5% of the minimum amount for
the sales charge level that applies to the total amount you plan to
buy.
o If the purchase you've made later qualifies for a reduced sales
charge through the 90-day backdating provisions, we'll make an
adjustment for the lower charge when the letter of intent expires.
Any adjustment will be used to buy additional shares at the reduced
sales charge.
o COMBINE PURCHASES WITH FAMILY MEMBERS
You can receive a quantity discount by combining purchases of
Investor A Shares that you, your spouse and children under age 21
make on the same day. Some distributions or payments from the
dissolution of certain qualified plans also qualify for the quantity
discount. Index Funds and Money Market Funds, except Investor B and
Investor C Shares of Nations Reserves Money Market Funds, don't
qualify.
The following investors can buy Investor A Shares without paying a
front-end sales charge:
o full-time employees and retired employees of Bank of America Corporation
(and its predecessors), its affiliates and subsidiaries and the
immediate families of these people
o banks, trust companies and thrift institutions, acting as fiduciaries
o individuals receiving a distribution from a Bank of America trust or
other fiduciary account may use the proceeds of that distribution to
buy Investor A Shares without paying a front-end sales charge, as
long as the proceeds are invested through a trust account
established with certain trustees and invested in the Funds within
90 days
o Nations Funds' Trustees, Directors and employees of its investment
sub-advisers
o registered broker/dealers that have entered into a Nations Funds dealer
agreement with Stephens may buy Investor A Shares without paying a
front-end sales charge for their investment account only
o registered personnel and employees of these broker/dealers may buy
Investor A Shares without paying a front-end sales charge according
to the internal policies and procedures of their employer as long as
these purchases are made for their own investment purposes
o employees or partners of any service provider to the Funds
o investors who buy through accounts established with certain fee-based
investment advisers or financial planners, including Nations Funds
Personal Investment Planner accounts, wrap fee accounts and other
managed agency/asset allocation accounts
o shareholders of certain Funds that reorganized into the Nations Funds
who were entitled to buy shares at net asset value
45
<PAGE>
The following plans can buy Investor A Shares without paying a front-end
sales charge:
o pension, profit-sharing or other employee benefit plans established
under Section 401 or Section 457 of the Internal Revenue Code of
1986, as amended (the tax code)
o employee benefit plans created according to Section 403(b) of the tax
code and sponsored by a non-profit organization qualified under
Section 501(c)(3) of the tax code. To qualify for the waiver, the plan
must:
o have at least $500,000 invested in Investor A Shares of Nations
Funds (except Money Market Funds), or
o sign a letter of intent to buy at least $500,000 of Investor A
Shares of Nations Funds (except Money Market Funds), or
o be an employer-sponsored plan with at least 100 eligible
participants, or
o be a participant in an alliance program that has signed an agreement
with the Fund or a selling agent
You can also buy Investor A Shares without paying a sales charge if you
buy the shares within 120 days of selling the same Fund. This is called
the reinstatement privilege. You can invest up to the amount of the
sale proceeds. We'll credit your account with any CDSC paid when you
sold the shares. The reinstatement privilege does not apply to any
shares you bought through a previous reinstatement. First Data,
Stephens or their agents must receive your written request within 120
days after you sell your shares.
Stephens may pay selling agents up to 1.00% of the net asset value of
Investor A Shares bought without a sales charge. Stephens may be
reimbursed through any CDSC that applies.
CONTINGENT DEFERRED SALES CHARGES
(Investor A, Investor B and Investor C Shares)
You won't pay a CDSC on the following transactions:
o shares sold following the death or disability (as defined in the tax
code) of a shareholder, including a registered joint owner
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<PAGE>
o the following retirement plan distributions:
o lump-sum or other distributions from a qualified corporate or self-
employed retirement plan following the retirement (or following
attainment of age 59 1/2 in the case of a "key employee" of a "top
heavy" plan)
o distributions from an IRA or Custodial Account under Section 403(b)(7)
of the tax code, following attainment of age 59 1/2
o a tax-free return of an excess contribution to an IRA
o distributions from a qualified retirement plan that aren't subject to
the 10% additional federal withdrawal tax under Section 72(t)(2)
of the tax code
o payments made to pay medical expenses which exceed 7.5% of income, and
distributions made to pay for insurance by an individual who has
separated from employment and who has received unemployment
compensation under a federal or state program for at least 12 weeks
o shares sold under our right to liquidate a shareholder's account,
including instances where the aggregate net asset value of Investor
A, Investor B or Investor C Shares held in the account is less than
the minimum account size
o withdrawals made under the Automatic Withdrawal Plan described in
BUYING, SELLING AND EXCHANGING SHARES, if the total withdrawals of
Investor A, Investor B or Investor C Shares made in a year are less
than 12% of the total value of those shares in your account. A CDSC
may only apply to Investor A Shares if you bought more than
$1,000,000
We'll also waive the CDSC on the sale of Investor A or Investor C
Shares bought before September 30, 1994 by current or retired employees
of Bank of America and its affiliates, or by current or former trustees
or directors of the Nations Funds or other management companies managed
by Bank of America.
You won't pay a CDSC on the sale of Investor B or Investor C Shares if
you reinvest any of the proceeds in the same Fund within 120 days of
the sale. This is called the reinstatement privilege. You can invest up
to the amount of the sale proceeds. We'll credit your account with any
CDSC paid when you sold the shares. The reinstatement privilege does
not apply to any shares you bought through a previous reinstatement.
First Data, Stephens or their agents must receive your written request
within 120 days after you sell your shares.
47
<PAGE>
[GRAPHIC]
WHEN YOU SELL SHARES OF A MUTUAL, FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] Buying, selling and exchanging shares
You can invest in the Funds through your selling agent or directly from
Nations Funds.
We encourage you to consult with an investment professional who can open an
account for you with a selling agent and help you with your investment
decisions. Once you have an account, you can buy, sell and exchange shares by
contacting your investment professional or selling agent. They will look after
any paperwork that's needed to complete a transaction and send your order to
us.
You should also ask your selling agent about its limits, fees and policies for
buying, selling and exchanging shares, which may be different from those
described here, and about its related programs or services.
The table on the next page summarizes some key information about buying,
selling and exchanging shares. You'll find sales charges and other fees that
apply to these transactions in CHOOSING A SHARE CLASS.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. Please contact your
investment professional, or call us at 1.800.321.7854 if you have any
questions or you need help placing an order.
48
<PAGE>
<TABLE>
<CAPTION>
Ways to
buy, sell or How much you can buy,
exchange sell or exchange Other things to know
------------------ ---------------------------------------- ----------------------------------------------------
<S> <C> <C> <C>
Buying shares In a lump sum minimum initial investment: There is no limit to the amount you can invest in
o $1,000 for regular accounts Investor A and C Shares. You can invest up to
o $500 for traditional and Roth IRA $250,000 in Investor B Shares at a time.
accounts
o $250 for certain fee-based accounts Investor B Shares are not available for Nations
o no minimum for certain retirement Short-Term Income Fund.
plan accounts like 401(k) plans and
SEP accounts, but other restrictions
apply
minimum additional investment:
o $100 for all accounts
Using our minimum initial investment: You can buy shares monthly, twice a month or
Systematic o $100 quarterly, using automatic transfers from your
Investment Plan minimum additional investment: bank account.
o $50
- ------------------------------------------------------------------------------------------------------------------------------------
Selling shares In a lump sum o you can sell up to $50,000 of your We'll deduct any CDSC from the amount you're
shares by telephone, otherwise there selling and send you or your selling agent the
are no limits to the amount you can balance, usually within three business days of
sell receiving your order.
o other restrictions may apply to If you paid for your shares with a check that
withdrawals from retirement plan wasn't certified, we'll hold the sale proceeds
accounts when you sell those shares for at least 15 days
after the trade date of the purchase, or until the
check has cleared.
Using our o minimum $25 per withdrawal Your account balance must be at least $10,000
Automatic to set up the plan. You can make withdrawals
Withdrawal Plan monthly, twice a month or quarterly. We'll send
your money by check or deposit it directly to
your bank account. No CDSC is deducted if you
withdraw 12% or less of the value of your
shares in a class.
- ------------------------------------------------------------------------------------------------------------------------------------
Exchanging shares In a lump sum o minimum $1,000 per exchange You can exchange your Investor A Shares for
Investor A Shares of any other Nations Fund,
except Index Funds. You won't pay a front-end
sales charge, CDSC or redemption fee on the
shares you're exchanging.
You can exchange your Investor B Shares for:
o Investor B Shares of any other Nations Fund,
except Nations Funds Money Market Funds
o Investor C Shares of Nations Funds Money
Market Funds (before October 1, 1999)
o Investor B Shares of Nations Reserves Money
Market Funds (on or after October 1, 1999)
You won't pay a CDSC on the shares you're
exchanging.
You can exchange your Investor C Shares for:
o Investor C Shares of any other Nations Fund,
except Nations Funds Money Market Funds
o Daily Shares of Nations Funds Money Market
Funds (before October 1, 1999)
o Investor C Shares of Nations Reserves Money
Market Funds (on or after October 1, 1999)
If you received Investor C Shares of a Fund from
an exchange of Investor A Shares of a Managed
Index Fund, you can also exchange these shares
for Investor A Shares of an Index Fund.
You won't pay a CDSC on the shares you're
exchanging.
- ------------------------------------------------------------------------------------------------------------------------------------
Using our o minimum $25 per exchange This feature is not available for Investor B
Automatic Shares. You must already have an investment in
Exchange Feature the Funds you want to exchange. You can make
exchanges monthly or quarterly.
</TABLE>
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<PAGE>
[GRAPHIC] A BUSINESS DAY IS ANY DAY THAT THE NEW YORK STOCK EXCHANGE (NYSE)
IS OPEN. A BUSINESS DAY ENDS AT THE CLOSE OF REGULAR TRADING ON
THE NYSE, USUALLY AT 4:00 P.M. EASTERN TIME. IF THE NYSE CLOSES
EARLY, THE BUSINESS DAY ENDS AS OF THE TIME THE NYSE CLOSES.
THE NYSE IS CLOSED ON WEEKENDS AND ON THE FOLLOWING NATIONAL
HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY, PRESIDENTS'
DAY, GOOD FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY,
THANKSGIVING DAY AND CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share for each class of each
Fund at the end of each business day. First, we calculate the net asset value
for each class of a Fund by determining the value of the Fund's assets in the
class and then subtracting its liabilities. Next, we divide this amount by the
number of shares that investors are holding in the class.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. The prices reported on stock exchanges and securities
markets around the world are usually used to value securities in a Fund. If
prices aren't readily available, we'll base the price of a security on its
fair market value. We use the amortized cost method, which approximates market
value, to value short-term investments maturing in 60 days or less.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents before the end of a business
day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will
receive that day's net asset value per share. Orders received after the end of
a business day will receive the next business day's net asset value per share.
The business day that applies to your order is also called the TRADE DATE. We
may refuse any order to buy or exchange shares. If this happens, we'll return
any money we've received to your selling agent.
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone if you complete the
telephone authorization section of our account application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account, you
must have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be
responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions are
genuine. For example, we require proof of your identification before
we will act on instructions received by telephone and may record
telephone conversations. If we and our service providers don't take
these steps, we may be liable for any losses from unauthorized or
fraudulent instructions.
o Telephone orders may be difficult to complete during periods of
significant economic or market change.
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<PAGE>
[GRAPHIC] THE OFFERING PRICE PER SHARE IS THE NET ASSET VALUE PER SHARE PLUS
ANY SALES CHARGE THAT APPLIES.
THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED
BY A FUND EVERY BUSINESS DAY.
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o You buy Investor A Shares at the offering price per share. You buy
Investor B and Investor C Shares at net asset value per share.
o If we don't receive your money within three business days of
receiving your order, we'll refuse the order.
o Selling agents are responsible for sending orders to us and
ensuring we receive your money on time.
o Shares you buy are recorded on the books of the Fund. We don't
issue certificates unless you ask for them in writing, and we
don't issue certificates for fractions of shares.
MINIMUM INITIAL INVESTMENT
The minimum initial amount you can buy is usually $1,000.
If you're buying shares through one of the following accounts or plans,
the minimum initial amount you can buy is:
o $500 for traditional and Roth individual retirement accounts (IRAs)
o $250 for accounts set up with some fee-based investment advisers or
financial planners, including wrap fee accounts and other managed
accounts
o $100 using our Systematic Investment Plan
o There is no minimum for 401(k) plans, simplified employee pension
plans (SEPs), salary reduction-simplified employee pension plans
(SAR-SEPs), Savings Incentives Match Plans for Employees (SIMPLE
IRAs), salary reduction IRAs (SAR-IRAs) or other similar kinds of
accounts. However, if the value of your account falls below
$1,000 for 401(k) plans or $500 for the other plans within one
year after you open your account, we may sell your shares. We'll
give you 60 days notice in writing if we're going to do this
MINIMUM ADDITIONAL INVESTMENT
You can make additional purchases of $100, or $50 if you use our
Systematic Investment Plan.
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<PAGE>
[GRAPHIC] FOR MORE INFORMATION
ABOUT TELEPHONE ORDERS,
SEE PAGE 50.
SYSTEMATIC INVESTMENT PLAN
You can make regular purchases of $50 or more using automatic transfers from
your bank account to the Funds you choose. You can contact your investment
professional or us to set up the plan.
Here's how the plan works:
o You can buy shares twice a month, monthly or quarterly.
o You can choose to have us transfer your money on or about the 15th or the
last day of the month.
o Some exceptions may apply to employees of Bank of America and its
affiliates, and to plans set up before August 1, 1997. For details,
please contact your investment professional.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We'll deduct any CDSC from the amount you're selling and send you
the balance.
o If you're selling your shares through a selling agent, we'll
normally send the sale proceeds by federal funds wire within
three business days after Stephens, First Data or their agents
receive your order. Your selling agent is responsible for
depositing the sale proceeds to your account on time.
o If you're selling your shares directly through us, we'll send the
sale proceeds by mail or wire them to your bank account within
three business days after the Fund receives your order.
o You can sell up to $50,000 of shares by telephone if you qualify
for telephone orders.
o If you paid for your shares with a check that wasn't certified,
we'll hold the sale proceeds when you sell those shares for at
least 15 days after the trade date of the purchase, or until the
check has cleared.
o If you hold any shares in certificate form, you must sign the
certificates (or send a signed stock power with them) and send
them to First Data. Your signature must be guaranteed unless
you've made other arrangements with us. We may ask for any other
information we need to prove that the order is properly
authorized.
o Under certain circumstances allowed under the Investment Company
Act of 1940 (1940 Act), we can pay you in securities or other
property when you sell your shares, or delay payment of the sale
proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions, please contact your
retirement plan administrator.
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<PAGE>
[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
We may sell your shares:
o if the value of your account falls below $500. We'll give you 60
days notice in writing if we're going to do this
o if your selling agent tells us to sell your shares under
arrangements made between the selling agent and its customers
o under certain other circumstances allowed under the 1940 Act
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan lets you withdraw $25 or more every month, every
quarter or every year. You can contact your investment professional or us to
set up the plan.
Here's how the plan works:
o Your account balance must be at least $10,000 to set up the plan.
o If you set up the plan after you've opened your account, your
signature must be guaranteed.
o You can choose to have us transfer your money on or about the 15th
or the 25th of the month.
o You won't pay a CDSC on Investor A, Investor B or Investor C Shares
if you withdraw 12% or less of the value of those shares in a
year. Otherwise, we'll deduct any CDSC from the withdrawals.
o We'll send you a check or deposit the money directly to your bank
account.
o You can cancel the plan by giving your selling agent or us 30 days
notice in writing.
It's important to remember that if you withdraw more than your investment in
the Fund is earning, you'll eventually use up your original investment.
[GRAPHIC] EXCHANGING SHARES
You can sell shares of one Fund to buy shares of another Nations Fund.
This is called an exchange. You might want to do this if your
investment goals or tolerance for risk changes.
Here's how exchanges work:
o You must exchange at least $1,000, or $25 if you use our Automatic
Exchange Feature.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o You may only make an exchange into a Fund that is legally sold in
your state of residence.
53
<PAGE>
o You generally may only make an exchange into a Fund that is
accepting investments.
o We may limit the number of exchanges you can make within a
specified period of time.
o We may change or cancel your right to make an exchange by giving
the amount of notice required by regulatory authorities
(generally 60 days for a material change or cancellation).
o You cannot exchange any shares you own in certificate form until
First Data has received the certificate and deposited the shares
to your account.
EXCHANGING INVESTOR A SHARES
You can exchange Investor A Shares of a Fund for Investor A Shares of
any other Nations Fund, except Index Funds.
Here are some rules for exchanging Investor A Shares:
o You won't pay a front-end sales charge on the shares of the Fund
you're exchanging.
o You won't pay a CDSC on the shares you're exchanging. Any CDSC will
be deducted later on when you sell the shares you received from
the exchange. The CDSC at that time will be based on the period
from when you bought the original shares until when you sold the
shares you received from the exchange.
o You won't pay a redemption fee on the shares you're exchanging. Any
redemption fee will be deducted later on when you sell the shares
you received from the exchange. Any redemption fee will be paid
to the original Fund.
o If you received Investor A Shares of Nations Short-Term Income Fund
directly or indirectly from an exchange of Investor B Shares of
another Fund, you can exchange these shares for:
o Investor B Shares of any other Nations Fund, except Nations Funds
Money Market Funds, or
o Investor C Shares of Nations Funds Money Market Funds (before
October 1, 1999)
o Investor B Shares of Nations Reserves Money Market Funds (on or
after October 1, 1999)
A CDSC may apply to the shares you receive from the exchange, and to
any Investor B Shares you receive from an exchange of these
shares. The CDSC will be based on the period from when you bought
your original Investor B Shares until you sell the shares you
received from the exchange.
54
<PAGE>
EXCHANGING INVESTOR B SHARES
You can exchange Investor B Shares of a Fund for:
o Investor B Shares of any other Nations Fund, except Nations Funds
Money Market Funds
o Investor C Shares of Nations Funds Money Market Funds (before
October 1, 1999)
o Investor B Shares of Nations Reserves Money Market Funds (on or
after October 1, 1999)
You won't pay a CDSC on the shares you're exchanging. Any CDSC will be
deducted later on when you sell the shares you received from the
exchange. The CDSC will be based on the period from when you bought the
original shares until you sold the shares you received from the
exchange.
If you received Investor C Shares of a Nations Funds Money Market Fund
from an exchange of Investor B Shares of a Fund before October 1, 1999,
a CDSC may apply when you sell your Investor C Shares. The CDSC will be
based on the period from when you bought the original shares until you
exchanged them.
EXCHANGING INVESTOR C SHARES
You can exchange Investor C Shares of a Fund for:
o Investor C Shares of any other Nations Fund, except Nations Funds
Money Market Funds
o Daily Shares of Nations Funds Money Market Funds (before October 1,
1999)
o Investor C Shares of Nations Reserves Money Market Funds (on or
after October 1, 1999)
If you received Investor C Shares of a Fund from an exchange of
Investor A Shares of a Managed Index Fund, you can also exchange these
shares for Investor A Shares of an Index Fund.
You won't pay a CDSC on the shares you're exchanging. Any CDSC will be
deducted later on when you sell the shares you received from the
exchange. The CDSC will be based on the period from when you bought the
original shares until you sold the shares you received from the
exchange.
If you received Daily Shares of a Nations Funds Money Market Fund
through an exchange of Investor C Shares of a Fund before October 1,
1999, a CDSC may apply when you sell your Daily Shares. The CDSC will
be based on the period from when you bought the original shares until
you exchanged them.
55
<PAGE>
AUTOMATIC EXCHANGE FEATURE
The Automatic Exchange Feature lets you exchange $25 or more of Investor A or
Investor C Shares every month or every quarter. You can contact your
investment professional or us to set up the plan.
Here's how automatic exchanges work:
o Send your request to First Data in writing or call 1.800.321.7854.
o You must already have an investment in the Funds you want to
exchange.
o You can choose to have us transfer your money on or about the 15th
or the last day of the month.
o The rules for making exchanges apply to automatic exchanges.
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<PAGE>
[GRAPHIC] THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE BECAUSE
IT'S PAID THROUGH A PLAN APPROVED UNDER RULE 12B-1 UNDER THE 1940
ACT.
YOUR SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
[GRAPHIC] How selling and servicing agents are paid
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
COMMISSIONS
Your selling agent may receive an up-front commission (reallowance) when you
buy shares of a Fund. The amount of this commission depends on which share
class you choose:
o up to 4.25% of the offering price per share of Investor A Shares. The
commission is paid from the sales charge we deduct when you buy your
shares
o up to 4.00% of the net asset value per share of Investor B Shares. The
commission is not deducted from your purchase -- we pay your selling
agent directly
o up to 1.00% of the net asset value per share of Investor C Shares. The
commission is not deducted from your purchase -- we pay your selling
agent directly
If you buy Investor B or Investor C Shares you will be subject to higher
distribution (12b-1) and shareholder servicing fees and may be subject to a
CDSC when you sell your shares.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES
Stephens and selling and servicing agents may be compensated for selling
shares and providing services to investors under distribution and shareholder
servicing plans.
The amount of the fee depends on the class of shares you own:
<TABLE>
<CAPTION>
Maximum annual distribution (12b-1)
and shareholder servicing fees
(as an annual % of average daily net assets)
<S> <C>
Investor A Shares 0.25% combined distribution (12b-1) and shareholder servicing fee(1)
Investor B Shares 0.75% distribution (12b-1) fee , 0.25% shareholder servicing fee
Investor C Shares 0.75% distribution (12b-1) fee, 0.25% shareholder servicing fee
</TABLE>
(1)Nations Short-Term Income Fund pays this fee under a separate servicing plan.
Fees are calculated daily and deducted monthly. Because these fees are paid
out of the Funds' assets on an ongoing basis, they will increase the cost of
your investment over time, and may cost you more than any sales charges you
may pay.
The Funds pay these fees to Stephens and to eligible selling and servicing
agents for as long as the plans continue. We may reduce or discontinue
payments at any time.
57
<PAGE>
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale, promotion
and marketing of the Funds
o additional amounts on all sales of shares:
o up to 1.00% of the offering price per share of Investor A Shares
o up to 1.00% of the net asset value per share of Investor B Shares
o up to 1.00% of the net asset value per share of Investor C Shares
o non-cash compensation like trips to sales seminars or vacation
destinations, tickets to sporting events, theater or other entertainment,
opportunities to participate in golf or other outings and gift
certificates for meals or merchandise
This compensation, which is not paid by the Funds, is discretionary and may be
available only to selected selling and servicing agents. For example, Stephens
sometimes sponsors promotions involving Banc of America Investments, Inc., an
affiliate of BAAI, and certain other selling or servicing agents. Selected
selling and servicing agents also may receive compensation for opening a
minimum number of accounts.
BAAI also may pay amounts from its own assets to Stephens or to selling or
servicing agents for related services they provide.
58
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] Distributions and taxes
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends paid
on COMMON STOCKS.
o A fund can also have CAPITAL GAIN if the value of its investments
increases. If a fund sells an investment at a gain, the gain is realized.
If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gain to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gain to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
All of the Funds distribute any net realized capital gain at least once a
year. All of the Funds, except Nations Intermediate Bond Fund, declare
distributions of net investment income daily and pay them monthly. Nations
Intermediate Bond Fund declares and pays distributions of net investment
income monthly.
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses. Each time a distribution is made,
the net asset value per share of the share class is reduced by the amount of
the distribution.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.321.7854.
We generally pay cash distributions within five business days after the end of
the month, quarter or year in which the distribution was made. If you sell all
of your shares, we'll pay any distribution that applies to those shares in
cash within five business days after the sale was made.
If you buy shares of a Fund shortly before it makes a distribution, you will,
in effect, receive part of your purchase back in the distribution, which is
subject to tax. Similarly, if you buy shares of a Fund that holds securities
with unrealized capital gain, you will, in effect, receive part of your
purchase back if and when the Fund sells those securities and distributes the
gain. This distribution is also subject to tax. Some Funds have built up, or
have the potential to build up, high levels of unrealized capital gain.
59
<PAGE>
[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT
TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions that come from a Fund's net investment income, net foreign
currency gain and any excess of net short-term capital gain over net long-term
capital loss generally are taxable to you as ordinary income.
Distributions that come from a Fund's net capital gain (generally the excess
of net long-term capital gain over net short-term capital loss), generally are
taxable to you as net capital gain. Corporate shareholders won't be able to
deduct any distributions from a Fund when determining their taxable income.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and
haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on
your account is incorrect according to its records
o the IRS informs us that you're otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
60
<PAGE>
TAXATION OF REDEMPTIONS AND EXCHANGES
Your redemptions (including redemptions "in kind") and exchanges of Fund
shares will usually result in a taxable capital gain or loss, depending on the
amount you receive for your shares (or are deemed to receive in the case of
exchanges) and the amount you paid (or are deemed to have paid) for them.
[GRAPHIC] Financial highlights
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. The total investment return line
indicates how much an investment in the Fund would have earned, assuming all
dividends and distributions had been reinvested.
This information, except as noted below, has been audited by
PricewaterhouseCoopers LLP. The independent accountant's report and Nations
Funds financial statements are incorporated by reference into the SAI. Please
see the back cover to find out how you can get a copy.
Financial Highlights for Investor B Shares of Nations Intermediate Bond Fund
are not provided because this class of shares had not yet commenced operations
during the period indicated.
The financial highlights of Nations U.S. Government Bond Fund for the period
ended May 16, 1997 were audited by other independent accountants.
61
<PAGE>
<TABLE>
<CAPTION>
NATIONS SHORT-TERM INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR A SHARES 3/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.77 $ 9.68
Net investment income 0.54 0.54
Net realized and unrealized gain/(loss) on
investments 0.02 0.09
Net increase/(decrease) in net asset value from
operations 0.56 0.63
DISTRIBUTIONS:
Dividends from net investment income (0.54) (0.54)
Distributions in excess of net investment income -- --
Distributions from capital -- --
Total dividends and distributions (0.54) (0.54)
Net asset value, end of period $ 9.79 $ 9.77
TOTAL RETURN++ 5.85% 6.67%
=================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $14,652 $13,688
Ratio of operating expenses to average net assets 0.70%(c) 0.76%(b)(c)
Ratio of net investment income to average net
assets 5.50% 5.55%
Portfolio turnover rate 64% 66%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.05%(c) 1.06%(c)
<CAPTION>
INVESTOR A SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A)# 11/30/95# 11/30/94#
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.76 $ 9.84 $ 9.48 $ 10.01
Net investment income 0.56 0.19 0.59 0.48
Net realized and unrealized gain/(loss) on
investments (0.08) (0.08) 0.36 ( 0.51)
Net increase/(decrease) in net asset value from
operations 0.48 0.11 0.95 ( 0.03)
DISTRIBUTIONS:
Dividends from net investment income (0.56) (0.19) (0.59) ( 0.46)
Distributions in excess of net investment income -- -- -- ( 0.02)
Distributions from capital -- -- -- ( 0.02)
Total dividends and distributions (0.56) (0.19) (0.59) ( 0.50)
Net asset value, end of period $ 9.68 $ 9.76 $ 9.84 $ 9.48
TOTAL RETURN++ 5.04% 1.13% 10.29% ( 0.33)%
=================================================== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $6,169 $2,810 $2,969 $2,490
Ratio of operating expenses to average net assets 0.75%(b) 0.75%+ 0.76% 0.71%
Ratio of net investment income to average net
assets 5.77% 5.87%+ 6.12% 5.02%
Portfolio turnover rate 172% 73% 224% 293%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.05% 1.08%+ 1.06% 1.03%
</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 share 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 fees reduced by the credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS SHORT-TERM INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR B SHARES 3/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.77 $ 9.68
Net investment income 0.52 0.53
Net realized and unrealized gain/(loss) on
investments 0.02 0.09
Net increase/(decrease) in net asset value from
operations 0.54 0.62
DISTRIBUTIONS:
Dividends from net investment income (0.52) (0.53)
Distributions in excess of net investment income -- --
Distributions from capital -- --
Total dividends and distributions (0.52) (0.53)
Net asset value, end of period $ 9.79 $ 9.77
TOTAL RETURN++ 5.70% 6.51%
=================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $5,825 $4,602
Ratio of operating expenses to average net assets 0.85%(c) 0.91%(b)(c)
Ratio of net investment income to average net
assets 5.35% 5.40%
Portfolio turnover rate 64% 66%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.80%(c) 1.21%(c)
<CAPTION>
INVESTOR B SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A)# 11/30/95# 11/30/94#
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.76 $ 9.84 $ 9.48 $ 10.01
Net investment income 0.55 0.19 0.57 0.47
Net realized and unrealized gain/(loss) on
investments (0.08) (0.08) 0.36 ( 0.51)
Net increase/(decrease) in net asset value from
operations 0.47 0.11 0.93 ( 0.04)
DISTRIBUTIONS:
Dividends from net investment income (0.55) (0.19) (0.57) ( 0.45)
Distributions in excess of net investment income -- -- -- ( 0.02)
Distributions from capital -- -- -- ( 0.02)
Total dividends and distributions (0.55) (0.19) (0.57) ( 0.49)
Net asset value, end of period $ 9.68 $ 9.76 $ 9.84 $ 9.48
TOTAL RETURN++ 4.89% 1.08% 10.10% ( 0.46)%
=================================================== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $5,536 $7,339 $8,873 $16,550
Ratio of operating expenses to average net assets 0.90%(b) 0.90%+ 0.91% 0.85%
Ratio of net investment income to average net
assets 5.62% 5.72%+ 5.97% 4.88%
Portfolio turnover rate 172% 73% 224% 293%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.20% 1.23%+ 1.21% 1.17%
</TABLE>
+ Annualized.
++ Total return represents aggregate total return
for the periods 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 share 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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
62
<PAGE>
<TABLE>
<CAPTION>
NATIONS SHORT-TERM INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR C SHARES 3/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.77 $ 9.68
Net investment income 0.52 0.53
Net realized and unrealized gain/(loss) on
investments 0.02 0.09
Net increase/(decrease) in net asset value from
operations 0.54 0.62
DISTRIBUTIONS:
Dividends from net investment income (0.52) (0.53)
Distributions in excess of net investment income -- --
Distributions from capital -- --
Total dividends and distributions (0.52) (0.53)
Net asset value, end of period $ 9.79 $ 9.77
TOTAL RETURN++ 5.64% 6.51%
======================================================= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,744 $2,992
Ratio of operating expenses to average net assets 1.01%(c) 0.91%(b)(c)
Ratio of net investment income to average net assets 5.19% 5.40%
Portfolio turnover rate 64% 66%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.80%(c) 1.21%(c)
<CAPTION>
INVESTOR C SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A)# 11/30/95# 11/30/94#
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.76 $ 9.84 $ 9.48 $ 10.01
Net investment income 0.55 0.19 0.57 0.46
Net realized and unrealized gain/(loss) on
investments (0.08) (0.08) 0.36 ( 0.51)
Net increase/(decrease) in net asset value from
operations 0.47 0.11 0.93 ( 0.05)
DISTRIBUTIONS:
Dividends from net investment income (0.55) (0.19) (0.57) ( 0.44)
Distributions in excess of net investment income -- -- -- ( 0.02)
Distributions from capital -- -- -- ( 0.02)
Total dividends and distributions (0.55) (0.19) (0.57) ( 0.48)
Net asset value, end of period $ 9.68 $ 9.76 $ 9.84 $ 9.48
TOTAL RETURN++ 4.89% 1.07% 10.08% ( 0.51)%
======================================================= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $4,063 $6,121 $6,056 $8,102
Ratio of operating expenses to average net assets 0.90%(b) 0.90%+ 0.91% 0.89%
Ratio of net investment income to average net assets 5.62% 5.72%+ 5.97% 4.84%
Portfolio turnover rate 172% 73% 224% 293%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.20% 1.23%+ 1.21% 1.21%
</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 share 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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
INVESTOR A SHARES 3/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 4.12 $ 3.99
Net investment income 0.21 0.22
Net realized and unrealized gain/(loss) on
investments (0.02) 0.13
Net increase/(decrease) in net asset value from
operations 0.19 0.35
DISTRIBUTIONS:
Dividends from net investment income (0.21) (0.22)
Distributions from net realized capital gains -- --
Total dividends and distributions (0.21) (0.22)
Net asset value, end of period $ 4.10 $ 4.12
TOTAL RETURN++ 4.76% 8.89%
====================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $44,793 $49,478
Ratio of operating expenses to average net assets 0.78%(d) 0.81%
Ratio of net investment income to average net assets 5.16% 5.33%
Portfolio turnover rate 242% 538%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.03%(d) 1.01%
<CAPTION>
INVESTOR A SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(B)# 11/30/95# 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 4.07 $ 4.14 $ 3.93 $ 4.28
Net investment income 0.22 0.07 0.23 0.22
Net realized and unrealized gain/(loss) on
investments (0.08) (0.07) 0.21 (0.33)
Net increase/(decrease) in net asset value from
operations 0.14 0.00 0.44 (0.11)
DISTRIBUTIONS:
Dividends from net investment income (0.22) (0.07)(a) (0.23)(a) (0.22)(a)
Distributions from net realized capital gains -- -- -- (0.02)
Total dividends and distributions (0.22) (0.07) (0.23) (0.24)
Net asset value, end of period $ 3.99 $ 4.07 $ 4.14 $ 3.93
TOTAL RETURN++ 3.51% 0.00%## 11.48% (2.41)%
====================================================== ======= ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $42,468 $57,381 $64,848 $77,128
Ratio of operating expenses to average net assets 0.83%(c)(d) 0.83%+ 0.80% 0.77%
Ratio of net investment income to average net assets 5.53% 5.12%+ 5.68% 5.58%
Portfolio turnover rate 529% 189% 328% 133%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.03%(d) 1.06%+ 1.00% 0.98%
</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 share 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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
63
<PAGE>
NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND FOR A SHARE OUTSTANDING THROUGH EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
INVESTOR B SHARES 3/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 4.12 $ 3.99
Net investment income 0.19 0.20
Net realized and unrealized gain/(loss) on
investments (0.02) 0.13
Net increase/(decrease) in net asset value from
operations 0.17 0.33
DISTRIBUTIONS:
Dividends from net investment income (0.19) (0.20)
Distributions from net realized capital gains -- --
Total dividends and distributions (0.19) (0.20)
Net asset value, end of period $ 4.10 $ 4.12
TOTAL RETURN++ 4.14% 8.35%
====================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $9,591 $9,815
Ratio of operating expenses to average net assets 1.38%(d) 1.34%
Ratio of net investment income to average net assets 4.56% 4.80%
Portfolio turnover rate 242% 538%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.78%(d) 1.54%
<CAPTION>
INVESTOR B SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(B)# 11/30/95# 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 4.07 $ 4.14 $ 3.93 $ 4.28
Net investment income 0.20 0.07 0.21 0.20
Net realized and unrealized gain/(loss) on
investments (0.08) (0.07) 0.21 (0.33)
Net increase/(decrease) in net asset value from
operations 0.12 0.00 0.42 (0.13)
DISTRIBUTIONS:
Dividends from net investment income (0.20) (0.07)(a) (0.21)(a) (0.20)(a)
Distributions from net realized capital gains -- -- -- (0.02)
Total dividends and distributions (0.20) (0.07) (0.21) (0.22)
Net asset value, end of period $ 3.99 $ 4.07 $ 4.14 $ 3.93
TOTAL RETURN++ 3.10% (0.13)% 11.02% (2.81)%
====================================================== ======= ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $10,788 $13,789 $14,893 $10,974
Ratio of operating expenses to average net assets 1.23%(c)(d) 1.23%+ 1.20% 1.19%
Ratio of net investment income to average net assets 5.13% 4.72%+ 5.28% 5.16%
Portfolio turnover rate 529% 189% 328% 133%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.43%(d) 1.46%+ 1.40% 1.40%
</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 share method.
(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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
INVESTOR C SHARES 3/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 4.12 $ 3.99
Net investment income 0.19 0.20
Net realized and unrealized gain/(loss) on
investments (0.03) 0.13
Net increase/(decrease) in net asset value from
operations 0.16 0.33
DISTRIBUTIONS:
Dividends from net investment income (0.19) (0.20)
Distributions from net realized capital gains -- --
Total dividends and distributions (0.19) (0.20)
Net asset value, end of period $ 4.09 $ 4.12
TOTAL RETURN++ 4.05% 8.45%
====================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,190 $1,808
Ratio of operating expenses to average net assets 1.34%(d) 1.31%
Ratio of net investment income to average net assets 4.60% 4.83%
Portfolio turnover rate 242% 538%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.78%(d) 1.51%
<CAPTION>
INVESTOR C SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(B)# 11/30/95# 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 4.07 $ 4.14 $ 3.93 $ 4.28
Net investment income 0.21 0.07 0.22 0.20
Net realized and unrealized gain/(loss) on
investments (0.08) (0.07) 0.21 (0.33)
Net increase/(decrease) in net asset value from
operations 0.13 0.00 0.43 (0.13)
DISTRIBUTIONS:
Dividends from net investment income (0.21) (0.07)(a) (0.22)(a) (0.20)(a)
Distributions from net realized capital gains -- -- -- (0.02)
Total dividends and distributions (0.21) (0.07) (0.22) (0.22)
Net asset value, end of period $ 3.99 $ 4.07 $ 4.14 $ 3.93
TOTAL RETURN++ 3.21% (0.10)% 11.15% (2.80)%
====================================================== ======= ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $8,334 $11,820 $13,206 $16,725
Ratio of operating expenses to average net assets 1.13%(c)(d) 1.13%+ 1.10% 1.17%
Ratio of net investment income to average net assets 5.23% 4.82%+ 5.38% 5.18%
Portfolio turnover rate 529% 189% 328% 133%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.33%(d) 1.36%+ 1.30% 1.38%
</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 share method.
(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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
64
<PAGE>
<TABLE>
<CAPTION>
NATIONS INTERMEDIATE BOND FUND
(SUCCESSOR TO THE PACIFIC HORIZON
INTERMEDIATE BOND FUND) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
PERIOD ENDED YEAR ENDED
INVESTOR A SHARES* 05/14/99 02/28/99
<S> <C> <C>
Net asset value per share, beginning of period $ 9.52 $ 9.69
Income from Investment Operations:
Net investment income 0.10 0.50
Net realized and unrealized gain (loss) on
investments (0.04) (0.03)
Net increase in net asset value from operations 0.06 0.47
DISTRIBUTIONS:
Dividends from net investment income (0.08) (0.53)
Distributions from net realized gains -- (0.11)
Total dividends and distributions (0.08) (0.64)
Net asset value per share, end of period $ 9.50 $ 9.52
TOTAL RETURN (excludes sales charge) 0.66%(d) 4.89%
===================================================== ======== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $61,412 $63,404
Ratio of expenses to average net assets 1.09%(c) 0.90%
Ratio of net investment income to average net
assets 4.90%(c) 5.14%
Ratio of expenses to average net assets** 1.12%(c) (b)
Ratio of net investment income (loss) to average net
assets** 4.87%(c) (b)
<CAPTION>
INVESTOR A SHARES* YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
02/28/98 02/28/97(A) 02/29/96 02/28/95
<S> <C> <C> <C> <C>
Net asset value per share, beginning of period $ 9.54 $ 9.75 $ 9.44 $ 9.81
Income from Investment Operations:
Net investment income 0.49 0.52 0.59 0.59
Net realized and unrealized gain (loss) on
investments 0.20 (0.15) 0.33 ( 0.37)
Net increase in net asset value from operations 0.69 0.37 0.92 0.22
DISTRIBUTIONS:
Dividends from net investment income (0.51) (0.52) (0.59) ( 0.59)
Distributions from net realized gains (0.03) (0.06) (0.02) --
Total dividends and distributions (0.54) (0.58) (0.61) ( 0.59)
Net asset value per share, end of period $ 9.69 $ 9.54 $ 9.75 $ 9.44
TOTAL RETURN (excludes sales charge) 7.40% 3.92% 10.45% 2.27%
===================================================== ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $41,875 $22,937 $13,179 $ 1,964
Ratio of expenses to average net assets 0.90% 0.75% 0.27% 0.00%
Ratio of net investment income to average net
assets 5.50% 5.45% 6.13% 6.43%
Ratio of expenses to average net assets** 1.21% 2.26% 5.00% 17.95%
Ratio of net investment income (loss) to average net
assets** 5.19% 3.94% 1.40% (11.52%)
</TABLE>
* Investor A Shares of Nations Intermediate Bond
Fund were formerly A Shares of Pacific Horizon
Intermediate Bond Fund.
**During the period, certain fees were voluntarily
reduced and expenses reimbursed. If such voluntary
fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) As of July 22, 1996 the Fund designated the
existing series of shares as "A" shares.
(b) There were no fee waivers or expense
reimbursements during the period.
(c) Annualized.
(d) Not annualized.
<TABLE>
<CAPTION>
NATIONS INTERMEDIATE BOND FUND
(SUCCESSOR TO THE PACIFIC HORIZON
INTERMEDIATE BOND FUND) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR C SHARES* PERIOD ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
05/14/99 02/28/99 02/28/98 02/28/97(A)
<S> <C> <C> <C> <C>
Net asset value per share, beginning of period $ 9.59 $ 9.72 $ 9.54 $ 9.53
Income from Investment Operations:
Net investment income 0.09 0.46 0.44 0.31
Net realized and unrealized gain on investments (0.04) -- 0.19 0.07
Net increase in net asset value from operations 0.05 0.46 0.63 0.38
DISTRIBUTIONS:
Dividends from net investment income (0.08) (0.48) (0.42) (0.31)
Distributions from net realized gains -- (0.11) (0.03) (0.06)
Total dividends and distributions (0.08) (0.59) (0.45) (0.37)
Net asset value per share, end of period $ 9.56 $ 9.59 $ 9.72 $ 9.54
TOTAL RETURN 0.47%(c) 4.76% 6.80% 3.73%(c)
================================================== ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000) $ 469 $ 495 $ 513 $ 332
Ratio of expenses to average net assets 1.57%(b) 1.39% 1.39% 1.43%(b)
Ratio of net investment income to average net
assets 4.42%(b) 4.67% 4.99% 5.41%(b)
Ratio of expenses to average net assets** 1.84%(b) 1.65% 1.73% 2.71%(b)
Ratio of net investment income to average net
assets** 4.15%(b) 4.41% 4.65% 4.13%(b)
</TABLE>
* Investor C Shares of Nations Intermediate Bond
Fund were formerly K Shares of Pacific Horizon
Intermediate Bond Fund.
**During the period, certain fees were voluntarily
reduced and expenses reimbursed. If such voluntary
fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from July 22, 1996 (inception date) to
February 28, 1997.
(b) Annualized.
(c) Not annualized.
65
<PAGE>
<TABLE>
<CAPTION>
NATIONS STRATEGIC FIXED
INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR A SHARES 3/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.03 $ 9.62
Net investment income 0.57 0.56
Net realized and unrealized gain/(loss) on
investments ( 0.04) 0.41
Net increase/(decrease) in net asset value from
operations 0.53 0.97
DISTRIBUTIONS:
Dividends from net investment income ( 0.57) ( 0.56)
Distributions in excess of net investment income -- --
Distributions from net realized capital gains ( 0.06) --
Distributions from capital -- --
Total dividends and distributions ( 0.63) ( 0.56)
Net asset value, end of period $ 9.93 $ 10.03
TOTAL RETURN++ 5.40% 10.30%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $32,119 $26,054
Ratio of operating expenses to average net assets 0.88%(c) 0.92%(c)(d)
Ratio of net investment income to average net
assets 5.66% 5.66%
Portfolio turnover rate 107% 244%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.03%(c) 1.03%(d)
<CAPTION>
INVESTOR A SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.93 $ 10.22 $ 9.32 $ 10.55
Net investment income 0.56 0.18 0.57 0.51
Net realized and unrealized gain/(loss) on
investments (0.20) ( 0.29) 0.90 ( 0.89)
Net increase/(decrease) in net asset value from
operations 0.36 ( 0.11) 1.47 ( 0.38)
DISTRIBUTIONS:
Dividends from net investment income (0.56) ( 0.18) ( 0.57) ( 0.49)
Distributions in excess of net investment income -- -- -- ( 0.02)
Distributions from net realized capital gains (0.11) -- -- ( 0.34)
Distributions from capital (0.00)(b) -- -- --
Total dividends and distributions (0.67) ( 0.18) ( 0.57) ( 0.85)
Net asset value, end of period $ 9.62 $ 9.93 $ 10.22 $ 9.32
TOTAL RETURN++ 3.70% ( 1.11)% 16.22% ( 3.76)%
==================================================== ======== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $6,345 $6,440 $6,662 $ 967
Ratio of operating expenses to average net assets 0.91%(c) 0.92%+ 0.91% 0.86%
Ratio of net investment income to average net
assets 5.78% 5.29%+ 5.85% 5.25%
Portfolio turnover rate 368% 133% 228% 307%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.01%(d) 1.03%+ 1.01% 0.94%
</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 share 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 fees reduced by credits
allowed by the custodian 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%.
<TABLE>
<CAPTION>
NATIONS STRATEGIC FIXED
INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR B SHARES 3/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.03 $ 9.62
Net investment income 0.51 0.51
Net realized and unrealized gain/(loss) on
investments ( 0.04) 0.41
Net increase/(decrease) in net asset value from
operations 0.47 0.92
DISTRIBUTIONS:
Dividends from net investment income ( 0.51) ( 0.51)
Distributions in excess of net investment income -- --
Distributions of net realized capital gains ( 0.06) --
Distributions from capital -- --
Total dividends and distributions ( 0.57) ( 0.51)
Net asset value, end of period $ 9.93 $ 10.03
TOTAL RETURN++ 4.76% 9.73%
====================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $5,440 $2,662
Ratio of operating expenses to average net assets 1.48%(c) 1.47%(c)(d)
Ratio of net investment income to average net assets 5.06% 5.11%
Portfolio turnover rate 107% 244%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.78%(c) 1.58%(d)
<CAPTION>
INVESTOR B SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.93 $ 10.22 $ 9.32 $ 10.55
Net investment income 0.52 0.16 0.53 0.47
Net realized and unrealized gain/(loss) on
investments (0.20) ( 0.29) 0.90 ( 0.89)
Net increase/(decrease) in net asset value from
operations 0.32 ( 0.13) 1.43 ( 0.42)
DISTRIBUTIONS:
Dividends from net investment income (0.52) ( 0.16) ( 0.53) ( 0.45)
Distributions in excess of net investment income -- -- -- ( 0.02)
Distributions of net realized capital gains (0.11) -- -- ( 0.34)
Distributions from capital (0.00)(b) -- -- --
Total dividends and distributions (0.63) ( 0.16) ( 0.53) ( 0.81)
Net asset value, end of period $ 9.62 $ 9.93 $ 10.22 $ 9.32
TOTAL RETURN++ 3.23% ( 1.26)% 15.70% ( 4.21)%
====================================================== ======== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,109 $2,496 $2,578 $2,145
Ratio of operating expenses to average net assets 1.36%(c) 1.37%+ 1.36% 1.33%
Ratio of net investment income to average net assets 5.33% 4.84%+ 5.40% 4.78%
Portfolio turnover rate 368% 133% 228% 307%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.46%(d) 1.48%+ 1.46% 1.41%
</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 share 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 fees reduced by credits
allowed by the custodian 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%.
66
<PAGE>
<TABLE>
<CAPTION>
NATIONS STRATEGIC FIXED
INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR C SHARES 3/31/99 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.03 $ 9.62
Net investment income 0.51 0.52
Net realized and unrealized gain/(loss) on
investments ( 0.04) 0.41
Net increase/(decrease) in net asset value from
operations 0.47 0.93
DISTRIBUTIONS:
Dividends from net investment income ( 0.51) ( 0.52)
Distributions in excess of net investment income -- --
Distributions from net realized capital gains ( 0.06) --
Distributions from capital -- --
Total dividends and distributions ( 0.57) ( 0.52)
Net asset value, end of period $ 9.93 $ 10.03
TOTAL RETURN++ 4.90% 9.87%
====================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,137 $ 943
Ratio of operating expenses to average net assets 1.40%(c) 1.42%(c)(d)
Ratio of net investment income to average net assets 5.14% 5.16%
Portfolio turnover rate 107% 244%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.78%(c) 1.53%(d)
<CAPTION>
INVESTOR C SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A) 11/30/95 11/30/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.93 $ 10.22 $ 9.32 $ 10.55
Net investment income 0.53 0.17 0.54 0.47
Net realized and unrealized gain/(loss) on
investments (0.20) ( 0.29) 0.90 ( 0.89)
Net increase/(decrease) in net asset value from
operations 0.33 ( 0.12) 1.44 ( 0.42)
DISTRIBUTIONS:
Dividends from net investment income (0.53) ( 0.17) ( 0.54) ( 0.45)
Distributions in excess of net investment income -- -- -- ( 0.02)
Distributions from net realized capital gains (0.11) -- -- ( 0.34)
Distributions from capital (0.00)(b) -- -- --
Total dividends and distributions (0.64) ( 0.17) ( 0.54) ( 0.81)
Net asset value, end of period $ 9.62 $ 9.93 $ 10.22 $ 9.32
TOTAL RETURN++ 3.38% ( 1.22)% 15.87% ( 4.14)%
====================================================== ======== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,068 $ 299 $ 227 $ 41
Ratio of operating expenses to average net assets 1.21%(c) 1.22%+ 1.21% 1.43%
Ratio of net investment income to average net assets 5.48% 4.99%+ 5.55% 4.68%
Portfolio turnover rate 368% 133% 228% 307%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.31%(d) 1.33%+ 1.31% 1.51%
</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 share 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 fees reduced by credits
allowed by the custodian 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%.
<TABLE>
<CAPTION>
NATIONS GOVERNMENT
SECURITIES FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR A SHARES 3/31/99# 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.90 $ 9.39
Net investment income 0.56 0.52
Net realized and unrealized gain/(loss) on
investments (0.05) 0.51
Net increase/(decrease) in net asset value from
operations 0.51 1.03
DISTRIBUTIONS:
Dividends from net investment income (0.55) (0.52)
Distributions in excess of net investment income -- --
Distributions in excess of net realized capital gains -- --
Distributions from capital -- --
Total dividends and distributions (0.55) (0.52)
Net asset value, end of period $ 9.86 $ 9.90
TOTAL RETURN++ 5.16% 11.37%
======================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $19,167 $8,509
Ratio of operating expenses to average net assets 0.98%(d) 1.10%(c)(d)
Ratio of net investment income to average net assets 5.45% 5.38%
Portfolio turnover rate 600% 303%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.09%(d) 1.24%(d)
<CAPTION>
INVESTOR A SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A)# 05/31/95# 05/31/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.67 $ 9.86 $ 9.80 $ 10.46
Net investment income 0.58 0.50 0.61 0.62
Net realized and unrealized gain/(loss) on
investments (0.30) (0.19) 0.06 ( 0.61)
Net increase/(decrease) in net asset value from
operations 0.28 0.31 0.67 0.01
DISTRIBUTIONS:
Dividends from net investment income (0.56) (0.48) (0.57) ( 0.56)
Distributions in excess of net investment income -- (0.02) -- ( 0.02)
Distributions in excess of net realized capital gains -- -- -- ( 0.05)
Distributions from capital (0.00)(b) -- (0.04) ( 0.04)
Total dividends and distributions (0.56) (0.50) (0.61) ( 0.67)
Net asset value, end of period $ 9.39 $ 9.67 $ 9.86 $ 9.80
TOTAL RETURN++ 2.92% 3.20% 7.29% ( 0.11)%
======================================================== ======== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/ SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $9,852 $11,662 $10,928 $14,044
Ratio of operating expenses to average net assets 1.05% 1.05%+ 1.01% 0.90%
Ratio of net investment income to average net assets 6.03% 6.11%+ 6.44% 5.91%
Portfolio turnover rate 468% 199% 413% 56%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.19% 1.20%+ 1.19% 1.11%
</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 share method.
(a) Fiscal year ended changed to March 31. Prior to
this, the fiscal year ended 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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
67
<PAGE>
<TABLE>
<CAPTION>
NATIONS GOVERNMENT
SECURITIES FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR B SHARES 3/31/99# 03/31/98
<S> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.90 $ 9.39
Net investment income 0.49 0.47
Net realized and unrealized gain/(loss) on
investments (0.04) 0.51
Net increase/(decrease) in net asset value from
operations 0.45 0.98
DISTRIBUTIONS:
Dividends from net investment income (0.49) (0.47)
Distributions in excess of net investment income -- --
Distributions in excess of net realized capital gains -- --
Distributions from capital -- --
Total dividends and distributions (0.49) (0.47)
Net asset value, end of period $ 9.86 $ 9.90
TOTAL RETURN++ 4.53% 10.78%
======================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $30,109 $32,391
Ratio of operating expenses to average net assets 1.58%(d) 1.63%(c)(d)
Ratio of net investment income to average net assets 4.85% 4.85%
Portfolio turnover rate 600% 303%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.84%(d) 1.77%(d)
<CAPTION>
INVESTOR B SHARES YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/97# 03/31/96(A)# 05/31/95# 05/31/94*
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 9.67 $ 9.86 $ 9.80 $ 10.49
Net investment income 0.54 0.47 0.58 0.54
Net realized and unrealized gain/(loss) on
investments (0.30) (0.19) 0.06 ( 0.64)
Net increase/(decrease) in net asset value from
operations 0.24 0.28 0.64 ( 0.10)
DISTRIBUTIONS:
Dividends from net investment income (0.52) (0.45) (0.54) ( 0.49)
Distributions in excess of net investment income -- (0.02) -- ( 0.01)
Distributions in excess of net realized capital gains -- -- -- ( 0.05)
Distributions from capital (0.00)(b) -- (0.04) ( 0.04)
Total dividends and distributions (0.52) (0.47) (0.58) ( 0.59)
Net asset value, end of period $ 9.39 $ 9.67 $ 9.86 $ 9.80
TOTAL RETURN++ 2.51% 2.85% 6.86% ( 1.09)%
======================================================== ======== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $38,807 $50,958 $56,155 $56,313
Ratio of operating expenses to average net assets 1.45% 1.45%+ 1.41% 1.38%+
Ratio of net investment income to average net assets 5.63% 5.71%+ 6.04% 5.43%+
Portfolio turnover rate 468% 199% 413% 56%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.59% 1.60%+ 1.59% 1.59%+
</TABLE>
* Nations Government Securities Fund 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 share 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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS GOVERNMENT
SECURITIES FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR C SHARES 3/31/99# 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.90 $ 9.39
Net investment income 0.49 0.48
Net realized and unrealized gain/(loss) on
investments (0.04) 0.51
Net increase/(decrease) in net asset value from
operations 0.45 0.99
DISTRIBUTIONS:
Dividends from net investment income (0.49) (0.48)
Dividends in excess of net investment income -- --
Distributions in excess of net realized capital gains -- --
Distributions from capital -- --
Total dividends and distributions (0.49) (0.48)
Net asset value, end of period $ 9.86 $ 9.90
TOTAL RETURN++ 4.52% 10.84%
======================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 213 $ 735
Ratio of operating expenses to average net assets 1.59%(d) 1.58%(c)(d)
Ratio of net investment income to average net assets 4.84% 4.90%
Portfolio turnover rate 600% 303%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.84%(d) 1.72%(d)
<CAPTION>
INVESTOR C SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A)# 05/31/95# 05/31/94
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.67 $ 9.86 $ 9.80 $ 10.46
Net investment income 0.55 0.47 0.57 0.55
Net realized and unrealized gain/(loss) on
investments (0.30) (0.19) 0.06 ( 0.61)
Net increase/(decrease) in net asset value from
operations 0.25 0.28 0.63 ( 0.06)
DISTRIBUTIONS:
Dividends from net investment income (0.53) (0.45) (0.53) ( 0.50)
Dividends in excess of net investment income -- (0.02) -- ( 0.01)
Distributions in excess of net realized capital gains -- -- -- ( 0.05)
Distributions from capital (0.00)(b) -- (0.04) ( 0.04)
Total dividends and distributions (0.53) (0.47) (0.57) ( 0.60)
Net asset value, end of period $ 9.39 $ 9.67 $ 9.86 $ 9.80
TOTAL RETURN++ 2.67% 2.83% 6.76% ( 0.69)%
======================================================== ======== ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,835 $2,558 $2,945 $5,265
Ratio of operating expenses to average net assets 1.30% 1.48%+ 1.51% 1.48%
Ratio of net investment income to average net assets 5.78% 5.68%+ 5.94% 5.33%
Portfolio turnover rate 468% 199% 413% 56%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.44% 1.63%+ 1.69% 1.69%
</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 share 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 fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
68
<PAGE>
<TABLE>
<CAPTION>
NATIONS U.S. GOVERNMENT BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED
INVESTOR A SHARES* 3/31/99#
<S> <C>
OPERATING PERFORMANCE:
Net asset value, at the beginning of the period $ 10.37
Net investment income 0.50
Net realized and unrealized gain/(loss) on
investments 0.07
Net increase in net asset value from operations 0.57
DISTRIBUTIONS:
Dividends from net investment income ( 0.50)
Distributions from net realized capital gains ( 0.36)
Total dividends and distributions ( 0.86)
Net asset value, end of the period $ 10.08
TOTAL RETURN ++ 5.57%
==================================================== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $2,311
Ratio of operating expenses to average net assets 0.84%(a)(c)
Ratio of net investment income to average net
assets 4.81%
Portfolio turnover rate 270%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.12%(a)
<CAPTION>
INVESTOR A SHARES* PERIOD ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/98 05/16/97 08/31/96 08/31/95(B)
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, at the beginning of the period $ 10.20 $ 10.54 $ 11.19 $ 10.48
Net investment income 0.46 0.39 0.59 0.37
Net realized and unrealized gain/(loss) on
investments 0.30 0.17 ( 0.20) 0.71
Net increase in net asset value from operations 0.76 0.56 0.39 1.08
DISTRIBUTIONS:
Dividends from net investment income ( 0.46) ( 0.39) ( 0.59) ( 0.37)
Distributions from net realized capital gains ( 0.13) ( 0.51) ( 0.45) --
Total dividends and distributions ( 0.59) ( 0.90) ( 1.04) ( 0.37)
Net asset value, end of the period $ 10.37 $ 10.20 $ 10.54 $ 11.19
TOTAL RETURN ++ 7.51% 5.44% 3.44% 10.41%
==================================================== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,927 $ 734 $ 632 $ 87
Ratio of operating expenses to average net assets 0.85%+(a) 0.87%+ 0.85% 0.82%+
Ratio of net investment income to average net
assets 5.01%+ 5.35%+ 5.44% 5.76%+
Portfolio turnover rate 188% 58% 87% 132%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.11%+(a) 1.07%+ 1.07% 1.12%+
</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's Class A Shares, which were reorganized into
the Investor A Shares of Nations U.S. Government
Bond Fund as of May 23, 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 share method.
(a) The effect of the fees reduced by the credits
allowed by the custodian on the expense ratio, with
and without waivers and/or expense reimbursements,
was less than 0.01%.
(b) Investor A Shares commenced operations on
February 7, 1995.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS U.S. GOVERNMENT BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED
INVESTOR B SHARES* 3/31/99#
<S> <C>
OPERATING PERFORMANCE:
Net asset value at the beginning of the period $ 10.37
Net investment income 0.44
Net realized and unrealized gain/(loss) on
investments 0.07
Net increase in net asset value from operations 0.51
DISTRIBUTIONS:
Dividends from net investment income ( 0.44)
Distributions from net realized capital gains ( 0.36)
Total dividends and distributions ( 0.80)
Net asset value at the end of the period $ 10.08
TOTAL RETURN++ 4.93%
==================================================== =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets at end of period (in 000's) $6,779
Ratio of operating expenses to average net assets 1.44%(a)(c)
Ratio of net investment income to average net
assets 4.21%
Portfolio turnover rate 270%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.87%(a)
<CAPTION>
INVESTOR B SHARES* PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
03/31/98 05/16/97 08/31/96 08/31/95(B)
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value at the beginning of the period $ 10.19 $ 10.52 $ 11.19 $ 10.05
Net investment income 0.41 0.34 0.51 0.46
Net realized and unrealized gain/(loss) on
investments 0.31 0.18 ( 0.22) 1.14
Net increase in net asset value from operations 0.72 0.52 0.29 1.60
DISTRIBUTIONS:
Dividends from net investment income ( 0.41) ( 0.34) ( 0.51) ( 0.46)
Distributions from net realized capital gains ( 0.13) ( 0.51) ( 0.45) --
Total dividends and distributions ( 0.54) ( 0.85) ( 0.96) ( 0.46)
Net asset value at the end of the period $ 10.37 $ 10.19 $ 10.52 $ 11.19
TOTAL RETURN++ 7.14% 4.99% 2.43% 16.19%
==================================================== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets at end of period (in 000's) $1,004 $1,529 $1,237 $ 146
Ratio of operating expenses to average net assets 1.40%+(a) 1.62%+ 1.65% 1.62%+
Ratio of net investment income to average net
assets 4.46%+ 4.60%+ 4.60% 5.19%+
Portfolio turnover rate 188% 58% 87% 132%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.66%+(a) 1.77%+ 1.82% 1.87%+
</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's Class B Shares which were reorganized into
the Nations U.S. Government Bond Fund Investor B
Shares as of May 23, 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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(b) Investor B Shares commenced operations on
November 10, 1994.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
69
<PAGE>
<TABLE>
<CAPTION>
NATIONS U.S. GOVERNMENT BOND
FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INVESTOR C SHARES YEAR ENDED PERIOD ENDED
3/31/99# 03/31/98(B)
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value at the beginning of the period $ 10.37 $ 10.41
Net investment income 0.44 0.25
Net realized and unrealized gain/(loss) on
investments 0.07 0.09
Net increase in net asset value from operations 0.51 0.34
DISTRIBUTIONS:
Dividends from net investment income ( 0.44) ( 0.25)
Distributions from net realized capital gains ( 0.36) ( 0.13)
Total dividends and distributions ( 0.80) ( 0.38)
Net asset value at the end of the period $ 10.08 $ 10.37
TOTAL RETURN++ 5.13% 3.50%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets at end of period (in 000's) $1,255 $1,332
Ratio of operating expenses to average net assets 1.34%(a)(c) 1.45%(a)+
Ratio of net investment income to average net
assets 4.31% 4.41%+
Portfolio turnover rate 270% 188%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.87%(a) 1.71%(a)+
</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 share method.
(a) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(b) Investor C Shares commenced operations on
September 19, 1997.
(c) The effect of interest expense on the operating
expense ratio was less than 0.01%.
<TABLE>
<CAPTION>
NATIONS DIVERSIFIED INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR A SHARES 3/31/99# 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.55 $ 10.11
Net investment income 0.63 0.63
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.44
Net increase/(decrease) in net asset value from
operations 0.49 1.07
DISTRIBUTIONS:
Dividends from net investment income ( 0.63) ( 0.63)
Distributions from net realized capital gains ( 0.10) --
Total dividends and distributions ( 0.73) ( 0.63)
Net asset value, end of period $ 10.31 $ 10.55
TOTAL RETURN++ 4.74% 10.80%
====================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $12,954 $11,946
Ratio of operating expenses to average net assets 0.95%(b) 0.98%(b)
Ratio of net investment income to average net assets 6.02% 6.02%
Portfolio turnover rate 94% 203%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.05%(b) 1.08%(b)
<CAPTION>
INVESTOR A SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A) 11/30/95 11/30/94#
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.42 $ 10.82 $ 9.67 $ 10.88
Net investment income 0.66 0.22 0.71 0.72
Net realized and unrealized gain/(loss) on
investments ( 0.18) ( 0.40) 1.15 ( 1.06)
Net increase/(decrease) in net asset value from
operations 0.48 ( 0.18) 1.86 ( 0.34)
DISTRIBUTIONS:
Dividends from net investment income ( 0.66) ( 0.22) ( 0.71) ( 0.72)(c)
Distributions from net realized capital gains ( 0.13) -- -- ( 0.15)
Total dividends and distributions ( 0.79) ( 0.22) ( 0.71) ( 0.87)
Net asset value, end of period $ 10.11 $ 10.42 $ 10.82 $ 9.67
TOTAL RETURN++ 4.71% ( 1.67)% 19.82% ( 3.26)%
====================================================== ======= ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $11,662 $13,332 $13,150 $10,819
Ratio of operating expenses to average net assets 1.00%(b) 1.02%+ 1.05% 0.96%
Ratio of net investment income to average net assets 6.48% 6.24%+ 6.78% 7.09%
Portfolio turnover rate 278% 69% 96% 144%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.10%(b) 1.12%+ 1.18% 1.17%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) Includes distributions in excess of less than
0.01 per share.
70
<PAGE>
<TABLE>
<CAPTION>
NATIONS DIVERSIFIED INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR B SHARES 3/31/99# 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.55 $ 10.11
Net investment income 0.57 0.57
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.44
Net increase/(decrease) in net asset value from
operations 0.43 1.01
DISTRIBUTIONS:
Dividends from net investment income ( 0.57) ( 0.57)
Distributions from net realized capital gains ( 0.10) --
Total dividends and distributions ( 0.67) ( 0.57)
Net asset value, end of period $ 10.31 $ 10.55
TOTAL RETURN++ 4.11% 10.18%
====================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $67,651 $65,248
Ratio of operating expenses to average net assets 1.55%(b) 1.55%(b)
Ratio of net investment income to average net assets 5.42% 5.45%
Portfolio turnover rate 94% 203%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.80%(b) 1.65%(b)
<CAPTION>
INVESTOR B SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A) 11/30/95 11/30/94#
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.42 $ 10.82 $ 9.67 $ 10.88
Net investment income 0.61 0.21 0.66 0.67
Net realized and unrealized gain/(loss) on
investments ( 0.18) ( 0.40) 1.15 ( 1.06)
Net increase/(decrease) in net asset value from
operations 0.43 ( 0.19) 1.81 ( 0.39)
DISTRIBUTIONS:
Dividends from net investment income ( 0.61) ( 0.21) ( 0.66) ( 0.67)(c)
Distributions from net realized capital gains ( 0.13) -- -- ( 0.15)
Total dividends and distributions ( 0.74) ( 0.21) ( 0.66) ( 0.82)
Net asset value, end of period $ 10.11 $ 10.42 $ 10.82 $ 9.67
TOTAL RETURN++ 4.18% ( 1.83)% 19.22% ( 3.77)%
====================================================== ======= ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $70,631 $84,692 $90,887 $55,058
Ratio of operating expenses to average net assets 1.50%(b) 1.52%+ 1.55% 1.49%
Ratio of net investment income to average net assets 5.98% 5.74%+ 6.28% 6.56%
Portfolio turnover rate 278% 69% 96% 144%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.60%(b) 1.62%+ 1.68% 1.70%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements was less than 0.01%.
(c) Includes distribution in excess of less than
$0.01 per share.
<TABLE>
<CAPTION>
NATIONS DIVERSIFIED INCOME FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED
INVESTOR C SHARES 3/31/99# 03/31/98
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.55 $ 10.11
Net investment income 0.57 0.58
Net realized and unrealized gain/(loss) on
investments ( 0.14) 0.44
Net increase/(decrease) in net asset value from
operations 0.43 1.02
DISTRIBUTIONS:
Dividends from net investment income ( 0.57) ( 0.58)
Distributions from net realized capital gains ( 0.10) --
Total dividends and distributions ( 0.67) ( 0.58)
Net asset value, end of period $ 10.31 $ 10.55
TOTAL RETURN++ 4.09% 10.27%
==================================================== ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $1,474 $2,090
Ratio of operating expenses to average net assets 1.56%(b) 1.46%(b)
Ratio of net investment income to average net
assets 5.41% 5.54%
Portfolio turnover rate 94% 203%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.80%(b) 1.56%(b)
<CAPTION>
INVESTOR C SHARES YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
03/31/97# 03/31/96(A) 11/30/95 11/30/94#
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 10.42 $ 10.82 $ 9.67 $ 10.88
Net investment income 0.63 0.21 0.66 0.67
Net realized and unrealized gain/(loss) on
investments ( 0.18) ( 0.40) 1.15 ( 1.06)
Net increase/(decrease) in net asset value from
operations 0.45 ( 0.19) 1.81 ( 0.39)
DISTRIBUTIONS:
Dividends from net investment income ( 0.63) ( 0.21) ( 0.66) ( 0.67)(c)
Distributions from net realized capital gains ( 0.13) -- -- ( 0.15)
Total dividends and distributions ( 0.76) ( 0.21) ( 0.66) ( 0.82)
Net asset value, end of period $ 10.11 $ 10.42 $ 10.82 $ 9.67
TOTAL RETURN++ 4.44% ( 1.77)% 19.22% ( 3.77)%
==================================================== ======= ======= ======= ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $3,343 $3,454 $3,582 $2,636
Ratio of operating expenses to average net assets 1.25%(b) 1.33%+ 1.55% 1.49%
Ratio of net investment income to average net
assets 6.23% 5.93%+ 6.28% 6.56%
Portfolio turnover rate 278% 69% 96% 144%
Ratio of operating expenses to average net assets
without waivers and/or expense reimbursements 1.35%(b) 1.43%+ 1.68% 1.70%
</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 share method.
(a) Fiscal year end changed to March 31. Prior to
this, the fiscal year end was November 30.
(b) The effect of the fees reduced by credits
allowed by the custodian on the operating expense
ratio, with and without waivers and/or expense
reimbursements, was less than 0.01%.
(c) Includes distributions in excess of less than
$0.01.
71
<PAGE>
[GRAPHIC] Terms used in this prospectus
ASSET-BACKED SECURITY - a debt security that gives you an interest in a pool
of assets that is collateralized or "backed" by one or more kinds of assets,
including real property, receivables or mortgages, generally issued by banks,
credit card companies or other lenders. Some securities may be issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities. Asset-backed securities typically make periodic payments,
which may be interest or a combination of interest and a portion of the
principal of the underlying assets.
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
CASH EQUIVALENTS - short-term, interest-bearing instruments, including
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities, bank obligations, asset-backed securities, foreign
government securities and commercial paper issued by U.S. and foreign issuers
which, at the time of investment, is rated at least Prime-2 by Moody's
Investor Services, Inc. (Moody's), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).
COLLATERALIZED MORTGAGE OBLIGATION (CMO) - a debt security that is backed by
real estate mortgages. CMO payment obligations are covered by interest and/or
principal payments from a pool of mortgages. In addition, the underlying
assets of a CMO are typically separated into classes, called tranches, based
on maturity. Each tranche pays a different rate of interest. CMOs are not
generally issued by the U.S. government, its agencies or instrumentalities.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
CONVERTIBLE SECURITY - a security that can be exchanged for common stock (or
another type of security) at a specified rate. Convertible securities include
convertible debt, rights and warrants.
CORPORATE OBLIGATION - a money market instrument issued by a corporation or
commercial bank.
72
<PAGE>
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
DEPOSITARY RECEIPTS - evidence of the deposit of a security with a custodian
bank. American Depositary Receipts (ADRs), for example, are certificates
traded in U.S. markets representing an interest of a foreign company. They
were created to make it possible for foreign issuers to meet U.S. security
registration requirements. Other examples include ADSs, GDRs and EDRs.
DOLLAR ROLL TRANSACTION - the sale by a Fund of mortgage-backed or other
asset-backed securities, together with a commitment to buy similar, but not
identical, securities at a future date.
DURATION - a measure used to estimate a security's or portfolio's sensitivity
to changes in interest rates. For example, if interest rates rise by one
percentage point, the share price of a fund with a duration of five years
would decline by about 5%. If interest rates fall by one percentage point, the
fund's share price would rise by about 5%.
EQUITY SECURITY - an investment that gives you an equity ownership right in a
company. Equity securities (or "equities") include common and preferred stock,
rights and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
FOREIGN SECURITY - a debt or equity security issued by a foreign company or
government.
FUTURES CONTRACT - a contract to buy or sell an asset or an index of
securities at a specified price on a specified future date. The price is set
through a futures exchange.
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
73
<PAGE>
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROS; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
INVESTMENT GRADE - a debt security that has been given a medium to high credit
rating (Baa or higher by Moody's, BBB or higher by S&P or a comparable rating
by other NRSROs) based on the issuer's ability to pay interest and repay
principal on time. The portfolio management team may consider an unrated debt
security to be investment grade if the team believes it is of comparable
quality. Please see the SAI for more information about credit ratings.
LEHMAN 3-YEAR MUNICIPAL BOND INDEX - a broad-based, unmanaged index of
investment grade bonds with maturities of two to four years. All dividends are
reinvested.
LEHMAN 7-YEAR MUNICIPAL BOND INDEX - a broad-based, unmanaged index of
investment grade bonds with maturities of seven to eight years. All dividends
are reinvested.
LEHMAN AGGREGATE BOND INDEX - an index made up of the Lehman
Government/Corporate Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index. These indexes include U.S. government agency
and U.S. Treasury securities, corporate bonds and mortgage-backed securities.
All dividends are reinvested.
LEHMAN GOVERNMENT BOND INDEX - an index of government bonds with an average
maturity of approximately nine years. All dividends are reinvested.
LEHMAN GOVERNMENT/CORPORATE BOND INDEX - an index of U.S. government, U.S.
Treasury and agency securities, and corporate and Yankee bonds. All dividends
are reinvested.
LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX - an index of U.S. government agency
and U.S. Treasury securities. All dividends are reinvested.
LEHMAN INTERMEDIATE TREASURY INDEX - an index of U.S. Treasury securities with
maturities of three to 10 years. All dividends are reinvested.
LEHMAN MUNICIPAL BOND INDEX - a broad-based, unmanaged index of 8,000
investment grade bonds with long-term maturities. All dividends are
reinvested.
74
<PAGE>
LIQUIDITY - a measurement of how easily a security can be bought or sold at a
price that is close to its market value.
MERRILL LYNCH 1-3 YEAR TREASURY INDEX - an index of U.S. Treasury bonds with
maturities of 1 to 3 years. All dividends are reinvested.
MONEY MARKET INSTRUMENT - a short-term debt security that matures in 13 months
or less. Money market instruments include U.S. Treasury obligations, U.S.
government obligations, certificates of deposit, bankers' acceptances,
commercial paper, repurchase agreements and certain municipal securities.
MORTGAGE-BACKED SECURITY OR MORTGAGE-RELATED SECURITY - a debt security that
gives you an interest in, and is backed by, a pool of residential mortgages
issued by the U.S. government or by financial institutions. The underlying
mortgages may be guaranteed by the U.S. government or one of its agencies,
authorities or instrumentalities. Mortgage-backed securities typically make
monthly payments, which are a combination of interest and a portion of the
principal of the underlying mortgages.
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PRE-REFUNDED BOND - a bond that is repaid before its maturity date. The
repayment is generally financed by a new issue. Issuers generally pre-refund
bonds during periods of lower interest rates to reduce their interest costs.
75
<PAGE>
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
REAL ESTATE INVESTMENT TRUST (REIT) - a portfolio of real estate investments
which may include office buildings, apartment complexes, hotels and shopping
malls, and real-estate-related loans or interests.
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
SALOMON BROTHERS MORTGAGE INDEX - an index of 30-year and 15-year GNMA, FNMA
and FHLMC securities, and FNMA and FHLMC balloon mortgages.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
ZERO-COUPON BOND - a bond that makes no periodic interest payments. Zero
coupon bonds are sold at a deep discount to their face value and mature at
face value. The difference between the face value at maturity and the purchase
price represents the return.
76
<PAGE>
[GRAPHIC] Where to find more information
You'll find more information about the Fixed Income Funds in the following
documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the auditor's
reports. The annual report also includes a discussion about the market
conditions and investment strategies that had a significant effect on
each Fund's performance during the period covered.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's incorporated
by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.321.7854
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website or
visit the Public Reference Section and copy the documents while you're
there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file numbers:
Nations Fund Trust, 811-04305
Nation Fund, Inc., 811-04614
NF-BONDPROIX-8/99
NATIONS FUNDS
[GRAPHIC]
EQUITY, BALANCED AND FIXED INCOME FUNDS
PROSPECTUS -- SEAFIRST SHARES
AUGUST 1, 1999
EQUITY FUND
NATIONS BLUE CHIP FUND
BALANCED FUND
NATIONS ASSET ALLOCATION FUND
FIXED INCOME FUND
NATIONS INTERMEDIATE BOND FUND
THE SECURITIES AND
EXCHANGE COMMISSION
(SEC) HAS NOT APPROVED OR
DISAPPROVED THESE
SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
NOT FDIC
INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
NATIONS FUNDS
<PAGE>
AN OVERVIEW OF THE FUNDS
- --------------------------------------------------------------------------------
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS
FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY
BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST
APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS
PROSPECTUS.
[GRAPHIC] YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 31.
YOUR INVESTMENT IN THESE FUNDS IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY BANK OF AMERICA, N.A. (BANK OF AMERICA),
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER
GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUNDS.
This booklet, which is called a prospectus, tells you about some of the
Nations Funds Equity Funds, Balanced Funds and Fixed Income Funds. Please read
it carefully, because it contains information that's designed to help you make
informed investment decisions.
ABOUT THE FUNDS
Each group of Funds has a different investment focus:
o the Equity Fund invests primarily in EQUITY SECURITIES of U.S.
companies
o the Balanced Fund invests in a mix of equity and FIXED INCOME
SECURITIES, as well as MONEY MARKET INSTRUMENTS
o the Fixed Income Fund focuses on the potential to earn income by
investing primarily in fixed income securities
The Funds also have different risk/return characteristics because they invest
in different kinds of securities.
Equity securities have the potential to provide you with higher returns than
many other kinds of investments, but they also tend to have the highest risk.
Fixed income securities have the potential to increase in value because when
interest rates fall, the value of these securities tends to rise. When
interest rates rise, however, the value of these securities tends to fall.
Other things can also affect the value of fixed income securities.
In every case, there's a risk that you'll lose money or you may not earn as
much as you expect.
CHOOSING THE RIGHT FUNDS FOR YOU
Not every Fund is right for every investor. When you're choosing a Fund to
invest in, you should consider things like your investment goals, how much
risk you can accept and how long you're planning to hold your investment.
The Equity Fund focuses on long-term growth. It may be suitable for you
if:
o you have longer-term investment goals
o it's part of a balanced portfolio
o you want to try to protect your portfolio against a loss of buying
power that inflation can cause over time.
It may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks
associated with equity securities
o you have short-term investment goals
o you're looking for a regular stream of income
2
<PAGE>
The Balanced Fund invests in a mix of equity and fixed income securities, as
well as money market instruments. It may be suitable for you if:
o you're looking for both long-term growth and income
o you want a diversified portfolio in a single mutual fund
It may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks
associated with equity and fixed income securities
o you have short-term investment goals
o you're looking for a regular stream of income
The Fixed Income Fund focuses on the potential to earn income. It may be
suitable for you if:
o you're looking for income
o you have longer-term investment goals
It may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks
associated with fixed income securities
You'll find a discussion of each Fund's principal investments, strategies and
risks in the Fund descriptions that start on page 5.
FOR MORE INFORMATION
If you have any questions about the Funds, please call us at 1.800.323.9919 or
contact your investment professional.
You'll find more information about the Funds in the Statement of Additional
Information (SAI). The SAI includes more detailed information about each
Fund's investments, policies, performance and management, among other things.
Please turn to the back cover to find out how you can get a copy.
3
<PAGE>
WHAT'S INSIDE
- --------------------------------------------------------------------------------
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI)* IS THE INVESTMENT ADVISER
TO EACH OF THE FUNDS. BAAI IS RESPONSIBLE FOR THE OVERALL
MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF EACH
FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED SUB-ADVISERS, WHICH ARE
RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT DECISIONS FOR EACH OF
THE FUNDS.
[GRAPHIC] YOU'LL FIND MORE ABOUT
BAAI AND THE SUB-ADVISERS
STARTING ON PAGE 18.
*BAAI'S NAME IS EXPECTED TO BE CHANGED FROM NATIONSBANC ADVISORS,
INC. ON OR ABOUT SEPTEMBER 1, 1999.
<TABLE>
<S> <C>
[GRAPHIC] ABOUT THE FUNDS
Equity Fund
NATIONS BLUE CHIP FUND 5
Sub-adviser: Chicago Equity Partners Corporation
- ---------------------------------------------------------------
Balanced Fund
NATIONS ASSET ALLOCATION FUND 9
Sub-advisers: TradeStreet Investment Associates, Inc., Chicago
Equity Partners Corporation
- ---------------------------------------------------------------
Fixed Income Fund
NATIONS INTERMEDIATE BOND FUND 13
Sub-adviser: TradeStreet Investment Associates, Inc.
- ---------------------------------------------------------------
OTHER IMPORTANT INFORMATION 17
- ---------------------------------------------------------------
HOW THE FUNDS ARE MANAGED 18
[GRAPHIC] ABOUT YOUR INVESTMENT
INFORMATION FOR INVESTORS
Buying, selling and exchanging shares 21
How selling and servicing agents are paid 25
Distributions and taxes 26
- ---------------------------------------------------------------
FINANCIAL HIGHLIGHTS 28
- ---------------------------------------------------------------
TERMS USED IN THIS PROSPECTUS 31
- ---------------------------------------------------------------
WHERE TO FIND MORE INFORMATION BACK COVER
</TABLE>
4
<PAGE>
ABOUT THE EQUITY FUND
- --------------------------------------------------------------------------------
ABOUT THE SUB-ADVISER
THE FUND DOES NOT HAVE ITS OWN
INVESTMENT ADVISER OR SUB-ADVISER BECAUSE IT'S A "FEEDER" FUND. A
FEEDER FUND TYPICALLY INVESTS ALL OF ITS ASSETS IN ANOTHER FUND,
WHICH IS CALLED A "MASTER PORTFOLIO." MASTER PORTFOLIO AND FUND
ARE SOMETIMES USED INTERCHANGEABLY.
BAAI IS THE MASTER PORTFOLIO'S INVESTMENT ADVISER, AND CHICAGO
EQUITY PARTNERS CORPORATION (CHICAGO EQUITY) IS ITS SUB-ADVISER.
CHICAGO EQUITY'S EQUITY MANAGEMENT TEAM MAKES THE DAY-TO-DAY
INVESTMENT DECISIONS FOR THE MASTER PORTFOLIO.
[GRAPHIC] YOU'LL FIND MORE ABOUT
CHICAGO EQUITY ON PAGE 19.
[GRAPHIC] WHY INVEST IN NATIONS BLUE CHIP FUND?
NATIONS BLUE CHIP FUND MAY BE SUITABLE FOR INVESTORS WHO ARE
LOOKING FOR A "CORE" EQUITY HOLDING FOR THEIR PORTFOLIO. IT'S
CONSIDERED TO BE A MORE CONSERVATIVE EQUITY INVESTMENT BECAUSE IT
INVESTS IN A BROAD RANGE OF LARGE, WELL-ESTABLISHED COMPANIES.
THESE COMPANIES TEND TO BE LESS VOLATILE THAN OTHER KINDS OF
COMPANIES.
NATIONS BLUE CHIP FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to achieve long-term capital appreciation through
investments in blue chip stocks.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund invests all of its assets in Nations Blue Chip Master
Portfolio (the Master Portfolio). The Master Portfolio has the same
investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in blue chip
stocks. These are stocks of well established, nationally known companies that
have a long record of profitability and a reputation for quality management,
products and services.
The Master Portfolio primarily invests in blue chip stocks that are included
in the S&P 500, but may invest up to 15% of its assets in stocks that are not
included in the index. It usually holds approximately 100 stocks.
The Master Portfolio may also invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the
SAI.
The portfolio management team uses QUANTITATIVE ANALYSIS to analyze
fundamental information about securities and identify value. Starting with a
universe of approximately 700 COMMON STOCKS, the portfolio management team
uses a multi-factor computer model to rank securities, based on the following
criteria, among others:
o changes in actual and expected earnings
o unexpected changes in earnings
o PRICE-TO-EARNINGS RATIO
o price-to-book ratio
o price-to-cash flow
The portfolio management team tries to manage risk by matching the market
capitalization, style and industry weighting characteristics of the S&P 500.
The team focuses on selecting individual stocks to try to provide higher
returns than the S&P 500 while maintaining a level of risk similar to the
index.
The team may sell a security when there is a development in the company or its
industry that causes earnings estimates to fall, when the team believes that
other investments are more attractive, or for other reasons.
5
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 17 AND IN THE SAI.
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITIONS OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Blue Chip Fund has the following risks:
o INVESTMENT STRATEGY RISK - The Master Portfolio uses quantitative
analysis to select blue chip stocks that are believed to have the
potential for long-term growth. There is a risk that the value of
these investments will not rise as high as expected, or will fall.
o STOCK MARKET RISK - The value of the stocks the Master Portfolio
holds can be affected by changes in U.S. or foreign economies and
financial markets, and the companies that issue the stocks, among
other things. Stock prices can rise or fall over short as well as
long periods. In general, stock markets tend to move in cycles, with
periods of rising prices and periods of falling prices. As of the
date of this prospectus, the stock markets, as measured by the S&P
500 and other commonly used indices, were trading at or close to
record levels. There can be no guarantee that these levels will
continue.
o INVESTING IN THE MASTER PORTFOLIO - Other mutual funds and eligible
investors can buy shares in the Master Portfolio. For example, the
World Horizon U.S. Equity Fund, which is also managed by BAAI,
invests all of its assets in the Master Portfolio.
All investors in the Master Portfolio invest under the same terms and
conditions as the Fund and pay a proportionate share of the Master
Portfolio's expenses. Other feeder funds that invest in the Master
Portfolio may have different share prices and returns than the Fund
because different feeder funds typically have varying sales charges,
and ongoing administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio
if it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses
could increase. The Fund might also have to pay brokerage, tax or
other charges.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has performed
in the past, and can help you understand the risks of investing in the
Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM
IN THE FUTURE.
6
<PAGE>
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Seafirst
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be lower
if they did.
[BAR CHART APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
30.26% -1.74% 22.46% 5.20% 14.04% 1.55% 35.69% 24.13% 33.27% 28.20%
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 11.41%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 23.84%
Worst: 3rd quarter 1990: -14.08%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common
stocks, weighted by market capitalization. The index is not available
for investment.
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Seafirst Shares 23.84% 23.92% 18.58%
S&P 500 28.58% 24.06% 19.21%
</TABLE>
7
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Seafirst Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)(2)
Management fees 0.65%
Shareholder servicing fees 0.25%
Other expenses 0.34%
------
Total annual Fund operating expenses 1.24%
Fee waivers and/or reimbursements (0.29)%
Total net expenses(3) 0.95%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
(3)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
June 23, 2000. At that time all Seafirst Shares will automatically
convert to Investor A Shares. The figure shown here is after waivers
and/or reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Seafirst Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and reimbursements included above expire June 23, 2000
and are not reflected in the 3, 5, and 10 year examples
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Seafirst Shares $97 $365 $653 $1,474
</TABLE>
8
<PAGE>
ABOUT THE BALANCED FUND
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISERS
THIS FUND IS MANAGED BY TWO
SUB-ADVISERS: TRADESTREET AND CHICAGO EQUITY. CHICAGO EQUITY'S
EQUITY MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS
FOR THE EQUITY PORTION OF THE FUND. TRADESTREET'S FIXED INCOME
MANAGEMENT TEAM MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE
FIXED INCOME AND MONEY MARKET PORTIONS OF THE FUND.
[GRAPHIC] YOU'LL FIND MORE ABOUT
TRADESTREET AND CHICAGO
EQUITY, STARTING ON PAGE 19.
[GRAPHIC] WHAT IS AN ASSET ALLOCATION
FUND?
THIS ASSET ALLOCATION FUND INVESTS IN A MIX OF EQUITY AND FIXED
INCOME SECURITIES, AND CASH EQUIVALENTS.
EACH OF THESE "ASSET CLASSES" HAS DIFFERENT RISK/RETURN
CHARACTERISTICS. THE PORTFOLIO MANAGEMENT TEAM CHANGES THE MIX
BASED ON ITS ASSESSMENT OF THE EXPECTED RISKS AND RETURNS OF EACH
CLASS.
ASSET ALLOCATION FUNDS LIKE THIS ONE CAN PROVIDE A DIVERSIFIED
ASSET MIX FOR YOU IN A SINGLE INVESTMENT.
NATIONS ASSET ALLOCATION FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to obtain long-term growth from capital appreciation,
and dividend and interest income.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in a mix of EQUITY and FIXED INCOME SECURITIES, as
well as CASH EQUIVALENTS, including U.S. GOVERNMENT OBLIGATIONS,
COMMERCIAL PAPER and other short-term, interest-bearing instruments.
The equity securities the Fund invests in are primarily COMMON STOCK of blue
chip companies. These companies are well established, nationally known
companies that have a long record of profitability and a reputation for
quality management, products and services.
The fixed income securities the Fund invests in are primarily INVESTMENT GRADE
bonds and notes. The Fund normally invests at least 25% of its assets in
SENIOR SECURITIES. The Fund may also invest up to 35% of its assets in
MORTGAGE-BACKED and ASSET-BACKED SECURITIES.
The Fund may also invest in securities that aren't part of its principal
investment strategies, but it won't hold more than 10% of its assets in any
one type of these securities. These securities are described in the SAI.
The portfolio management team uses asset allocation as its principal
investment approach. The team actively allocates assets among the three asset
classes based on its assessment of the expected risks and returns of each
class.
For the equity portion of the Fund, the portfolio management team uses
QUANTITATIVE ANALYSIS to analyze fundamental information about securities and
identify value. Starting with a universe of approximately 700 common stocks,
the team uses a multi-factor computer model to rank securities, based on the
following criteria, among others:
o changes in actual and expected earnings
o unexpected changes in earnings
o PRICE-TO-EARNINGS RATIO
o price-to-book ratio
o price-to-cash flow
The portfolio management team tries to manage risk by matching the market
capitalization, style and industry weighting characteristics of the S&P 500.
The team focuses on selecting individual stocks to try to provide higher
returns than the S&P 500 while maintaining a level of risk similar to the
index.
The team may sell a security when the Fund's asset allocation changes, there
is a deterioration in the issuer's financial situation, when the team believes
that other investments are more attractive, or for other reasons.
9
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 17 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Asset Allocation Fund has the following risks:
o INVESTMENT STRATEGY RISK - The team uses an asset allocation strategy
to try to achieve the highest total return. There is a risk that the
mix of investments will not produce the returns the team expects, or
will fall in value.
o STOCK MARKET RISK - The value of the stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other things.
Stock prices can rise or fall over short as well as long periods. In
general, stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices. As of the date of this
prospectus, the stock markets, as measured by the S&P 500 and other
commonly used indices, were trading at or close to record levels.
There can be no guarantee that these levels will continue.
o INTEREST RATE RISK - The prices of the Fund's fixed income securities
will tend to fall when interest rates rise. In general, fixed income
securities with longer terms tend to fall more in value when interest
rates rise than fixed income securities with shorter terms.
o CREDIT RISK - The Fund could lose money if the issuer of a fixed
income security is unable to pay interest or repay principal when
it's due. Credit risk usually applies to most fixed income
securities, but is generally not a factor for U.S. government
obligations.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed securities that have lower yields.
10
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE
OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Seafirst
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be
lower if they did.
[BAR CHART APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
18.97% 4.11% 18.17% 5.58% 11.05% -0.69% 26.50% 16.02% 21.63% 21.01%
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: 5.9%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 4th quarter 1998: 12.69%
Worst: 3rd quarter 1990: -6.78%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the S&P 500 and the LEHMAN AGGREGATE BOND INDEX. The S&P
500 is an unmanaged index of 500 widely held common stocks, weighted by
market capitalization. The Lehman Aggregate Bond Index is an index of
fixed income securities issued by the U.S. government and its agencies,
and by corporations. These indexes are not available for investment.
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Seafirst Shares 21.01% 16.49% 13.92%
S&P 500 28.58% 24.06% 19.21%
Lehman Aggregate Bond Index 8.69% 7.27% 9.26%
</TABLE>
11
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Seafirst Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)
Management fees 0.65%
Shareholder servicing fees 0.25%
Other expenses 0.38%
------
Total annual Fund operating expenses 1.28%
Fee waivers and/or reimbursements (0.33)%
------
Total net expenses(2) 0.95%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
June 23, 2000. At that time, all Seafirst Shares will automatically
convert to Investor A Shares. The figure shown here is after waivers
and/or reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Seafirst Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and reimbursements included above expire June 23, 2000
and are not reflected in the 3, 5, and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Seafirst Shares $97 $373 $671 $1,516
</TABLE>
12
<PAGE>
ABOUT THE FIXED INCOME FUND
- --------------------------------------------------------------------------------
[GRAPHIC] ABOUT THE SUB-ADVISER
THE FUND DOES NOT HAVE ITS OWN
INVESTMENT ADVISER OR SUB-ADVISER BECAUSE IT'S A "FEEDER" FUND. A
FEEDER FUND TYPICALLY INVESTS ALL OF ITS ASSETS IN ANOTHER FUND,
WHICH IS CALLED A "MASTER PORTFOLIO." MASTER PORTFOLIO AND FUND
ARE SOMETIMES USED INTERCHANGEABLY.
BAAI IS THE MASTER PORTFOLIO'S INVESTMENT ADVISER, AND TRADESTREET
IS ITS SUB-ADVISER. TRADESTREET'S FIXED INCOME MANAGEMENT TEAM
MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE MASTER
PORTFOLIO.
[GRAPHIC] YOU'LL FIND MORE ABOUT
TRADESTREET ON PAGE 19.
[GRAPHIC] INTERMEDIATE-TERM SECURITIES
THE PORTFOLIO MANAGEMENT TEAM FOCUSES ON FIXED INCOME SECURITIES
WITH INTERMEDIATE TERMS. WHILE THESE SECURITIES GENERALLY WON'T
EARN AS MUCH INCOME AS SECURITIES WITH LONGER TERMS, THEY TEND TO
BE LESS SENSITIVE TO CHANGES IN INTEREST RATES.
[GRAPHIC] DURATION
DURATION IS A MEASURE USED TO ESTIMATE HOW MUCH A FUND'S PORTFOLIO
WILL FLUCTUATE IN RESPONSE TO A CHANGE IN INTEREST RATES.
NATIONS INTERMEDIATE BOND FUND
[GRAPHIC] INVESTMENT OBJECTIVE
This Fund seeks to obtain interest income and capital appreciation.
[GRAPHIC] PRINCIPAL INVESTMENT STRATEGIES
The Fund invests all of its assets in Nations Intermediate Bond Master
Portfolio (the Master Portfolio). The Master Portfolio has the same
investment objective as the Fund.
The Master Portfolio normally invests at least 65% of its assets in
intermediate and longer-term FIXED INCOME SECURITIES that are INVESTMENT
GRADE. The Master Portfolio can invest up to 35% of its assets in
MORTGAGE-BACKED SECURITIES, including COLLATERALIZED MORTGAGE OBLIGATIONS
(CMOs), that are backed by the U.S government or one of its agencies or
instrumentalities.
The Master Portfolio may also invest in securities that aren't part of its
principal investment strategies, but it won't hold more than 10% of its assets
in any one type of these securities. These securities are described in the
SAI.
Normally, the Master Portfolio's AVERAGE DOLLAR-WEIGHTED MATURITY will be
between three and six years. Its DURATION generally will be the same as the
LEHMAN BROTHERS INTERMEDIATE/CORPORATE BOND INDEX.
When selecting individual investments, the portfolio management team:
o looks at a fixed income security's potential to generate both income
and price appreciation
o allocates assets among U.S. corporate securities and mortgage-backed
securities, based on how they have performed in the past, and on how
they are expected to perform under current market conditions. The
team may change the allocations when market conditions change
o selects securities using structure analysis, which evaluates the
characteristics of a security, including its call features, coupons,
and expected timing of cash flows
o tries to maintain a duration that is similar to the duration of the
Fund's benchmark. This can help manage interest rate risk
o tries to manage risk by diversifying the Fund's investments in
securities of many different issuers
The team may sell a security when it believes the security is overvalued,
there is a deterioration in the security's credit rating or in the issuer's
financial situation, when other investments are more attractive, or for other
reasons.
13
<PAGE>
[GRAPHIC] YOU'LL FIND MORE ABOUT
OTHER RISKS OF INVESTING IN
THIS FUND STARTING ON
PAGE 17 AND IN THE SAI.
[GRAPHIC] RISKS AND OTHER THINGS TO CONSIDER
Nations Intermediate Bond Fund has the following risks:
o INVESTMENT STRATEGY RISK - There is a risk that the value of the
investments that the portfolio management team chooses for the Master
Portfolio will not rise as high as the team expects, or will fall.
o INTEREST RATE RISK - The prices of fixed income securities will tend
to fall when interest rates rise. In general, fixed income securities
with longer terms tend to fall more in value when interest rates rise
than fixed income securities with shorter terms.
o CREDIT RISK - The Master Portfolio could lose money if the issuer of
a fixed income security is unable to pay interest or repay principal
when it's due. Credit risk usually applies to most fixed income
securities, but is generally not a factor for U.S. GOVERNMENT
OBLIGATIONS.
o DERIVATIVES RISK - The Master Portfolio may invest in derivatives.
There is a risk that these investments could result in losses, reduce
returns, increase transaction costs or increase the Master
Portfolio's volatility.
o CHANGING DISTRIBUTION LEVELS - The level of monthly income
distributions paid by the Fund depends on the amount of income paid
by the securities the Fund holds. It is not guaranteed and will
change. Changes in the value of the securities, however, generally
should not affect the amount of income they pay.
o PREPAYMENT AND EXTENSION RISK - The value of the Fund's mortgage-
backed securities can fall if the owners of the underlying mortgages
pay off their mortgages sooner than expected, which could happen when
interest rates fall, or later than expected, which could happen when
interest rates rise. If the underlying mortgages are paid off sooner
than expected, the Fund may have to reinvest this money in
mortgage-backed securities that have lower yields.
o INVESTING IN THE MASTER PORTFOLIO - Other mutual funds and eligible
investors can buy shares in the Master Portfolio. For example, the
World Horizon U.S. Bond Fund, which is also managed by BAAI, invests
all of its assets in the Master Portfolio.
All investors in the Master Portfolio invest under the same terms and
conditions as the Fund and pay a proportionate share of the Master
Portfolio's expenses. Other feeder funds that invest in the Master
Portfolio may have different share prices and returns than the Fund
because different feeder funds typically have varying sales charges,
and ongoing administrative and other expenses.
The Fund can withdraw its entire investment from the Master Portfolio
if it believes it's in the best interest of the Fund to do so. It is
unlikely that this would happen, but if it did, the Fund's portfolio
could be less diversified and therefore less liquid, and expenses
could increase. The Fund might also have to pay brokerage, tax or
other charges.
14
<PAGE>
[GRAPHIC] MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET
CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS, AND FUND
EXPENSES.
CALL US AT 1.800.323.9919 OR CONTACT YOUR INVESTMENT PROFESSIONAL
FOR THE FUND'S CURRENT YIELD.
[GRAPHIC] A LOOK AT THE FUND'S PERFORMANCE
The following bar chart and table show you how the Fund has
performed in the past, and can help you understand the risks of
investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF
HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Seafirst
Shares has varied from year to year. These returns do not reflect
deductions of sales charges or account fees, if any, and would be
lower if they did.
[BAR CHART APPEARS HERE]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
12.25% 9.34% 13.32% 6.09% 7.11% -2.38% 14.26% 2.79% 6.40% 7.43%
YEAR-TO-DATE RETURN AS OF JUNE 30, 1999: -0.94%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
<TABLE>
<S> <C>
Best: 2nd quarter 1989: 6.09%
Worst: 1st quarter 1994: -2.06%
</TABLE>
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1998
The table shows the Fund's average annual total return for each period,
compared with the LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX, an index
of U.S. government agency and U.S. Treasury securities. All dividends
are reinvested.
<TABLE>
<CAPTION>
1 year 5 years 10 years
<S> <C> <C> <C>
Seafirst Shares 7.43% 5.56% 7.55%
Lehman Intermediate Government Bond Index 8.49% 6.74% 8.34%
</TABLE>
15
<PAGE>
[GRAPHIC] THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND
ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S
ASSETS.
TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER
WAIVERS AND/OR REIMBURSEMENTS.
[GRAPHIC] THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR
LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
[GRAPHIC] WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(Fees paid directly from your investment) Seafirst Shares
<S> <C>
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
ANNUAL FUND OPERATING EXPENSES(1)
(Expenses that are deducted from the Fund's assets)(2)
Management fees 0.40%
Shareholder servicing fees 0.25%
Other expenses 0.56%
------
Total annual Fund operating expenses 1.21%
Fee waivers and/or reimbursements (0.26)%
------
Total net expenses(3) 0.95%
======
</TABLE>
(1)The figures contained in the above table are based on amounts incurred
during the Fund's most recent fiscal year and have been adjusted, as
needed, to reflect current service provider fees.
(2)These fees and expenses include the Fund's portion of the fees and
expenses deducted from the assets of the Master Portfolio.
(3)The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until
June 23, 2000. At that time, all Seafirst Shares will automatically
convert to Investor A Shares. The figure shown here is after waivers
and/or reimbursements. There is no guarantee that these waivers and/or
reimbursements will continue after this date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Seafirst Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table
above
o the waivers and/or reimbursements shown above expire June 23, 2000
and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Seafirst Shares $97 $358 $640 $1,443
</TABLE>
16
<PAGE>
[GRAPHIC] OTHER IMPORTANT INFORMATION
You'll find specific information about each Fund's principal investments,
strategies and risks in the descriptions starting on page 5. The following are
some other risks and information you should consider before you invest:
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment
objective and certain investment policies of any Fund can be changed
without shareholder approval. Other investment policies may be
changed only with shareholder approval.
o HOLDING OTHER KINDS OF INVESTMENTS - The Funds may hold investments
that aren't part of their principal investment strategies. Please
refer to the SAI for more information. The portfolio managers or
management team can also choose not to invest in specific securities
described in this prospectus and in the SAI.
o FOREIGN INVESTMENT RISK - Funds that invest in FOREIGN SECURITIES may
be affected by changes in currency exchange rates and the costs of
converting currencies; the implementation of the Euro; foreign
government controls on foreign investment, repatriation of capital,
and currency and exchange; foreign taxes; inadequate supervision and
regulation of some foreign markets; difficulties selling some
securities, which may increase volatility; difficulty getting
complete or accurate information about foreign companies; less strict
accounting, auditing and financial reporting standards than those in
the U.S.; political, economic or social instability; and difficulty
enforcing legal rights outside the U.S.
o INVESTING DEFENSIVELY - A Fund may temporarily hold investments that
are not part of its investment objective or its principal investment
strategies to try to protect it during a market or economic downturn
or because of political or other conditions. A Fund may not achieve
its investment objective while it is investing defensively.
o PORTFOLIO TURNOVER - A Fund that replaces -- or turns over -- more
than 100% of its investments in a year is considered to trade
frequently. Frequent trading can result in larger distributions of
short-term CAPITAL GAINS to shareholders. These gains are taxable at
higher rates than long-term capital gains. Frequent trading can also
mean higher brokerage and other transaction costs, which could reduce
the Fund's returns. The Funds generally buy securities for capital
appreciation, investment income, or both, and don't engage in short-
term trading. You'll find the portfolio turnover rate for each Fund
in FINANCIAL HIGHLIGHTS.
o PREPARING FOR THE YEAR 2000 - The year 2000 is an issue for
organizations, companies and entities around the world that rely on
computer systems to process date-related information. Computer
systems that cannot read a four-digit year may not be able to
calculate and process information on or after January 1, 2000.
All of the Funds' primary service providers have confirmed that they
have been working to make the necessary changes to their systems,
and that they expect them to be adapted in time. There is no
guarantee, however, that their computer systems will be ready by the
year 2000. If their computer systems are not ready in time, there
could be a negative effect on Fund operations.
A Fund's performance could also be affected if securities it holds
decrease in value because of year 2000 issues. Funds that invest in
foreign securities may be at greater risk because the computer
systems of foreign issuers, governments or other entities may not be
ready for the year 2000.
17
<PAGE>
[GRAPHIC] BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] HOW THE FUNDS ARE MANAGED
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in the
Nations Funds family, including the Equity, Balanced and Fixed Income Funds
described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of
Bank of America, which is owned by Bank of America Corporation. Nations Funds
pays BAAI an annual fee for its investment advisory services. The fee is
calculated daily based on the average net assets of each Fund and is paid
monthly. BAAI uses part of this money to pay investment sub-advisers for the
services they provide to each Fund.
BAAI has agreed to waive fees and/or reimburse expenses for certain Funds
until June 23, 2000. You'll find a discussion of any waiver and/or
reimbursement in the Fund descriptions. There is no assurance that BAAI will
continue to waive and/or reimburse any fees and/or expenses after these dates.
The following chart shows the maximum advisory fees BAAI can receive, along
with the actual advisory fees it received during the Funds' last fiscal year,
after waivers and/or reimbursements:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
<TABLE>
<CAPTION>
Maximum Actual fee
advisory paid last
fee fiscal year
<S> <C> <C>
Nations Blue Chip Fund(1) 0.65% 0.50%
Nations Asset Allocation Fund 0.65% 0.40%
Nations Intermediate Bond Fund(2) 0.40% 0.21%
</TABLE>
(1)This Fund doesn't have its own investment adviser because it invests in
Nations Blue Chip Master Portfolio. BAAI is the investment adviser to the
Master Portfolio.
(2)This Fund doesn't have its own investment adviser because it invests in
Nations Intermediate Bond Master Portfolio. BAAI is the investment adviser
to the Master Portfolio.
18
<PAGE>
[GRAPHIC] TRADESTREET INVESTMENT
ASSOCIATES, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
[GRAPHIC] CHICAGO EQUITY PARTNERS
CORPORATION
231 SOUTH LASALLE
CHICAGO, ILLINOIS 60697
INVESTMENT SUB-ADVISERS
Nations Funds and BAAI have engaged investment sub-advisers to provide day-
to-day portfolio management for the Funds. These sub-advisers function under
the supervision of BAAI and the Boards of Directors/Trustees of Nations Funds.
TRADESTREET INVESTMENT ASSOCIATES, INC.
TradeStreet is a registered investment adviser and a wholly-owned subsidiary
of Bank of America. Its management expertise covers all major domestic asset
classes, including EQUITY and FIXED INCOME SECURITIES and MONEY MARKET
INSTRUMENTS.
Currently managing more than $90 billion, TradeStreet has over 200
institutional clients and is sub-adviser to more than 50 mutual funds in the
Nations Funds family. TradeStreet takes a team approach to investment
management. Each team has access to the latest technology and analytical
resources.
TradeStreet is the investment sub-adviser to the Funds shown in the table
below. The table tells you which internal TradeStreet asset management team is
responsible for making the day-to-day investment decisions for the Funds.
<TABLE>
<CAPTION>
Fund TradeStreet Team
<S> <C>
Nations Asset Allocation Fund Fixed Income Management Team for the
fixed income and money market portions
of the Fund
Nations Intermediate Bond Fund(1) Fixed Income Management Team
</TABLE>
(1)Nations Intermediate Bond Fund doesn't have its own investment sub-adviser
because it invests in Nations Intermediate Bond Master Portfolio.
TradeStreet is the investment sub-adviser to the Master Portfolio.
CHICAGO EQUITY PARTNERS CORPORATION
Chicago Equity is a registered investment adviser and a wholly-owned
subsidiary of Bank of America. Chicago Equity is the investment sub-adviser to
Nations Blue Chip Master Portfolio and is one of two sub-advisers to Nations
Asset Allocation Fund.
Chicago Equity's Equity Management Team is responsible for making the day-
to-day investment decisions for Nations Blue Chip Master Portfolio and for the
equity portion of Nations Asset Allocation Fund.
19
<PAGE>
[GRAPHIC] STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
[GRAPHIC] FIRST DATA INVESTOR
SERVICES GROUP, INC.
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
OTHER SERVICE PROVIDERS
The Funds are distributed and co-administered by Stephens Inc., a registered
broker/dealer. Stephens may pay shareholder servicing fees to companies for
providing services to investors.
BAAI is also co-administrator of the Funds, and assists in overseeing the
administrative operations of the Funds. The Funds pay BAAI and Stephens a
combined fee for their services, plus certain out-of-pocket expenses. The fee
is paid monthly and is calculated as an annual percentage of the average daily
net assets of the Funds, as follows:
<TABLE>
<S> <C>
Domestic Equity Funds 0.23%
Fixed Income Funds 0.22%
</TABLE>
First Data Investor Services Group, Inc. (First Data) is the transfer agent
for the Funds' shares. Its responsibilities include processing purchases,
sales and exchanges, calculating and paying distributions, keeping shareholder
records, preparing account statements and providing customer service.
20
<PAGE>
ABOUT YOUR INVESTMENT
- --------------------------------------------------------------------------------
[GRAPHIC] WE'VE USED THE TERM, INVESTMENT PROFESSIONAL, TO REFER TO THE
PERSON WHO HAS ASSISTED YOU WITH BUYING NATIONS FUNDS. SELLING
AGENT OR SERVICING AGENT (SOMETIMES REFERRED TO AS A SELLING
AGENT) MEANS THE COMPANY THAT EMPLOYS YOUR INVESTMENT
PROFESSIONAL. SELLING AND SERVICING AGENTS INCLUDE BANKS,
BROKERAGE FIRMS, MUTUAL FUND DEALERS AND OTHER FINANCIAL
INSTITUTIONS, INCLUDING AFFILIATES OF BANK OF AMERICA.
WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
[GRAPHIC] BUYING, SELLING AND EXCHANGING SHARES
This prospectus offers Seafirst Shares of the Funds. Here are some general
rules about this class of shares:
o Seafirst Shares are available to eligible accounts for which the
Northwest Division of Bank of America or its affiliates act as
custodian.
o In order to qualify, an account must have been established before
June 23, 1997, and remained continuously invested in at least one of
the Funds since that time.
o There is no minimum amount for initial or additional investments.
o There are no sales charges for buying, selling or exchanging these
shares.
Eligible accounts include:
o IRAs established under Section 408(e) of the Internal Revenue Code of
1986, as amended (the tax code). These include:
o rollover accounts and Simplified Employee Pension Plans (SEP Plans)
o IRAs opened after June 23, 1997 under a SEP Plan that was established
before June 23, 1997
o IRAs opened before June 23, 1997 through a signed transfer or
rollover notification indicating a pending purchase of Seafirst
Shares
o qualified pension or profit-sharing trusts established under Section
501(a) of the tax code that also comply with Section 401(a) of the
tax code. These include:
o corporate pension or profit-sharing trusts
o pension or profit-sharing trust for self-employed individuals (H.R.
10 or Keogh Plans)
o accounts opened for new participants in a qualified pension or
profit- sharing trust that was open before June 23, 1997
You'll find more information about buying, selling and exchanging Seafirst
Shares on the pages that follow. You should also ask the Northwest Division of
Bank of America or its affiliates about their limits, fees and policies for
buying, selling and exchanging shares, which may be different from those
described here, and about their related programs or services.
The Funds also offer other classes of shares, with different features and
expense levels, which you may be eligible to buy. Please contact your
investment professional, or call us at 1.800.323.9919 if you have any
questions or you need help placing an order.
21
<PAGE>
[GRAPHIC] A BUSINESS DAY IS ANY DAY THAT THE NEW YORK STOCK EXCHANGE (NYSE)
IS OPEN. A BUSINESS DAY ENDS AT THE CLOSE OF REGULAR TRADING ON
THE NYSE, USUALLY AT 4:00 P.M. EASTERN TIME. IF THE NYSE CLOSES
EARLY, THE BUSINESS DAY ENDS AS OF THE TIME THE NYSE CLOSES.
THE NYSE IS CLOSED ON WEEKENDS AND ON THE FOLLOWING NATIONAL
HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY, PRESIDENTS'
DAY, GOOD FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY,
THANKSGIVING DAY AND CHRISTMAS DAY.
AUTOMATIC CONVERSION TO INVESTOR A SHARES
Seafirst Shares will automatically convert to Investor A Shares on
June 23, 2000.
Here's how the conversion will work:
o Investors will receive the same dollar value of Investor A Shares as
the Seafirst Shares that are converted. No sales charge or other
charges apply.
o No sales charges will apply to additional purchases of Investor A
Shares in eligible IRAs, and pension or profit-sharing trusts.
Please note that Investor A Shares have higher expenses than Seafirst Shares,
which will reduce total returns.
HOW SHARES ARE PRICED
All transactions are based on the price of a Fund's shares -- or its net asset
value per share. We calculate net asset value per share for each class of each
Fund at the end of each business day. First, we calculate the net asset value
for each class of a Fund by determining the value of the Fund's assets in the
class and then subtracting its liabilities. Next, we divide this amount by the
number of shares that investors are holding in the class.
VALUING SECURITIES IN A FUND
The value of a Fund's assets is based on the total market value of all of the
securities it holds. The prices reported on stock exchanges and securities
markets around the world are usually used to value securities in a Fund. If
prices aren't readily available, we'll base the price of a security on its
fair market value. We use the amortized cost method, which approximates market
value, to value short-term investments maturing in 60 days or less.
International markets may be open on days when U.S. markets are closed. The
value of foreign securities owned by a Fund could change on days when Fund
shares may not be bought or sold.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, First Data or their agents before the end of a business
day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will
receive that day's net asset value per share. Orders received after the end of
a business day will receive the next business day's net asset value per share.
The business day that applies to your order is also called the TRADE DATE. We
may refuse any order to buy or exchange shares. If this happens, we'll return
any money we've received.
22
<PAGE>
[GRAPHIC] BUYING SHARES
Here are some general rules for buying shares:
o Investors buy Seafirst Shares at net asset value per share.
o If we don't receive payment within three business days of receiving
an order, we'll refuse the order. We'll return any payment received
for orders that we refuse.
o The Northwest Division of Bank of America and its affiliates are
responsible for sending us orders for their clients and for ensuring
that we receive payment on time.
o Shares purchased are recorded on the books of the Fund. We don't
issue certificates.
o The Northwest Division of Bank of America and its affiliates are
responsible for recording the beneficial ownership of the shares of
their clients, and for reporting this ownership on account statements
they send to their clients.
[GRAPHIC] SELLING SHARES
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire within
three business days after Stephens, First Data or their agents
receive the order.
o If shares were paid for with a check that wasn't certified, we'll
hold the sale proceeds when those shares are sold for at least 15
days after the trade date of the purchase, or until the check has
cleared.
o The Northwest Division of Bank of America and its affiliates are
responsible for sending us orders for their clients and for
depositing the sale proceeds to their accounts on time.
o Under certain circumstances allowed under the Investment Company
Act of 1940 (1940 Act), we can pay investors in securities or
other property when they sell shares, or delay payment of the
sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more
information about these restrictions, please contact your
retirement plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll
provide 60 days notice in writing if we're going to do this
o if the Northwest Division of Bank of America or one of its
affiliates tells us to sell the shares for a client under
arrangements it has made with its clients
o under certain other circumstances allowed under the 1940 Act
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<PAGE>
[GRAPHIC] YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND
POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS
PROSPECTUS CAREFULLY.
[GRAPHIC] EXCHANGING SHARES
Investors can sell shares of a Fund to buy shares of another Nations
Fund. This is called an exchange, and may be appropriate if investment
goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Seafirst Shares of a Fund for Seafirst
Shares of any other Fund (until June 23, 2000), or for Investor A
Shares of any Nations Fund, except Index Funds.
o The rules for buying shares of a Fund, including any minimum
investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the
investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting
investments.
o We may limit the number of exchanges that can be made within a
specified period of time.
o We may change or cancel the right to make an exchange by giving the
amount of notice required by regulatory authorities (generally 60
days for a material change or cancellation).
24
<PAGE>
[GRAPHIC] THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
[GRAPHIC] HOW SELLING AND SERVICING AGENTS ARE PAID
Selling and servicing agents usually receive compensation based on your
investment in the Funds. The kind and amount of the compensation depends on
the share class you invest in. Selling agents typically pay a portion of the
compensation they receive to their investment professionals.
SHAREHOLDER SERVICING FEES
Servicing agents may be compensated for providing services to investors under
a shareholder servicing plan.
Servicing agents may receive a maximum annual shareholder servicing fee of
0.25% of the average daily net assets of Seafirst Shares of the Funds.
Fees are calculated daily and paid monthly. Because these fees are paid out of
the Funds' assets on an ongoing basis they will increase the cost of your
investment over time, and may cost you more than any sales charges you may
pay.
The Funds pay these fees to eligible servicing agents for as long as the plan
continues. We may reduce or discontinue payments at any time.
25
<PAGE>
[GRAPHIC] THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A
FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR
COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN
TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF
COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE
OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL
EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
[GRAPHIC] DISTRIBUTIONS AND TAXES
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends
paid on COMMON STOCKS.
o A fund can also have CAPITAL GAIN if the value of its investments
increases. If a fund sells an investment at a gain, the gain is
realized. If a fund continues to hold the investment, any gain is
unrealized.
A mutual fund is not subject to income tax as long as it distributes its net
investment income and realized capital gain to its shareholders. The Funds
intend to pay out a sufficient amount of their income and capital gain to
their shareholders so the Funds won't have to pay any income tax. When a Fund
makes this kind of a payment, it's split equally among all shares, and is
called a distribution.
All of the Funds distribute any net realized capital gain at least once a
year.
The frequency of distributions of net investment income varies by Fund:
<TABLE>
<CAPTION>
Fund Frequency of income distributions
<S> <C>
Nations Blue Chip Fund quarterly
Nations Asset Allocation Fund quarterly
Nations Intermediate Bond Fund monthly
</TABLE>
A distribution is paid based on the number of shares you hold on the record
date, which is usually the day the distribution is declared (daily dividend
Funds) or the day before the distribution is declared (all other Funds).
Shares are eligible to receive distributions from the SETTLEMENT DATE (daily
dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and
including the day before the shares are sold.
Different share classes of a Fund usually pay different distribution amounts,
because each class has different expenses. Each time a distribution is made,
the net asset value per share of the share class is reduced by the amount of
the distribution.
We'll automatically reinvest distributions in additional shares of the same
Fund unless you tell us you want to receive your distributions in cash. You
can do this by writing to us at the address on the back cover, or by calling
us at 1.800.323.9919.
We generally pay cash distributions within five business days after the end of
the month, quarter or year in which the distribution was made. If you sell all
of your shares, we'll pay any distribution that applies to those shares in
cash within five business days after the sale was made.
26
<PAGE>
[GRAPHIC] THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY
AFFECT YOUR INVESTMENT IN THE FUNDS. IT IS NOT INTENDED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR
OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE
AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC] FOR MORE INFORMATION ABOUT
TAXES, PLEASE SEE THE SAI.
If you buy shares of a Fund shortly before it makes a distribution, you will,
in effect, receive part of your purchase back in the distribution, which is
subject to tax. Similarly, if you buy shares of a Fund that holds securities
with unrealized capital gain, you will, in effect, receive part of your
purchase back if and when the Fund sells those securities and distributes the
gain. This distribution is subject to tax. Some Funds have built up, or have
the potential to build up, high levels of unrealized capital gain.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions that come from a Fund's tax-exempt interest income are generally
free from federal income tax, but may be subject to state or local tax. A
portion of these distributions may also be subject to the federal alternative
minimum tax.
Any distributions that come from taxable income or realized capital gain are
generally subject to tax. Distributions that come from taxable income and any
net short-term capital gain (generally the excess of net short-term capital
gain over net long-term capital loss) generally are taxable to you as ordinary
income. Distributions of net capital gain (generally the excess of net
long-term capital gain over net short-term capital loss) generally are taxable
to you as net capital gain. Corporate shareholders will not be able to deduct
any distributions from a Fund when determining their taxable income.
In general, all distributions are taxable to you when paid, whether they are
paid in cash or automatically reinvested in additional shares of the Fund.
However, any distributions declared in October, November or December of one
year and distributed in January of the following year will be taxable as if
they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in
distributions during the year and their federal tax status. Foreign, state and
local taxes may also apply to these distributions.
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any taxable
distributions and redemption proceeds paid to you (including amounts deemed to
be paid for "in kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN)
and haven't certified that the TIN is correct and withholding doesn't
apply
o the Internal Revenue Service (IRS) has notified us that the TIN
listed on your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup
withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
27
<PAGE>
Amounts we withhold are applied to your federal income tax liability. You may
receive a refund from the IRS if the withholding tax results in an overpayment
of taxes.
We're also normally required by federal law to withhold tax on distributions
paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
Your redemptions (including redemptions "in kind") and exchanges of Fund
shares will usually result in a taxable capital gain or loss to you, depending
on the amount you receive for your shares (or are deemed to receive in the
case of exchanges) and the amount you paid (or are deemed to have paid) for
them.
[GRAPHIC] Financial highlights
The financial highlights table is designed to help you understand how the
Funds have performed for the past five years. Certain information reflects
financial results for a single Fund share. The total investment return line
indicates how much an investment in the Fund would have earned, assuming all
dividends and distributions had been reinvested.
This information has been audited by PricewaterhouseCoopers LLP. The
independent accountant's report and Nations Funds financial statements are
incorporated by reference into the SAI. Please see the back cover to find out
how you can get a copy.
28
<PAGE>
NATIONS BLUE CHIP FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
BLUE CHIP FUND)
<TABLE>
<CAPTION>
FOR THE PERIOD
PERIOD ENDED YEAR ENDED JUNE 23, 1997(A)
SEAFIRST SHARES* 5/14/99 2/28/99 THROUGH 2/28/98
<S> <C> <C> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $ 29.45 $ 26.53 $ 24.02
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.14 0.14
Net realized and unrealized gains (losses) on
investment transactions 2.19 4.66 3.99
Total income from investment operations 2.21 4.80 4.13
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends to shareholders from net investment income (0.02) (0.16) (0.12)
Distributions to shareholders from net realized gains -- (1.72) (1.50)
Total Dividends and Distributions (0.02) (1.88) (1.62)
Net change in net asset value per share 2.19 2.92 2.51
Net asset value per share, end of period $ 31.64 $ 29.45 $ 26.53
TOTAL RETURN 7.52%(c) 18.89% 19.30%(c)
========================================================= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 444 $ 418 $ 370
Ratio of expenses to average net assets 0.95%(b) 0.95% 0.95%(b)
Ratio of net investment income to average net assets 0.32%(b) 0.52% 0.81%(b)
Ratio of expenses to average net assets** 1.34%(b) 1.17% 1.15%(b)
Ratio of net investment income to average net assets** (0.07)%(b) 0.30% 0.61%(b)
</TABLE>
* Seafirst Shares of Nations Blue Chip Fund were
formerly SRF Shares of the Pacific Horizon Blue Chip
Fund.
** During the period, certain fees were voluntarily
reduced and expenses reimbursed. If such voluntary
fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Date of commencement of operations of SRF Shares
of the Fund.
(b) Annualized.
(c) Not annualized.
NATIONS ASSET ALLOCATION FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
ASSET ALLOCATION FUND)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED PERIOD ENDED
SEAFIRST SHARES* 5/14/99 2/28/99(B) 2/28/98(A)
<S> <C> <C> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $ 17.01 $ 16.63 $ 15.79
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.08 0.45 0.30
Net realized and unrealized gains on investment
transactions 0.69 1.88 1.65
Total income from investment operations 0.77 2.33 1.95
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends to shareholders from net investment income (0.12) (0.46) (0.24)
Distributions to shareholders from net realized gains -- (1.49) (0.87)
Total Dividends and Distributions (0.12) (1.95) (1.11)
Net change in net asset value per share 0.65 0.38 0.84
Net asset value per share, end of period $ 17.66 $ 17.01 $ 16.63
TOTAL RETURN 4.52%(d) 14.76% 13.56%(d)
========================================================= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (millions) $ 214 $ 208 $ 197
Ratio of expenses to average net assets 0.95%(c) 0.93% 0.95%(c)
Ratio of net investment income to average net assets 2.23%(c) 2.65% 2.73%(c)
Ratio of expenses to average net assets** 1.19%(c) 0.94% 0.97%(c)
Ratio of net investment income to average net assets** 1.99%(c) 2.64% 2.71%(c)
Portfolio turnover rate 20%(d) 114% 67%
</TABLE>
* Seafirst Shares of Nations Asset Allocation Fund
were formerly SRF Shares of the Pacific Horizon
Asset Allocation Fund.
** During the period, certain fees were voluntarily
reduced and expenses reimbursed. If such voluntary
fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from June 23, 1997 (inception date) to
February 28, 1998.
(b) On October 1, 1998, BankAmerica Corp., the
parent company of the Fund's Advisor, merged with
NationsBank Corporation.
(c) Annualized.
(d) Not annualized.
29
<PAGE>
NATIONS INTERMEDIATE BOND FUND FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
(SUCCESSOR TO THE PACIFIC HORIZON
INTERMEDIATE BOND FUND)
<TABLE>
<CAPTION>
Period Ended Year Ended Period Ended
SEAFIRST SHARES* 5/14/99 2/28/99 2/28/98(a)
<S> <C> <C> <C>
NET ASSET VALUE PER SHARE, BEGINNING OF PERIOD $ 10.76 $ 10.87 $ 10.72
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.11 0.57 0.40
Net realized and unrealized gain (loss) on investment
transactions (0.04) (0.05) 0.13
Total income from investment operations 0.07 0.52 0.53
LESS DIVIDENDS AND DISTRIBUTIONS:
Dividends to shareholders from net investment income (0.08) (0.52) (0.38)
Distributions to shareholders from net realized gains -- (0.11) --
Total Dividends and Distributions (0.08) (0.63) (0.38)
Net change in net asset value per share (0.01) (0.11) 0.15
Net asset value per share, end of period $ 10.75 $ 10.76 $ 10.87
TOTAL RETURN 0.68%(d) 4.88% 4.86%(d)
========================================================= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000) $32,438 $33,449 $35,161
Ratio of expenses to average net assets 0.95%(c) 0.90% 0.95%(c)
Ratio of net investment income to average net assets 5.04%(c) 5.16% 5.45%(c)
Ratio of expenses to average net assets** 1.10%(c) (b) 1.07%(c)
Ratio of net investment income to average net assets** 4.89%(c) (b) 5.33%(c)
</TABLE>
* Seafirst Shares of Nations Intermediate Bond Fund
were formerly SRF Shares of the Pacific Horizon
Intermediate Bond Fund.
** During the period, certain fees were voluntarily
reduced and expenses reimbursed. If such voluntary
fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from June 23, 1997 (inception date) to
February 28, 1998.
(b) There were no waivers or expense reimbursements
during the period.
(c) Annualized.
(d) Not Annualized.
30
<PAGE>
[GRAPHIC] TERMS USED IN THIS PROSPECTUS
ASSET-BACKED SECURITY - a debt security that gives you an interest in a pool
of assets that is collateralized or "backed" by one or more kinds of assets,
including real property, receivables or mortgages, generally issued by banks,
credit card companies or other lenders. Some securities may be issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities. Asset-backed securities typically make periodic payments,
which may be interest or a combination of interest and a portion of the
principal of the underlying assets.
AVERAGE DOLLAR-WEIGHTED MATURITY - the average length of time until the debt
securities held by a Fund reach maturity. In general, the longer the average
dollar-weighted maturity, the more a Fund's share price will fluctuate in
response to changes in interest rates.
BANK OBLIGATION - a money market instrument issued by a bank, including
certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security
and its selling price. You realize a capital gain when you sell a security for
more than you paid for it. You realize a capital loss when you sell a security
for less than you paid for it.
CASH EQUIVALENTS - short-term, interest-bearing instruments, including
obligations issued or guaranteed by the U.S. government, its agencies and
instrumentalities, bank obligations, asset-backed securities, foreign
government securities and commercial paper issued by U.S. and foreign issuers
which, at the time of investment, is rated at least Prime-2 by Moody's
Investor Services, Inc. (Moody's), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).
COLLATERALIZED MORTGAGE OBLIGATION (CMO) - a debt security that is backed by
real estate mortgages. CMO payment obligations are covered by interest and/or
principal payments from a pool of mortgages. In addition, the underlying
assets of a CMO are typically separated into classes, called tranches, based
on maturity. Each tranche pays a different rate of interest. CMOs are not
generally issued by the U.S. government, its agencies or instrumentalities.
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company.
Common stock typically allows you to vote at shareholder meetings and to share
in the company's profits by receiving dividends.
CONVERTIBLE DEBT - a debt security that can be exchanged for common stock (or
another type of security) on a specified basis and date.
CONVERTIBLE SECURITY - a security that can be exchanged for common stock (or
another type of security) at a specified rate. Convertible securities include
convertible debt, rights and warrants.
31
<PAGE>
CORPORATE OBLIGATION - a money market instrument issued by a corporation or
commercial bank.
CROSSING NETWORKS - an electronic system where anonymous parties can match buy
and sell transactions. These transactions don't affect the market, and
transaction costs are extremely low.
DEBT SECURITY - when you invest in a debt security, you are typically lending
your money to a governmental body or company (the issuer) to help fund their
operations or major projects. The issuer pays interest at a specified rate on
a specified date or dates, and repays the principal when the security matures.
Short-term debt securities include money market instruments such as treasury
bills. Long-term debt securities include fixed income securities such as
government and corporate bonds, and mortgage-backed and asset-backed
securities.
DEPOSITARY RECEIPTS - evidence of the deposit of a security with a custodian
bank. American Depositary Receipts (ADRs), for example, are certificates
traded in U.S. markets representing an interest of a foreign company. They
were created to make it possible for foreign issuers to meet U.S. security
registration requirements. Other examples include ADSs, GDRs and EDRs.
DIVIDEND YIELD - rate of return of dividends paid on a common or preferred
stock. It equals the amount of the annual dividend on a stock expressed as a
percentage of the stock's current market value.
DOLLAR ROLL TRANSACTION - the sale by a Fund of mortgage-backed or other
asset-backed securities, together with a commitment to buy similar, but not
identical, securities at a future date.
DURATION - a measure used to estimate how much a mutual fund's portfolio will
fluctuate in response to a change in interest rates. For example, if interest
rates rise by one percentage point, the share price of a fund with a duration
of five years would decline by about 5%. If interest rates fall by one
percentage point, the fund's share price would rise by about 5%.
EQUITY SECURITY - an investment that gives you an equity ownership right in a
company. Equity securities (or "equities") include common and preferred stock,
rights and warrants.
FIRST BOSTON CONVERTIBLE INDEX - a widely-used unmanaged index that measures
the performance of convertible securities. The index is not available for
investment.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that
is an eligible investment for money market funds and has the highest
short-term rating from a nationally recognized statistical rating organization
(NRSRO), or if unrated, is determined by the fund's portfolio management team
to be of comparable quality, or is a money market fund issued by a registered
investment company, or is a government security.
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<PAGE>
FIXED INCOME SECURITY - an intermediate to long-term debt security that
matures in more than one year.
FOREIGN SECURITY - a debt or equity security issued by a foreign company or
government.
FUNDAMENTAL ANALYSIS - a method of securities analysis that tries to evaluate
the intrinsic, or "true," value of a particular stock. It includes a study of
the overall economy, industry conditions and the financial condition and
management of a company.
FUTURES CONTRACT - a contract to buy or sell an asset or an index of
securities at a specified price on a specified future date. The price is set
through a futures exchange.
GUARANTEED INVESTMENT CONTRACT - an investment instrument issued by a rated
insurance company in return for a payment by an investor.
HIGH QUALITY - in the case of municipal securities, a long-term rating of A or
higher from Duff & Phelps Credit Rating Co. (D&P), Fitch, S&P, Thomson
BankWatch, Inc. (BankWatch), or Moody's in the case of certain bonds that are
lacking a short-term rating from the required number of NRSROs; rated D-1 or
higher by D&P, F-1 or higher by Fitch, SP-1 by S&P, or MIG-1 by Moody's in the
case of notes; rated D-1 or higher by D&P, F-1 or higher by Fitch, or VMIG-1
by Moody's in the case of variable rate demand notes; or rated D-1 or higher
by D&P, F-1 or higher by Fitch, A-1 or higher by S&P or PRIME-1 by Moody's in
the case of tax-exempt commercial paper. The portfolio management team may
consider an unrated municipal security to be investment grade if the team
believes it to be of comparable quality, based on guidelines provided by the
Fund's Board of Directors. Please see the SAI for more information about
credit ratings.
IFC INVESTABLES INDEX - an unmanaged index that tracks more than 1,400 stocks
in 25 emerging markets in Asia, Latin America, Eastern Europe, Africa and the
Middle East. The index is weighted by market capitalization.
INVESTMENT GRADE - a debt security that has been given a medium to high credit
rating (Baa or higher by Moody's, BBB or higher by S&P or a comparable rating
by other NRSROs) based on the issuer's ability to pay interest and repay
principal on time. The portfolio management team may consider an unrated debt
security to be investment grade if the team believes it is of comparable
quality. Please see the SAI for more information about credit ratings.
LEHMAN 3-YEAR MUNICIPAL BOND INDEX - a broad-based, unmanaged index of
investment grade bonds with maturities of two to four years. All dividends are
reinvested.
LEHMAN 7-YEAR MUNICIPAL BOND INDEX - a broad-based, unmanaged index of
investment grade bonds with maturities of seven to eight years. All dividends
are reinvested.
33
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LEHMAN AGGREGATE BOND INDEX - an index made up of the Lehman
Government/Corporate Index, the Asset-Backed Securities Index and the
Mortgage-Backed Securities Index. These indexes include U.S. government agency
and U.S. Treasury securities, corporate bonds and mortgage-backed securities.
All dividends are reinvested.
LEHMAN GOVERNMENT BOND INDEX - an index of government bonds with an average
maturity of approximately nine years. All dividends are reinvested.
LEHMAN GOVERNMENT/CORPORATE BOND INDEX - an index of U.S. government, U.S.
Treasury and agency securities, and corporate and Yankee bonds. All dividends
are reinvested.
LEHMAN INTERMEDIATE GOVERNMENT BOND INDEX - an index of U.S. government agency
and U.S. Treasury securities. All dividends are reinvested.
LEHMAN INTERMEDIATE TREASURY INDEX - an index of U.S. Treasury securities with
maturities of three to 10 years. All dividends are reinvested.
LEHMAN MUNICIPAL BOND INDEX - a broad-based, unmanaged index of 8,000
investment grade bonds with long-term maturities. All dividends are
reinvested.
LIQUIDITY - a measurement of how easily a security can be bought or sold at a
price that is close to its market value.
MERRILL LYNCH 1-3 YEAR TREASURY INDEX - an index of U.S. Treasury bonds with
maturities of 1 to 3 years. All dividends are reinvested.
MONEY MARKET INSTRUMENT - a short-term debt security that is considered to
mature in 13 months or less. Money market instruments include U.S. Treasury
obligations, U.S. government obligations, certificates of deposit, bankers'
acceptances, commercial paper, repurchase agreements and certain municipal
securities.
MORTGAGE-BACKED SECURITY OR MORTGAGE-RELATED SECURITY - a debt security that
gives you an interest in, and is backed by, a pool of residential mortgages
issued by the U.S. government or by financial institutions. The underlying
mortgages may be guaranteed by the U.S. government or one of its agencies,
authorities or instrumentalities. Mortgage-backed securities typically make
monthly payments, which are a combination of interest and a portion of the
principal of the underlying mortgages.
MSCI EAFE INDEX - Morgan Stanley Capital International Europe, Australasia and
Far East Index, an index of over 1,100 stocks from 21 developed markets in
Europe, Australia, New Zealand and Asia. The index reflects the relative size
of each market.
34
<PAGE>
MUNICIPAL SECURITY (OBLIGATION) - a debt security issued by state or local
governments or governmental authorities to pay for public projects and
services. "General obligations" are typically backed by the issuer's full
taxing and revenue-raising powers. "Revenue securities" depend on the income
earned by a specific project or authority, like road or bridge tolls, user
fees for water or revenues from a utility. Interest income from these
securities is exempt from federal income taxes and is generally exempt from
state taxes if you live in the state that issued the security. If you live in
the municipality that issued the security, interest income may also be exempt
from local taxes.
NON-DIVERSIFIED - a fund that holds securities of fewer issuers or kinds of
issuers than other kinds of funds. Non-diversified funds tend to have greater
price swings than more diversified funds because events affecting one or more
of its securities may have a disproportionately large effect on the fund.
OVER-THE-COUNTER MARKET - a market where dealers trade securities through a
telephone or computer network rather than through a public stock exchange.
PARTICIPATION - a pass-through certificate representing a share in a pool of
debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with
interest and principal paid by a servicing intermediary shortly after interest
payments are received from borrowers.
PREFERRED STOCK - a type of equity security that gives you a limited ownership
right in a company, with certain preferences or priority over common stock.
Preferred stock generally pays a fixed annual dividend. If the company goes
bankrupt, preferred shareholders generally receive their share of the
company's remaining assets before common shareholders and after bondholders
and other creditors.
PRE-REFUNDED BOND - a bond that is repaid before its maturity date. The
repayment is generally financed by a new issue. Issuers generally pre-refund
bonds during periods of lower interest rates to reduce their interest costs.
PRICE-TO-EARNINGS RATIO (P/E RATIO) - the current price of a share divided by
its actual or estimated earnings per share. The P/E ratio is one measure of
the value of a company.
PRIVATE ACTIVITY BOND - a municipal security that is used to finance private
projects or other projects that aren't qualified for tax purposes. Private
activity bonds are generally taxable, unless their use is specifically
exempted, or may be treated as tax preference items.
QUANTITATIVE ANALYSIS - an analysis of financial information about a company
or security to identify securities that have the potential for growth or are
otherwise suitable for a fund to buy.
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REAL ESTATE INVESTMENT TRUST (REIT) - a portfolio of real estate investments
which may include office buildings, apartment complexes, hotels and shopping
malls, and real-estate-related loans or interests.
REPURCHASE AGREEMENT - a short-term (often overnight) investment arrangement.
The investor agrees to buy certain securities from the borrower and the
borrower promises to buy them back at a specified date and price. The
difference between the purchase price paid by the investor and the repurchase
price paid by the borrower represents the investor's return. Repurchase
agreements are popular because they provide very low-risk return and can
virtually eliminate credit difficulties.
REVERSE REPURCHASE AGREEMENT - a repurchase agreement in which an investor
sells a security to another party, like a bank or dealer, in return for cash,
and agrees to buy the security back at a specified date and price.
RIGHT - a temporary privilege allowing investors who already own a common
stock to buy additional shares directly from the company at a specified price
or formula.
RUSSELL 2000 - an unmanaged index of 2,000 of the smallest stocks representing
approximately 11% of the U.S. equity market. The index is weighted by market
capitalization, and is not available for investment.
S&P 500(1) - Standard & Poor's 500 Composite Stock Price Index, an unmanaged
index of 500 widely held common stocks. It is not available for investment.
S&P MIDCAP 400(1) - an unmanaged index of 400 domestic stocks chosen for market
size, liquidity and industry representation. The index is weighted by market
value, and is not available for investment.
S&P SMALLCAP 600(1) - Standard & Poor's SmallCap 600 Index, an unmanaged index
of 600 common stocks, weighted by market capitalization. It is not available
for investment.
S&P/BARRA SMALLCAP VALUE INDEX(1) - an unmanaged index of a group of stocks
from the S&P SmallCap 600 that have low price-to-book ratios relative to the
S&P SmallCap 600 as a whole. It is weighted by market capitalization, and is
not available for investment.
S&P/BARRA VALUE INDEX(1) - an unmanaged index of a group of stocks from the S&P
500 that have low price-to-book ratios relative to the S&P 500 as a whole. It
is weighted by market capitalization, and is not available for investment.
SALOMON BROTHERS MORTGAGE INDEX - an index of 30-year and 15-year GNMA, FNMA
and FHLMC securities, and FNMA and FHLMC balloon mortgages.
36
<PAGE>
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security
that is an eligible investment for money market funds, but is not a first-tier
security.
SENIOR SECURITY - a debt security that allows holders to receive their share
of a company's remaining assets in a bankruptcy before other bondholders,
creditors, and common and preferred shareholders.
SETTLEMENT DATE - the date on which an order is settled either by payment or
delivery of securities.
SPECIAL PURPOSE ISSUER - an entity organized solely to issue asset-backed
securities on a pool of assets it owns.
TRADE DATE - the effective date of a purchase, sale or exchange transaction,
or other instructions sent to us. The trade date is determined by the day and
time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or
guaranteed by the U.S. government or its agencies, authorities or
instrumentalities.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
WARRANT - a certificate that gives you the right to buy common shares at a
specified price within a specified period of time.
WILSHIRE 5000 EQUITY INDEX - an index that measures the performance of the
equity securities of all companies headquartered in the U.S. that have readily
available price data -- over 7, 000 companies. The index is weighted by market
capitalization and is not available for investment.
ZERO-COUPON BOND - a bond that makes no periodic interest payments. Zero
coupon bonds are sold at a deep discount to their face value and mature at
face value. The difference between the face value at maturity and the purchase
price represents the return.
(1)S&P and BARRA have not reviewed any stock included in the S&P 500, S&P 600,
BARRA Index or BARRA SmallCap Index for its investment merit. S&P and BARRA
determine and calculate their indexes independently of the Funds and are not
a sponsor or affiliate of the Funds. S&P and BARRA give no information and
make no statements about the suitability of investing in the Funds or the
ability of their indexes to track stock market performance. S&P and BARRA
make no guarantees about the indexes, any data included in them and the
suitability of the indexes or their data for any purpose. "Standard and
Poor's," "S&P 500" and "S&P 600" are trademarks of the McGraw-Hill
Companies, Inc.
37
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[GRAPHIC] WHERE TO FIND MORE INFORMATION
You'll find more information about the Equity, Balanced and Fixed Income Funds
in the following documents:
[GRAPHIC] ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund
investments and performance, the financial statements and the
auditor's reports. The annual report also includes a discussion about
the market conditions and investment strategies that had a
significant effect on each Fund's performance during the period
covered.
[GRAPHIC] STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Funds and their
policies. The SAI is legally part of this prospectus (it's
incorporated by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other
information about the Funds and make shareholder inquiries by
contacting Nations Funds:
By telephone: 1.800.323.9919
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONSBANK.COM/NATIONSFUNDS
If you prefer, you can write the SEC's Public Reference Room and ask
them to mail you copies of these documents. They'll charge you a fee
for this service. You can also download them from the SEC's website
or visit the Public Reference Section and copy the documents while
you're there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
NATIONS FUNDS
SEC file number:
Nations Reserves, 811-6030
NF-SEAFIRST-8/99
<PAGE>
NATIONS RESERVES
(formerly known as The Capitol Mutual Funds)
Statement of Additional Information
NATIONS CASH RESERVES
NATIONS MONEY MARKET RESERVES
NATIONS TREASURY RESERVES
NATIONS GOVERNMENT RESERVES
NATIONS MUNICIPAL RESERVES
NATIONS CALIFORNIA TAX-EXEMPT RESERVES
NATIONS ASSET ALLOCATION FUND
NATIONS CAPITAL INCOME FUND
NATIONS CALIFORNIA MUNICIPAL BOND FUND
NATIONS INTERMEDIATE BOND FUND
NATIONS BLUE CHIP FUND
Capital, Adviser, Liquidity, Market, Investor, Service, Daily, Trust,
Investor A, Investor B, Investor C, Primary A, Primary B, Marsico
and Seafirst Shares
August 1, 1999
This Statement of Additional Information (the "SAI") is not a prospectus. It is
intended to provide additional information regarding the eleven series of
Nations Reserves (the "Trust") and should be read in conjunction with the
Trust's prospectuses dated August 1, 1999, as supplemented (each a "Prospectus"
and collectively, the "Prospectuses"). All terms used in this SAI that are
defined in the Prospectuses will have the same meanings as assigned in the
Prospectuses. Copies of the Prospectuses may be obtained without charge by
writing Nations Funds c/o the Distributor, Stephens Inc., One Bank of America
Plaza, 33rd Floor, Charlotte, North Carolina 28255, or by calling Nations Funds
at (800) 321-7854.
<PAGE>
TABLE OF CONTENTS
Page
HISTORY OF THE TRUST........................................... x
DESCRIPTION OF THE TRUST AND THE INVESTMENTS AND RISKS
OF THE FUNDS .................................................. x
General................................................... x
Investment Limitations ................................... x
Permissible Fund Investments.............................. x
Asset-Backed Securities................................... x
Borrowings................................................ x
Commercial Instruments.................................... x
Combined Transactions..................................... x
Convertible Securities.................................... x
Corporate Debt Securities................................. x
Custodial Receipts........................................ x
Currency Swaps............................................ x
Delayed Delivery Transactions............................. x
Dollar Roll Transactions ................................. x
Equity Swap Contracts .................................... x
Foreign Currency Transactions ............................ x
Futures, Options and Other Derivative
Instruments........................................... x
Risk Factors Associated with Futures and Options
Transactions.......................................... x
Guaranteed Investment Contracts........................... x
Insured Municipal Securities ............................. x
Interest Rate Transactions ............................... x
Lower Rated Debt Securities............................... x
Municipal Securities ..................................... x
Options on Currencies..................................... x
Other Investment Companies................................ x
Participation Interests and Company Receipts.............. x
Real Estate Investment Trusts............................. x
Repurchase Agreements .................................... x
Reverse Repurchase Agreements ............................ x
Securities Lending........................................ x
Short Sales............................................... x
Special Situations........................................ x
Stand-by Commitments ..................................... x
Stripped Securities....................................... x
U.S. and Foreign Bank Obligations......................... x
U.S. Government Obligations............................... x
Use of Segregated and Other Special Accounts.............. x
Variable and Floating Rate Instruments ................... x
Warrants.................................................. x
When-Issued Purchases and Forward Commitments ........... x
Portfolio Turnover........................................ x
Investment Risks.......................................... x
MANAGEMENT OF THE TRUST........................................ x
Nations Funds Retirement Plan............................ x
Nations Funds Deferred Compensation Plan................. x
Shareholder and Trustee Liability........................ x
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INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY,
TRANSFER AGENCY, OTHER SERVICE PROVIDERS, SHAREHOLDER SERVICING AND
DISTRIBUTION AGREEMENTS ....................................... x
Investment Adviser and Sub-Advisers....................... x
Co-Administrators and Sub-Administrator................... x
Distribution Plans and Shareholder Servicing
Arrangements for
Liquidity Class........................................ x
Market Class........................................... x
Adviser Class.......................................... x
Trust Class............................................ x
Daily Class............................................ x
Service Class.......................................... x
Investor Class......................................... x
Investor A Shares...................................... x
Investor B Shares...................................... x
Investor C Shares...................................... x
Primary B Shares....................................... x
Marsico Shares......................................... x
Seafirst Shares........................................ x
Expenses.................................................. x
Transfer Agents and Custodians............................ x
Distributor............................................... x
Independent Accountant and Reports........................ x
Counsel................................................... x
FUND TRANSACTIONS AND BROKERAGE................................ x
General Brokerage Policy.................................. x
Section 28(e) Standards................................... x
DESCRIPTION OF SHARES.......................................... x
Description of Shares of the Trust........................ x
Purchase and Redemption of Fund Shares.................... x
Exchanges................................................. x
Determination of Net Asset Value.......................... x
ADDITIONAL INFORMATION CONCERNING TAXES........................ x
General................................................... x
Excise Tax ............................................... x
Private Letter Ruling..................................... x
Taxation of Fund Investments.............................. x
Foreign Taxes ............................................ x
Capital Gain Distribution................................. x
Other Distributions....................................... x
Disposition of Fund Shares................................ x
Federal Income Tax Rates.................................. x
Corporate Shareholders.................................... x
Foreign Shareholders...................................... x
Backup Withholding........................................ x
Tax Deferred Plans........................................ x
Special Tax Consideration................................. x
Additional Consideration for Nations Municipal Reserves,
Nations California Tax-Exempt Reserves and Nations
California Municipal Bond Fund......................... x
Additional Consideration for Nations California Tax-Exempt
Reserves and Nations California Municipal Bond Fund.... x
Other Matters............................................. x
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PERFORMANCE INFORMATION........................................ x
General................................................... x
Yield Calculations........................................ x
Total Return Calculations................................. x
MISCELLANEOUS.................................................. x
Certain Record Holders.................................... x
REPORTS, EXPERTS AND FINANCIAL INFORMATION..................... x
SCHEDULE A - Description of
Ratings.................................................. A-1
iii
<PAGE>
HISTORY OF NATIONS RESERVES
Nations Reserves (formerly known as The Capitol Mutual Funds),(1) (referred to
herein as the "Trust") is an open-end registered investment company in the
Nations Funds family, which consists of the Trust, Nations Fund Trust, Nations
Fund, Inc., Nations Fund Portfolios, Inc., Nations LifeGoal Funds, Inc., Nations
Annuity Trust and Nations Master Investment Trust.
The Trust was organized as a Massachusetts business trust on January 22,
1990. It has a fiscal year end of March 31st.
DESCRIPTION OF THE TRUST AND
THE INVESTMENTS AND RISKS OF ITS FUNDS
General
The Agreement and Declaration of Trust under which the Trust was duly
established permits the Trust to offer separate series of units of beneficial
interest ("shares"). Each share of each series represents an equal proportionate
interest in that series. This Statement of Additional Information ("SAI")
relates to the Trust's Nations Cash Reserves, Nations Money Market Reserves,
Nations Treasury Reserves, Nations Government Reserves, Nations Municipal
Reserves and the Nations California Tax-Exempt Reserves (collectively referred
to as the "Money Market Funds"), and to the Trust's Nations Asset Allocation
Fund, Nations Capital Income Fund, Nations California Municipal Bond Fund,
Nations Intermediate Bond Fund and Nations Blue Chip Fund (collectively referred
to as the "Non-Money Market Funds," and, together with the Money Market Funds,
the "Funds").
Nations Intermediate Bond Fund and Nations Blue Chip Fund are sometimes
referred to herein as the "Feeder Funds." The Feeder Funds seek to achieve their
respective investment objectives by investing substantially all of their assets
in diversified investment portfolios having the same investment objective as the
Master Portfolios of Nations Master Investment Trust ("NMIT"), an open-end
management investment company. Nations Intermediate Bond Fund invests
substantially all of its assets in Nations Intermediate Bond Master Portfolio.
Nations Blue Chip Fund invests substantially all of its assets in Nations Blue
Chip Master Portfolio.
Each share of the Trust is without par value, represents an equal
proportionate interest in the related fund with other shares of the same class,
and is entitled to such dividends and distributions out of the income earned on
the assets belonging to such fund as are declared in the discretion of the
Trust's Board of Trustees. The Trust's Agreement and Declaration of Trust
authorizes the Board of Trustees to classify or reclassify any class of shares
into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a
proportionate fractional vote for each fractional share held. Shareholders of
each fund of the Trust will vote in the aggregate and not by fund, and
shareholders of each fund will vote in the aggregate and not by class except as
otherwise expressly required by law or when the Board of Trustees determines
that the matter to be voted on affects only the interests of shareholders of a
particular fund or class. See the SAI for examples of when the 1940 Act requires
voting by fund.
_________
(1) More specifically, Nations Reserves is the name under which The Capitol
Mutual Funds conducts business.
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<PAGE>
As of August 1, 1999, Bank of America, N.A. ("Bank of America") and its
affiliates possessed or shared power to dispose or vote with respect to more
than 25% of the outstanding shares of the Trust and therefore could be
considered to be a controlling person of the Trust for purposes of the 1940 Act.
For more detailed information concerning the percentage of each class or series
of shares over which Bank of America and its affiliates possessed or shared
power to dispose or vote as of a certain date, see the SAI.
The Trust does not presently intend to hold annual meetings except as
required by the 1940 Act. Shareholders will have the right to remove Trustees.
The Trust's By-Laws provides that special meetings of shareholders shall be
called at the written request of the shareholders entitled to vote at least 10%
of the outstanding shares of the Trust entitled to be voted at such meeting.
Banc of America Advisors, Inc. ("BAAI") is the investment adviser to the
Funds, except Nations Blue Chip Fund and Nations Intermediate Bond Fund. Chicago
Equity Partners Corporation ("Chicago Equity") is co-investment sub-adviser with
TradeStreet Investment Associates, Inc. ("TradeStreet") to Nations Asset
Allocation Fund. TradeStreet Investment Associates, Inc. ("TradeStreet") is the
investment sub-adviser to all other Funds, except Nations Blue Chip Fund and
Nations Intermediate Bond Fund. Nations Intermediate Bond Fund and Nations Blue
Chip Fund invest all of their assets in Nations Intermediate Bond Master
Portfolio and Nations Blue Chip Master Portfolio, respectively (each a "Master
Portfolio"). BAAI is the investment adviser, and TradeStreet is the investment
sub-adviser, to each Master Portfolio As used herein the term "Adviser" shall
mean BAAI, TradeStreet, and/or Chicago Equity as the context may require.
This SAI is intended to furnish prospective investors with additional
information concerning the Companies and the Funds. Some of the information
required to be in this SAI is also included in the Funds' current Prospectuses,
and, in order to avoid repetition, reference will be made to sections of the
Prospectuses. Additionally, the Prospectuses and this SAI omit certain
information contained in the registration statement filed with the SEC. Copies
of the registration statement, including items omitted from the Prospectuses and
this SAI, may be obtained from the SEC by paying the charges prescribed under
its rules and regulations. No investment in the Funds' Shares should be made
without first reading the related Prospectuses.
Investment Limitations
Information concerning each Fund's investment objective is set forth in
each Prospectus. There can be no assurance that the Funds will achieve their
objectives. The features of the Funds' principal investment strategies and the
principal risks associated with those investment strategies also are discussed
in the Prospectuses. The most significant investment restrictions applicable to
the Funds' investment programs are set forth below:
The following investment limitations are matters of fundamental policy and
may not be changed without the affirmative vote of the holders of a majority of
the Fund's outstanding shares. Other investment limitations that cannot be
changed without such a vote of shareholders are described in the SAI. In
addition,, each Fund is seeking or has obtained permission from the SEC to
borrow money from or lend money to other funds of the companies, and to other
investment companies that permit such transactions, and for which BAAI serves as
investment adviser.
2
<PAGE>
Each Fund (except with respect to certain Funds whose restrictions are
enumerated separately) will not:
1. Borrow money or issue senior securities as defined in the Investment
Company Act of 1940, as amended (the "1940 Act") except that (a) a Fund
may borrow money from banks for temporary purposes in amounts up to
one-third of the value of such Fund's total assets at the time of
borrowing, provided that borrowings in excess of 5% of the value of such
Fund's total assets will be repaid prior to the purchase of additional
portfolio securities by such Fund, (b) a Fund may enter into commitments
to purchase securities in accordance with the Fund's investment program,
including delayed delivery and when-issued securities, which commitments
may be considered the issuance of senior securities, and (c) a Fund may
issue multiple classes of shares in accordance with SEC regulations or
exemptions under the 1940 Act. The purchase or sale of futures contracts
and related options shall not be considered to involve the borrowing of
money or issuance of senior securities. Each Fund may enter into reverse
repurchase agreements or dollar roll transactions. The purchase or sale of
futures contracts and related options shall not be considered to involve
the borrowing of money or issuance of senior securities.
2. Purchase any securities on margin (except for such short-term credits as
are necessary for the clearance of purchases and sales of portfolio
securities) or sell any securities short (except against the box.) For
purposes of this restriction, the deposit or payment by the Fund of
initial or maintenance margin connection with futures contracts and
related options and options on securities is not considered to be the
purchase of a security on margin.
3. Underwrite securities issued by any other person, except to the extent
that the purchase of securities and the later disposition of such
securities in accordance with the Fund's investment program may be deemed
an underwriting. This restriction shall not limit a Fund's ability to
invest in securities issued by other registered investment companies.
4. Invest in real estate or real estate limited partnership interests. (A
Fund may, however, purchase and sell securities secured by real estate or
interests therein or issued by issuers which invest in real estate or
interests therein.) This restriction does not apply to real estate limited
partnerships listed on a national stock exchange (e.g., the New York Stock
Exchange).
5. Purchase or sell commodity contracts except that each Fund may, to the
extent appropriate under its investment policies, purchase publicly traded
securities of companies engaging in whole or in part in such activities,
may enter into futures contracts and related options, may engage in
transactions on a when-issued or forward commitment basis, and may enter
into forward currency contracts in accordance with its investment
policies.
3
<PAGE>
Nations Cash Reserves, Nations Treasury Reserves, Nations Government Reserves
and Nations Municipal Reserves may not:
1. Acquire more than 10% of the voting securities of any one issuer.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. Any borrowing
will be done from a bank and to the extent that such borrowing exceeds 5% of
the value of the Fund's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall
below 300%, the Fund shall, within three days thereafter or such longer
period as the SEC may prescribe by rules and regulations, reduce the amount
of its borrowings to such an extent that the asset coverage of such
borrowings shall be at least 300%. This borrowing provision is included
solely to facilitate the orderly sale of portfolio securities to accommodate
heavy redemption requests if they should occur and is not for investment
purposes. All borrowings will be repaid before making additional
investments and any interest paid on such borrowings will reduce income.
4. Make loans, except that (a) a Fund may purchase or hold debt instruments in
accordance with its investment objective and policies; (b) may enter into
repurchase agreement and non-negotiable time deposits, provided that
repurchase agreements and non-negotiable time deposits maturing in more than
seven days, illiquid restricted securities and other securities which are
not readily marketable are not to exceed, in the aggregate, 10% of the
Fund's total assets and (c) the Funds (except Nations Municipal Reserves)
may engage in securities lending as described in each prospectus and in this
SAI.
5. Pledge, mortgage or hypothecate assets except to secure temporary borrowings
permitted by (3) above in aggregate amounts not to exceed 10% of total
assets taken at current value at the time of the incurrence of such loan,
except as permitted with respect to securities lending.
6. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts.
7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits as
necessary for the clearance of security transactions.
8. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a Fund security.
4
<PAGE>
9. Purchase securities of other investment companies except as permitted by the
1940 Act and the rules and regulations thereunder and may only purchase
securities of other money market funds. Under these rules and regulations,
the Funds are prohibited from acquiring the securities of other investment
companies if, as a result of such acquisition, the Funds own more than 3% of
the total voting stock of the company; securities issued by any one
investment company represent more than 5% of the Fund's total assets; or
securities (other than treasury stock) issued by all investment companies
represent more than 10% of the total assets of the Fund. These investment
companies typically incur fees that are separate from those fees incurred
directly by the Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that Shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees. It is the position of the
Securities and Exchange Commission's Staff that certain nongovernmental
issues of CMOs and REMICS constitute investment companies pursuant to the
1940 Act and either (a) investments in such instruments are subject to the
limitations set forth above or (b) the issuers of such instruments have
received orders from the SEC exempting such instruments from the definition
of investment company.
10. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the SEC.
11. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, or partner of the Trust or Adviser of the Trust
owns beneficially more than 1/2 of 1% of the shares or securities of such
issuer and all such officers, trustees and partners owning more than 1/2 of
1% of such shares or securities together own more than 5% of such shares or
securities.
12. Invest in interest in oil, gas or other mineral exploration or development
programs and oil, gas or mineral leases.
13. Write or purchase puts, calls or combinations thereof.
14. Invest in warrants valued at lower of cost or market exceeding 5% of the
Fund's net assets. Included in that amount but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York Stock Exchange
or American Stock Exchange.
Nations Money Market Reserves may not:
1. Purchase or sell real estate, except that the Fund may purchase securities
of issuers which deal in real estate and may purchase securities which are
secured by interests in real estate.
2. Acquire any other investment company or investment company security except
in connection with a merger, consolidation, reorganization or acquisition
of assets or where otherwise permitted by the 1940 Act.
3. Act as an underwriter of securities within the meaning of the 1933 Act
except to the extent that the purchase of obligations directly from the
issuer thereof in accordance with the Fund's investment objective, policies
and limitations may be deemed to be underwriting.
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4. Write or sell put options, call options, straddles, spreads, or any
combination thereof, except for transactions in options on securities,
securities indices, futures contracts and options on futures contracts.
5. Purchase securities on margin, make short sales of securities or maintain a
short position, except that (a) this investment limitation shall not apply
to the Fund's transactions in futures contracts and related options, and
(b) the Fund may obtain short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities.
6. Purchase or sell commodity contracts, or invest in oil, gas or mineral
exploration or development programs, except that the Fund may, to the
extent appropriate to its investment objective, purchase publicly traded
securities of companies engaging in whole or in part in such activities and
may enter into futures contracts and related options.
7. Make loans, except that the Fund may purchase and hold debt instruments and
enter into repurchase agreements in accordance with its investment
objective and policies and may lend portfolio securities.
8. Purchase securities of companies for the purpose of exercising control.
9. Purchase securities of any one issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or
certificates of deposit for any such securities) if, immediately after such
purchase, more than 15% of its total assets would be invested in
certificates of deposit or bankers' acceptances of any one bank, or more
than 5% of the value of the Fund's total assets would be invested in other
securities of any one bank or in the securities of any other issuer, or
more than 10% of the issuer's outstanding voting securities would be owned
by the Fund; except that up to 25% of the value of the Fund's total assets
may be invested without regard to the foregoing limitations. For purposes
of this limitation, a security is considered to be issued by the entity (or
entities) whose assets and revenues back the security. A guarantee of a
security shall not be deemed to be a security issued by the guarantor when
the value of all securities issued and guaranteed by the guarantor, and
owned by the Fund, does not exceed 10% of the value of the Fund's total
assets. In accordance with the current regulations of the SEC, the Fund
intends to limit its investments in bankers' acceptances, certificates of
deposit and other securities of any one bank to not more than 5% of the
Fund's total assets at the time of purchase (rather than the 15% limitation
set forth above), provided that the Fund may invest up to 25% of its total
assets in the securities of any one issuer for a period of up to three
business days. This practice, which is not a fundamental policy of the
Fund, could be changed only in the event that such regulations of the
Securities and Exchange Commission are amended in the future.
6
<PAGE>
10. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation
with respect to: (i) instruments issued or guarantee by the United States,
any state, territory or possession of the United States, the District of
Columbia or any of their authorities, agencies, instrumentalities or
political subdivisions, (ii) instruments issued by domestic branches of
U.S. banks; and (iii) repurchase agreements secured by the instruments
described in clauses (i) and (ii); (b) wholly-owned finance companies will
be considered to be in the industries of their parents if their activities
are primarily related to financing the activities of the parents; and (c)
utilities will be divided according to their services, for example, gas,
gas transmission, electric and gas, electric and telephone will each be
considered a separate industry. In construing Investment Limitation 10 in
accordance with SEC policy, to the extent permitted, U.S. branches of
foreign banks will be considered to be U.S. banks where they are subject to
the same regulation as U.S. banks.
11. Borrow money or issue senior securities, except that the Fund may borrow
from banks and enter into reverse repurchase agreements for temporary
purposes in amounts up to one-third of the value of the total assets at the
time of such borrowing or mortgage, pledge or hypothecate any assets,
except in connection with any such borrowing and then in amounts not in
excess of one-third of the value of the Fund's total assets at the time of
such borrowing. The Fund will not purchase securities while its borrowings
(including reverse repurchase agreements) in excess of 5% of its total
assets are outstanding. Securities held in escrow or separate accounts in
connection with the Fund's investment practices described in this SAI or in
the Prospectuses are not deemed to be pledged for purposes of this
limitation.
Although the foregoing investment limitations would permit Nations Money
Market Reserves to invest in options, futures contracts and options on futures
contracts, the Fund does not currently intend to trade in such instruments
during the next 12 months. Prior to making any such investments, the Fund would
notify its shareholders and add appropriate descriptions concerning the
instruments to the Prospectuses and this SAI.
As stated in the Prospectuses, securities subject to unconditional demand
features acquired by Nations Money Market Reserves must satisfy special SEC
diversification requirements. In particular, a security that has an
unconditional demand feature or other guarantee (as defined by SEC regulations)
which is issued by a person that, directly or indirectly, does not control, and
is not controlled by or under common control with, the issuer of the security
(an "Unconditional Demand Feature") is subject to the following diversification
requirements: Immediately after the acquisition of the security, Nations Money
Market Reserves may not have invested more than 10% of its total assets in
securities issued by or subject to Unconditional Demand Features from the same
person, except that the Fund may invest up to 25% of its total assets in
securities subject to Unconditional Demand Features of persons that are rated in
the highest rating category as determined by two NRSROs (or one NRSRO if the
security is rated by only one NRSRO).
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<PAGE>
Nations California Tax-Exempt Reserves may not:
1. Borrow money, issue senior securities or mortgage, pledge or hypothecate
its assets except to the extent permitted under the 1940 Act.
2. Underwrite any issue of securities within the meaning of the 1933 Act,
except when it might be technically deemed to be an underwriter either (a)
in connection with the disposition of a portfolio security, or (b) in
connection with the purchase of securities directly from the issuer thereof
in accordance with its investment objective.
3. Purchase any securities which would cause 25% or more of the value of its
total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the
same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state or
territory of the United States, or any of their agencies, instrumentalities
or political subdivisions, and (b) not withstanding this limitation or any
other fundamental investment limitation, assets may be invested in the
securities of one or more diversified management investment companies to
the extent permitted by the 1940 Act. Notwithstanding the above limitation,
there is no limitation with respect to investments by any of the Funds in
repurchase agreements, domestic bank obligations and certain bank
obligations considered to be issued by domestic banks purchase to
regulations or pronouncements of the Securities and Exchange Commission or
its staff.
4. Purchase or sell real estate, except a Fund may purchase securities of
issuers which deal or invest in real estate and may purchase securities
which are secured by real estate or interests in real estate.
5. Purchase or sell commodities, except that a Fund may, to the extent
consistent with its investment objective, invest in securities of companies
that purchase or sell commodities or which invest in such programs, and
purchase and sell options, forward contracts, future contracts and options
on future contracts. This limitation does not apply to foreign currency
transactions including without limitation forward currency contracts.
6. Make loans, except to the extent permitted by the 1940 Act.
Nations Asset Allocation Fund, Nations Capital Income Fund, Nations California
Municipal Bond Fund, Nations Intermediate Bond Master Portfolio and Nations Blue
Chip Master Portfolio may not:
1. Underwrite any issue of securities within the meaning of the 1933 Act
except when it might technically be deemed to be an underwriter either (a)
in connection with the disposition of a portfolio security, or (b) in
connection with the purchase of securities directly from the issuer thereof
in accordance with its investment objective.
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<PAGE>
2. Purchase or sell real estate, except a Fund may purchase securities of
issuers which deal or invest in real estate and may purchase securities
which are secured by real estate or interests in real estate.
3. Purchase or sell commodities, except that a Fund may to the extent
consistent with its investment objective, invest in securities of companies
that purchase or sell commodities or which invest in such programs, and
purchase and sell options, forward contracts, futures contracts, and
options on futures contracts. This limitation does not apply to foreign
currency transactions including without limitation forward currency
contracts.
4. Purchase any securities which would cause 25% or more of the value of its
total assets at the time of purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the
same industry, provided that: (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. government, any state or
territory of the United States, or any of their agencies, instrumentalities
or political subdivisions, and (b) notwithstanding this limitation or any
other fundamental investment limitation, assets may be invested in the
securities of one or more diversified management investment companies to
the extent permitted by the 1940 Act and the rules and regulations
thereunder.
5. Make loans, except to the extent permitted by the 1940 Act.
6. Borrow money, issue senior securities or mortgage, pledge or hypothecate
its assets except to the extent permitted under the 1940 Act.
7. Purchase securities (except securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities) of any one issuer if, as a
result, more than 5% of its total assets will be invested in the securities
of such issuer or it would own more than 10% of the voting securities of
such issuer, except that (a) up to 25% of its total assets may be invested
without regard to these limitations and (b) a Fund's assets may be invested
in the securities of one or more diversified management investment
companies to the extent permitted by the 1940 Act.
Non-Fundamental Investment Limitations:
1. Nations Treasury Reserves may not write covered call options or purchase
put options as long as the Fund invests exclusively in U.S. Treasury
obligations, separately traded component parts of such obligations
transferable through the Federal book-entry system, and repurchase
agreements involving such obligations.
2. Nations California Tax-Exempt Reserves may not purchase the securities of
any issuer (except securities issued by the U.S. Government, its agencies
or instrumentalities) if as a result more than 5% of the value of the
Fund's total assets would be invested in the securities of such issuer
except that (a) up to 50% of the value of the Fund's total assets may be
invested without regard to this 5% limitation provided that no more than
25% of the value of the Fund's total assets are invested in the securities
of any one issuer; (b) a Fund's assets may be invested in the securities of
one or more diversified management investment companies to the extent
permitted by 1940 Act and (c) the 5% limitation may be temporarily exceeded
provided that the discrepancy is eliminated as the end of the quarter or
within 30 days thereafter.
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<PAGE>
Notwithstanding the foregoing restriction, the California Tax-Exempt
Reserves invest without regard to 5% limitation in securities subject to
certain guarantees and certain money market Fund securities in accordance
with Rule 2a-7 under 1940 Act or any successor rule, and otherwise
permitted in accordance with Rule 2a-7 or any successor rule.
3. Nations Asset Allocation Fund, Nations Capital Income Fund, Nations
California Municipal Bond Fund, Nations Intermediate Bond Master Portfolio
and Nations Blue Chip Master Portfolio may not: sell securities short,
maintain a short position, or purchase securities on margin, except for
such short-term credits as are necessary for the clearance of transactions.
For this purpose, a deposit or payment by a Fund for initial or maintenance
margin in connection with future contracts is not considered to be the
purchase or sale of a security on margin.
4. Nations Asset Allocation Fund, Nations Capital Income Fund, Nations
California Municipal Bond Fund, Nations Intermediate Bond Master Portfolio
and Nations Blue Chip Master Portfolio may not purchase securities of other
investment companies except as permitted by the 1940 Act.
5. Nations California Municipal Bond Fund may not purchase securities of
companies for the purpose of exercising control.
6. Nations Intermediate Bond Master Portfolio, Nations Blue Chip Master
Portfolio, Nations Asset Allocation Fund, Nations Capital Income Fund and
Nations California Municipal Bond Fund may not write or sell puts, calls,
straddles, spreads or combinations thereof except that a Fund may acquire
standby commitments and may enter into futures contracts and options in
accordance with their investment objectives.
The foregoing percentages will apply at the time of the purchase of a security
and shall not be considered violated unless an excess or deficiency occurs or
exists immediately after and as a result of a purchase of such security.
Permissible Fund Investments
In addition to the principal investment strategies for each Fund, which
are outlined in the Funds' prospectuses, each Fund also may invest in other
types of securities in percentages of less than 10% of its total assets (unless
otherwise indicated, e.g., most Funds may invest in money market instruments
without limit during temporary defensive periods). These types of securities are
listed below for each portfolio and then are described in more detail after this
sub-section.
Nations Asset Allocation Fund: In addition to the types of securities
described in the Fund's Prospectus, the Fund may invest in: certain specified
derivative securities, including: interest rate swaps, caps and floors for
hedging purposes; exchange-traded options; over-the-counter options executed
with primary dealers, including long calls and puts and covered calls to enhance
return; and CFTC-approved U.S. and foreign exchange-traded financial futures and
options thereon for market exposure risk-management. The Fund may lend its Fund
securities to qualified institutional investors and may invest in repurchase
agreements, restricted, private placement and other illiquid securities. The
Fund may engage in reverse repurchase agreements and dollar roll transactions.
Additionally, the Fund may purchase securities issued by other investment
companies, consistent with the Fund's investment objective and policies. The
Fund also may invest in instruments issued by trusts or certain partnerships
including pass-through certificates representing participations in, or debt
investments backed by, the securities and other assets owned by such trusts and
partnerships.
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<PAGE>
Nations Blue Chip Fund: In addition to the types of securities described
in the Fund's Prospectus, the Blue Chip Master Portfolio (in which the Fund
invests all of its assets) may invest in: cash equivalents, which include the
following short-term interest rate bearing instruments--obligations issued or
guaranteed by the U.S. Government, its agencies and instrumentalities (some of
which may be subject to repurchase agreements), certificates of deposit,
bankers' acceptances, time deposits and other interest-bearing deposits issued
by domestic and foreign banks and foreign branches of U.S. banks, foreign
government securities and commercial papers issued by U.S. and foreign issuers
which is rated at the time of purchase at least Prime-2 by Moody's or A-2 by
S&P, Duff & Phelps and Fitch IBCA. For a description of ratings, see Appendix A
to this SAI. The Master Portfolio also may invest in certain specified
derivative securities including: exchange-traded options, over-the-counter
options executed with primary dealers, including long calls and puts and covered
calls to enhance return; and CFTC-approved U.S. and foreign exchange-traded
financial futures and options thereon for market exposure risk-management. The
Master Portfolio also may lend its portfolios securities to qualified
institutional investors and may invest in repurchase agreements, restricted,
private placement and other illiquid securities. It also may invest in real
estate investment trust securities, securities issued by other investment
companies, consistent with the Master Portfolio's investment objective and
policies.
Nations Capital Income Fund: In addition to the types of securities
described in the Fund's Prospectus, the Fund may invest in: Eurodollar
convertible securities, securities issued or guaranteed by the U.S. Government,
its agencies and instrumentalities, money market securities, investment grade
debt securities, cash equivalents, options, securities purchase on a
when-issued, forward-commitment or delayed-settlement basis. The Fund also may
invest in: certain specified derivative securities including: exchange-traded
options, over-the-counter options executed with primary dealers, including long
calls and puts and covered calls to enhance return; and CFTC-approved U.S. and
foreign exchange-traded financial futures and options thereon for market
exposure risk-management. The Fund also may lend its portfolios securities to
qualified institutional investors and may invest in repurchase agreements,
restricted, private placement and other illiquid securities. It also may invest
in real estate investment trust securities, securities issued by other
investment companies, consistent with the Fund's investment objective and
policies.
Nations Intermediate Bond Fund: In addition to the types of securities
described in the Fund's Prospectus, the Intermediate Bond Master Portfolio (in
which the Fund invests all of its assets) may invest in: municipal securities,
cash equivalents, certain specified derivative securities, including: interest
rate swaps, caps and floors for hedging purposes; exchange-traded options;
over-the-counter options executed with primary dealers, including long calls and
puts and covered calls to enhance return; and CFTC-approved U.S. and foreign
exchange-traded financial futures and options thereon for market exposure
risk-management. The Master Portfolio may lend its securities to qualified
institutional investors and may invest in repurchase agreements, restricted,
private placement and other illiquid securities. The Master Portfolio may engage
in reverse repurchase agreements and dollar roll transactions. Additionally, the
Master Portfolio may purchase securities issued by other investment companies,
consistent with its investment objective and policies. The Master Portfolio also
may invest in instruments issued by trusts or certain partnerships including
pass-through certificates representing participations in, or debt investments
backed by, the securities and other assets owned by such trusts and
partnerships.
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<PAGE>
Nations California Municipal Bond Fund: below investment-grade municipal
securities, short-term taxable and non-taxable obligations, repurchase
agreements, private activity bonds, certain specified derivative securities,
including: interest rate swaps, caps and floors for hedging purposes;
exchange-traded options; over-the-counter options executed with primary dealers,
including long calls and puts and covered calls to enhance return; and
CFTC-approved U.S. and foreign exchange-traded financial futures and options
thereon for market exposure risk-management. The Fund may lend its Fund
securities to qualified institutional investors and may invest in repurchase
agreements, restricted, private placement and other illiquid securities. The
Fund may engage in reverse repurchase agreements and dollar roll transactions.
Additionally, the Fund may purchase securities issued by other investment
companies, consistent with the Fund's investment objective and policies. The
Fund also may invest in instruments issued by trusts or certain partnerships
including pass-through certificates representing participations in, or debt
investments backed by, the securities and other assets owned by such trusts and
partnerships.
Nations California Tax-Exempt Reserves: cash equivalents and taxable
obligations, during temporary defensive periods.
Nations Cash Reserves: In addition to the types of securities described in
the Prospectus, the Fund may lend its portfolios securities to qualified
institutional investors and may invest in reverse repurchase agreements.
Nations Treasury Reserves: In addition to the types of securities
described in the Prospectus, the Fund may lend its portfolios securities to
qualified institutional investors.
Nations Municipal Reserves: In addition to the types of securities
described in the Prospectus, the Fund may lend its portfolios securities to
qualified institutional investors and may invest in reverse repurchase
agreements.
Additional information on the particular types of securities in which
certain Funds may invest in is set forth below.
Asset-Backed Securities
In General. Asset-backed securities arise through the grouping by
governmental, government-related, and private organizations of loans,
receivables, or other assets originated by various lenders. Asset-backed
securities consist of both mortgage- and non-mortgage-backed securities.
Interests in pools of these assets may differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal paid at maturity or specified call dates. Conversely,
asset-backed securities provide periodic payments which may consist of both
interest and principal payments.
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<PAGE>
The life of an asset-backed security varies depending upon the rate of the
prepayment of the underlying debt instruments. The rate of such prepayments will
be a function of current market interest rates, and other economic and
demographic factors. For example, falling interest rates generally result in an
increase in the rate of prepayments of mortgage loans while rising interest
rates generally decrease the rate of prepayments. An acceleration in prepayments
in response to sharply falling interest rates will shorten the security's
average maturity and limit the potential appreciation in the security's value
relative to a conventional debt security. Consequently, asset-backed securities
may not be as effective in locking in high, long-term yields. Conversely, in
periods of sharply rising rates, prepayments are generally slow, increasing the
security's average life and its potential for price depreciation.
Mortgage-Backed Securities. Mortgage-backed securities represent an
ownership interest in a pool of mortgage loans.
Mortgage pass-through securities may represent participation interests in
pools of residential mortgage loans originated by U.S. governmental or private
lenders and guaranteed, to the extent provided in such securities, by the U.S.
Government or one of its agencies, authorities or instrumentalities. Such
securities, which are ownership interests in the underlying mortgage loans,
differ from conventional debt securities, which provide for periodic payment of
interest in fixed amounts (usually semi-annually) and principal payments at
maturity or on specified call dates. Mortgage pass-through securities provide
for monthly payments that are a "pass-through" of the monthly interest and
principal payments (including any prepayments) made by the individual borrowers
on the pooled mortgage loans, net of any fees paid to the guarantor of such
securities and the servicer of the underlying mortgage loans.
The guaranteed mortgage pass-through securities in which a Fund may invest
may include those issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac.
Such Certificates are mortgage-backed securities which represent a partial
ownership interest in a pool of mortgage loans issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations. Such
mortgage loans may have fixed or adjustable rates of interest.
The average life of a mortgage-backed security is likely to be
substantially less than the original maturity of the mortgage pools underlying
the securities. Prepayments of principal by mortgagors and mortgage foreclosures
will usually result in the return of the greater part of principal invested far
in advance of the maturity of the mortgages in the pool.
The yield which will be earned on mortgage-backed securities may vary from
their coupon rates for the following reasons: (i) Certificates may be issued at
a premium or discount, rather than at par; (ii) Certificates may trade in the
secondary market at a premium or discount after issuance; (iii) interest is
earned and compounded monthly, which has the effect of raising the effective
yield earned on the Certificates; and (iv) the actual yield of each Certificate
is affected by the prepayment of mortgages included in the mortgage pool
underlying the Certificates and the rate at which principal so prepaid is
reinvested. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium may result in a loss to the
Fund.
Mortgage-backed securities issued by private issuers, whether or not such
obligations are subject to guarantees by the private issuer, may entail greater
risk than obligations directly or indirectly guaranteed by the U.S. Government.
13
<PAGE>
Collateralized mortgage obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities (collateral
collectively hereinafter referred to as "Mortgage Assets"). Multi-class
pass-through securities are interests in a trust composed of Mortgage Assets and
all references herein to CMOs will include multi-class pass-through securities.
Payments of principal of and interest on the Mortgage Assets, and any
reinvestment income thereon, provide the funds to pay debt service on the CMOs
or make scheduled distribution on the multi-class pass-through securities.
Moreover, principal prepayments on the Mortgage Assets may cause the CMOs
to be retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of the premium if any has
been paid. Interest is paid or accrues on all classes of the CMOs on a monthly,
quarterly or semiannual basis.
The principal and interest payments on the Mortgage Assets may be
allocated among the various classes of CMOs in several ways. Typically, payments
of principal, including any prepayments, on the underlying mortgages are applied
to the classes in the order of their respective stated maturities or final
distribution dates, so that no payment of principal is made on CMOs of a class
until all CMOs of other classes having earlier stated maturities or final
distribution dates have been paid in full.
Stripped mortgage-backed securities ("SMBS") are derivative multi-class
mortgage securities. A Fund will only invest in SMBS that are obligations backed
by the full faith and credit of the U.S. Government. SMBS are usually structured
with two classes that receive different proportions of the interest and
principal distributions from a pool of mortgage assets. A Fund will only invest
in SMBS whose mortgage assets are U.S. Government obligations.
A common type of SMBS will be structured so that one class receives some
of the interest and most of the principal from the mortgage assets, while the
other class receives most of the interest and the remainder of the principal. If
the underlying mortgage assets experience greater than anticipated prepayments
of principal, a Fund may fail to fully recoup its initial investment in these
securities. The market value of any class which consists primarily or entirely
of principal payments generally is unusually volatile in response to changes in
interest rates.
The average life of mortgage-backed securities varies with the maturities
of the underlying mortgage instruments. The average life is likely to be
substantially less than the original maturity of the mortgage pools underlying
the securities as the result of mortgage prepayments, mortgage refinancings, or
foreclosures. The rate of mortgage prepayments, and hence the average life of
the certificates, will be a function of the level of interest rates, general
economic conditions, the location and age of the mortgage and other social and
demographic conditions. Such prepayments are passed through to the registered
holder with the regular monthly payments of principal and interest and have the
effect of reducing future payments. Estimated average life will be determined by
the Adviser and used for the purpose of determining the average weighted
maturity and duration of the Funds.
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<PAGE>
Additional Information on Mortgage-Backed Securities.
Mortgage-backed securities represent an ownership interest in a pool of
residential mortgage loans. These securities are designed to provide monthly
payments of interest and principal to the investor. The mortgagor's monthly
payments to his/her lending institution are "passed-through" to an investor.
Most issuers or poolers provide guarantees of payments, regardless of whether or
not the mortgagor actually makes the payment. The guarantees made by issuers or
poolers are supported by various forms of credit collateral, guarantees or
insurance, including individual loan, title, pool and hazard insurance purchased
by the issuer. There can be no assurance that the private issuers or poolers can
meet their obligations under the policies. Mortgage-backed securities issued by
private issuers or poolers, whether or not such securities are subject to
guarantees, may entail greater risk than securities directly or indirectly
guaranteed by the U.S. Government.
Interests in pools of mortgage-backed securities differ from other forms
of debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment which consists of both
interest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their residential
mortgage loans, net of any fees paid. Additional payments are caused by
repayments resulting from the sale of the underlying residential property,
refinancing or foreclosure net of fees or costs which may be incurred. Some
mortgage-backed securities are described as "modified pass-through." These
securities entitle the holders to receive all interest and principal payments
owed on the mortgages in the pool, net of certain fees, regardless of whether or
not the mortgagors actually make the payments.
Residential mortgage loans are pooled by the Federal Home Loan Mortgage
Corporation (FHLMC). FHLMC is a corporate instrumentality of the U.S. Government
and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its stock is owned by
the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PC's"), which represent interests in mortgages from FHLMC's national
portfolio. FHLMC guarantees the timely payment of interest and ultimate
collection of principal.
The Federal National Mortgage Association (FNMA) is a Government sponsored
corporation owned entirely by private stockholders. It is subject to general
regulation by the Secretary of Housing and Urban Development. FNMA purchases
residential mortgages from a list of approved sellers/servicers which include
state and federally-chartered savings and loan associations, mutual savings
banks, commercial banks and credit unions and mortgage bankers. Pass-through
securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA.
The principal Government guarantor of mortgage-backed securities is the
Government National Mortgage Association (GNMA). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued by
approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.
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Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than Government and Government-related pools because there are no
direct or indirect Government guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title, pool
and hazard insurance purchased by the issuer. The insurance and guarantees are
issued by Governmental entities, private insurers, and the mortgage poolers.
There can be no assurance that the private insurers or mortgage poolers can meet
their obligations under the policies.
The Fund expects that Governmental or private entities may create mortgage
loan pools offering pass-through investments in addition to those described
above. The mortgages underlying these securities may be alternative mortgage
instruments, that is, mortgage instruments whose principal or interest payment
may vary or whose terms to maturity may be shorter than previously customary. As
new types of mortgage-backed securities are developed and offered to investors,
certain Funds will, consistent with their investment objective and policies,
consider making investments in such new types of securities.
Underlying Mortgages
Pools consist of whole mortgage loans or participations in loans. The
majority of these loans are made to purchasers of 1-4 family homes. The terms
and characteristics of the mortgage instruments are generally uniform within a
pool but may vary among pools. For example, in addition to fixed-rate,
fixed-term mortgages, a Fund may purchase pools of variable-rate mortgages
(VRM), growing equity mortgages (GEM), graduated payment mortgages (GPM) and
other types where the principal and interest payment procedures vary. VRM's are
mortgages which reset the mortgage's interest rate periodically with changes in
open market interest rates. To the extent that the Fund is actually invested in
VRM's, the Fund's interest income will vary with changes in the applicable
interest rate on pools of VRM's. GPM and GEM pools maintain constant interest
rates, with varying levels of principal repayment over the life of the mortgage.
These different interest and principal payment procedures should not impact the
Fund's net asset value since the prices at which these securities are valued
will reflect the payment procedures.
All poolers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Poolers also establish
credit standards and underwriting criteria for individual mortgages included in
the pools. In addition, some mortgages included in pools are insured through
private mortgage insurance companies.
Average Life
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage, and other social and demographic conditions.
As prepayment rates of individual pools vary widely, it is not possible to
accurately predict the average life of a particular pool. For pools of
fixed-rated 30-year mortgages, common industry practice is to assume that
prepayments will result in a 12-year average life. Pools of mortgages with other
maturities or different characteristics will have varying assumptions for
average life.
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Returns on Mortgage-Backed Securities
Yields on mortgage-backed pass-through securities are typically quoted
based on the maturity of the underlying instruments and the associated average
life assumption. Actual prepayment experience may cause the yield to differ from
the assumed average life yield.
Reinvestment of prepayments may occur at higher or lower interest rates than
the original investment, thus affecting the yields of the Fund. The compounding
effect from reinvestments of monthly payments received by the Fund will increase
its yield to shareholders, compared to bonds that pay interest semi-annually.
Non-Mortgage Asset-backed Securities. Non-mortgage asset-backed securities
include interests in pools of receivables, such as motor vehicle installment
purchase obligations and credit card receivables. Such securities are generally
issued as pass-through certificates, which represent undivided fractional
ownership interests in the underlying pools of assets. Such securities also may
be debt instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt. Such securities also
may include instruments issued by certain trusts, partnerships or other special
purpose issuers, including pass-through certificates representing participations
in, or debt instruments backed by, the securities and other assets owned by such
issuers.
Non-mortgage-backed securities are not issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; however, the payment of
principal and interest on such obligations may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution (such as a bank or insurance company) unaffiliated with
the issuers of such securities.
The purchase of non-mortgage-backed securities raises considerations
peculiar to the financing of the instruments underlying such securities. For
example, most organizations that issue asset-backed securities relating to motor
vehicle installment purchase obligations perfect their interests in their
respective obligations only by filing a financing statement and by having the
servicer of the obligations, which is usually the originator, take custody
thereof. In such circumstances, if the servicer were to sell the same
obligations to another party, in violation of its duty not to do so, there is a
risk that such party could acquire an interest in the obligations superior to
that of the holders of the Asset-backed Securities. Also, although most such
obligations grant a security interest in the motor vehicle being financed, in
most states the security interest in a motor vehicle must be noted on the
certificate of title to perfect such security interest against competing claims
of other parties. Due to the larger number of vehicles involved, however, the
certificate of title to each vehicle financed, pursuant to the obligations
underlying the Asset-backed Securities, usually is not amended to reflect the
assignment of the seller's security interest for the benefit of the holders of
the Asset-backed Securities. Therefore, there is the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities. In addition, various state and Federal laws give
the motor vehicle owner the right to assert against the holder of the owner's
obligation certain defenses such owner would have against the seller of the
motor vehicle. The assertion of such defenses could reduce payments on the
related Asset-backed Securities. Insofar as credit card receivables are
concerned, credit card holders are entitled to the protection of a number of
state and Federal consumer credit laws, many of which give such holders the
right to set off certain amounts against balances owed on the credit card,
thereby reducing the amounts paid on such receivables. In addition, unlike most
other Asset-backed Securities, credit card receivables are unsecured obligations
of the card holder.
While the market for Asset-backed Securities is becoming increasingly
liquid, the market for mortgage-backed securities issued by certain private
organizations and non-mortgage-backed securities is not as well developed. As
stated above, the Adviser intends to limit its purchases of mortgage-backed
securities issued by certain private organizations and non-mortgage-backed
securities to securities that are readily marketable at the time of purchase.
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Borrowings
NFT, NFI and NFP participate in an uncommitted line of credit provided by
The Bank of New York under a line of credit agreement (the "Agreement").
Advances under the Agreement are taken primarily for temporary or emergency
purposes, including the meeting of redemption requests that otherwise might
require the untimely disposition of securities. Interest on borrowings is
payable at the federal funds rate plus .50% on an annualized basis. The
Agreement requires, among other things, that each participating Fund maintain a
ratio of no less than 4 to 1 net assets (not including funds borrowed pursuant
to the Agreement) to the aggregate amount of indebtedness pursuant to the
Agreement. Specific borrowings by a Fund under the Agreement over the last
fiscal year, if any, can by found in the Funds' Annual Reports for the year
ended March 31, 1999.
Commercial Instruments
Commercial Instruments consist of short-term U.S. dollar-denominated
obligations issued by domestic corporations or issued in the U.S. by foreign
corporations and foreign commercial banks. The Prime Fund will limit purchases
of commercial instruments to instruments which: (a) if rated by at least two
Nationally Rated Statistical Rating Organizations ("NRSROs"), are rated in the
highest rating category for short-term debt obligations given by such
organizations, or if only rated by one such organization, are rated in the
highest rating category for short-term debt obligations given by such
organization; or (b) if not rated, are (i) comparable in priority and security
to a class of short-term instruments of the same issuer that has such rating(s),
or (ii) of comparable quality to such instruments as determined by NFI's Board
of Directors on the advice of the Adviser.
Investments by a Fund in commercial paper will consist of issues rated in
a manner consistent with such Fund's investment policies and objectives. In
addition, the Funds may acquire unrated commercial paper and corporate bonds
that are determined by the Adviser at the time of purchase to be of comparable
quality to rated instruments that may be acquired by such Funds as previously
described.
Variable-rate master demand notes are unsecured instruments that permit
the indebtedness thereunder to vary and provide for periodic adjustments in the
interest rate. While some of these notes are not rated by credit rating
agencies, issuers of variable rate master demand notes must satisfy the Adviser
that similar criteria to that set forth above with respect to the issuers of
commercial paper purchasable by the Prime Fund are met. Variable-rate
instruments acquired by a Fund will be rated at a level consistent with such
Fund's investment objective and policies of high quality as determined by a
major rating agency or, if not rated, will be of comparable quality as
determined by the Adviser. See also the discussion of variable- and
floating-rate instruments in this SAI.
Variable- and floating-rate instruments are unsecured instruments that
permit the indebtedness thereunder to vary. While there may be no active
secondary market with respect to a particular variable or floating rate
instrument purchased by a Fund, a Fund may, from time to time as specified in
the instrument, demand payment of the principal or may resell the instrument to
a third party. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of an instrument if the issuer defaulted on its
payment obligation or during periods when a Fund is not entitled to exercise its
demand rights, and a Fund could, for these or other reasons, suffer a loss. A
Fund may invest in variable and floating rate instruments only when the Adviser
deems the investment to involve minimal credit risk. If such instruments are not
rated, the Adviser will consider the earning power, cash flows, and other
liquidity ratios of the issuers of such instruments and will continuously
monitor their financial status to meet payment on demand. In determining average
weighted portfolio maturity, an instrument will be deemed to have a maturity
equal to the longer of the period remaining to the next interest rate adjustment
or the demand notice period specified in the instrument.
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Certain Funds also may purchase short-term participation interests in
loans extended by banks to companies, provided that both such banks and such
companies meet the quality standards set forth above. In purchasing a loan
participation or assignment, the Fund acquires some or all of the interest of a
bank or other lending institution in a loan to a corporate borrower. Many such
loans are secured and most impose restrictive covenants which must be met by the
borrower and which are generally more stringent than the covenants available in
publicly traded debt securities. However, interests in some loans may not be
secured, and the Fund will be exposed to a risk of loss if the borrower
defaults. Loan participations also may be purchased by the Fund when the
borrowing company is already in default. In purchasing a loan participation, the
Fund may have less protection under the federal securities laws than it has in
purchasing traditional types of securities. The Fund's ability to assert its
rights against the borrower will also depend on the particular terms of the loan
agreement among the parties.
Combined Transactions
Certain Funds may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple forward foreign
currency exchange contracts and any combination of futures, options and forward
foreign currency exchange contracts ("component" transactions), instead of a
single transaction, as part of a single hedging strategy when, in the opinion of
the Adviser, it is in the best interest of a Fund to do so and where underlying
hedging strategies are permitted by a Fund's investment policies. A combined
transaction, while part of a single hedging strategy, may contain elements of
risk that are present in each of its component transactions. (See above for the
risk characteristics of certain transactions.)
Convertible Securities
Certain Funds may invest in convertible securities, such as bonds, notes,
debentures, preferred stocks and other securities that may be converted into
common stock. All convertible securities purchased by the Fund will be rated in
the top two categories by an Nationally Recognized Statistical Rating
Organization ("NRSRO") or, if unrated, determined by the Adviser to be of
comparable quality. Investments in convertible securities can provide income
through interest and dividend payments, as well as, an opportunity for capital
appreciation by virtue of their conversion or exchange features.
The convertible securities in which a Fund may invest include fixed-income
and zero coupon debt securities, and preferred stock that may be converted or
exchanged at a stated or determinable exchange ratio into underlying shares of
common stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
corporate distributions or scheduled changes in the exchange ratio. Convertible
debt securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities, generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stock changes, and, therefore, also
tends to follow movements in the general market for equity securities. A unique
feature of convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying common
stock increases, the price of a convertible security tends to rise as a
reflection of the value of the underlying common stock, although typically not
as much as the price of the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
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As debt securities, convertible securities are investments which provide
for a stream of income or, in the case of zero coupon securities, accretion of
income with generally higher yields than common stocks. Of course, like all debt
securities, there can be no assurance of income or principal payments because
the issuers of the convertible securities may default on their obligations.
Convertible securities generally offer lower yields than non-convertible
securities of similar quality because of their conversion exchange features.
Convertible securities generally are subordinated to other similar debt
securities but not to non-convertible securities of the same issuer. Convertible
bonds, as corporate debt obligations, are senior in right of payment to all
equity securities, and convertible preferred stock is senior to common stock, of
the same issuer. However, convertible bonds and convertible preferred stock
typically have lower coupon rates than similar non-convertible securities.
Convertible securities may be issued as fixed income obligations that pay
current income or as zero coupon notes and bonds, including Liquid Yield Option
Notes ("LYONs"). Zero coupon securities pay no cash income and are sold at
substantial discounts from their value at maturity. When held to maturity, their
entire income, which consists of accretion of discount, comes from the
difference between the issue price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation because
increases (or decreases) in the market value of such securities closely follow
the movements in the market value of the underlying common stock. Zero coupon
convertible securities generally are expected to be less volatile than the
underlying common stocks because they usually are issued with short maturities
(15 years or less) and are issued with options and/or redemption features
exercisable by the holder of the obligation entitling the holder to redeem the
obligation and receive a defined cash payment.
Corporate Debt Securities
Certain Funds may invest in corporate debt securities of domestic issuers
of all types and maturities, such as bonds, debentures, notes and commercial
paper. Corporate debt securities may involve equity features, such as conversion
or exchange rights or warrants for the acquisition of stock of the same or a
different issuer, participation based on revenue, sales or profit, or the
purchase of common stock or warrants in a unit transaction (where corporate debt
obligations and common stock are offered as a unit). Each Fund may also invest
in corporate debt securities of foreign issuers.
The corporate debt securities in which the Funds will invest will be rated
investment grade by at least one NRSRO (e.g., BBB or above by Standard & Poor's
Corporation ("S&P") or Baa or above by Moody's Investors Services, Inc.
("Moody's")). Commercial paper purchased by the Funds will be rated in the top
two categories by a NRSRO. Corporate debt securities that are not rated may be
purchased by such Funds if they are determined by the Adviser to be of
comparable quality under the direction of the Board of Directors of the Company.
If the rating of any corporate debt security held by a Fund falls below such
ratings or if the Adviser determines that an unrated corporate debt security is
no longer of comparable quality, then such security shall be disposed of in an
orderly manner as quickly as possible. A description of these ratings is
attached as Schedule A to this Statement of Additional Information.
Custodial Receipts
Certain Funds may also acquire custodial receipts that evidence ownership
of future interest payments, principal payments or both on certain U.S.
Government notes or bonds. Such notes and bonds are held in custody by a bank on
behalf of the owners. These custodial receipts are known by various names,
including "Treasury Receipts," "Treasury Investors Growth Receipts" and
"Certificates of Accrual on Treasury Securities." Although custodial receipts
are not considered U.S. Government securities, they are indirectly issued or
guaranteed as to principal and interest by the U.S. Government, its agencies,
authorities or instrumentalities. Custodial receipts will be treated as illiquid
securities.
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Currency Swaps
Certain Funds also may enter into currency swaps for hedging purposes and
to seek to increase total return. In as much as swaps are entered into for good
faith hedging purposes or are offset by a segregated account as described below,
the Fund and the Adviser believe that swaps do not constitute senior securities
as defined in the 1940 Act and, accordingly, will not treat them as being
subject to the Fund's borrowing restrictions. The net amount of the excess, if
any, of the Fund's obligations over its entitlement with respect to each
currency swap will be accrued on a daily basis and an amount of cash or liquid
high grade debt securities (i.e., securities rated in one of the top three
ratings categories by an NRSRO, or, if unrated, deemed by the Adviser to be of
comparable credit quality) having an aggregate net asset value at least equal to
such accrued excess will be maintained in a segregated account by the Fund's
custodian. The Fund will not enter into any currency swap unless the credit
quality of the unsecured senior debt or the claims-paying ability of the other
party thereto is considered to be investment grade by the Adviser.
Delayed Delivery Transactions
In a delayed delivery transaction, the Fund relies on the other party to
complete the transaction. If the transaction is not completed, the Fund may miss
a price or yield considered to be advantageous. In delayed delivery
transactions, delivery of the securities occurs beyond normal settlement
periods, but a Fund would not pay for such securities or start earning interest
on them until they are delivered. However, when a Fund purchases securities on
such a delayed delivery basis, it immediately assumes the risk of ownership,
including the risk of price fluctuation. Failure by a counterparty to deliver a
security purchased on a delayed delivery basis may result in a loss or missed
opportunity to make an alternative investment. Depending upon market conditions,
a Fund's delayed delivery purchase commitments could cause its net asset value
to be more volatile, because such securities may increase the amount by which
the Fund's total assets, including the value of when-issued and delayed delivery
securities held by the Fund, exceed its net assets.
Dollar Roll Transactions
Certain Funds may enter into "dollar roll" transactions, which consist of
the sale by a Fund to a bank or broker/dealer (the "counterparty") of GNMA
certificates or other mortgage-backed securities together with a commitment to
purchase from the counterparty similar, but not identical, securities at a
future date, at the same price. The counterparty receives all principal and
interest payments, including prepayments, made on the security while it is the
holder. A Fund receives a fee from the counterparty as consideration for
entering into the commitment to purchase. Dollar rolls may be renewed over a
period of several months with a different repurchase price and a cash settlement
made at each renewal without physical delivery of securities. Moreover, the
transaction may be preceded by a firm commitment agreement pursuant to which the
Fund agrees to buy a security on a future date. If the broker/dealer to whom a
Fund sells the security becomes insolvent, the Fund's right to purchase or
repurchase the security may be restricted; the value of the security may change
adversely over the term of the dollar roll; the security that the Fund is
required to repurchase may be worth less than the security that the Fund
originally held, and the return earned by the Fund with the proceeds of a dollar
roll may not exceed transaction costs.
The entry into dollar rolls involves potential risks of loss that are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Fund's right to purchase
from the counterparty might be restricted. Additionally, the value of such
securities may change adversely before the Fund is able to purchase them.
Similarly, the Fund may be required to purchase securities in connection with a
dollar roll at a higher price than may otherwise be available on the open
market. Since, as noted above, the counterparty is required to deliver a
similar, but not identical security to the Fund, the security that the Fund is
required to buy under the dollar roll may be worth less than an identical
security. Finally, there can be no assurance that the Fund's use of the cash
that it receives from a dollar roll will provide a return that exceeds borrowing
costs.
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Equity Swap Contracts
Certain Funds may from time to time enter into equity swap contracts. The
counterparty to an equity swap contract will typically be a bank, investment
banking firm or broker/dealer. For example, the counterparty will generally
agree to pay a Fund the amount, if any, by which the notional amount of the
Equity Swap Contract would have increased in value had it been invested in the
stocks comprising the S&P 500 Index in proportion to the composition of the
Index, plus the dividends that would have been received on those stocks. A Fund
will agree to pay to the counterparty a floating rate of interest (typically the
London Inter Bank Offered Rate) on the notional amount of the Equity Swap
Contract plus the amount, if any, by which that notional amount would have
decreased in value had it been invested in such stocks. Therefore, the return to
a Fund on any Equity Swap Contract should be the gain or loss on the notional
amount plus dividends on the stocks comprising the S&P 500 Index less the
interest paid by the Fund on the notional amount. A Fund will only enter into
Equity Swap Contracts on a net basis, i.e., the two parties' obligations are
netted out, with the Fund paying or receiving, as the case may be, only the net
amount of any payments. Payments under the Equity Swap Contracts may be made at
the conclusion of the contract or periodically during its term.
If there is a default by the counterparty to an Equity Swap Contract, a
Fund will be limited to contractual remedies pursuant to the agreements related
to the transaction. There is no assurance that Equity Swap Contract
counterparties will be able to meet their obligations pursuant to Equity Swap
Contracts or that, in the event of default, a Fund will succeed in pursuing
contractual remedies. A Fund thus assumes the risk that it may be delayed in or
prevented from obtaining payments owed to it pursuant to Equity Swap Contracts.
A Fund will closely monitor the credit of Equity Swap Contract counterparties in
order to minimize this risk.
Certain Funds may from time to time enter into the opposite side of Equity
Swap Contracts (i.e., where a Fund is obligated to pay the increase (net of
interest) or receive the decrease (plus interest) on the contract to reduce the
amount of the Fund's equity market exposure consistent with the Fund's
objective. These positions are sometimes referred to as Reverse Equity Swap
Contracts.
Equity Swap Contracts will not be used to leverage a Fund. A Fund will not
enter into any Equity Swap Contract or Reverse Equity Swap Contract unless, at
the time of entering into such transaction, the unsecured senior debt of the
counterparty is rated at least A by Moody's or S&P. Since the SEC considers
Equity Swap Contracts and Reverse Equity Swap Contracts to be illiquid
securities, a Fund will not invest in Equity Swap Contracts or Reverse Equity
Swap Contracts if the total value of such investments together with that of all
other illiquid securities which a Fund owns would exceed 15% of the Fund's total
assets.
The Adviser does not believe that a Fund's obligations under Equity Swap
Contracts or Reverse Equity Swap Contracts are senior securities and,
accordingly, the Fund will not treat them as being subject to its borrowing
restrictions. However, the net amount of the excess, if any, of a Fund's
obligations over its respective entitlements with respect to each Equity Swap
Contract and each Reverse Equity Swap Contract will be accrued on a daily basis
and an amount of cash, U.S. Government securities or other liquid high quality
debt securities having an aggregate market value at least equal to the accrued
excess will be maintained in a segregated account by the Fund's custodian.
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Foreign Currency Transactions
Certain Funds may invest in foreign currency transactions. Foreign
securities involve currency risks. The U.S. dollar value of a foreign security
tends to decrease when the value of the U.S. dollar rises against the foreign
currency in which the security is denominated, and tends to increase when the
value of the U.S. dollar falls against such currency. A Fund may purchase or
sell forward foreign currency exchange contracts ("forward contracts") to
attempt to minimize the risk to the Fund from adverse changes in the
relationship between the U.S. dollar and foreign currencies. A Fund may also
purchase and sell foreign currency futures contracts and related options (see
"Purchase and Sale of Currency Futures Contracts and Related Options"). A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date that is individually negotiated and privately
traded by currency traders and their customers.
Forward foreign currency exchange contracts establish an exchange rate at
a future date. These contracts are transferable in the interbank market
conducted directly between currency traders (usually large commercial banks) and
their customers. A forward foreign currency exchange contract generally has no
deposit requirement, and is traded at a net price without commission. A Fund
will direct its custodian to segregate high grade liquid assets in an amount at
least equal to its obligations under each forward foreign currency exchange
contract. Neither spot transactions nor forward foreign currency exchange
contracts eliminate fluctuations in the prices of a Fund's portfolio securities
or in foreign exchange rates, or prevent loss if the prices of these securities
should decline.
A Fund may enter into a forward contract, for example, when it enters into
a contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security (a
"transaction hedge"). In addition, when the Adviser believes that a foreign
currency may suffer a substantial decline against the U.S. dollar, it may enter
into a forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency, or when the Adviser believes that the U.S. dollar may
suffer a substantial decline against the foreign currency, it may enter into a
forward purchase contract to buy that foreign currency for a fixed dollar amount
(a "position hedge").
A Fund may, however, enter into a forward contract to sell a different
foreign currency for a fixed U.S. dollar amount where the Adviser believes that
the U.S. dollar value of the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the U.S. dollar value of the
currency in which the fund securities are denominated (a "cross-hedge").
Foreign currency hedging transactions are an attempt to protect a Fund
against changes in foreign currency exchange rates between the trade and
settlement dates of specific securities transactions or changes in foreign
currency exchange rates that would adversely affect a portfolio position or an
anticipated portfolio position. Although these transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, at the same
time they tend to limit any potential gain that might be realized should the
value of the hedged currency increase. The precise matching of the forward
contract amount and the value of the securities involved will not generally be
possible because the future value of these securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and date it matures.
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The Fund's custodian will segregate cash, U.S. Government securities or
other high-quality debt securities having a value equal to the aggregate amount
of the Fund's commitments under forward contracts entered into with respect to
position hedges and cross-hedges. If the value of the segregated securities
declines, additional cash or securities will be segregated on a daily basis so
that the value of the segregated securities will equal the amount of the Fund's
commitments with respect to such contracts. As an alternative to segregating all
or part of such securities, the Fund may purchase a call option permitting the
Fund to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price or the Fund may
purchase a put option permitting the Fund to sell the amount of foreign currency
subject to a forward purchase contract at a price as high or higher than the
forward contract price.
The Funds are dollar-denominated mutual funds and therefore consideration
is given to hedging part or all of the portfolio back to U.S. dollars from
international currencies. All decisions to hedge are based upon an analysis of
the relative value of the U.S. dollar on an international purchasing power
parity basis (purchasing power parity is a method for determining the relative
purchasing power of different currencies by comparing the amount of each
currency required to purchase a typical bundle of goods and services to domestic
markets) and an estimation of short-term interest rate differentials (which
affect both the direction of currency movements and also the cost of hedging).
Futures, Options and Other Derivative Instruments
Futures Contracts in General. A futures contract is an agreement between
two parties for the future delivery of fixed income securities or equity
securities or for the payment or acceptance of a cash settlement in the case of
futures contracts on an index of fixed income or equity securities. A "sale" of
a futures contract means the contractual obligation to deliver the securities at
a specified price on a specified date, or to make the cash settlement called for
by the contract. Futures contracts have been designed by exchanges which have
been designated "contract markets" by the Commodity Futures Trading Commission
("CFTC") and must be executed through a brokerage firm, known as a futures
commission merchant, which is a member of the relevant contract market. Futures
contracts trade on these markets, and the exchanges, through their clearing
organizations, guarantee that the contracts will be performed as between the
clearing members of the exchange. Presently, futures contracts are based on such
debt securities as long-term U.S. Treasury Bonds, Treasury Notes, GNMA modified
pass-through mortgage-backed securities, three-month U.S. Treasury Bills, bank
certificates of deposit, and on indices of municipal, corporate and government
bonds.
While futures contracts based on securities do provide for the delivery
and acceptance of securities, such deliveries and acceptances are seldom made.
Generally, a futures contract is terminated by entering into an offsetting
transaction. A Fund will incur brokerage fees when it purchases and sells
futures contracts. At the time such a purchase or sale is made, a Fund must
provide cash or money market securities as a deposit known as "margin." The
initial deposit required will vary, but may be as low as 2% or less of a
contract's face value. Daily thereafter, the futures contract is valued through
a process known as "marking to market," and a Fund that engages in futures
transactions may receive or be required to pay "variation margin" as the futures
contract becomes more or less valuable. At the time of delivery of securities
pursuant to a futures contract based on securities, adjustments are made to
recognize differences in value arising from the delivery of securities with a
different interest rate than the specific security that provides the standard
for the contract. In some (but not many) cases, securities called for by a
futures contract may not have been issued when the contract was written.
Futures contracts on indices of securities are settled through the making
and acceptance of cash settlements based on changes in value of the underlying
rate or index between the time the contract is entered into and the time it is
liquidated.
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Futures Contracts on Fixed Income Securities and Related Indices. As noted
in their respective Prospectuses, certain Funds may enter into transactions in
futures contracts for the purpose of hedging a relevant portion of their
portfolios. A Fund may enter into transactions in futures contracts that are
based on U.S. Government obligations, including any index of government
obligations that may be available for trading. Such transactions will be entered
into where movements in the value of the securities or index underlying a
futures contract can be expected to correlate closely with movements in the
value of securities held in a Fund. For example, a Fund may sell futures
contracts in anticipation of a general rise in the level of interest rates,
which would result in a decline in the value of its fixed income securities. If
the expected rise in interest rates occurs, the Fund may realize gains on its
futures position, which should offset all or part of the decline in value of
fixed income fund securities. A Fund could protect against such decline by
selling fixed income securities, but such a strategy would involve higher
transaction costs than the sale of futures contracts and, if interest rates
again declined, the Fund would be unable to take advantage of the resulting
market advance without purchases of additional securities.
The purpose of the purchase or sale of a futures contract on government
securities and indices of government securities, in the case of the
above-referenced Funds, which hold or intend to acquire long-term debt
securities, is to protect a Fund from fluctuations in interest rates without
actually buying or selling long-term debt securities. For example, if long-term
bonds are held by a Fund, and interest rates were expected to increase, the Fund
might enter into futures contracts for the sale of debt securities. Such a sale
would have much the same effect as selling an equivalent value of the long-term
bonds held by the Fund. If interest rates did increase, the value of the debt
securities in the Fund would decline, but the value of the futures contracts to
the Fund would increase at approximately the same rate thereby keeping the net
asset value of the Fund from declining as much as it otherwise would have. When
a Fund is not fully invested and a decline in interest rates is anticipated,
which would increase the cost of fixed income securities that the Fund intends
to acquire, it may purchase futures contracts. In the event that the projected
decline in interest rates occurs, the increased cost of the securities acquired
by the Fund should be offset, in whole or part, by gains on the futures
contracts by entering into offsetting transactions on the contract market on
which the initial purchase was effected. In a substantial majority of
transactions involving futures contracts on fixed income securities, a Fund will
purchase the securities upon termination of the long futures positions, but
under unusual market conditions, a long futures position may be terminated
without a corresponding purchase of securities.
Similarly, when it is expected that interest rates may decline, futures
contracts on fixed income securities and indices of government securities may be
purchased for the purpose of hedging against anticipated purchases of long-term
bonds at higher prices. Since the fluctuations in the value of such futures
contracts should be similar to that of long-term bonds, a Fund could take
advantage of the anticipated rise in the value of long-term bonds without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Fund's cash reserves could then be used to
buy long-term bonds in the cash market. Similar results could be accomplished by
selling bonds with long maturities and investing in bonds with short maturities
when interest rates are expected to increase. However, since the futures market
is more liquid than the cash market, the use of these futures contracts as an
investment technique allows a Fund to act in anticipation of such an interest
rate decline without having to sell its portfolio securities. To the extent a
Fund enters into futures contracts for this purpose, the segregated assets
maintained by a Fund will consist of cash, cash equivalents or high quality debt
securities of the Fund in an amount equal to the difference between the
fluctuating market value of such futures contract and the aggregate value of the
initial deposit and variation margin payments made by the Fund with respect to
such futures contracts.
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Stock Index Futures Contracts. Certain Funds may sell stock index futures
contracts in order to offset a decrease in market value of its securities that
might otherwise result from a market decline. A Fund may do so either to hedge
the value of its portfolio as a whole, or to protect against declines, occurring
prior to sales of securities, in the value of securities to be sold. Conversely,
a Fund may purchase stock index futures contracts in order to protect against
anticipated increases in the cost of securities to be acquired.
In addition, a Fund may utilize stock index futures contracts in
anticipation of changes in the composition of its portfolio. For example, in the
event that a Fund expects to narrow the range of industry groups represented in
its portfolio, it may, prior to making purchases of the actual securities,
establish a long futures position based on a more restricted index, such as an
index comprised of securities of a particular industry group. As such securities
are acquired, a Fund's futures positions would be closed out. A Fund may also
sell futures contracts in connection with this strategy, in order to protect
against the possibility that the value of the securities to be sold as part of
the restructuring of its portfolio will decline prior to the time of sale.
Options on Futures Contracts. An option on a futures contract gives the
purchaser (the "holder") the right, but not the obligation, to purchase a
position in the underlying futures contract (i.e., a purchase of such futures
contract) in the case of an option to purchase (a "call" option), or a "short"
position in the underlying futures contract (i.e., a sale of such futures
contract) in the case of an option to sell (a "put" option), at a fixed price
(the "strike price") up to a stated expiration date. The holder pays a
non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchase of the option assumes is equal to the
premium plus related transaction costs, although this entire amount may be lost.
Upon exercise of the option by the holder, the exchange clearing corporation
establishes a corresponding long position in the case of a put option. In the
event that an option is exercised, the parties will be subject to all the risks
associated with the trading of futures contracts, such as payment of variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
Options on Futures Contracts on Fixed Income Securities and Related
Indices. Certain Funds may purchase put options on futures contracts in which
such Funds are permitted to invest for the purpose of hedging a relevant portion
of their portfolios against an anticipated decline in the values of portfolio
securities resulting from increases in interest rates, and may purchase call
options on such futures contracts as a hedge against an interest rate decline
when they are not fully invested. A Fund would write options on these futures
contracts primarily for the purpose of terminating existing positions.
Options on Stock Index Futures Contracts, Options on Stock Indices and
Options on Equity Securities. Certain Funds may purchase put options on stock
index futures contracts, stock indices or equity securities for the purpose of
hedging the relevant portion of their portfolio securities against an
anticipated market-wide decline or against declines in the values of individual
portfolio securities, and they may purchase call options on such futures
contracts as a hedge against a market advance when they are not fully invested.
A Fund would write options on such futures contracts primarily for the purpose
of terminating existing positions. In general, options on stock indices will be
employed in lieu of options on stock index futures contracts only where they
present an opportunity to hedge at lower cost. With respect to options on equity
securities, a Fund may, under certain circumstances, purchase a combination of
call options on such securities and U.S. Treasury bills. The Adviser believes
that such a combination may more closely parallel movements in the value of the
security underlying the call option than would the option itself.
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Further, while a Fund generally would not write options on individual
portfolio securities, it may do so under limited circumstances known as
"targeted sales" and "targeted buys," which involve the writing of call or put
options in an attempt to purchase or sell portfolio securities at specific
desired prices. A Fund would receive a fee, or a "premium," for the writing of
the option. For example, where the Fund seeks to sell portfolio securities at a
"targeted" price, it may write a call option at that price. In the event that
the market rises above the exercise price, it would receive its "targeted"
price, upon the exercise of the option, as well as the premium income. Also,
where it seeks to buy portfolio securities at a "targeted" price, it may write a
put option at that price for which it will receive the premium income. In the
event that the market declines below the exercise price, a Fund would pay its
"targeted" price upon the exercise of the option. In the event that the market
does not move in the direction or to the extent anticipated, however, the
targeted sale or buy might not be successful and a Fund could sustain a loss on
the transaction that may not be offset by the premium received. In addition, a
Fund may be required to forego the benefit of an intervening increase or decline
in value of the underlying security.
Options and Futures Strategies. The Adviser may seek to increase the
current return of certain Funds by writing covered call or put options. In
addition, through the writing and purchase of options and the purchase and sale
of U.S. and certain foreign stock index futures contracts, interest rate futures
contracts, foreign currency futures contracts and related options on such
futures contracts, the Adviser may at times seek to hedge against a decline in
the value of securities included in the Fund or an increase in the price of
securities that it plans to purchase for the Fund. Expenses and losses incurred
as a result of such hedging strategies will reduce the Fund's current return. A
Fund's investment in foreign stock index futures contracts and foreign interest
rate futures contracts, and related options on such futures contracts, are
limited to only those contracts and related options that have been approved by
the CFTC for investment by U.S. investors. Additionally, with respect to a
Fund's investment in foreign options, unless such options are specifically
authorized for investment by order of the CFTC or meet the definition of trade
options as set forth in CFTC Rule 32.4, a Fund will not make these investments.
The ability of a Fund to engage in the options and futures strategies
described below will depend on the availability of liquid markets in such
instruments. Markets in options and futures with respect to stock indices,
foreign government securities and foreign currencies are relatively new and
still developing. It is impossible to predict the amount of trading interest
that may exist in various types of options or futures. Therefore, no assurance
can be given that a Fund will be able to utilize these instruments effectively
for the purposes stated below. Furthermore, a Fund's ability to engage in
options and futures transactions may be limited by tax considerations. Although
a Fund will only engage in options and futures transactions for limited
purposes, these activities will involve certain risks which are described below
under "Risk Factors Associated with Futures and Options Transactions." A Fund
will not engage in options and futures transactions for leveraging purposes.
Writing Covered Options on Securities. Certain Funds may write covered
call options and covered put options on securities in which it is permitted to
invest from time to time as the Adviser determines is appropriate in seeking to
attain its objective. Call options written by a Fund give the holder the right
to buy the underlying securities from a Fund at a stated exercise price; put
options give the holder the right to sell the underlying security to the Fund at
a stated price.
A Fund may write only covered options, which means that, so long as the
Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, a Fund will
maintain in a separate account cash or short-term U.S. Government securities
with a value equal to or greater than the exercise price of the underlying
securities. A Fund may also write combinations of covered puts and calls on the
same underlying security.
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<PAGE>
A Fund will receive a premium from writing a put or call option, which
increases the Fund's return in the event the option expires unexercised or is
closed out at a profit. The amount of the premium will reflect, among other
things, the relationship of the market price of the underlying security to the
exercise price of the option, the term of the option and the volatility of the
market price of the underlying security. By writing a call option, a Fund limits
its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, the Fund assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
value, resulting in a potential capital loss if the purchase price exceeds the
market value plus the amount of the premium received, unless the security
subsequently appreciates in value.
A Fund may terminate an option that it has written prior to its expiration
by entering into a closing purchase transaction in which it purchases an option
having the same terms as the option written. A Fund will realize a profit or
loss from such transaction if the cost of such transaction is less or more than
the premium received from the writing of the option. In the case of a put
option, any loss so incurred may be partially or entirely offset by the premium
received from a simultaneous or subsequent sale of a different put option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by unrealized appreciation of the underlying security owned by a Fund.
Purchasing Put and Call Options on Securities. A Fund may purchase put
options to protect its portfolio holdings in an underlying security against a
decline in market value. Such hedge protection is provided during the life of
the put option since a Fund, as holder of the put option, is able to sell the
underlying security at the put exercise price regardless of any decline in the
underlying security's market price. In order for a put option to be profitable,
the market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs. By using put options
in this manner, a Fund will reduce any profit it might otherwise have realized
in its underlying security by the premium paid for the put option and by
transaction costs.
A Fund may also purchase call options to hedge against an increase in
prices of securities that it wants ultimately to buy. Such hedge protection is
provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. By using call options in this manner, a Fund will reduce any
profit it might have realized had it bought the underlying security at the time
it purchased the call option by the premium paid for the call option and by
transaction costs.
Purchase and Sale of Options and Futures on Stock Indices. A Fund may
purchase and sell options on non-U.S. stock indices and stock index futures as a
hedge against movements in the equity markets.
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<PAGE>
Options on stock indices are similar to options on specific securities
except that, rather than the right to take or make delivery of the specific
security at a specific price, an option on a stock index gives the holder the
right to receive, upon exercise of the option, an amount of cash if the closing
level of that stock index is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the exercise
price of the option expressed in dollars multiplied by a specified multiple. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike options on specific securities, all settlements
of options on stock indices are in cash and gain or loss depends on general
movements in the stocks included in the index rather than price movements in
particular stocks. A stock index futures contract is an agreement in which one
party agrees to deliver to the other an amount of cash equal to a specific
amount multiplied by the difference between the value of a specific stock index
at the close of the last trading day of the contract and the price at which the
agreement is made. No physical delivery of securities is made.
If the Adviser expects general stock market prices to rise, a Fund might
purchase a call option on a stock index or a futures contract on that index as a
hedge against an increase in prices of particular equity securities it wants
ultimately to buy. If in fact the stock index does rise, the price of the
particular equity securities intended to be purchased may also increase, but
that increase would be offset in part by the increase in the value of a Fund's
index option or futures contract resulting from the increase in the index. If,
on the other hand, the Adviser expects general stock market prices to decline, a
Fund might purchase a put option or sell a futures contract on the index. If
that index does in fact decline, the value of some or all of the equity
securities in a Fund may also be expected to decline, but that decrease would be
offset in part by the increase in the value of the Fund's position in such put
option or futures contract.
Purchase and Sale of Interest Rate Futures. A Fund may purchase and sell
interest rate futures contracts on foreign government securities including, but
not limited to, debt securities of the governments and central banks of France,
Germany, Denmark and Japan for the purpose of hedging fixed income and interest
sensitive securities against the adverse effects of anticipated movements in
interest rates.
A Fund may sell interest rate futures contracts in anticipation of an
increase in the general level of interest rates. Generally, as interest rates
rise, the market value of the fixed income securities held by a Fund will fall,
thus reducing the net asset value of the Fund. This interest rate risk can be
reduced without employing futures as a hedge by selling long-term fixed income
securities and either reinvesting the proceeds in securities with shorter
maturities or by holding assets in cash. This strategy, however, entails
increased transaction costs to a Fund in the form of dealer spreads and
brokerage commissions.
The sale of interest rate futures contracts provides an alternative means
of hedging against rising interest rates. As rates increase, the value of a
Fund's short position in the futures contracts will also tend to increase, thus
offsetting all or a portion of the depreciation in the market value of a Fund's
investments that are being hedged. While a Fund will incur commission expenses
in selling and closing out futures positions (which is done by taking an
opposite position which operates to terminate the position in the futures
contract), commissions on futures transactions are lower than transaction costs
incurred in the purchase and sale of portfolio securities.
Options on Stock Index Futures Contracts and Interest Rate Futures
Contracts. A Fund may purchase and write call and put options on non-U.S. stock
index and interest rate futures contracts. A Fund may use such options on
futures contracts in connection with its hedging strategies in lieu of
purchasing and writing options directly on the underlying securities or stock
indices or purchasing and selling the underlying futures. For example, a Fund
may purchase put options or write call options on stock index futures, or
interest rate futures, rather than selling futures contracts, in anticipation of
a decline in general stock market prices or rise in interest rates,
respectively, or purchase call options or write put options on stock index or
interest rate futures, rather than purchasing such futures, to hedge against
possible increases in the price of equity securities or debt securities,
respectively, which the Fund intends to purchase.
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<PAGE>
Purchase and Sale of Currency Futures Contracts and Related Options. In
order to hedge its portfolio and to protect it against possible variations in
foreign exchange rates pending the settlement of securities transactions, a Fund
may buy or sell currency futures contracts and related options. If a fall in
exchange rates for a particular currency is anticipated, a Fund may sell a
currency futures contract or a call option thereon or purchase a put option on
such futures contract as a hedge. If it is anticipated that exchange rates will
rise, a Fund may purchase a currency futures contract or a call option thereon
or sell (write) a put option to protect against an increase in the price of
securities denominated in a particular currency a Fund intends to purchase.
These futures contracts and related options thereon will be used only as a hedge
against anticipated currency rate changes, and all options on currency futures
written by a Fund will be covered.
A currency futures contract sale creates an obligation by a Fund, as
seller, to deliver the amount of currency called for in the contract at a
specified future time for a special price. A currency futures contract purchase
creates an obligation by a Fund, as purchaser, to take delivery of an amount of
currency at a specified future time at a specified price. Although the terms of
currency futures contracts specify actual delivery or receipt, in most instances
the contracts are closed out before the settlement date without the making or
taking of delivery of the currency. Closing out of a currency futures contract
is effected by entering into an offsetting purchase or sale transaction. Unlike
a currency futures contract, which requires the parties to buy and sell currency
on a set date, an option on a currency futures contract entitles its holder to
decide on or before a future date whether to enter into such a contract. If the
holder decides not to enter into the contract, the premium paid for the option
is fixed at the point of sale.
The Fund will write (sell) only covered put and call options on currency
futures. This means that a Fund will provide for its obligations upon exercise
of the option by segregating sufficient cash or short-term obligations or by
holding an offsetting position in the option or underlying currency future, or a
combination of the foregoing. A Fund will, so long as it is obligated as the
writer of a call option on currency futures, own on a contract-for-contract
basis an equal long position in currency futures with the same delivery date or
a call option on stock index futures with the difference, if any, between the
market value of the call written and the market value of the call or long
currency futures purchased maintained by a Fund in cash, Treasury bills, or
other high grade short-term obligations in a segregated account with its
custodian. If at the close of business on any day the market value of the call
purchased by a Fund falls below 100% of the market value of the call written by
the Fund, a Fund will so segregate an amount of cash, Treasury bills or other
high grade short-term obligations equal in value to the difference.
Alternatively, a Fund may cover the call option through segregating with the
custodian an amount of the particular foreign currency equal to the amount of
foreign currency per futures contract option times the number of options written
by a Fund. In the case of put options on currency futures written by the Fund,
the Fund will hold the aggregate exercise price in cash, Treasury bills, or
other high grade short-term obligations in a segregated account with its
custodian, or own put options on currency futures or short currency futures,
with the difference, if any, between the market value of the put written and the
market value of the puts purchased or the currency futures sold maintained by a
Fund in cash, Treasury bills or other high grade short-term obligations in a
segregated account with its custodian. If at the close of business on any day
the market value of the put options purchased or the currency futures by a Fund
falls below 100% of the market value of the put options written by the Fund, a
Fund will so segregate an amount of cash, Treasury bills or other high grade
short-term obligations equal in value to the difference.
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<PAGE>
If other methods of providing appropriate cover are developed, a Fund
reserves the right to employ them to the extent consistent with applicable
regulatory and exchange requirements. In connection with transactions in stock
index options, stock index futures, interest rate futures, foreign currency
futures and related options on such futures, a Fund will be required to deposit
as "initial margin" an amount of cash or short-term government securities equal
to from 5% to 8% of the contract amount. Thereafter, subsequent payments
(referred to as "variation margin") are made to and from the broker to reflect
changes in the value of the futures contract.
Limitations on Purchase of Options. The staff of the SEC has taken the
position that purchased over-the-counter options and assets used to cover
written over-the-counter options are illiquid and, therefore, together with
other illiquid securities, cannot exceed 15% of a Fund's assets. The Adviser
intends to limit a Fund's writing of over-the-counter options in accordance with
the following procedure. Each Fund intends to write over-the-counter options
only with primary U.S. Government securities dealers recognized by the Federal
Reserve Bank of New York. Also, the contracts which a Fund has in place with
such primary dealers will provide that the Fund has the absolute right to
repurchase an option it writes at any time at a price which represents the fair
market value, as determined in good faith through negotiation between the
parties, but which in no event will exceed a price determined pursuant to a
formula in the contract. Although the specific formula may vary between
contracts with different primary dealers, the formula will generally be based on
a multiple of the premium received by a Fund for writing the option, plus the
amount, if any, of the option's intrinsic value (i.e., the amount that the
option is in-the-money). The formula also may include a factor to account for
the difference between the price of the security and the strike price of the
option if the option is written out-of-the-money. A Fund will treat all or a
part of the formula price as illiquid for purposes of the 15% test imposed by
the SEC staff.
Risk Factors Associated with Futures and Options Transactions
The effective use of options and futures strategies depends on, among
other things, a Fund's ability to terminate options and futures positions at
times when its the Adviser deems it desirable to do so. Although a Fund will not
enter into an option or futures position unless the Adviser believes that a
liquid secondary market exists for such option or future, there is no assurance
that a Fund will be able to effect closing transactions at any particular time
or at an acceptable price. A Fund generally expects that its options and futures
transactions will be conducted on recognized U.S. and foreign securities and
commodity exchanges. In certain instances, however, a Fund may purchase and sell
options in the over-the-counter market. A Fund's ability to terminate option
positions established in the over-the-counter market may be more limited than in
the case of exchange-traded options and may also involve the risk that
securities dealers participating in such transactions would fail to meet their
obligations to the Fund.
Options and futures markets can be highly volatile and transactions of
this type carry a high risk of loss. Moreover, a relatively small adverse market
movement with respect to these types of transactions may result not only in loss
of the original investment but also in unquantifiable further loss exceeding any
margin deposited.
The use of options and futures involves the risk of imperfect correlation
between movements in options and futures prices and movements in the price of
securities which are the subject of the hedge. Such correlation, particularly
with respect to options on stock indices and stock index futures, is imperfect,
and such risk increases as the composition of a Fund diverges from the
composition of the relevant index. The successful use of these strategies also
depends on the ability of the Adviser to correctly forecast interest rate
movements, currency rate movements and general stock market price movements.
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In addition to certain risk factors described above, the following sets
forth certain information regarding the potential risks associated with the
Funds' futures and options transactions.
Risk of Imperfect Correlation. A Fund's ability effectively to hedge all
or a portion of its portfolio through transactions in futures, options on
futures or options on stock indices depends on the degree to which movements in
the value of the securities or index underlying such hedging instrument
correlate with movements in the value of the relevant portion of the Fund's
securities. If the values of the securities being hedged do not move in the same
amount or direction as the underlying security or index, the hedging strategy
for a Fund might not be successful and the Fund could sustain losses on its
hedging transactions which would not be offset by gains on its portfolio. It is
also possible that there may be a negative correlation between the security or
index underlying a futures or option contract and the portfolio securities being
hedged, which could result in losses both on the hedging transaction and the
fund securities. In such instances, a Fund's overall return could be less than
if the hedging transactions had not been undertaken. Stock index futures or
options based on a narrower index of securities may present greater risk than
options or futures based on a broad market index, as a narrower index is more
susceptible to rapid and extreme fluctuations resulting from changes in the
value of a small number of securities. A Fund would, however, effect
transactions in such futures or options only for hedging purposes.
The trading of futures and options on indices involves the additional risk
of imperfect correlation between movements in the futures or option price and
the value of the underlying index. The anticipated spread between the prices may
be distorted due to differences in the nature of the markets, such as
differences in margin requirements, the liquidity of such markets and the
participation of speculators in the futures and options market. The purchase of
an option on a futures contract also involves the risk that changes in the value
of underlying futures contract will not be fully reflected in the value of the
option purchased. The risk of imperfect correlation, however, generally tends to
diminish as the maturity date of the futures contract or termination date of the
option approaches. The risk incurred in purchasing an option on a futures
contract is limited to the amount of the premium plus related transaction costs,
although it may be necessary under certain circumstances to exercise the option
and enter into the underlying futures contract in order to realize a profit.
Under certain extreme market conditions, it is possible that a Fund will not be
able to establish hedging positions, or that any hedging strategy adopted will
be insufficient to completely protect the Fund.
A Fund will purchase or sell futures contracts or options only if, in the
Adviser's judgment, there is expected to be a sufficient degree of correlation
between movements in the value of such instruments and changes in the value of
the relevant portion of the Fund's portfolio for the hedge to be effective.
There can be no assurance that the Adviser's judgment will be accurate.
Potential Lack of a Liquid Secondary Market. The ordinary spreads between
prices in the cash and futures markets, due to differences in the natures of
those markets, are subject to distortions. First, all participants in the
futures market are subject to initial deposit and variation margin requirements.
This could require a Fund to post additional cash or cash equivalents as the
value of the position fluctuates. Further, rather than meeting additional
variation margin requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
cash and futures markets. Second, the liquidity of the futures or options market
may be lacking. Prior to exercise or expiration, a futures or option position
may be terminated only by entering into a closing purchase or sale transaction,
which requires a secondary market on the exchange on which the position was
originally established. While a Fund will establish a futures or option position
only if there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular futures or option
contract at any specific time. In such event, it may not be possible to close
out a position held by a Fund, which could require the Fund to purchase or sell
the instrument underlying the position, make or receive a cash settlement, or
meet ongoing variation margin requirements. The inability to close out futures
or option positions also could have an adverse impact on a Fund's ability
effectively to hedge its securities, or the relevant portion thereof.
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The liquidity of a secondary market in a futures contract or an option on
a futures contract may be adversely affected by "daily price fluctuation limits"
established by the exchanges, which limit the amount of fluctuation in the price
of a contract during a single trading day and prohibit trading beyond such
limits once they have been reached. The trading of futures and options contracts
also is subject to the risk of trading halts, suspensions, exchange or clearing
house equipment failures, government intervention, insolvency of the brokerage
firm or clearing house or other disruptions of normal trading activity, which
could at times make it difficult or impossible to liquidate existing positions
or to recover excess variation margin payments.
Risk of Predicting Interest Rate Movements. Investments in futures
contracts on fixed income securities and related indices involve the risk that
if the Adviser's investment judgment concerning the general direction of
interest rates is incorrect, a Fund's overall performance may be poorer than if
it had not entered into any such contract. For example, if a Fund has been
hedged against the possibility of an increase in interest rates which would
adversely affect the price of bonds held in its portfolio and interest rates
decrease instead, the Fund will lose part or all of the benefit of the increased
value of its bonds which have been hedged because it will have offsetting losses
in its futures positions. In addition, in such situations, if a Fund has
insufficient cash, it may have to sell bonds from its portfolio to meet daily
variation margin requirements, possibly at a time when it may be disadvantageous
to do so. Such sale of bonds may be, but will not necessarily be, at increased
prices which reflect the rising market.
Trading and Position Limits. Each contract market on which futures and
option contracts are traded has established a number of limitations governing
the maximum number of positions which may be held by a trader, whether acting
alone or in concert with others. The Adviser does not believe that these trading
and position limits will have an adverse impact on the hedging strategies
regarding the Funds' investments.
Regulations on the Use of Futures and Options Contracts. Regulations of
the CFTC require that the Funds enter into transactions in futures contracts and
options thereon for hedging purposes only, in order to assure that they are not
deemed to be a "commodity pool" under such regulations. In particular, CFTC
regulations require that all short futures positions be entered into for the
purpose of hedging the value of investment securities held by a Fund, and that
all long futures positions either constitute bona fide hedging transactions, as
defined in such regulations, or have a total value not in excess of an amount
determined by reference to certain cash and securities positions maintained for
the Fund, and accrued profits on such positions. In addition, a Fund may not
purchase or sell such instruments if, immediately thereafter, the sum of the
amount of initial margin deposits on its existing futures positions and premiums
paid for options on futures contracts would exceed 5% of the market value of the
Fund's total assets.
When a Fund purchases a futures contract, an amount of cash or cash
equivalents or high quality debt securities will be segregated with the Fund's
custodian so that the amount so segregated, plus the initial deposit and
variation margin held in the account of its broker, will at all times equal the
value of the futures contract, thereby insuring that the use of such futures is
unleveraged.
The Funds' ability to engage in the hedging transactions described herein
may be limited by the current federal income tax requirement that a Fund derive
less than 30% of its gross income from the sale or other disposition of stock or
securities held for less than three months. The Funds may also further limit
their ability to engage in such transactions in response to the policies and
concerns of various Federal and state regulatory agencies. Such policies may be
changed by vote of the Board of Directors/Trustees.
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Additional Information on Futures and Options
As stated in the Prospectus, each Non-Money Market Fund, may enter into
futures contracts and options for hedging purposes. Such transactions are
described in this Schedule. During the current fiscal year, each of these Funds
intends to limit its transactions in futures contracts and options so that not
more than 5% of the Fund's net assets are at risk. Furthermore, in no event
would any Fund purchase or sell futures contracts, or related options thereon,
for hedging purposes if, immediately thereafter, the aggregate initial margin
that is required to be posted by the Fund under the rules of the exchange on
which the futures contract (or futures option) is traded, plus any premiums paid
by the Fund on its open futures options positions, exceeds 5% of the Fund's
total assets, after taking into account any unrealized profits and unrealized
losses on the Fund's open contracts and excluding the amount that a futures
option is "in-the-money" at the time of purchase. (An option to buy a futures
contract is "in-the-money" if the value of the contract that is subject to the
option exceeds the exercise price; an option to sell a futures contract is
"in-the-money" if the exercise Price exceeds the value of the contract that is
subject of the option.)
I..Interest Rate Futures Contracts.
Use of Interest Rate Futures Contracts. Bond prices are established in
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures market have tended to move generally in the aggregate
in concert with the cash market prices and have maintained fairly predictable
relationships. Accordingly, a Fund may use interest rate futures as a defense,
or hedge, against anticipated interest rate changes and not for speculation. As
described below, this would include the use of futures contract sales to protect
against expected increases in interest rates and futures contract purchases to
offset the impact of interest rate declines.
A Fund presently could accomplish a similar result to that which it hopes
to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Fund, through using futures contracts.
Description of Interest Rates Futures Contracts. An interest rate futures
contract sale would create an obligation by a Fund, as seller, to deliver the
specific type of financial instrument called for in the contract at a specific
future time for a specified price. A futures contract purchase would create an
obligation by the Fund, as purchaser, to take delivery of the specific type of
financial instrument at a specific future time at a specific price. The specific
securities delivered or taken, respectively, at settlement date, would not be
determined until at or near that date. The determination would be in accordance
with the rules of the exchange on which the futures contract sale or purchase
was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before the settlement date without the making or taking of delivery of
securities. Closing out a futures contract sale is effected by the Fund's
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
in the sale exceeds the price in the offsetting purchase, the Fund is paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the Fund's entering
into a futures contract sale. If the offsetting sale price exceeds the purchase
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.
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Interest rate futures contracts are traded in an auction environment on
the floors of several exchanges - principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the New York Futures Exchange. A Fund would deal
only in standardized contracts on recognized changes. Each exchange guarantees
performance under contract provisions through a clearing corporation, a
nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association ("GNMA") modified pass-through
mortgage-backed securities; three-month United States Treasury Bills; and
ninety-day commercial paper. The Funds may trade in any futures contract for
which there exists a public market, including, without limitation, the foregoing
instruments.
Examples of Futures Contract Sale. A Fund would engage in an interest rate
futures contract sale to maintain the income advantage from continued holding of
a long-term bond while endeavoring to avoid part or all of the loss in market
value that would otherwise accompany a decline in long-term securities prices.
Assume that the market value of a certain security in a Fund tends to move in
concert with the futures market prices of long-term United States Treasury bonds
("Treasury Bonds"). The Adviser wishes to fix the current market value of this
portfolio security until some point in the future. Assume the portfolio security
has a market value of 100, and the Adviser believes that, because of an
anticipated rise in interest rates, the value will decline to 95. The Fund might
enter into futures contract sales of Treasury bonds for an equivalent of 98. If
the market value of the portfolio securities does indeed decline from 100 to 95,
the equivalent futures market price for the Treasury bonds might also decline
from 98 to 93.
In that case, the five-point loss in the market value of the portfolio
security would be offset by the five-point gain realized by closing out the
futures contract sale. Of course, the futures market price of Treasury bonds
might well decline to more than 93 or to less than 93 because of the imperfect
correlation between cash and futures prices mentioned below.
The Adviser could be wrong in its forecast of interest rates and the
equivalent futures market price could rise above 98. In this case, the market
value of the portfolio securities, including the portfolio security being
protected, would increase. The benefit of this increase would be reduced by the
loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example
might incur a loss of 2 points (which might be reduced by an offsetting
transaction prior to the settlement date). In each transaction, transaction
expenses would also be incurred.
Examples of Future Contract Purchase. A Fund would engage in an interest
rate futures contract purchase when it is not fully invested in long-term bonds
but wishes to defer for a time the purchase of long-term bonds in light of the
availability of advantageous interim investments, e.g., shorter-term securities
whose yields are greater than those available on long-term bonds. The Fund's
basic motivation would be to maintain for a time the income advantage from
investing in the short-term securities; the Fund would be endeavoring at the
same time to eliminate the effect of all or part of an expected increase in
market price of the long-term bonds that the Fund may purchase.
For example, assume that the market price of a long-term bond that the
Fund may purchase, currently yielding 10%, tends to move in concert with futures
market prices of Treasury bonds. The Adviser wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example) when it may purchase the bond. Assume the long-term bond
has a market price of 100, and the Adviser believes that, because of an
anticipated fall in interest rates, the price will have risen to 105 (and the
yield will have dropped to about 9-1/2%) in four months. The Fund might enter
into futures contracts purchases of Treasury bonds for an equivalent price of
98. At the same time, the Fund would assign a pool of investments in short-term
securities that are either maturing in four months or earmarked for sale in four
months, for purchase of the long-term bond at an assumed market price of 100.
Assume these short-term securities are yielding 15%. If the market price of the
long-term bond does indeed rise from 100 to 105, the equivalent futures market
price for Treasury bonds might also rise from 98 to 103. In that case, the
5-point increase in the price that the Fund pays for the long-term bond would be
offset by the 5-point gain realized by closing out the futures contract
Purchase.
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The Adviser could be wrong in its forecast of interest rates; long-term
interest rates might rise to above 10%; and the equivalent futures market price
could fall below 98. If short-term rates at the same time fall to 10% or below,
it is possible that the Fund would continue with its purchase program for
long-term bonds. The market price of available long-term bonds would have
decreased. The benefit of this price decrease, and thus yield increase, will be
reduced by the loss realized on closing out the futures contract purchase.
If, however, short-term rates remained above available long-term rates, it
is possible that the Fund would discontinue its purchase program for long-term
bonds. The yield on short-term securities in the portfolio, including those
originally in the pool assigned to the particular long-term bond, would remain
higher than yields on long-term bonds. The benefit of this continued incremental
income will be reduced by the loss realized on closing out the futures contract
purchase.
In each transaction, expenses also would be incurred.
II. Index Futures Contracts.
A stock or bond index assigns relative values to the stocks or bonds
included in the index, and the index fluctuates with changes in the market
values of the stocks or bonds included. Some stock index futures contracts are
based on broad market indices, such as the Standard & Poor's 500 or the New York
Stock Exchange Composite Index. In contract, certain exchanges offer futures
contracts on narrower market indices, such as the Standard & Poor's 100, the
Bond Buyer Municipal Bond Index, an index composed of 40 term revenue and
general obligation bonds, or indices based on an industry or market segment,
such as oil and gas stocks. Futures contracts are traded on organized exchanges
regulated by the Commodity Futures Trading Commission. Transactions on such
exchanges are cleared through a clearing corporation, which guarantees the
performance of the parties to each contract.
A Fund will sell index futures contracts in order to offset a decrease in
market value of its portfolio securities that might otherwise result from a
market decline. The Fund may do so either to hedge the value of its portfolio as
a whole, or to protect against declines, occurring prior to sales of securities,
in the value of the securities to be sold. Conversely, a Fund will purchase
index futures contracts in anticipation of purchases of securities. In a
substantial majority of these transactions, the Fund will purchase such
securities upon termination of the long futures position, but a long futures
position may be terminated without a corresponding purchase of securities.
In addition, a Fund may utilize index futures contracts in anticipation of
changes in the composition of its portfolio holdings. For example, in the event
that a Fund expects to narrow the range of industry groups represented in its
holdings it may, prior to making purchases of the actual securities, establish a
long futures position based on a more restricted index, such as an index
comprised of securities of a particular industry group. A Fund also may sell
futures contracts in connection with this strategy, in order to protect against
the possibility that the value of the securities to be sold as part of the
restructuring of the portfolio will decline prior to the time of sale.
The following are examples of transactions in stock index futures (net of
commissions and premiums, if any).
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ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
Portfolio Futures
-Day Hedge is Placed
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/
Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/
Increase in Purchase Contract
Price = $2,500 Gain on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future Hedge
Objective: Protect Against Declining (Value of the Portfolio)
Factors
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index - 1.0
Portfolio Futures
-Day Hedge is Placed
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio-Own Buy 16 Index Futures at 120
Stock with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Gain on Futures = $40,000
Value = $40 000
If, however, the market moved in the opposite direction, that is, market
value decreased and the Fund had entered into an anticipatory purchase hedge, or
market value increased and the Fund had hedged its stock portfolio, the results
of the Fund's transactions in stock index futures would be as set forth below.
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ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
Portfolio Futures
-Day Hedge is Placed
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/
Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost = $60,000 Value of Futures = $60,000/
Contract
Decrease in Purchase Loss on Futures = $2,500
Price = $2,500 Contract
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index - 1.0
Portfolio Futures
-Day Hedge is Placed
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio-Own Buy 16 Index Futures at 130
Stock with Value = $1,040,000 Value of Futures = $1,040,000
Gain in Portfolio = $40,000 Loss of Futures = $40,000
Value = $40,000
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III. Margin Payments
Unlike when a Fund purchases or sells a security, no price is paid or
received by the Fund upon the purchase or sale of a futures contract. Initially,
the Fund will be required to deposit with the broker or in a segregated account
with the Fund's Custodian an amount of cash or cash equivalents, the value, of
which may vary but is generally equal to 10% or less of the value of the
contract. This amount is known as initial margin. The nature of initial margin
in futures transactions is different from that of margin in security
transactions in that futures contract margin does not involve the borrowing of
funds by the customer to finance the transactions. Rather, the initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures contract assuming all
contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying security or index fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
marking to the market. For example, when a Fund has purchased a futures contract
and the price of the contract has risen in response to a rise in the underlying
instruments, that position will have increased in value and the Fund will be
entitled to receive from the broker a variation margin payment equal to that
increase in value. Conversely, where a Fund has purchased a futures contract and
the price of the futures contract has declined in response to a decrease in the
underlying instruments, the position would be less valuable, the Fund would be
required to make a variation margin payment to the broker. At any time prior to
expiration of the futures contract, the Adviser may elect to close the position
by taking an opposite position, subject to the availability of a secondary
market, which will operate to terminate the Fund's position in the futures
contract. A final determination of variation margin is then made, additional
cash is required to be paid by or released to the Fund, and the Fund realizes a
loss or gain.
IV. Risks of Transactions in Futures Contracts
There are several risks in connection with the use of futures by a Fund as
a hedging device. One risk arises because of the imperfect correlation between
movements in the price of the future and movements in the price of the
securities which are the subject of the hedge. The price of the future may move
more than or less than the price of the securities being hedged. If the price of
the future moves less than the price of the securities which are the subject of
the hedge, the hedge will not be fully effective but, if the price of securities
being hedged has moved in an unfavorable direction, the Fund would be in a
better position than if it had not hedged at Al. If the price of the securities
being hedged has moved in a favorable direction, this advance will be partially
offset by the loss on the future. If the price of the future moves more than the
price of the hedged securities, the Fund involved will experience either a loss
or gain on the future which will not be completely offset by movements in the
price of the securities which are the subject of the hedge.
To compensate for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of futures contracts, a Fund
may buy or sell futures contracts in a greater dollar amount than the dollar
amount of securities being hedged if the volatility over a particular time
period of the prices of such securities has been greater than the volatility
over such time period of the future, or if otherwise deemed to be appropriate by
the Adviser. Conversely, a Fund may buy or sell fewer futures contracts if the
volatility over a particular time period of the prices of the securities being
hedged is less than the volatility over such time period of the futures contract
being used, or if otherwise deemed to be appropriate by the Adviser. It also is
possible that, where a Fund has sold futures to hedge its portfolio against a
decline in the market, the market may advance, and the value of securities held
by the Fund may decline. If this occurred, the Fund would lose money on the
future and also experience a decline in value in its portfolio securities.
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Where futures are purchased to hedge against a possible increase in the
price of securities before a Fund is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead; if the Fund then concludes not to invest in
securities or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the futures
contract that is not offset by a reduction in the price of securities purchased.
In instances involving the purchase of futures contracts by a Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Fund's Custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the securities
being hedged, the price of futures may not correlate perfectly with movement in
the cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced thus producing distortions. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of Price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of general
market trends or interest rate movements by the Adviser still may not result in
a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a liquid
secondary market on any exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible to
close a futures investment position, and in the event of adverse price
movements, a Fund would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have been used to
hedge portfolio securities, such securities will not be sold until the futures
contract can be terminated. In such circumstances, an increase in the price of
the securities, if any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.
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Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions.
Successful use of futures by a Fund also is subject to the Adviser's
ability to predict correctly movements in the direction of the market. For
example, if a Fund has hedged against the possibility of a decline in the market
adversely affecting securities held in its portfolio and securities prices
increase instead, the Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. A Fund may have to sell
securities at a time when it may be disadvantageous to do so.
V. Options on Futures Contracts.
The Funds may purchase options on the futures contracts described above. A
futures option gives the holder, in return for the premium paid, the right to
buy (call) from or sell (put) to the writer of the option a futures contract at
a specified price at any time during the period of the option. Upon exercise,
the writer of the option is obligated to pay the difference between the cash
value of the futures contract and the exercise price. Like the buyer or seller
of a futures contract, the holder, or writer, of an option has the right to
terminate its position prior to the scheduled expiration of the option by
selling, or purchasing, an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the purchase
of an option also entails the risk that changes in the value of the underlying
futures contract will not be fully reflected in the value of the option
purchased. Depending on the pricing of the option compared to either the futures
contract upon which it is based, or upon the price of the securities being
hedged, an option may or may not be less risky than ownership of the futures
contract or such securities. In general, the market prices of options can be
expected to be more volatile than the market prices on the underlying futures
contract. Compared to the purchase or sale of futures contracts, however, the
purchase of call or put options on futures contracts may frequently involve less
potential risk to a Fund because the maximum amount at risk is the premium paid
for the options (plus transaction costs). Although permitted by their
fundamental investment policies, the Funds do not currently intend to write
future options, and will not do so in the future absent any necessary regulatory
approvals.
Accounting Treatment.
Accounting for futures contracts and options will be in accordance with
generally accepted accounting principles.
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Guaranteed Investment Contracts
Guaranteed investment contracts, investment contracts or funding
agreements (each referred to as a "GIC") are investment instruments issued by
highly rated insurance companies. Pursuant to such contracts, a Fund may make
cash contributions to a deposit fund of the insurance company's general or
separate accounts. The insurance company then credits to a Fund guaranteed
interest. The insurance company may assess periodic charges against a GIC for
expense and service costs allocable to it, and the charges will be deducted from
the value of the deposit fund. The purchase price paid for a GIC generally
becomes part of the general assets of the issuer, and the contract is paid from
the general assets of the issuer.
A Fund will only purchase GICs from issuers which, at the time of
purchase, meet quality and credit standards established by the Adviser.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance companies, and an active secondary market in GICs does not
currently exist. Also, a Fund may not receive the principal amount of a GIC from
the insurance company on seven days' notice or less, at which point the GIC may
be considered to be an illiquid investment.
A Money Market Fund will acquire GlCs so that they, together with other
instruments in such Fund's portfolio which are not readily marketable, will not
exceed applicable limitations on such Fund's investments in illiquid securities.
A Money Market Fund will restrict its investments in GlCs to those having a term
of 397 days or less. In determining average weighted portfolio maturity, a GIC
will be deemed to have a maturity equal to the period of time remaining under
the next readjustment of the guaranteed interest rate.
Insured Municipal Securities
Certain of the Municipal Securities held by the Funds may be insured at
the time of issuance as to the timely payment of principal and interest. The
insurance policies will usually be obtained by the issuer of the Municipal
Securities at the time of its original issuance. In the event that the issuer
defaults with respect to interest or principal payments, the insurer will be
notified and will be required to make payment to the bondholders. There is,
however, no guarantee that the insurer will meet its obligations. In addition,
such insurance will not protect against market fluctuations caused by changes in
interest rates and other factors.
Interest Rate Transactions
Among the strategic transactions into which certain Funds may enter are
interest rate swaps and the purchase or sale of related caps and floors. The
Funds expect to enter into these transactions primarily to preserve a return or
spread on a particular investment or portion of its portfolio, to protect
against currency fluctuations, as a duration management technique or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. A Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream the
Fund may be obligated to pay. Interest rate swaps involve the exchange by a Fund
with another party of their respective commitments to pay or receive interest,
e.g. an exchange of floating rate payments for fixed rate payments with respect
to a notional amount of principal. A currency swap is an agreement to exchange
cash flows on a notional amount of two or more currencies based on the relative
value differential among them and an index swap is an agreement to swap cash
flows on a notional amount based on changes in the values of the reference
indices. The purchase of a cap entitles the purchaser to receive payments on a
notional principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount.
A Fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. In as much as these swaps, caps and
floors are entered into for good faith hedging purposes, the Adviser and the
Fund believe such obligations do not constitute senior securities under the 1940
Act and, accordingly, will not treat them as being subject to its borrowing
restrictions. A Fund will not enter into any swap, cap and floor transaction
unless, at the time of entering into such transaction, the unsecured long-term
debt of the counterparty, combined with any credit enhancements, is rated at
least "A" by Standard & Poor's Corporation or Moody's Investors Service, Inc. or
has an equivalent rating from a Nationally Recognized Statistical Rating
Organization ("NRSRO") or is determined to be of equivalent credit quality by
the Adviser. If there is a default by the counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps and floors are more recent innovations for which
standardized documentation has not yet been fully developed and, accordingly,
they are less liquid than swaps.
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With respect to swaps, a Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade securities
having a value equal to the accrued excess. Caps and floors require segregation
of assets with a value equal to the Fund's net obligation, if any.
Lower Rated Debt Securities
The yields on lower rated debt and comparable unrated fixed-income
securities generally are higher than the yields available on higher-rated
securities. However, investments in lower rated debt and comparable unrated
securities generally involve greater volatility of price and risk of loss of
income and principal, including the probability of default by or bankruptcy of
the issuers of such securities. Lower rated debt and comparable unrated
securities (a) will likely have some quality and protective characteristics
that, in the judgment of the rating organization, are outweighed by large
uncertainties or major risk exposures to adverse conditions and (b) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. Accordingly,
it is possible that these types of factors could, in certain instances, reduce
the value of securities held in a Fund's portfolio, with a commensurate effect
on the value of the Fund's shares. Therefore, an investment in the Fund should
not be considered as a complete investment program and may not be appropriate
for all investors.
The market prices of lower rated securities may fluctuate more than higher
rated securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates. During an economic
downturn or a prolonged period of rising interest rates, the ability of issuers
of lower quality debt to service their payment obligations, meet projected
goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower rated securities, the
Adviser will try to minimize the risks inherent in investing in lower rated debt
securities by engaging in credit analysis, diversification, and attention to
current developments and trends affecting interest rates and economic
conditions. The Adviser will attempt to identify those issuers of high-yielding
securities whose financial condition is adequate to meet future obligations,
have improved, or are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated
securities, but they may not be attractive to as may buyers. Each Fund's
policies regarding lower rated debt securities is not fundamental and may be
changed at any time without shareholder approval.
While the market values of lower rated debt and comparable unrated
securities tend to react less to fluctuations in interest rate levels than the
market values of higher-rated securities, the market values of certain lower
rated debt and comparable unrated securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
higher-rated securities. In addition, lower rated debt securities and comparable
unrated securities generally present a higher degree of credit risk. Issuers of
lower rated debt and comparable unrated securities often are highly leveraged
and may not have more traditional methods of financing available to them so that
their ability to service their debt obligations during an economic downturn or
during sustained periods of rising interest rates may be impaired. The risk of
loss due to default by such issuers is significantly greater because lower rated
debt and comparable unrated securities generally are unsecured and frequently
are subordinated to the prior payment of senior indebtedness. A Fund may incur
additional expenses to the extent that it is required to seek recovery upon a
default in the payment of principal or interest on its portfolio holdings. The
existence of limited markets for lower rated debt and comparable unrated
securities may diminish a Fund's ability to (a) obtain accurate market
quotations for purposes of valuing such securities and calculating its net asset
value and (b) sell the securities at fair value either to meet redemption
requests or to respond to changes in the economy or in financial markets.
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Fixed-income securities, including lower rated debt securities and
comparable unrated securities, frequently have call or buy-back features that
permit their issuers to call or repurchase the securities from their holders,
such as a Fund. If an issuer exercises these rights during periods of declining
interest rates, a Fund may have to replace the security with a lower yielding
security, thus resulting in a decreased return to a Fund.
The market for certain lower rated debt and comparable unrated securities
is relatively new and has not weathered a major economic recession. The effect
that such a recession might have on such securities is not known. Any such
recession, however, could disrupt severely the market for such securities and
adversely affect the value of such securities. Any such economic downturn also
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon.
Municipal Securities
Generally. The two principal classifications of municipal securities are
"general obligation" securities and "revenue" securities. General obligation
securities are secured by the issuer's pledge of its full faith, credit, and
taxing power for the payment of principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by a Fund are in most cases revenue securities and are not
payable from the unrestricted revenues of the issuer. Consequently, the credit
quality of private activity bonds is usually directly related to the credit
standing of the corporate user of the facility involved.
Municipal securities may include "moral obligation" bonds, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation bonds is unable to meet its debt service obligations from current
revenues, it may draw on a reserve fund, the restoration of which is a moral
commitment but not a legal obligation of the state or municipality which created
the issuer.
Municipal securities may include variable- or floating- rate instruments
issued by industrial development authorities and other governmental entities.
While there may not be an active secondary market with respect to a particular
instrument purchased by a Fund, a Fund may demand payment of the principal and
accrued interest on the instrument or may resell it to a third party as
specified in the instruments. The absence of an active secondary market,
however, could make it difficult for a Fund to dispose of the instrument if the
issuer defaulted on its payment obligation or during periods the Fund is not
entitled to exercise its demand rights, and the Fund could, for these or other
reasons, suffer a loss.
Some of these instruments may be unrated, but unrated instruments
purchased by a Fund will be determined by the Adviser to be of comparable
quality at the time of purchase to instruments rated "high quality" by any major
rating service. Where necessary to ensure that an instrument is of comparable
"high quality," a Fund will require that an issuer's obligation to pay the
principal of the note may be backed by an unconditional bank letter or line of
credit, guarantee, or commitment to lend.
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Municipal securities may include participations in privately arranged
loans to municipal borrowers, some of which may be referred to as "municipal
leases." Generally such loans are unrated, in which case they will be determined
by the Adviser to be of comparable quality at the time of purchase to rated
instruments that may be acquired by a Fund. Frequently, privately arranged loans
have variable interest rates and may be backed by a bank letter of credit. In
other cases, they may be unsecured or may be secured by assets not easily
liquidated. Moreover, such loans in most cases are not backed by the taxing
authority of the issuers and may have limited marketability or may be marketable
only by virtue of a provision requiring repayment following demand by the
lender. Such loans made by a Fund may have a demand provision permitting the
Fund to require payment within seven days. Participations in such loans,
however, may not have such a demand provision and may not be otherwise
marketable.
Although lease obligations do not constitute general obligations of the
municipality for which the municipality's taxing power is pledged, a lease
obligation is ordinarily backed by the municipality's covenant to budget for,
appropriate, and make the payments due under the lease obligation. However,
certain lease obligations contain "non-appropriation" clauses which provide that
the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In addition to the "non-appropriation" risk, these securities
represent a relatively new type of financing that has not yet developed the
depth of marketability associated with more conventional bonds. In the case of a
"non-appropriation" lease, the Funds' ability to recover under the lease in the
event of non-appropriation or default will be limited solely to the repossession
of the leased property in the event foreclosure might prove difficult.
The Funds will not invest more than 5% of their total investment assets in
lease obligations that contain "non-appropriation" clauses where (1) the nature
of the leased equipment or property is such that its ownership or use is
essential to a governmental function of the municipality, (2) the lease payments
will commence amortization of principal at an early date resulting in an average
life of seven years or less for the lease obligation, (3) appropriate covenants
will be obtained from the municipal obligor prohibiting the substitution or
purchase of similar equipment if lease payments are not appropriated, (4) the
lease obligor has maintained good market acceptability in the past, (5) the
investment is of a size that will be attractive to institutional investors, and
(6) the underlying leased equipment has elements of probability and/or use that
enhance its marketability in the event foreclosure on the underlying equipment
were ever required. The Funds have not imposed any percentage limitations with
respect to their investment in lease obligations not subject to the
"non-appropriation" risk. To the extent municipal leases are illiquid, they will
be subject to each Fund's limitation on investments in illiquid securities.
Recovery of an investment in any such loan that is illiquid and payable on
demand may depend on the ability of the municipal borrower to meet an obligation
for full repayment of principal and payment of accrued interest within the
demand period, normally seven days or less (unless a Fund determines that a
particular loan issue, unlike most such loans, has a readily available market).
As it deems appropriate, the Adviser will establish procedures to monitor the
credit standing of each such municipal borrower, including its ability to meet
contractual payment obligations.
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In evaluating the credit quality of a municipal lease obligation and
determining whether such lease obligation will be considered "liquid," the
Adviser for each Fund will consider: (1) whether the lease can be canceled; (2)
what assurance there is that the assets represented by the lease can be sold;
(3) the strength of the lessee's general credit (e.g., its debt, administrative,
economic, and financial characteristics); (4) the likelihood that the
municipality will discontinue appropriating funding for the leased property
because the property is no longer deemed essential to the operations of the
municipality (e.g., the potential for an "event of non-appropriation"); and (5)
the legal recourse in the event of failure to appropriate.
Municipal securities may include units of participation in trusts holding
pools of tax-exempt leases. Municipal participation interests may be purchased
from financial institutions, and give the purchaser an undivided interest in one
or more underlying municipal security. To the extent that municipal
participation interests are considered to be "illiquid securities," such
instruments are subject to each Fund's limitation on the purchase of illiquid
securities. Municipal leases and participating interests therein, which may take
the form of a lease or an installment sales contract, are issued by state and
local governments and authorities to acquire a wide variety of equipment and
facilities. Interest payments on qualifying leases are exempt from Federal
income taxes.
In addition, certain of the Funds may acquire "stand-by commitments" from
banks or broker/dealers with respect to municipal securities held in their
portfolios. Under a stand-by commitment, a dealer would agree to purchase at a
Fund's option specified Municipal Securities at a specified price. The Funds
will acquire stand-by commitments solely to facilitate portfolio liquidity and
do not intend to exercise their rights thereunder for trading purposes.
Although the Funds do not presently intend to do so on a regular basis,
each may invest more than 25% of its total assets in municipal securities the
interest on which is paid solely from revenues of similar projects if such
investment is deemed necessary or appropriate by the Adviser. To the extent that
more than 25% of a Fund's total assets are invested in Municipal Securities that
are payable from the revenues of similar projects, a Fund will be subject to the
peculiar risks presented by such projects to a greater extent than it would be
if its assets were not so concentrated.
There are, of course, variations in the quality of Municipal Securities,
both within a particular classification and between classifications, and the
yields on Municipal Securities depend upon a variety of factors, including
general money market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular offering, the
maturity of the obligation, and the rating of the issue. The ratings of
nationally recognized statistical rating organizations represent their opinions
as to the quality of Municipal Securities. It should be emphasized, however,
that these ratings are general and are not absolute standards of quality, and
Municipal Securities with the same maturity, interest rate, and rating may have
different yields while Municipal Securities of the same maturity and interest
rate with different ratings may have the same yield. Subsequent to its purchase
by a Fund, an issue of Municipal Securities may cease to be rated, or its rating
may be reduced below the minimum rating required for purchase by that Fund. The
Adviser will consider such an event in determining whether a Fund should
continue to hold the obligation.
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Opinions relating to the validity of Municipal Securities and to the
exemption of interest thereon from regular Federal income tax or state income
tax are rendered by counsel to the issuer or bond counsel at the time of
issuance. Neither the Funds nor the Adviser will review the proceedings relating
to the issuance of Municipal Securities or the bases for opinions relating to
the validity of such issuance.
The payment of principal and interest on most securities purchased by a
Fund will depend upon the ability of the issuers to meet their obligations. Each
state, each of their political subdivisions, municipalities, and public
authorities, as well as the District of Columbia, Puerto Rico, Guam, and the
Virgin Islands are a separate "issuer" as that term is used in the Prospectuses
and this SAI. The non-governmental user of facilities financed by private
activity bonds is also considered to be an "issuer." An issuer's obligations
under its Municipal Securities are subject to the provisions of bankruptcy,
insolvency, and other laws affecting the rights and remedies of creditors, such
as the Federal Bankruptcy Code, and laws, if any, which may be enacted by
Federal or state legislatures extending the time for payment of principal or
interest, or both, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. The power or
ability of an issuer to meet its obligations for the payment of interest on and
principal of its Municipal Securities may be materially adversely affected by
litigation or other conditions.
The following information relates specifically to the Nations California
Tax-Exempt Reserves and the California Municipal Bond Fund:
This summary does not purport to be a comprehensive description of all relevant
facts. Although the Trust has no reason to believe that the information
summarized herein is not correct in all material respects, this information has
not been independently verified for accuracy or thoroughness by the Trust.
Rather, the information presented herein has been culled from official
statements and prospectuses issued in connection with various securities
offerings of the State of California and local agencies in California, available
as of the date of this Statement of Additional Information. Further, the
estimates and projections presented herein should not be construed as statements
of fact. They are based upon assumptions which may be affected by numerous
factors and there can be no assurance that target levels will be achieved.
Economic Factors
Fiscal Years Prior to 1995-96. Pressures on the State's budget in the late
1980's and early l990's were caused by a combination of external economic
conditions and growth of the largest General Fund Program--K-14 education,
health, welfare and corrections--at rates faster than the revenue base. These
pressures could continue as the State's overall population and school age
population continue to grow, and as the State's corrections program responds to
a "Three Strikes" law enacted in 1994, which requires mandatory life prison
terms for certain third-time felony offenders. In addition, the State's health
and welfare programs are in a transition period as result of recent federal and
State welfare reform initiatives.
As a result of these factors and others, and especially because a severe
recession between 1990-94 reduced revenues and increased expenditures for social
welfare programs, from the late 1980's until 1992-93, the State had period of
significant budget imbalance. During this period, expenditures exceeded revenues
in four out of six years, and the State accumulated and sustained a budget
deficit in its budget reserve, the Special Fund for Economic Uncertainties
("SFEU") approaching $2.8 billion at its peak at June 30, 1993. Between the
1991-92 and 1994-95 Fiscal Years, each budget required multibillion dollar
actions to bring projected revenues and expenditures into balance, including
significant cuts in health and welfare program expenditures; transfers of
program responsibilities and funding from the State to local governments;
transfers of about $3.6 billion in annual local property tax revenues from other
local governments to local school districts, thereby reducing State funding for
schools under Proposition 98; and revenue increases (particularly in the 1991-92
Fiscal Year budget), most of which were for a short duration.
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Despite these budget actions, as noted, the effects of the recession led to
large, unanticipated deficits in the SFEU, as compared to projected positive
balances. By the 1993-94 Fiscal Year, the accumulated deficit was so large that
it was impractical to budget to retire such deficits in one year, so a two-year
program was implemented, using the issuance of revenue anticipation warrants to
carry a portion of the deficit over to the end of the fiscal year. When the
economy failed to recover sufficiently in 1993-94, a second two-year Plan was
implemented in 1994-95, again using cross-fiscal year revenue anticipation
warrants to partly finance the deficit into the 1995-96 fiscal year.
Another consequence of the accumulated budget deficits, together with other
factors such as disbursement of funds to local school districts "borrowed" from
future fiscal years and hence not shown in the annual budget, was to
significantly reduce the State's cash resources available to pay its ongoing
obligations. When the Legislature and the Governor failed to adopt a budget for
the 1992-93 Fiscal Year by July 1, 1992, which would have allowed the State to
carry out its normal annual cash flow borrowing to replenish cash reserves, the
State Controller issued registered warrants to pay a variety of obligations
representing prior years' or continuing appropriations, and mandates from court
orders. Available funds were used to make constitutionally-mandated payments,
such as debt service on bonds and warrants. Between July 1 and September 4,
1992, when the budget was adopted, the State Controller issued a total of
approximately $3.8 billion of registered warrants.
For several fiscal years during the recession, the State was forced to rely on
external debt markets to meet its cash needs, as a succession of notes and
revenue anticipation warrants were issued in the period from June 1992 to July
1994, often needed to pay previously maturing notes or warrants. These
borrowings were used also in part to spread out the repayment of the accumulated
budget deficit over the end of a fiscal year, as noted earlier. The last and
largest of these borrowings was $4.0 billion of revenue anticipation warrants
which were issued in July, 1994 and matured on April 25, 1996.
1995-96, 1996-97 and 1997-98 Fiscal Years
With the end of the recession, and a growing economy beginning in 1994, the
State's financial condition improved markedly in the last two fiscal years, with
a combination of better than expected revenues, slowdown in growth of social
welfare programs, and continued spending restraint based on the actions taken in
earlier years. The last of the recession-induced budget deficits was repaid,
allowing the SFEU to post a positive cash balance for only the second time in
the l990's, totaling $1.8 billion as of June 30, 1998. The State's cash position
also returned to health, as cash flow borrowing was limited to $3 billion in
1996-97, and no deficit borrowing has occurred over the end of these last two
fiscal years.
In each of these two fiscal years, the State budget contained the following
major features:
1. Expenditures for K-14 schools grew significantly, as new revenues were
directed to school spending under Proposition 98. These additional funds allowed
several new education initiatives to be funded, and raised K-14 per-pupil
spending to around $4,900 by Fiscal Year 1996-97. See "STATE FINANCES" -
Proposition 98".
2. The Budgets restrained health and welfare spending levels, holding to reduced
benefit levels enacted in earlier years, and attempted to reduce General Fund
spending by calling for greater support from the federal government. The State
also attempted to shift to the federal government a larger share of the cost of
incarceration and social services for illegal aliens. Some of these efforts were
successful, and federal welfare reform also helped, but as a whole the federal
support never reached the levels anticipated when the budgets were enacted.
These funding shortfalls were, however, filled by the strong revenue
collections, which exceeded expectations.
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3. General Fund support for the University of California and the California
State University system grew by an average of 5.2 percent increase, 3.3 percent
and 6 percent per year, respectively, and there were no increases in student
fees.
4. General Fund support for the Department of Corrections grew as needed to meet
increased prison population. No new prisons were approved for construction,
however.
5. There were no tax increases, and starting January 1, 1997, there was a 5
percent cut in corporate taxes. The suspension of the Renter's Tax Credit, first
taken as a cost-saving measure during the recession, was continued.
As noted, the economy grew strongly during these fiscal years, and as a result,
the General Fund took in substantially greater tax revenues than were initially
planned when the budgets were enacted. These additional funds were largely
directed to school spending as mandated by Proposition 98, and to make up
shortfalls from reduced federal health and welfare aid. As a result, there was
no dramatic increase in budget reserves, although the accumulated budget deficit
from the recession years was finally eliminated in the past fiscal year.
1998-99 Fiscal Year
On January 9, 1998, the Governor projected General Fund revenues for the 1998-99
Fiscal Year of $55.4 billion, and proposed expenditures in the same amount. In
May 14, 1998, the Administration projected that revenues for the 1997-98 and
1998-99 Fiscal Years combined would be more than $4.2 billion higher than was
projected on January 9, 1998. The Governor proposed that most of this increased
revenue be dedicated to fund a 75% cut in the Vehicle License Fee ("VLF").
For the current fiscal year, the State legislature did not adhere to the
constitutional requirement that it adopt its budget for the upcoming fiscal year
by midnight of June 15th. On July 22, 1998, the Legislature unanimously passed
an $18.9 billion emergency-spending bill to cover the costs of, among others,
bond payments, paychecks for state workers, retirement pensions, prisons, school
and welfare programs from July 1st through August 5th. The Legislature passed
the Budget Bill on August 11, 1998.
Fiscal Year 1998-99 Budget Act
On August 21, 1998, the Governor signed the Budget Act, but vetoed expenditures
of $1.360 billion from the General Fund, and $160 million from Special Funds. Of
this total, the Governor indicated that about $250 million of vetoed funds were
"set aside" to fund programs for education. Vetoed items included education
funds, salary increases and many individual resources and capital projects.
The Budget Act anticipated General Fund revenues and transfers of $57.0 billion
(after giving effect to various tax reductions enacted in 1997 and 1998), a 4.2%
increase from the revised 1997-98 figures. Special Fund revenues were estimated
at $14.3 billion. In May of 1999, the Governor released new projections for the
balance of the 1998-99 fiscal year (the "May Update"). The May Update showed
that the State's economy grew stronger in late 1998 and into 1999 than had been
anticipated. Most of the increase was reviewed from personal income taxes,
reflecting stronger wage employment than previously estimated, and additional
growth in capital gain realizations resulting from the stock market's rise.
After giving effect to the Governor's vetoes, the Budget Act provides authority
for expenditures of $57.3 billion from the General Fund (a 7.3% increase from
1997-98), $14.7 billion from Special Funds, and $3.4 billion from bond funds.
The Budget Act projected a balance in the SFEU as of June 30, 1999 (but without
including the "set aside" veto amount) of $1.255 billion, a little more than 2%
of general fund revenues. The May update projects that the SFEU will have a
balance of almost $1.9 billion as of June 30, 1999. The Budget Act assumes the
State will carry out its normal intra-year cash flow borrowing in the amount of
$1.7 billion of revenue anticipation notes, which were issued on October 1,
1998.
The Budget Act provides that starting on January 1, 1999, the VLF will be
reduced by 25%, at a cost to the general fund of approximately $500 million in
the 1998-99 Fiscal year and about $1 billion annually thereafter. In addition to
the cut in VLF, the 1998-99 Budget includes both temporary and permanent
increases, in the personal income tax dependent credit ($612 million General
Fund cost in 1998-99, but less in future years), a nonrefundable renters tax
credit ($133 million), and various targeted business tax credits ($106 million).
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The following were the major features of the 1998-99 Budget Act:
Proposition 98 funding for K-14 schools is increased by $1.7 billion in General
Fund moneys over revised 1997-98 levels, about $300 million higher than the
minimum Proposition 98 guaranty. An additional $600 million was appropriated to
"settle up" prior years' Proposition 98 entitlements, and was primarily devoted
to one-time uses such as block grants, deferred maintenance, and computer and
laboratory equipment. Of the 1998-99 funds, major new programs include money for
instructional and library materials, deferred maintenance, support for
increasing the school year to 180 days and reduction of class sizes in Grade 9.
The Governor held $250 million of education funds which were vetoed as set-aside
for enactment of additional reforms. Overall, per-pupil spending for K-14
schools under Proposition 98 is increased to $5,695, more than one-third higher
than the level in the last recession year of 1993-94. The 1998-99 Budget also
includes $250 million as repayment of prior years' loans to schools, as part of
the settlement of the CTA v. Gould lawsuit.
Funding for higher education increased substantially above the level called for
in the Governor's four-year compact. General Fund support was increased by $340
million (15.6%) for the University of California and $267 million (14.1%) for
the California State University system. In addition, Community Colleges received
a $300 million (6.6%) increase under Proposition 98.
The Budget Act includes increased funding for health, welfare and social
services programs. A 4.9% grant increase was included in the basic welfare
grants, the first increase in those grants in nine years. Future increases will
depend on sufficient general fund revenue to trigger the phased cuts in VLF
described above.
Funding for the judiciary and criminal justice programs increased by about 11%
over 1997-98, primarily to reflect increased State support for local trial
courts and rising prison population.
Various other highlights of the Budget included new funding for resources
projects, dedication of $376 million of general fund moneys for capital outlay
projects, funding of a three percent State employee salary increase, funding of
2,000 new Department of Transportation positions to accelerate transportation
construction projects, and funding of the Infrastructure and Economic
Development Bank ($50 million).
The State of California received approximately $167 million of federal
reimbursements to offset costs related to the incarceration of undocumented
alien felons for federal fiscal year 1997. The State anticipates receiving
approximately $195 million in federal reimbursements for federal fiscal year
1998.
After the Budget Act was signed, and prior to the close of the Legislative
session on August 31, 1998, the Legislature passed a variety of fiscal bills.
The Governor had until September 30, 1998 to sign or veto these bills. The bills
with the most significant fiscal impact which the Governor signed include $235
million for certain water system improvements in Southern California, $243
million for the State's share of the purchase of environmentally sensitive
forest lands, $178 million for state prisons, $160 million for housing
assistance, and $125 million for juvenile facilities. The Governor also signed
bills totaling $223 million for education programs which were part of the
Governor's $250 million veto "set aside," and $32 million for local governments'
fiscal relief. In addition, he signed a bill reducing by $577 million the
State's obligation to contribute to the State Teachers' Retirement System in the
1998-99 Fiscal Year.
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Although California's strong economy is producing additional revenues for the
State government, the State's budget continues to be under stress from mandated
spending on education and services. There can be no assurances that, if economic
conditions weaken in the United States or abroad, or other factors intercede,
the State will not experience gaps in the future.
Proposed 1999-2000 Fiscal Year Budget
On January 8, 1999, the Governor released his proposed budget for the 1999-2000
Fiscal Year (the "Proposed Budget"). The Proposed Budget estimates general fund
revenues and transfers in 1999-2000 of $60.3 billion, a 7.1% increase from
revised 1998-99 figures. The Governor proposes expenditures of $60.5 billion, a
3.8% increase from 1998-99. The Proposed Budget projects a balance in the SFEU
of $414.5 million on June 30, 2000 and is expanded to $42.8 billion, an increase
of $2.8 billion over 1998-99.
The Proposed Budget incorporates a proposal to obtain federal waiver and federal
funding for the current state-funded family planning program, titled Family
Planning, Access, Care and Treatment ("Family PACT"). The federal funding of
approximately $122 million will reduce General Fund expenditures for Medi-Cal by
a similar amount, $62 million of which savings will be used to assist in
balancing the 1999-2000 budget.
The Orange County Bankruptcy. On December 6, 1994, Orange County, California and
its Investment Pool (the "Pool") filed for bankruptcy under Chapter 9 of the
United States Bankruptcy Code. The subsequent restructuring led to the sale of
substantially all of the Pool's portfolio and resulted in losses estimated to be
approximately $1.7 billion (or approximately 22% of amounts deposited by the
Pool investors). Approximately 187 California public entities -- substantially
all of which are public agencies within the county -- had various bonds, notes
or other forms of indebtedness outstanding. In some instances the proceeds of
such indebtedness were invested in the Pool.
In April, 1996, the County emerged from bankruptcy after closing on a $900
million recovery bond transaction. At that time, the County and its financial
advisors stated that the County had emerged from the bankruptcy without any
structural fiscal problems and assured that the County would not slip back into
bankruptcy. However, for many of the cities, schools and special districts that
lost money in the County portfolio, repayment remains contingent on the outcome
of litigation which is pending against investment firms and other finance
professionals. Thus, it is impossible to determine the ultimate impact of the
bankruptcy and its aftermath on these various agencies and their claims.
Constitutional, Legislative and Other Factors
Certain California constitutional amendments, legislative measures, executive
orders, administrative regulations and voter initiatives could produce the
adverse effects described below, among others.
Revenue Distribution. Certain Debt Obligations in Nations California Municipal
Bond Fund may be obligations of issuers which rely in whole or in part on
California State revenues for payment of these obligations. Property tax
revenues and a portion of the State's general fund surplus are distributed to
counties, cities and their various taxing entities and the State assumes certain
obligations theretofore paid out of local funds. Whether and to what extent a
portion of the State's general fund will be distributed in the future to
counties, cities and their various entities is unclear.
Health Care Legislation. Certain Debt Obligations in Nations California
Municipal Bond Fund may be obligations which are payable solely from the
revenues of health care institutions. Certain provisions under California law
may adversely affect these revenues and, consequently, payment on those Debt
Obligations.
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The Federally sponsored Medicaid program for health care services to eligible
welfare beneficiaries in California is known as the Medi-Cal program.
Historically, the Medi-Cal program has provided for a cost-based system of
reimbursement for inpatient care furnished to Medi-Cal beneficiaries by any
hospital wanting to participate in the Medi-Cal program, provided such hospital
met applicable requirements for participation. California law now provides that
the State of California shall selectively contract with hospitals to provide
acute inpatient services to Medi-Cal patients. Medi-Cal contracts currently
apply only to acute inpatient services. Generally, such selective contracting is
made on a flat per diem payment basis for all services to Medi-Cal
beneficiaries, and generally such payment has not increased in relation to
inflation, costs or other factors. Other reductions or limitations may be
imposed on payment for services rendered to MediCal beneficiaries in the future.
Under this approach, in most geographical areas of California, only those
hospitals which enter into a MediCal contract with the State of California will
be paid for non-emergency acute inpatient services rendered to Medi-Cal
beneficiaries. The State may also terminate these contracts without notice under
certain circumstances and is obligated to make contractual payments only to the
extent the California legislature appropriates adequate funding therefor.
California enacted legislation in 1982 that authorizes private health plans and
insurers to contract directly with hospitals for services to beneficiaries on
negotiated terms. Some insurers have introduced plans known as "preferred
provider organizations" ("PPOs"), which offer financial incentives for
subscribers who use only the hospitals which contract with the plan. Under an
exclusive provider plan, which includes most health maintenance organizations
("HMOs"), private payors limit coverage to those services provided by selected
hospitals. Discounts offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly from
projections. Often, HMO or PPO contracts are enforceable for a stated term,
regardless of provider losses or of bankruptcy of the respective HMO or PPO. It
is expected that failure to execute and maintain such PPO and HMO contracts
would reduce a hospital's patient base or gross revenues. Conversely,
participation may maintain or increase the patient base, but may result in
reduced payment and lower net income to the contracting hospitals.
These Debt Obligations may also be insured by the State of California pursuant
to an insurance program implemented by the Office of Statewide Health Planning
and Development for health facility construction loans. If a default occurs on
insured Debt Obligations, the State Treasurer will issue debentures payable out
of a reserve fund established under the insurance program or will pay principal
and interest on an unaccelerated basis from unappropriated State funds. At the
request of the Office of Statewide Health Planning and Development, Arthur D.
Little, Inc. prepared a study in December 1983, to evaluate the adequacy of the
reserve fund established under the insurance program and based on certain
formulations and assumptions found the reserve fund substantially underfunded.
In September of 1986, Arthur D. Little, Inc. prepared an update of the study and
concluded that an additional 10% reserve be established for "multi-level"
facilities. For the balance of the reserve fund, the update recommended
maintaining the current reserve calculation method. In March of 1990, Arthur D.
Little, Inc. prepared a further review of the study and recommended that
separate reserves continue to be established for "multi-level" facilities at a
reserve level consistent with those that would be required by an insurance
company.
Mortgages and Deeds. Certain Debt Obligations in Nations California Municipal
Bond Fund may be obligations which are secured in whole or in part by a mortgage
or deed of trust on real property. California has five principal statutory
provisions which limit the remedies of a creditor secured by a mortgage or deed
of trust. Two statutes limit the creditor's right to obtain a deficiency
judgment, one limitation being based on the method of foreclosure and the other
on the type of debt secured. Under the former, a deficiency judgment is barred
when the foreclosure is accomplished by means of a nonjudicial trustee's sale.
Under the latter, a deficiency judgment is barred when the foreclosed mortgage
or deed of trust secures certain purchase money obligations. Another California
statute, commonly known as the "one form of action" rule, requires creditors
secured by real property to exhaust their real property security by foreclosure
before bringing a personal action against the debtor. The fourth statutory
provision limits any deficiency judgment obtained by a creditor secured by real
property following a judicial sale of such property to the excess of the
outstanding debt over the fair value of the property at the time of the sale,
thus preventing the creditor from obtaining a large deficiency judgment against
the debtor as the result of low bids at a judicial sale. The fifth statutory
provision gives the debtor the right to redeem the real property from any
judicial foreclosure sale as to which a deficiency judgment may be ordered
against the debtor.
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Upon the default of a mortgage or deed of trust with respect to California real
property, the creditor's nonjudicial foreclosure rights under the power of sale
contained in the mortgage or deed of trust are subject to the constraints
imposed by California law upon transfers of title to real property by private
power of sale. During the three-month period beginning with the filing of a
formal notice of default, the debtor is entitled to reinstate the mortgage by
making any overdue payments. Under standard loan servicing procedures, the
filing of the formal notice of default does not occur unless at least three full
monthly payments have become due and remain unpaid. The power of sale is
exercised by posting and publishing a notice of sale for at least 20 days after
expiration of the three-month reinstatement period. The debtor may reinstate the
mortgage, in the manner described above, up to five business days prior to the
scheduled sale date. Therefore, the effective minimum period for foreclosing on
a mortgage could be in excess of seven months after the initial default. Such
time delays in collections could disrupt the flow of revenues available to an
issuer for the payment of debt service on the outstanding obligations if such
defaults occur with respect to a substantial number of mortgages or deeds of
trust securing an issuer's obligations.
In addition, a court could find that there is sufficient involvement of the
issuer in the nonjudicial sale of property securing a mortgage for such private
sale to constitute "state action," and could hold that the private right-of-sale
proceedings violate the due process requirements of the Federal or State
Constitutions, consequently preventing an issuer from using the nonjudicial
foreclosure remedy described above.
Certain Debt Obligations in Nations California Municipal Bond Fund may be
obligations which finance the acquisition of single family home mortgages for
low and moderate income mortgagors. These obligations may be payable solely from
revenues derived from the home mortgages, and are subject to California's
statutory limitations described above applicable to obligations secured by real
property. Under California antideficiency legislation, there is no personal
recourse against a mortgagor of a single family residence purchased with the
loan secured by the mortgage, regardless of whether the creditor chooses
judicial or nonjudicial foreclosure.
Under California law, mortgage loans secured by single-family owner-occupied
dwellings may be prepaid at any time. Prepayment charges on such mortgage loans
may be imposed only with respect to voluntary prepayments made during the first
five years during the term of the mortgage loan, and then only if the borrower
prepays an amount in excess of 20% of the original principal amount of the
mortgage loan in a 12-month period; a prepayment charge cannot in any event
exceed six months' advance interest on the amount prepaid during the 12-month
period in excess of 20% of the original principal amount of the loan. This
limitation could affect the flow of revenues available to an issuer for debt
service on the outstanding debt obligations which financed such home mortgages.
Proposition 13. Certain of the Debt Obligations may be obligations of issuers
who rely in whole or in part on ad valorem real property taxes as a source of
revenue. On June 6, 1978, California voters approved an amendment to the
California Constitution known as Proposition 13, which added Article XIIIA to
the California Constitution. The effect of Article XIIIA was to limit ad valorem
taxes on real property and to restrict the ability of taxing entities to
increase real property tax revenues.
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Section 1 of Article XIIIA, as amended, limits the maximum ad valorem tax on
real property to 1% of full cash value to be collected by the counties and
apportioned according to law. The 1% limitation does not apply to ad valorem
taxes or special assessments to pay the interest and redemption charges on any
bonded indebtedness for the acquisition or improvement of real property approved
by two-thirds of the votes cast by the voters voting on the proposition. Section
2 of Article XIIIA defines "full cash value" to mean "the County Assessor's
valuation of real property as shown on the 1975/76 tax bill under `full cash
value' or, thereafter, the appraised value of real property when purchased,
newly constructed, or a change in ownership has occurred after the 1975
assessment." The full cash value may be adjusted annually to reflect inflation
at a rate not to exceed 2% per year, or reduction in the consumer price index or
comparable local data, or reduced in the event of declining property value
caused by damage, destruction or other factors.
Legislation enacted by the California Legislature to implement Article XIIIA
provides that notwithstanding any other law, local agencies may not levy any ad
valorem property tax except to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and that each county will levy the maximum tax
permitted by Article XIIIA.
Proposition 9. On November 6, 1979, an initiative known as "Proposition 9" or
the "Gann Initiative" was approved by the California voters, which added Article
XIIIB to the California Constitution. Under Article XIIIB, State and local
governmental entities have an annual "appropriations limit" and are not allowed
to spend certain moneys called "appropriations subject to limitation" in an
amount higher than the "appropriations limit." Article XIIIB does not affect the
appropriation of moneys which are excluded from the definition of
"appropriations subject to limitation," including debt service on indebtedness
existing or authorized as of January 1, 1979, or bonded indebtedness
subsequently approved by the voters. In general terms, the "appropriations
limit" is required to be based on certain 1978/79 expenditures, and is to be
adjusted annually to reflect changes in consumer prices, population, and certain
services provided by these entities. Article XIIIB also provides that if these
entities' revenues in any year exceed the amounts permitted to be spent, the
excess is to be returned by revising tax rates or fee schedules over the
subsequent two years.
Proposition 98. On November 8, 1988, voters of the State approved Proposition
98, a combined initiative constitutional amendment and statute called the
"Classroom Instructional Improvement and Accountability Act." Proposition 98
changed State funding of public education below the university level and the
operation of the State Appropriations Limit, primarily by guaranteeing K-14
schools a minimum share of General Fund revenues. Under Proposition 98 (modified
by Proposition 111 as discussed below), K-14 schools are guaranteed the greater
of (a) in general, a fixed percent of General Fund revenues ("Test 1"), (b) the
amount appropriated to K-14 schools in the prior year, adjusted for changes in
the cost of living (measured as in Article XIIIB by reference to State per
capita personal income) and enrollment ("Test 2"), or (c) a third test, which
would replace Test 2 in any year when the percentage growth in per capita
General Fund revenues from the prior year plus one half of one percent is less
than the percentage growth in State per capita personal income ("Test 3"). Under
Test 3, schools would receive the amount appropriated in the prior year adjusted
for changes in enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If Test 3 is used in any year, the
difference between Test 3 and Test 2 would become a "credit" to schools which
would be the basis of payments in future years when per capita General Fund
revenue growth exceeds per capita personal income growth.
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Proposition 98 permits the Legislature -- by two-thirds vote of both houses,
with the Governor's concurrence -- to suspend the K-14 schools' minimum funding
formula for a one-year period. Proposition 98 also contains provisions
transferring certain State tax revenues in excess of the Article XIIIB limit to
K-14 schools.
During the recession years of the early 1990s, General Fund revenues for several
years were less than originally projected, so that the original Proposition 98
appropriations turned out to be higher than the minimum percentage provided in
the law. The Legislature responded to these developments by designating the
"extra" Proposition 98 payments in one year as a "loan" from future years'
Proposition 98 entitlements, and also intended that the "extra" payments would
not be included in the Proposition 98 "base" for calculating future years'
entitlements. In 1992, a lawsuit was filed, California Teachers' Association v.
Gould, which challenged the validity of these off-budget loans. During the
course of this litigation, a trial court determined that almost $2 billion in
"loans" which had been provided to school districts during the recession
violated the constitutional protection of support for public education. A
settlement was reached on April 12, 1996 which ensures that future school
funding will not be in jeopardy over repayment of these so-called loans.
Proposition 111. On June 30, 1989, the California Legislature enacted Senate
Constitutional Amendment 1, a proposed modification of the California
Constitution to alter the spending limit and the education funding provisions of
Proposition 98. Senate Constitutional Amendment 1 -- on the June 5, 1990 ballot
as Proposition 111 -- was approved by the voters and took effect on July l,
1990. Among a number of important provisions, Proposition 111 recalculated
spending limits for the State and for local governments, allowed greater annual
increases in the limits, allowed the averaging of two years' tax revenues before
requiring action regarding excess tax revenues, reduced the amount of the
funding guarantee in recession years for school districts and community college
districts (but with a floor of 40.9 percent of State general fund tax revenues),
removed the provision of Proposition 98 which included excess moneys transferred
to school districts and community college districts in the base calculation for
the next year, limited the amount of State tax revenue over the limit which
would be transferred to school districts and community college districts, and
exempted increased gasoline taxes and truck weight fees from the State
appropriations limit. Additionally, Proposition 111 exempted from the State
appropriations limit funding for capital outlays.
Proposition 62. On November 4, 1986, California voters approved an initiative
statute known as Proposition 62. This initiative provided the following:
1. Requires that any tax for general governmental purposes imposed by local
governments be approved by resolution or ordinance adopted by a two-thirds vote
of the governmental entity's legislative body and by a majority vote of the
electorate of the governmental entity;
2. Requires that any special tax (defined as taxes levied for other than general
governmental purposes) imposed by a local governmental entity be approved by a
two-thirds vote of the voters within that jurisdiction;
3. Restricts the use of revenues from a special tax to the purposes or for the
service for which the special tax was imposed;
4. Prohibits the imposition of ad valorem taxes on real property by local
governmental entities except as permitted by Article XIIIA;
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5. Prohibits the imposition of transaction taxes and sales taxes on the sale of
real property by local governments;
6. Requires that any tax imposed by a local government on or after August 1,
1985 be ratified by a majority vote of the electorate within two years of the
adoption of the initiative;
7. Requires that, in the event a local government fails to comply with the
provisions of this measure, a reduction in the amount of property tax revenue
allocated to such local government occurs in an amount equal to the revenues
received by such entity attributable to the tax levied in violation of the
initiative; and
8. Permits these provisions to be amended exclusively by the voters of the State
of California.
In September 1988, the California Court of Appeal in City of Westminster v.
County of Orange, 204 Cal. App.3d 623, 215 Cal. Rptr. 511 (Cal. Ct. App. 1988),
held that Proposition 62 is unconstitutional to the extent that it requires a
general tax by a general law city, enacted on or after August 1, 1985 and prior
to the effective date of Proposition 62, to be subject to approval by a majority
of voters. The Court held that the California Constitution prohibits the
imposition of a requirement that local tax measures be submitted to the
electorate by either referendum or initiative. It is impossible to predict the
impact of this decision on charter cities, on special taxes or on new taxes
imposed after the effective date of Proposition 62. The California Court of
Appeal in City of Woodlake v. Logan, 230 Cal. App.3d 1058, 282 Cal. Rptr. 27
(1991) , subsequently held that Proposition 62's popular vote requirements for
future local taxes also provided for an unconstitutional referenda. The
California Supreme Court declined to review both the City of Westminster and the
City of Woodlake decisions.
In Santa Clara Local Transportation Authority v. Guardino, 11 Cal. 4th 220
(1995), reh'g denied, modified [45 Cal. Rptr. 2d 204] (1995), the California
Supreme Court upheld the constitutionality of Proposition 62's popular vote
requirements for future taxes, and specifically disapproved of the City of
Woodlake decision as erroneous. The Court did not determine the correctness of
the City of Westminster decision, because that case appeared distinguishable,
was not relied on by the parties in Guardino, and involved taxes not likely to
still be at issue. It is impossible to predict the impact of the Supreme Court's
decision on charter cities or on taxes imposed in reliance on the City of
Woodlake case.
California Senate Bill 1590, introduced February 16, 1996, would make the
Guardino decision inapplicable to any tax first imposed or increased by an
ordinance or resolution adopted before December 14, 1995. The California State
Senate passed the Bill on May 16, 1996 and would be constitutional as a
non-voted amendment to Proposition 62 or as a non-voted change to Proposition
62's operative date.
Proposition 218. On November 5, 1996, the voters of the State of California
approved Proposition 218, a constitutional initiative, entitled the "Right to
Vote on Taxes Act." Proposition 218 adds Articles XIIIC and XIIID to the
California Constitution and contains a number of interrelated provisions
affecting the ability of local governments to levy and collect both existing and
future taxes, assessments, fees and charges. Proposition 218 became effective on
November 6, 1996. The Sponsors are unable to predict whether and to what extent
Proposition 218 may be held to be constitutional or how its terms will be
interpreted and applied by the courts. However, if upheld, Proposition 218 could
substantially restrict certain local governments' ability to raise future
revenues and could subject certain existing sources of revenue to reduction or
repeal, and increase local government costs to hold elections, calculate fees
and assessments, notify the public and defend local government fees and
assessments in court.
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Article XIIIC of Proposition 218 requires majority voter approval for the
imposition, extension or increase of general taxes and two-thirds voter approval
for the imposition, extension or increase of special taxes, including special
taxes deposited into a local government's general fund. Proposition 218 also
provides that any general tax imposed, extended or increased without voter
approval by any local government on or after January 1, 1995 and prior to
November 6, 1996 shall continue to be imposed only if approved by a majority
vote in an election held within two years of November 6, 1996.
Article XIIIC of Proposition 218 also expressly extends the initiative power to
give voters the power to reduce or repeal local taxes, assessments, fees and
charges, regardless of the date such taxes, assessments, fees or charges were
imposed. This extension of the initiative power to some extent
constitutionalizes the 1995 California State Supreme Court decision in Rossi v.
Brown, 9 Cal. 4th 688 [38 Cal. Rptr. 2d 363] (1995), which upheld an initiative
that repealed a local tax and held that the State constitution does not preclude
the repeal, including the prospective repeal, of a tax ordinance by an
initiative, as contrasted with the State constitutional prohibition on
referendum powers regarding statutes and ordinances which impose a tax.
Generally, the initiative process enables California voters to enact legislation
upon obtaining requisite voter approval at a general election. Proposition 218
extends the authority stated in Rossi by expanding the initiative power to
include reducing or repealing assessments, fees and charges, which had
previously been considered administrative rather than legislative matters and
therefore beyond the initiative power.
The initiative power granted under Article XIIIC of Proposition 218, by its
terms, applies to all local taxes, assessments, fees and charges and is not
limited to local taxes, assessments, fees and charges that are property related.
Article XIIID of Proposition 218 adds several new requirements making it
generally more difficult for local agencies to levy and maintain "assessments"
for municipal services and programs. "Assessment" is defined to mean any levy or
charge upon real property for a special benefit conferred upon the real
property.
Article XIIID of Proposition 218 also adds several provisions affecting "fees"
and "charges" which are defined as "any levy other than an ad valorem tax, a
special tax, or an assessment, imposed by a local government upon a parcel or
upon a person as an incident of property ownership, including a user fee or
charge for a property related service." All new and, after June 30, 1997,
existing property related fees and charges must conform to requirements
prohibiting, among other things, fees and charges which (i) generate revenues
exceeding the funds required to provide the property related service, (ii) are
used for any purpose other than those for which the fees and charges are
imposed, (iii) are for a service not actually used by, or immediately available
to, the owner of the property in question, or (iv) are used for general
governmental services, including police, fire or library services, where the
service is available to the public at large in substantially the same manner as
it is to property owners. Further, before any property related fee or charge may
be imposed or increased, written notice must be given to the record owner of
each parcel of land affected by such fee or charges. The local government must
then hold a hearing upon the proposed imposition or increase of such property
based fee, and if written protests against the proposal are presented by a
majority of the owners of the identified parcels, the local government may not
impose or increase the fee or charge. Moreover, except for fees or charges for
sewer, water and refuse collection services, no property related fee or charge
may be imposed or increased without majority approval by the property owners
subject to the fee or charge or, at the option of the local agency, two-thirds
voter approval by the electorate residing in the affected area.
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Proposition 87. On November 8, 1988, California voters approved Proposition 87.
Proposition 87 amended Article XVI, Section 16, of the California Constitution
by authorizing the California Legislature to prohibit redevelopment agencies
from receiving any of the property tax revenue raised by increased property tax
rates levied to repay bonded indebtedness of local governments which is approved
by voters on or after January 1, 1989.
Other Investment Information. The investment adviser believes that it is likely
that sufficient California Municipal Securities will be available to satisfy the
investment objective, policies and limitations of Nations California Municipal
Bond Fund, and to enable the Fund to invest at least 50% of its total assets in
California Municipal Securities at the close of each of its fiscal quarters. In
meeting this investment policy the Fund may invest in Municipal Securities which
are private activity bonds (including industrial development bonds under prior
law) the interest on which is subject to the 26% to 28% federal alternative
minimum tax applicable to individuals and the 20% federal alternative minimum
tax and the environmental tax applicable to corporations. The environmental tax
applicable to corporations is imposed at the rate of .12% on the excess of the
corporations modified federal alternative minimum taxable income over
$2,000,000. Investments in such securities, however, will not exceed under
normal market conditions 35% of the Fund's total assets when added together with
any taxable investments held by the Fund. Moreover, although the Fund does not
presently intend to do so on a regular basis, it may invest more than 25% of its
assets in Municipal Securities the interest on which is paid solely from
revenues of similar projects if such investment is deemed necessary or
appropriate by the Fund's investment adviser in light of the Fund's investment
objective and policies. To the extent that the Fund's assets are concentrated in
Municipal Securities payable from revenues on similar projects, the Fund will be
subject to the peculiar risks presented by such projects to a greater extent
than it would be if the Fund's assets were not so concentrated.
If the Trust's Board of Trustees, after consultation with the investment
adviser, should for any reason determine that it is impracticable to invest at
least 50% of the Fund's total assets in Nations California Tax-Exempt Reserves
and Nations California Municipal Bond Fund at the close of each quarter of the
Fund's taxable year, the Board would re-evaluate each Fund's investment
objective and policies and consider changes in its structure and name or
possible dissolution.
Options on Currencies
Certain Funds may purchase and sell options on currencies to hedge the
value of securities the Fund holds or intends to buy. Options on foreign
currencies may be traded on U.S. and foreign exchanges or over-the-counter.
Other Investment Companies
In seeking to attain their investment objectives, certain Funds may invest
in securities issued by other investment companies within the limits prescribed
by the 1940 Act. Each Fund currently intends to limit its investments so that,
as determined immediately after a securities purchase is made: (a) not more than
5% of the value of its total assets will be invested in the securities of any
one investment company; (b) not more than 10% of the value of its total assets
will be invested in the aggregate in securities of investment companies as a
group; and (c) not more than 3% of the outstanding voting stock of any one
investment company will be owned by the Fund or by the Company as a whole. As a
shareholder of another investment company, a Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including Advisory fees. These expenses would be in addition to the Advisory and
other expenses that a Fund bears in connection with its own operations. The
Adviser has agreed to remit to the respective investing Fund fees payable to it
under its respective Investment Advisory Agreement with an affiliated money
market Fund to the extent such fees are based upon the investing Fund's assets
invested in shares of the affiliated money market fund.
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Participation Interests and Company Receipts
The Government Bond Fund also may purchase from domestic financial
institutions and trusts created by such institutions participation interests and
trust receipts in high quality debt securities. A participation interest or
receipt gives the Fund an undivided interest in the security in the proportion
that the Fund's participation interest or receipt bears to the total principal
amount of the security. As to certain instruments for which the Fund will be
able to demand payment, the Fund intends to exercise its right to do so only
upon a default under the terms of the security, as needed to provide liquidity
or to maintain or improve the quality of its investment portfolio. It is
possible that a participation interest or trust receipt may be deemed to be an
extension of credit by the Fund to the issuing financial institution rather than
to the obligor of the underlying security and may not be directly entitled to
the protection of any collateral security provided by the obligor. In such
event, the ability of the Fund to obtain repayment could depend on the issuing
financial institution.
Participation interests and trust receipts may have fixed, floating or
variable rates of interest, and will have remaining maturities of thirteen
months or less (as defined by the SEC). If a participation interest or trust
receipt is unrated, the Adviser will have determined that the interest or
receipt is of comparable quality to those instruments in which the Fund may
invest pursuant to guidelines approved by the Board of Directors. For certain
participation interests or trust receipts the Fund will have the right to demand
payment, on not more than 30 days' notice, for all or any part of the Fund's
participation interest or trust receipt in the securities involved, plus accrued
interest.
Real Estate Investment Trusts
A real estate investment trust ("REIT") is a managed portfolio of real
estate investments which may include office buildings, apartment complexes,
hotels and shopping malls. An equity REIT holds equity positions in real estate,
and it seeks to provide its shareholders with income from the leasing of its
properties, and with capital gain from any sales of properties. A mortgage REIT
specializes in lending money to developers of properties, and passes any
interest income it may earn to its shareholders.
REITs may be affected by changes in the value of the underlying property
owned or financed by the REIT, while Mortgage REITs also may be affected by the
quality of credit extended. Both equity and mortgage REITs are dependent upon
management skill and may not be diversified. REITs also may be subject to heavy
cash flow dependency, defaults by borrowers, self-liquidation, and the
possibility of failing to qualify for tax-free pass-through of income under the
Internal Revenue Code of 1986, as amended.
Repurchase Agreements
The repurchase price under any repurchase agreements described in the
Prospectuses generally equals the price paid by a Fund plus interest negotiated
on the basis of current short-term rates (which may be more or less than the
rate on the securities underlying the repurchase agreement). Securities subject
to repurchase agreements will be held by a Company's custodian in a segregated
account or in the Federal Reserve/Treasury book-entry system. Repurchase
agreements are considered to be loans by such Company under the 1940 Act.
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Reverse Repurchase Agreements
At the time a Fund enters into a reverse repurchase agreement, it may
establish a segregated account with its custodian bank in which it will maintain
cash, U.S. Government securities or other liquid high grade debt obligations
equal in value to its obligations in respect of reverse repurchase agreements.
Reverse repurchase agreements involve the risk that the market value of the
securities the Funds are obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Funds' use
of proceeds of the agreement may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Funds'
obligation to repurchase the securities. Reverse repurchase agreements are
speculative techniques involving leverage, and are subject to asset coverage
requirements if the Funds do not establish and maintain a segregated account (as
described above). In addition, some or all of the proceeds received by a Fund
from the sale of a portfolio instrument may be applied to the purchase of a
repurchase agreement. To the extent the proceeds are used in this fashion and a
common broker/dealer is the counterparty on both the reverse repurchase
agreement and the repurchase agreement, the arrangement might be recharacterized
as a swap transaction. Under the requirements of the 1940 Act, the Funds are
required to maintain an asset coverage (including the proceeds of the
borrowings) of at least 300% of all borrowings. Depending on market conditions,
the Funds' asset coverage and other factors at the time of a reverse repurchase,
the Funds may not establish a segregated account when the Adviser believes it is
not in the best interests of the Funds to do so. In this case, such reverse
repurchase agreements will be considered borrowings subject to the asset
coverage described above.
Securities Lending
To increase return on portfolio securities, certain Funds may lend their
portfolio securities to broker/dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned. Collateral for such loans may include cash, securities of the
U.S. Government, its agencies or instrumentalities, an irrevocable letter of
credit issued by (i) a U.S. bank that has total assets exceeding $1 billion and
that is a member of the Federal Deposit Insurance Corporation, or (ii) a foreign
bank that is one of the 75 largest foreign commercial banks in terms of total
assets, or any combination thereof. Such loans will not be made if, as a result,
the aggregate of all outstanding loans of the Fund involved exceeds 33% of the
value of its total assets which may include cash collateral received for
securities loaned. There may be risks of delay in receiving additional
collateral or in recovering the securities loaned or even a loss of rights in
the collateral should the borrower of the securities fail financially. However,
loans are made only to borrowers deemed by the Adviser to be of good standing
and when, in its judgment, the income to be earned from the loan justifies the
attendant risks. Pursuant to the securities loan agreement a Fund is able to
terminate the securities loan upon notice of not more than five business days
and thereby secure the return to the Fund of securities identical to the
transferred securities upon termination of the loan.
Short Sales
Certain Funds may from time to time enter into short sales transactions. A
Fund will not make short sales of securities nor maintain a short position
unless at all times when a short position is open, such Fund owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short. This is a technique known
as selling short "against the box." Such short sales will be used by a Fund for
the purpose of deferring recognition of gain or loss for federal income tax
purposes.
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Special Situations
Certain Funds may invest in "special situations." A special situation
arises when, in the opinion of the Adviser, the securities of a particular
company will, within a reasonably estimable period of time, be accorded market
recognition at an appreciated value solely by reason of a development applicable
to that company, and regardless of general business conditions or movements of
the market as a whole. Developments creating special situations might include,
among others: liquidations, reorganizations, recapitalizations, mergers,
material litigation, technical breakthroughs and new management or management
policies. Although large and well known companies may be involved, special
situations more often involve comparatively small or unseasoned companies.
Investments in unseasoned companies and special situations often involve much
greater risk than is inherent in ordinary investment securities.
Stand-By Commitments
Certain Funds may acquire "stand-by commitments" with respect to Municipal
Securities held in their portfolios. Under a "stand-by commitment," a dealer
agrees to purchase from a Fund, at a Fund's option, specified Municipal
Securities at a specified price. Stand-by commitments are exercisable by a Fund
at any time before the maturity of the underlying Municipal Securities, and may
be sold, transferred, or assigned by a Fund only with the underlying
instruments.
The amount payable to a Tax-Free Bond Fund upon its exercise of a stand-by
commitment will normally be (i) the Fund's acquisition cost of the Municipal
Securities (excluding any accrued interest which a Tax-Free Bond Fund paid on
their acquisition), less any amortized market premium or plus any amortized
market or original issue discount during the period a Tax-Free Bond Fund owned
the securities, plus (ii) all interest accrued on the securities since the last
interest payment date during that period. Under normal market conditions, in
determining net asset value a Tax-Free Bond Fund values the underlying Municipal
Securities on an amortized cost basis. Accordingly, the amount payable by a
dealer upon exercise of a stand-by commitment will normally be substantially the
same as the portfolio value of the underlying Municipal Securities.
A Fund's right to exercise stand-by commitments will be unconditional and
unqualified. A stand-by commitment will not be transferable by a Fund, although
the Fund could sell the underlying Municipal Securities to a third party at any
time. Until a Fund exercises its stand-by commitment, it owns the securities in
its portfolio which are subject to the stand-by commitment.
The Funds expect that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, a Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for the security being acquired
which will be subject to the commitment (thus reducing the yield to maturity
otherwise available for the same security). When a Fund pays any consideration
directly or indirectly for a stand-by commitment, its cost will be reflected as
unrealized depreciation for the period during which the commitment is held by
that Fund. The Tax-Free Bond Funds will not acquire a stand-by commitment unless
immediately after the acquisition not more than 5% of the Funds' total assets
will be subject to a demand feature, or in stand-by commitments, with the same
institution.
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Each Fund intends to enter into stand-by commitments only with banks and
broker/dealers which, in the Adviser's opinion, present minimal credit risks. In
evaluating the credit worthiness of the issuer of a stand-by commitment, the
Adviser will review periodically the issuer's assets, liabilities, contingent
claims, and other relevant financial information.
The Funds would acquire stand-by commitments solely to facilitate
portfolio liquidity and do not intend to exercise their rights thereunder for
trading purposes. Stand-by commitments acquired by a Fund will be valued at zero
in determining net asset value. A Fund's reliance upon the credit of these
dealers, banks, and broker/dealers will be secured by the value of the
underlying Municipal Securities that are subject to the commitment. Thus, the
risk of loss to the Fund in connection with a "stand-by commitment" will not be
qualitatively different from the risk of loss faced by a person that is holding
securities pending settlement after having agreed to sell the securities in the
ordinary course of business.
Stripped Securities
Certain Funds may purchase stripped securities issued or guaranteed by the
U.S. Government, where the principal and interest components are traded
independently under the Separate Trading of Registered Interest and Principal of
Securities program ("STRIPS"). Under STRIPS, the principal and interest
components are individually numbered and separately issued by the U.S. Treasury
at the request of depository financial institutions, which then trade the
component parts independently.
In addition, the Fund may purchase stripped mortgage-backed securities
("SMBS") issued by the U.S. Government (or a U.S. Government agency or
instrumentality) or by private issuers such as banks and other institutions. If
the underlying obligations experience greater than anticipated prepayments of
principal, the Fund may fail to fully recover its initial investment. The market
value of the class consisting entirely of principal payments can be extremely
volatile in response to changes in interest rates. The yields on a class of SMBS
that receives all or most of the interest are generally higher than prevailing
market yields on other mortgage-backed obligations because their cash flow
patterns are also volatile and there is a greater risk that the initial
investment will not be full recovered. SMBS issued by the U.S. Government (or a
U.S. Government agency or instrumentality) may be considered liquid under
guidelines established by the Company's Board of Directors if they can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of the Fund's per share net asset value.
Although stripped securities may not pay interest to holders prior to
maturity, Federal income tax regulations require a Fund to recognize as interest
income a portion of the bond's discount each year. This income must then be
distributed to shareholders along with other income earned by the Fund. To the
extent that any shareholders in the Fund elect to receive their dividends in
cash rather than reinvest such dividends in additional Fund shares, cash to make
these distributions will have to be provided from the assets of the Fund or
other sources such as proceeds of sales of Fund shares and/or sales of portfolio
securities. In such cases, the Fund will not be able to purchase additional
income producing securities with cash used to make such distributions and its
current income may ultimately be reduced as a result.
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U.S. and Foreign Bank Obligations
These obligations include negotiable certificates of deposit, banker's
acceptances and fixed time deposits. Each Fund limits its investments in
domestic bank obligations to banks having total assets in excess of $1 billion
and subject to regulation by the U.S. Government. Each Fund may also invest in
certificates of deposit issued by members of the Federal Deposit Insurance
Corporation ("FDIC") having total assets of less than $1 billion, provided that
the Fund will at no time own more than $100,000 principal amount of certificates
of deposit (or any higher principal amount which in the future may be fully
covered by FDIC insurance) of any one of those issuers. Fixed time deposits are
obligations which are payable at a stated maturity date and bear a fixed rate of
interest. Generally, fixed time deposits may be withdrawn on demand by a Fund,
but they may be subject to early withdrawal penalties which vary depending upon
market conditions and the remaining maturity of the obligation. Although fixed
time deposits do not have a market, there are no contractual restrictions on a
Fund's right to transfer a beneficial interest in the deposit to a third party.
Each Fund limits its investments in foreign bank obligations (i.e.,
obligations of foreign branches and subsidiaries of domestic banks, and domestic
and foreign branches and agencies of foreign banks) to obligations of banks
which at the time of investment are branches or subsidiaries of domestic banks
which meet the criteria in the preceding paragraphs or are branches or agencies
of foreign banks which (i) have more than $10 billion, or the equivalent in
other currencies, in total assets; (ii) in terms of assets are among the 75
largest foreign banks in the world; (iii) have branches or agencies in the
United States; and (iv) in the opinion of the Adviser, pursuant to the
established by the Board of Directors of the Company, are of an investment
quality comparable to obligations of domestic banks which may be purchased by a
Fund. These obligations may be general obligations of the parent bank in
addition to the issuing branch or subsidiary, but the parent bank's obligations
may be limited by the terms of the specific obligation or by governmental
regulation. Each Fund also limits its investments in foreign bank obligations to
banks, branches and subsidiaries located in Western Europe (United Kingdom,
France, Germany, Belgium, The Netherlands, Italy and Switzerland), Scandinavia
(Denmark and Sweden), Australia, Japan, the Cayman Islands, the Bahamas and
Canada. Each Fund will limit its investment in securities of foreign banks to
not more than 20% of total assets at the time of investment.
Each Fund may also make interest-bearing savings deposits in commercial
and savings banks in amounts not in excess of 5% of the total assets of the
Fund.
U.S. Government Obligations
Each Fund may invest in U.S. Government obligations. Examples of the types
of U.S. Government obligations that may be held by the Funds include, in
addition to U.S. Treasury bonds, notes and bills, the obligations of the Federal
Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, Government National Mortgage Association,
Federal National Mortgage Association, General Services Administration, Student
Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, Tennessee Valley
Authority, Resolution Funding Corporation and Maritime Administration.
Obligations guaranteed as to principal or interest by the U.S. Government, its
agencies, authorities or instrumentalities are deemed to include: (a) securities
for which the payment of principal and interest is backed by an irrevocable
letter of credit issued by the U.S. Government, its agencies, authorities or
instrumentalities and (b) participations in loans made to foreign governments or
their agencies that are so guaranteed. The secondary market for certain of these
participations is limited. If such participations are illiquid they will not be
purchased.
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U.S. Government obligations include principal and interest components of
securities issued or guaranteed by the U.S. Treasury if the components are
traded independently under the Separate Trading of Registered Interest and
Principal of Securities program. Obligations issued or guaranteed as to
principal or interest by the U.S. Government, its agencies, authorities or
instrumentalities may also be acquired in the form of custodial receipts. These
receipts evidence ownership of future interest payments, principal payments or
both on certain notes or bonds issued by the U.S. Government, its agencies,
authorities or instrumentalities.
Use of Segregated and Other Special Accounts
Options, futures and forward foreign currency contracts that obligate a
Fund to provide cash, securities or currencies to complete such transactions
will entail that Fund to either segregate assets in an account with, or on the
books of, the Company's custodian, or otherwise "covering" the transaction as
described below. For example, a call option written by a Fund will require the
Fund to hold the securities subject to the call (or securities convertible into
the needed securities without additional consideration) or liquid assets
sufficient to meet the obligation by purchasing and delivering the securities if
the call is exercised. A call option written on an index will require that Fund
to have portfolio securities that correlate with the index. A put option written
by a Fund also will require that Fund to have available assets sufficient to
purchase the securities the Fund would be obligated to buy if the put is
exercised.
A forward foreign currency contract that obligates a Fund to provide
currencies will require the Fund to hold currencies or liquid securities
denominated in a foreign currency which will equal the Fund's obligations. Such
a contract requiring the purchase of currencies also requires segregation.
Unless a segregated account consists of the securities, cash or currencies
that are the subject of the obligation, a Fund will hold cash, U.S. Government
securities and other high grade liquid debt obligations in a segregated account.
These assets cannot be transferred while the obligation is outstanding unless
replaced with other suitable assets. In the case of an index-based transaction,
a Fund could own securities substantially replicating the movement of the
particular index.
In the case of a futures contract, a Fund must deposit initial margin and
variation margin, as often as daily, if the position moves adversely, sufficient
to meet its obligation to purchase or provide securities or currencies, or to
pay the amount owed at the expiration of an index-based futures contract.
Similarly, options on futures contracts require a Fund to deposit margin to the
extent necessary to meet the Fund's commitments.
In lieu of such assets, such transactions may be covered by other means
consistent with applicable regulatory policies. A Fund may enter into
off-setting transactions so that its combined position, coupled with any
segregated assets, equals its net outstanding obligation in related options and
hedging transactions. For example, a Fund could purchase a put option if the
strike price of that option is the same or higher than the strike price of a put
option sold by that Fund. Moreover, instead of segregating assets if a Fund held
a futures or forward contract, it could purchase a put option on the same
futures or forward contract with a strike price as high or higher than the price
of the contract held. Of course, the off-setting transaction must terminate at
the time of or after the primary transaction.
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Variable- and Floating-Rate Instruments
Certain Funds may purchase variable-rate and floating rate obligations. If
such instrument is not rated, the Adviser will consider the earning power, cash
flows, and other liquidity ratios of the issuers and guarantors of such
obligations and, if the obligation is subject to a demand feature, will monitor
their financial status to meet payment on demand. In determining average
weighted portfolio maturity, a variable-rate demand instrument issued or
guaranteed by the U.S. Government or an agency or instrumentality thereof will
be deemed to have a maturity equal to the period remaining until the obligations
next interest rate adjustment. Other variable-rate obligations will be deemed to
have a maturity equal to the longer of the period remaining to the next interest
rate adjustment or the time a Fund can recover payment of principal as specified
in the instrument. Variable-rate demand notes held by a Money Market Fund may
have maturities of more than 397 days, provided (i) the Fund is entitled to
payment principal on not more than 30 days' notice, or at specified intervals
not exceeding 397 days (upon not more than 30 days' notice), and (ii) the rate
of interest on such note is adjusted automatically at periodic intervals which
may extend up to 397 days.
The variable- and-floating rate demand instruments that the Funds may
purchase include participations in Municipal Securities purchased from and owned
by financial institutions, primarily banks. Participation interests provide a
Fund with a specified undivided interest (up to 100%) in the underlying
obligation and the right to demand payment of the unpaid principal balance plus
accrued interest on the participation interest from the institution upon a
specified number of days' notice, not to exceed 30 days. Each participation
interest is backed by an irrevocable letter of credit or guarantee of a bank
that the Adviser has determined meets the prescribed quality standards for the
Funds. The bank typically retains fees out of the interest paid on the
obligation for servicing the obligation, providing the letter of credit, and
issuing the repurchase commitment.
Warrants
Certain Funds are permitted to invest in warrants. Warrants are privileges
issued by corporations enabling the owner to subscribe to and purchase a
specified number of shares of the corporation at a specified price during a
specified period of time. The prices of warrants do not necessarily correlate
with the prices of the underlying securities. The purchase of warrants involves
the risk that the purchaser could lose the purchase value of the warrant if the
right to subscribe to additional shares is not exercised prior to the warrant's
expiration. Also, the purchase of warrants involves the risk that the effective
price paid for the warrant added to the subscription price of the related
security may exceed the value of the subscribed security's market price such as
when there is no movement in the level of the underlying security.
When-Issued Purchases and Forward Commitments
A Fund may agree to purchase securities on a when-issued basis or enter
into a forward commitment to purchase securities. When a Fund engages in these
transactions, its custodian will segregate cash, U.S. government securities or
other high quality debt obligations equal to the amount of the commitment.
Normally, the custodian will segregate portfolio securities to satisfy a
purchase commitment, and in such a case a Fund may be required subsequently to
segregate additional assets in order to ensure that the value of the segregated
assets remains equal to the amount of the Fund's commitment. Because a Fund will
segregate cash or liquid assets to satisfy its purchase commitments in the
manner described, the Fund's liquidity and ability to manage its portfolio might
be adversely affected in the event its commitments to purchase when-issued
securities ever exceeded 25% of the value of its assets. In the case of a
forward commitment to sell portfolio securities, the Fund's custodian will hold
the portfolio securities themselves in a segregated account while the commitment
is outstanding.
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<PAGE>
A Fund will make commitments to purchase securities on a when-issued basis
or to purchase or sell securities on a forward commitment basis only with the
intention of completing the transaction and actually purchasing or selling the
securities. If deemed advisable as a matter of investment strategy, however, a
Fund may dispose of or renegotiate a commitment after it is entered into, and
may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a capital gain or loss.
When a Fund engages in when-issued and forward commitment transactions, it
relies on the other party to consummate the trade. Failure of such party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.
The value of the securities underlying a when-issued purchase or a forward
commitment to purchase securities, and any subsequent fluctuations in their
value, is taken into account when determining the net asset value of a Fund
starting on the date the Fund agrees to purchase the securities. The Fund does
not earn dividends on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When the Fund makes a forward
commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets. Fluctuations in the value of the
underlying securities are not reflected in the Fund's net asset value as long as
the commitment remains in effect.
Portfolio Turnover
Generally, the Equity Funds will purchase portfolio securities for capital
appreciation or investment income, or both, and not for short-term trading
profits. If a Fund's annual portfolio turnover rate exceeds 100%, it may result
in higher brokerage costs and possible tax consequences for the Portfolio and
its shareholders. For the Funds' portfolio turnover rates, see the "Financial
Highlights" in the Prospectus.
Investment Risks
In addition to the risks identified in certain of the securities
descriptions above, there also are general investment risks associated with an
investment in any of the Funds.
Investments by a Fund in common stocks and other equity securities are
subject to stock market risks. The value of the stocks that the Fund holds, like
the broader stock market, may decline over short or even extended periods. The
U.S. stock market tends to be cyclical, with periods when stock prices generally
rise and periods when prices generally decline. As of the date of this
Prospectus, the stock market, as measured by the S&P 500 Index and other
commonly used indexes, was trading at or close to record levels. There can be no
guarantee that these levels will continue.
Nations California Tax-Exempt Reserves and Nations California Municipal
Bond Fund, as non-diversified funds, typically invest in California municipal
securities. Therefore, events affecting the State of California could have a
greater impact on the Fund's net asset value.
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<PAGE>
The value of a Fund's investments in debt securities, including U.S.
Government Obligations, will tend to decrease when interest rates rise and
increase when interest rates fall. In general, longer-term debt instruments tend
to fluctuate in value more than shorter-term debt instruments in response to
interest rate movements. In addition, debt securities that are not backed by the
United States Government are subject to credit risk, which is the risk that the
issuer may not be able to pay principal and/or interest when due. In addition,
obligations with the lowest investment grade rating (e.g., "BBB" by Standard &
Poor's Corporation ("S&P") or "Baa" by Moody's Investors Service, Inc.
("Moody's")) have speculative characteristics and changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade debt
obligations. Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. The Adviser will consider such an event in determining
whether the Fund should continue to hold the obligation. Unrated obligations may
be acquired by the Fund if they are determined by the Adviser to be of
comparable quality at the time of purchase to rated obligations that may be
acquired.
Certain of the Funds' investments constitute derivative securities, which
are securities whose value is derived, at least in part, from an underlying
index or reference rate. There are certain types of derivative securities that
can, under certain circumstances, significantly increase a purchaser's exposure
to market or other risks. The Adviser, however, only purchases derivative
securities in circumstances where it believes such purchases are consistent with
such Fund's investment objective and do not unduly increase the Fund's exposure
to market or other risks. For additional risk information regarding the Funds'
investments in particular instruments, see "Appendix A -- Fund Securities."
Certain of the Funds may invest in securities of smaller and newer
issuers. Investments in such companies may present greater opportunities for
capital appreciation because of high potential earnings growth, but also present
greater risks than investments in more established companies with longer
operating histories and greater financial capacity.
MANAGEMENT OF THE TRUST
The business and affairs of the Trust are managed under the direction of
its Boards of Trustees. This SAI contains the names of and general background
information concerning each Trustee.
The Trust and the Adviser have adopted codes of ethics which contain
policies on personal securities transactions by "access persons," including
portfolio managers and investment analysts. These policies substantially comply
in all material respects with the recommendations set forth in the May 9, 1994
Report of the Advisory Group on Personal Investing of the Investment Company
Institute.
The management and affairs of the Trust are supervised by the Trustees
under the laws governing business trusts in the Commonwealth of Massachusetts.
The Trustees and the officers of the Trust and their principal occupations for
the last five years are set forth below.
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Principal Occupations
During Past 5 Years
Position with and Current
Name, Address, and Age the Trust Directorships
- ---------------------- --------- -------------
Edmund L. Benson, III, Director Director, President and
62 Treasurer, Saunders &
Saunders & Benson, Inc. Benson, Inc. (Insurance),
1510 Willow Lawn Drive Insurance Managers, Inc.
Suite 216 (insurance); Trustee,
Richmond, VA 23230 Nations Reserves, Master
Investment Trust, Nations
Annuity Trust and Nations Fund
Trust; Director, Nations Fund,
Inc., Nations LifeGoal Funds,
Inc., and Nations Fund
Portfolios, Inc.
James Ermer, 56 Director Retired Executive Vice
11511 Compass Point President, Corporate
Drive Development and Planning -
Ft. Meyers, FL 33908 Land America (title
insurance); Senior Vice
President, Finance - CSX
Corporation (transportation and
natural resources); Director -
National Mine Service (mining
supplies), Lawyers Title
Corporation (title insurance),
Nations Fund, Inc., Nations
Fund Portfolios, Inc. and
Nations LifeGoal Funds, Inc.;
Trustee - Nations Reserves,
Nations Fund Trust, Nations
Annuity Trust and Nations
Master Investment Trust.
William H. Grigg, 66 Director Chairman Emeritus since
Duke Power Co. July 1997, Chairman and
16092A Reap Road Chief Executive Officer
Albermarle, NC 28001 from April 1994 to July
1997 - Duke Power Co.; Director
- The Shaw Group, Inc.;
Director and Vice Chairman,
Aegis Insurance Services, Ltd.
(a mutual insurance company in
Bermuda); Director-Hatteras
Income Securities, Inc.,
Nations Government Income Term
Trust 2003, Inc., Nations
Government Income Term Trust
2004, Inc., Nations Balanced
Target Maturity Fund, Inc.,
Nations Fund, Inc., Nations
Fund Portfolios, Inc. and
Nations LifeGoal Funds, Inc.;
Trustee - Nations Reserves,
Nations Fund Trust, Nations
Annuity Trust and Nations
Master Investment Trust.
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Thomas F. Keller, 67 Director R.J. Reynolds Industries
Fuqua School of Business Professor of Business
P.O. Box 90120 Administration and Former
Duke University Dean - Fuqua School of
Durham, NC 27708 Business, Duke University;
Director - LADD Furniture,
Inc. (furniture), Wendy's
International, Inc.
(restaurant operating and
franchising), American
Business Products, Inc.
(printing services),
Dimon, Inc. (tobacco),
Biogen, Inc.
(pharmaceutical
biotechnology), Hatteras
Income Securities, Inc.,
Nations Government Income
Term Trust 2003, Inc.,
Nations Government Income
Term Trust 2004, Inc.,
Nations Balanced Target
Maturity Fund, Inc.,
Nations Fund, Inc.,
Nations Fund Portfolios,
Inc. and Nations LifeGoal
Funds, Inc.; Trustee - The
Mentor Funds, Mentor
Institutional Trust, Cash
Reserve Trust, Nations
Reserves, Nations Fund
Trust, Nations Annuity
Trust and Nations Master
Investment Trust.
Carl E. Mundy, Jr., 64 Director President and CEO - USO
USO World Headquarters from May 1996 to present;
Washington Navy Yard Commandant - United States
Building 198 Marine Corps from July
901 M Street, S.E. 1991 to July 1995;
Washington, D.C. Director - Shering-Plough
20374-5096 (pharmaceuticals and
health care products);
General Dynamics
Corporation (defense
systems), Nations Fund,
Inc., Nations Fund
Portfolios, Inc. and
Nations LifeGoal Funds,
Inc.; Trustee - Nations
Reserves, Nations Fund
Trust, Nations Annuity
Trust and Nations Master
Investment Trust.
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<PAGE>
Dr. Cornelius J. Pings, Director/Trustee President - Association of
70* American Universities from
480 S. Orange Grove February 1993 to June
Blvd. 1998; Director - Farmers
Pasadena, CA 91105 Group, Inc. (insurance
company), Nations Fund, Inc.,
Nations LifeGoal Funds, Inc.
and Nations Fund Portfolios,
Inc.; Trustee - Master
Investment Trust, Series I from
1995 to 1999, Master Investment
Trust, Series II from 1995 to
1997, Nations Reserves, Nations
Fund Trust, Nations Annuity
Trust and Nations Master
Investment Trust.;
Director/Trustee and Chairman -
Pacific Horizon Funds, Inc. and
Master Investment Trust, Series
I, from inception to May 1999;
Director - Time Horizon Funds
and Pacific Innovations Trust.
James B. Sommers*, 60 Director President - NationsBank
237 Cherokee Road Trust from January 1992 to
Charlotte, NC 28207 September 1996; Executive
Vice President - NationsBank
Corporation from January 1992
to May 1997; Chairman - Central
Piedmont Community College
Foundation; Board of
Commissioners, Charlotte/
Mecklenberg Hospital Authority;
Director Nations Fund, Inc.,
Nations Fund Portfolios, Inc.
and Nations LifeGoal Funds,
Inc.; Trustee Central Piedmont
Community College; Mint Museum
of Art, Nations Reserves,
Nations Fund Trust, Nations
Annuity Trust and Nations
Master Investment Trust.
A. Max Walker*, 77 President, Director Independent Financial
4580 Windsor Gate Court and Chairman of the Consultant; Director and
Atlanta, GA 30342 Board Chairman of the Board -
Hatteras Income Securities,
Inc., Nations Government Income
Term Trust 2003, Inc., Nations
Government Income Term Trust
2004, Inc., Nations Balanced
Target Maturity Fund, Inc.;
President, Director and
Chairman of the Board - Nations
Fund, Inc., Nations LifeGoal
Funds, Inc. and Nations Fund
Portfolios, Inc.; President,
Trustee and Chairman of the
Board Nations Reserves, Nations
Fund Trust, Nations Annuity
Trust and Nations Master
Investment Trust.
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<PAGE>
Charles B. Walker, 60 Director Director-Ethyl Corporation
Albermarle Corporation (chemical manufacturing);
Vice Chairman and CFO Vice Chairman and Chief
330 South Fourth Street Financial Officer -
Richmond, VA 23219 Albemarle Corporation
(chemical manufacturing);
Director - Nations Fund,
Inc., Nations Fund
Portfolios, Inc. and
Nations LifeGoal Funds,
Inc.; Trustee - Nations
Reserves, Nations Fund
Trust, Nations Annuity
Trust and Nations Master
Investment Trust.
Thomas S. Word, Jr.*, 61 Director Partner - McGuire, Woods,
McGuire, Woods, Battle Battle & Boothe LLP (law
& Boothe LLP firm); Director -
One James Center Vaughan-Bassett Furniture
8th Floor Companies, Inc.
Richmond, VA 23219 (furniture), Nations Fund,
Inc., Nations Fund
Portfolios, Inc. and
Nations LifeGoal Funds,
Inc.; Trustee - Nations
Reserves, Nations Fund
Trust, Nations Annuity
Trust and Nations Master
Investment Trust.
Richard H. Blank, Jr., Secretary and Treasurer Senior Vice President
42 since 1998, Vice President
Stephens Inc. from 1994 to 1998 and
111 Center Street Manager from 1990 to 1994
Little Rock, AR 72201 - Mutual Fund Services,
Stephens Inc.; Secretary since
September 1993 and Treasurer
since November 1998 - Nations
Fund, Inc., Nations Fund
Portfolios, Inc., Nations
LifeGoal Funds, Inc., Nations
Reserves, Nations Fund Trust,
Nations Annuity Trust and
Nations Master Investment
Trust.
71
<PAGE>
Michael W. Nolte, 38 Assistant Secretary Assistant Secretary -
Stephens Inc. Nations Fund Trust,
Nations Fund, Inc., Nations
Reserves, Nations Fund
Portfolios, Inc., Nations
LifeGoal Funds, Inc., Nations
Annuity Trust and Nations
Master Investment Trust.
James E. Banks, 43 Assistant Secretary Assistant Secretary -
Stephens Inc. Nations Fund Trust,
Nations Fund, Inc., Nations
Reserves, Nations Fund
Portfolios, Inc., Nations
LifeGoal Funds, Inc., Nations
Annuity Trust and Nations
Master Investment Trust.
- --------------------
* James P. Sommers, A. Max Walker and Thomas S. Word, Jr. are considered
"interested persons" of the Trust for purposes of the 1940 Act.
Mr. Blank serves as Secretary, Treasurer, and Chief Operating Officer to
other investment companies for which Stephens Inc. serves as administrator.
Each Director of the Company is also a Director of Nations Fund, Inc.,
Nations LifeGoal Funds, Inc. Nations Fund Portfolios, Inc. and a Trustee of
Nations Fund Trust, Nations Annuity Trust, and Nations Master Investment Trust,
each an open-end registered investment company that is part of the Nations Funds
Family. Richard H. Blank, Jr., Michael W. Nolte and James E. Banks, Jr. are
also officers of Nations Fund, Inc., Nations Fund Trust, Nations Fund
Portfolios, Inc., Nations LifeGoal Funds, Inc., Nations Annuity Trust and
Nations Master Investment Trust and Nations Reserves.
Each Trustee receives (i) an annual retainer of $1,000 ($3,000 for the
Chairman of the Board) plus $500 for each Fund of the Trust, plus (ii) a fee of
$1,000 for attendance at each "in-person" meeting of the Board of Trustees (or
committee thereof) and $500 for each telephonic Board meeting attended. All
Trustees receive reimbursements for expenses related to their attendance at
meetings of the Board of Trustees. Officers receive no direct remuneration in
such capacity from the Trust. No person who is an officer, director, or employee
of Bank of America or its affiliates serves as an officer, Trustee, or employee
of the Trust. The Trustees and officers of Nations Funds own less than 1% of the
shares of the Trust.
72
<PAGE>
The Trust has adopted a Code of Ethics which, among other things,
prohibits each access person of the Trust from purchasing or selling securities
when such person knows or should have known that, at the time of the
transaction, the security (i) was being considered for purchase or sale by a
Fund or (ii) was being purchased or sold by a Fund. For purposes of the Code of
Ethics, an access person means (i) a Trustee or officer of the Trust, (ii) any
employee of the Trust (or any company in a control relationship with the Trust)
who, in the course of his/her regular duties, obtains information about, or
makes recommendations with respect to, the purchase or sale of securities by the
Trust, and (iii) any natural person in a control relationship with the Trust who
obtains information concerning recommendations made to the Trust regarding the
purchase or sale of securities. Portfolio managers and other persons who assist
in the investment process are subject to additional restrictions, including a
requirement that they disgorge to the Trust any profits realized on short-term
trading (i.e., the purchase/sale or sale/purchase of securities within any
60-day period). The above restrictions do not apply to purchases or sales of
certain types of securities, including mutual fund shares, money market
instruments and certain U.S. Government securities. To facilitate enforcement,
the Code of Ethics generally requires that the Trust's access persons, other
than its "disinterested" Trustees, submit reports to the Trust's designated
compliance person regarding transactions involving securities which are eligible
for purchase by a Fund.
Nations Funds Retirement Plan
Under the terms of the Nations Funds Retirement Plan for Eligible Trustees
(the "Retirement Plan"), each Trustee may be entitled to certain benefits upon
retirement from the Board of Trustees. Pursuant to the Retirement Plan, the
normal retirement date is the date on which the eligible Trustee has attained
age 65 and has completed at least five years of continuous service with one or
more of the open-end investment companies (the "Funds") advised by the Adviser.
If a Trustee retires before reaching age 65, no benefits are payable. Each
eligible Trustee is entitled to receive an annual benefit from the Funds
commencing on the first day of the calendar quarter coincident with or next
following his date of retirement equal to 5% of the aggregate Trustee's fees
payable by the Funds during the calendar year in which the Trustee's retirement
occurs multiplied by the number of years of service (not in excess of ten years
of service) completed with respect to any of the Funds. Such benefit is payable
to each eligible Trustee in quarterly installments for a period of no more than
five years. If an eligible Trustee dies after attaining age 65, the Trustee's
surviving spouse (if any) will be entitled to receive 50% of the benefits that
would have been paid (or would have continued to have been paid) to the Trustee
if he or she had not died. The Retirement Plan is unfunded. The benefits owed to
each Trustee are unsecured and subject to the general creditors of the Funds.
Nations Funds Deferred Compensation Plan
Under the terms of the Nations Funds Deferred Compensation Plan for
Eligible Trustees (the "Deferred Compensation Plan"), each Trustee may elect, on
an annual basis, to defer all or any portion of the annual board fees (including
the annual retainer and all attendance fees) payable to the Trustee for that
calendar year. An application was submitted to and approved by the SEC to permit
deferring Trustees to elect to tie the rate of return on fees deferred pursuant
to the Deferred Compensation Plan to one or more of certain investment
portfolios of certain Funds. Distributions from the deferring Trustees' deferral
accounts will be paid in cash, in generally equal quarterly installments over a
period of five years beginning on the date the deferring Trustee's retirement
benefits commence under the Retirement Plan. The Board of Trustees, in its sole
discretion, may accelerate or extend such payments after a Trustee's termination
of service. If a deferring Trustee dies prior to the commencement of the
distribution of amounts in his or her deferral account, the balance of the
deferral account will be distributed to his or her designated beneficiary in a
lump sum as soon as practicable after the Trustee's death. If a deferring
Trustee dies after the commencement of such distribution, but prior to the
complete distribution of his or her deferral account, the balance of the amounts
credited to his or her deferral account will be distributed to his or her
designated beneficiary over the remaining period during which such amounts were
distributable to the Trustee. Amounts payable under the Deferred Compensation
Plan are not funded or secured in any way and deferring Trustees have the status
of unsecured creditors of the Funds from which they are deferring compensation.
73
<PAGE>
Director Compensation Through July 1, 1999
COMPENSATION TABLE
<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Benefits Estimated
Compensation Accrued as Annual
from Part of Benefits Upon Total Compensation
Name of Person Registrant Fund Retirement from Registrant
Position (1) (2) Expenses Plan & Fund Complex(3)(4)
- ------------ --- -------- ---- --------------------
<S> <C> <C> <C> <C>
Edmund L. Benson, III $ 10,875 $ 944 $ 35,000 $ 77,378
Trustee
James Ermer $ 8,875 $ 944 $ 35,000 $ 65,375
Trustee
William H. Grigg $ 9,875 $ 944 $ 35,000 $ 90,875
Trustee
Thomas F. Keller $ 10,875 $ 944 $ 35,000 $ 94,875
Trustee
A. Max Walker $ 12,875 $ 944 $ 40,000 $110,875
Chairman of the
Board
Charles B. Walker $ 9,875 $ 944 $ 35,000 $ 71,375
Trustee
Thomas S. Word $ 10,875 $ 944 $ 35,000 $ 77,375
Trustee
James P. Sommers $ 9,875 $ 944 $ 35,000 $ 73,375
Trustee
Carl E. Mundy, Jr $ 10,377 $ 944 $ 35,000 $ 74,377
Trustee
Dr. Cornelius Pings $ 0 $ 0 $ 0 $ 0
Trustee
Totals: $ 94,377 $ 8,496 $735,880 $329,000
</TABLE>
74
<PAGE>
(1) All Trustees receive reimbursements for expenses related to their attendance
at meetings of the Board of Trustees. Officers of the Trust receive no
direct remuneration in such capacity from the Trust.
(2) For current fiscal year and includes estimated future payments. Each Trustee
receives (i) an annual retainer of $1,000 ($3,000 for the Chairman of the
Board) plus $500 for each Fund of the Trust, Nations Fund, Inc., Nations
Fund Portfolios, Inc., Nations Fund Trust, Nations Annuity Trust, Nations
Master Investment Trust and Nations LifeGoal Funds, Inc., plus (ii) a fee of
$1,000 for attendance at each in-person board meeting attended and $500 for
each telephonic board meeting attended. The Trust also reimburses expenses
incurred by the Trustees in attending such meetings.
(3) Messrs. Grigg, Keller and A.M. Walker receive compensation from ten
investment companies, including Nations Fund, Inc., Nations Fund Portfolios,
Inc., Nations Fund Trust, Nations Annuity Trust, Nations Master Investment
Trust and Nations LifeGoal Funds, Inc., that are deemed to be part of the
Nations Fund "fund complex," as that term is defined under Rule 14a-101 of
the Securities Exchange Act of 1934, as amended. Messrs. Benson, Ermer, C.
Walker, Mundy and Word receive compensation from six investment companies,
including Nations Fund, Inc., Nations Fund Portfolios, Inc., Nations Fund
Trust, Nations Annuity Trust and Nations LifeGoal Funds, Inc. deemed to be
part of the Nations Funds complex.
(4) Total compensation amounts include deferred compensation payable to or
accrued for the following Trustees: Edmund L. Benson, III $35,188; William
H. Grigg $66,375; Thomas F. Keller $70,375; and Thomas S. Word $70,375.
Director Compensation After July 1, 1999
The Board of Trustees of the Company along with the Boards of
Directors/Trustees of the other open-end registered investment companies in the
Nations Funds family approved a new compensation structure for the Board
members, effective July 1, 1999. The new structure compensates the Board members
for their services to the Nations Funds family on a flat rate basis, and not on
a per registered investment company or per fund basis. The Nations Funds family
currently consists of Nations Fund Trust, Nations Fund, Inc., Nations Fund
Portfolios, Inc., Nations Reserves, Nations Annuity Trust, Nations LifeGoal
Funds, Inc. and Nations Master Investment Trust.
Under the new structure, each Board member would receive a base retainer
fee in the amount of $65,000 per year, in addition to $5,000 for each in-person
meeting attended; in addition to $1,000 for each telephonic meeting attended.
Each Board member would be compensated only for a maximum of six meetings per
calendar year. In addition, the Chairman of the Boards, currently A. Max
Walker, would receive an addtional fee of 20% of the base retainer fee; the
Chairman of the Nominating Committees would receive an additional fee of 10% of
the base retainer fee. The members of the Nominating and Audit Committees will
receive additional compensation at the rate of $1,000 per meeting attended.
75
<PAGE>
Shareholder and Trustee Liability
The Agreement and Declaration of Trust provides that a Trustee shall be
liable only for his own willful defaults and, if reasonable care has been
exercised in the selection of officers, agents, employees or investment
advisers, shall not be liable for any neglect or wrongdoing of any such person.
The Agreement and Declaration of Trust also provides that the Trust will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with actual or threatened litigation in which they may be involved
because of their offices with the Trust unless it is determined in the manner
provided in the Agreement and Declaration of Trust that they have not acted in
good faith in the reasonable belief that their actions were in the best
interests of the Trust. However, nothing in the Agreement and Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust could,
under certain circumstances, be held personally liable as partners for the
obligations of the trust. Even if, however, the Trust were held to be a
partnership, the possibility of the shareholders' incurring financial loss for
that reason appears remote because the Trust's Agreement and Declaration of
Trust contains an express disclaimer of shareholder liability for obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by or on behalf of
the Trust or the Trustees, and because the Agreement and Declaration of Trust
provides for indemnification out of the Trust property for any shareholder held
personally liable for the obligations of the Trust.
INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY,
TRANSFER AGENCY, OTHER SERVICE PROVIDERS, SHAREHOLDER SERVICING AND DISTRIBUTION
AGREEMENTS
Investment Adviser and Sub-Advisers
Banc of America Advisors, Inc. ("BAAI") serves as investment adviser to
the Funds, except the Feeder Funds, pursuant to an investment advisory agreement
(the "Investment Advisory Agreement") dated January 1, 1996, as amended December
2, 1998. Chicago Equity Partners Corporation ("Chicago Equity") serves as
co-investment sub-adviser with TradeStreet Investment Associates, Inc.
("TradeStreet") to Nations Asset Allocation Fund pursuant to a co-investment
sub-advisory agreement dated May 21, 1999 (the "Co-Investment Sub-Advisory
Agreement"). TradeStreet serves as investment sub-adviser to all other Funds
except the Feeder Funds, pursuant to an investment sub-advisory agreement dated
January 1, 1996, as amended December 2, 1998 (the "Sub-Advisory Agreement," and
together with the Co-Investment Sub-Advisory Agreement, the "Sub-Advisory
Agreements"). Nations Intermediate Bond Fund and Nations Blue Chip Fund invest
100% of their net investable assets in the Nations Intermediate Bond Master
Portfolio and the Nations Blue Chip Master Portfolio (the "Master Portfolios"),
respectively, which are portfolios of Nations Master Investment Trust (the
"Master Trust"), an open-end management investment company in the Nations Fund
Family, and therefore do not have a direct investment adviser. BAAI serves as
the investment adviser to the Master Portfolios. TradeStreet serves as the
investment sub-adviser to the Nations Intermediate Bond Master Portfolio and
Chicago Equity Partners Corporation ("Chicago Equity") services as investment
sub-adviser to Nations Blue Chip Master Portfolio. As used herein, "Adviser"
shall mean BAAI, TradeStreet and/or Chicago Equity as the context may require.
76
<PAGE>
BAAI also serves as the investment adviser to the portfolios of Nations
Fund Trust, Nations Fund, Inc., Nations Fund Portfolios, Inc., Nations Annuity
Trust, Nations LifeGoal Funds, Inc., each a registered investment company that
is part of the Nations Funds Family. In addition, BAAI serves as the investment
advisor to Hatteras Income Securities, Inc., Nations Government Income Term
Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc. and Nations
Balanced Target Maturity Fund, Inc., each a closed-end diversified management
investment company traded on the New York Stock Exchange. TradeStreet also
serves as the investment sub-adviser to Nations Fund Trust, Nations Fund, Inc.,
Nations Annuity Trust, Nations LifeGoal Funds, Inc., Nations Master Investment
Trust, Nations Government Income Term Trust 2003, Inc., Nations Government
Income Term Trust 2004, Inc., Nations Balanced Target Maturity Fund, Inc., and
Hatteras Income Securities, Inc.
BAAI, TradeStreet and Chicago Equity are each wholly owned subsidiaries of
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.
The Investment Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of obligations or
duties thereunder on the part of BAAI or any of its officers, Trustees,
employees or agents, BAAI shall not be subject to liability to the Trust or to
any shareholder of the Trust for any act or omission in the course of, or
connected with, rendering services thereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
The Investment Advisory Agreement became effective with respect to a Fund
when approved by the Trustees of the Trust, and thereafter continues from year
to year, provided that such continuation of the Agreement is specifically
approved at least annually by (a) (i) the Trust's Board of Trustees or (ii) the
vote of "a majority of the outstanding voting securities" of a Fund (as defined
in Section 2(a)(42) of the 1940 Act), and (b) the affirmative vote of a majority
of the Trust's Trustees who are not parties to such Agreement or "interested
persons" (as defined in the 1940 Act) of a party to such Agreement (other than
as Trustees of the Trust), by votes cast in person at a meeting specifically
called for such purpose. The continuation of the Investment Advisory and
Sub-Advisory Agreement with TradeStreet was last approved by the Board of
Trustees at the November 5-6, 1998 Board of Trustees meeting and the amendment
to the Investment Advisory and the Sub-Advisory Agreement with TradeStreet was
approved by the Board of Trustees at the December 2, 1998 Board of Trustees
meeting.
The Investment Advisory Agreement will terminate automatically in the
event of its assignment, and is terminable with respect to a Fund at any time
without penalty by the Trust (by vote of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund) or by BAAI on 60
days' written notice.
The Sub-Advisory Agreements provide that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties thereunder on the part of TradeStreet and/or Chicago Equity or any of
their officers, Trustees, employees or agents, TradeStreet and/or Chicago Equity
shall not be subject to liability to BAAI or to the Trust for any act or
omission in the course of, or connected with, rendering services thereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
77
<PAGE>
The Sub-Advisory Agreements became effective with respect to each Fund as
of their execution date and, unless sooner terminated, continue in full force
and effect for one year, and may be continued with respect to each Fund
thereafter, provided that the continuation of the Agreements are specifically
approved at least annually by (a) (i) the Trust's Board of Trustees or (ii) the
vote of "a majority of the outstanding voting securities" of a Fund (as defined
in Section 2(a)(42) of the 1940 Act), and (b) the affirmative vote of a majority
of the Trust's Trustees who are not parties to such Agreements or "interested
persons" (as defined in the 1940 Act) of a party to such Agreements (other than
as Trustees of the Trust), by votes cast in person at a meeting specifically
called for such purpose.
The Sub-Advisory Agreements will terminate automatically in the event of
their assignment, and are terminable with respect to a Fund at any time without
penalty by the Trust (by vote of the Board of Trustees or by vote of a majority
of the outstanding voting securities of the Fund), or by BAAI, TradeStreet or
Chicago Equity on 60 days' written notice.
The Funds, in any advertisement or sales literature, may advertise the
names, experience and/or qualifications of the portfolio manager(s) of any Fund,
or if a Fund is managed by team or committee, such Fund may advertise the names,
experience and/or qualifications of any such team or committee member.
For the 11-month fiscal period from May 1, 1998 to March 31, 1999 (the
Trust changed its fiscal year end from April 30th to March 31st), Nations Cash
Reserves, Nations Treasury Reserves, Nations Government Reserves and Nations
Municipal Reserves paid Advisory fees to BAAI as follows:
Fees Reimb.
Net Net by
Fees Paid Fees Waived BAAI
1999 1999 1999
---- ---- ----
Nations Cash Reserves $10,651,186 $9,394,814 $0
Nations Treasury Reserves 2,472,643 3,152,121 31,236
Nations Government Reserves 757,681 982,319 0
Nations Municipal Reserves 343,134 505,210 114,656
For the fiscal year from May 1, 1997 to April 30, 1998 Nations Cash Reserves,
Nations Treasury Reserves, Nations Government Reserves and Nations Municipal
Reserves paid Advisory fees to BAAI as follows:
78
<PAGE>
Net Net Fees Reimb.
Fees Paid Fees Waived by BAAI
--------- ----------- -------
Nations Cash Reserves $5,755,496 $5,510,631 $0
Nations Treasury Reserves 1,317,229 1,539,732 0
Nations Government Reserves 660,333 757,134 0
Nations Municipal Reserves 306,303 429,881 0
For the fiscal year from May 1, 1996 to April 30, 1997 Nations Cash Reserves,
Nations Treasury Reserves, Nations Government Reserves and Nations Municipal
Reserves paid Advisory fees to BAAI as follows:
Net Net Fees Reimb.
Fees Paid Fees Waived by BAAI
--------- ----------- -------
Nations Cash Reserves $2,357,981.18 $2,797,837.24 $0
Nations Treasury Reserves 780,877.72 1,033,412.10 0
Nations Government Reserves 277,002.18 556,881.07 0
Nations Municipal Reserves 137,642.13 437,536.71 0
For the 11-month fiscal period from May 1, 1998 to March 31, 1999 (the Trust
changed its fiscal year end from April 30th to March 31st), BAAI paid
Sub-Advisory fees to TradeStreet as follows:
Fees Reimb.
Net Net by
Fees Paid Fees Waived Adviser
1999 1999 1999
---- ---- ----
Nations Cash Reserves $2,205,087 $0 $0
Nations Treasury Reserves 230,492 0 0
Nations Government Reserves 582,930 0 0
Nations Municipal Reserves 105,670 0 0
For the fiscal year from May 1, 1997 to April 30, 1998 BAAI paid Sub-Advisory
fees to TradeStreet as follows:
Fees Reimb.
Net Net by
Fees Paid Fees Waived Adviser
--------- ----------- -------
Nations Cash Reserves $1,214,726 $0 $0
Nations Treasury Reserves 290,220 0 0
Nations Government Reserves 146,691 0 0
Nations Municipal Reserves 77,922 0 0
For the fiscal year from May 1, 1996 to April 30, 1997 BAAI paid Sub-Advisory
fees to TradeStreet as follows:
Fees Reimb.
Net Net by
Fees Paid Fees Waived Adviser
--------- ----------- -------
Nations Cash Reserves $567,140 $0 $0
Nations Treasury Reserves 199,572 0 0
Nations Government Reserves 91,727 0 0
Nations Municipal Reserves 32,121 0 0
79
<PAGE>
Barnett Capital Advisors, Inc. ("Barnett") assumed the responsibilities as
investment adviser for the Emerald Prime Advantage Institutional Fund (the
predecessor portfolio to Nations Money Market Reserves) on June 29, 1996 and
assumed sole responsibility for the Fund under a new advisory agreement on
December 1, 1996.
For the fiscal period from May 16, 1998 to March 31, 1999 the Nations Money
Market Reserves paid Advisory fees to BAAI as follows:
Fees Reimb.
Net Net by
Fees Paid Fees Waived BAAI
1999 1999 1999
---- ---- ----
Nations Money Market Reserves $672,666 $1,448,334 $0
For the fiscal period from December 1, 1997 to May 16, 1998 the Emerald Prime
Advantage Institutional Fund paid Advisory fees to Barnett as follows:
Fees Reimb.
Net Net by
Fees Paid Fees Waived Barnett
--------- ----------- -------
Emerald Prime Advantage $44,692 $0 $19,626
Institutional Fund
For the fiscal year from December 1, 1996 to November 30, 1997 the Emerald Prime
Advantage Institutional Fund paid Advisory fees to Barnett as follows:
Fees Reimb.
Net Net by
Fees Paid Fees Waived Barnett
--------- ----------- -------
Emerald Prime Advantage $89,737 $0 $55,159
Institutional Fund
For the fiscal period from May 16, 1998 to March 31, 1999 the Nations Money
Market Reserves paid Sub-Advisory fees to TradeStreet as follows:
Fees Reimb.
Net Net by
Fees Paid Fees Waived TradeStreet
1999 1999 1999
---- ---- ----
Nations Money Market Reserves $226,797 $0 $0
Prior to May 15, 1999, Bank of America National Trust and Savings
Association ("Bank of America Adviser") was the investment adviser to the
Pacific Horizon California Tax-Exempt Money Market Fund (the predecessor to
Nations California Tax-Exempt Reserves), the Pacific Horizon Asset Allocation
Fund (the predecessor to Nations Asset Allocation Fund), Pacific Horizon Capital
Income Fund (the predecessor to Nations Capital Income Fund) and the Pacific
Horizon California Municipal Bond Fund (the predecessor to Nations California
Municipal Bond Fund). Prior to May 15, 1999, Bank of America Adviser was also
the investment adviser to the Pacific Horizon Investment Grade Bond Master
Portfolio (the predecessor to Nations Intermediate Bond Master Portfolio) and
the Pacific Horizon Blue Chip Master Portfolio (the predecessor to Nations Blue
Chip Master Portfolio).
80
<PAGE>
For the fiscal year from March 1, 1998 to February 28, 1999, the Pacific
Horizon California Tax-Exempt Money Market Fund, the Pacific Horizon Asset
Allocation Fund, the Pacific Horizon Capital Income Fund, the Pacific Horizon
California Municipal Bond Fund, the Pacific Horizon Investment Grade Bond Master
Portfolio, the Pacific Horizon Blue Chip Master Portfolio, and the Pacific
Horizon Blue Chip (Feeder) Fund paid Advisory fees to Bank of America Adviser as
follows:
Fees Reimb.
by
Bank of
Net Net America
Fees Paid Fees Waived Adviser
1999 1999 1999
---- ---- ----
Pacific Horizon California $1,548,799 $ 0 $ 0
Tax-Exempt Money Market Fund
Pacific Horizon Asset 1,089,007 0 0
Allocation Fund
Pacific Horizon Capital Income 1,740,699 0 0
Fund
Pacific Horizon California 687,688 0 0
Municipal Bond Fund
Pacific Horizon Investment 295,046 133,952 0
Grade Bond Master Portfolio
Pacific Horizon Blue Chip 4,147,169 0 0
Master Portfolio
Pacific Horizon Blue Chip N/A N/A 38,230
(Feeder) Fund
For the fiscal year from March 1, 1997 to February 28, 1998, the Pacific
Horizon California Tax-Exempt Money Market Fund, the Pacific Horizon Asset
Allocation Fund (Pacific Horizon Asset Allocation Master Portfolio prior to June
23, 1997), the Pacific Horizon Capital Income Fund, the Pacific Horizon
California Municipal Bond Fund, the Pacific Horizon Investment Grade Bond Master
Portfolio and the Pacific Horizon Blue Chip Master Portfolio paid Advisory fees
to Bank of America Adviser as follows:
Fees Reimb.
by
Bank of
Net Net America
Fees Paid Fees Waived Adviser
--------- ----------- -------
Pacific Horizon California $1,149,877 $ 0 $ 0
Tax-Exempt Money Market Fund
Pacific Horizon Asset 0 650,191 0
Allocation Fund
Pacific Horizon Capital Income 1,637,658 0 0
Fund
Pacific Horizon California 828,272 194,717 0
Municipal Bond Fund
Pacific Horizon Investment 217,339 248,915 0
Grade Bond Master Portfolio
Pacific Horizon Blue Chip 3,099,522 262,519 0
Master Portfolio
81
<PAGE>
For the fiscal year from March 1, 1996 to February 28, 1997, the Pacific
Horizon California Tax-Exempt Money Market Fund, the Pacific Horizon Asset
Allocation Master Portfolio, the Pacific Horizon Capital Income Fund, the
Pacific Horizon California Municipal Bond Fund, the Pacific Horizon Investment
Grade Bond Master Portfolio and the Pacific Horizon Blue Chip Master Portfolio
paid Advisory fees to Bank of America Adviser as follows:
Fees Reimb.
by
Bank of
Net Net America
Fees Paid Fees Waived Adviser
--------- ----------- -------
Pacific Horizon California $ 849,799 $ 0 $ 0
Tax-Exempt Money Market Fund
Pacific Horizon Asset 310,609 735,797 31,598
Allocation Master Portfolio
Pacific Horizon Capital Income 1,220,622 0 0
Fund
Pacific Horizon California 857,206 244,720 0
Municipal Bond Fund
Pacific Horizon Investment 171,848 256,439 146,716
Grade Bond Master Portfolio
Pacific Horizon Blue Chip 1,740,647 961,001 0
Master Portfolio
Co-Administrators and Sub-Administrator
Stephens Inc. and BAAI (the "Co-Administrators") serve as
co-administrators of each Fund.
The Co-Administrators serve under a co-administration agreement
("Co-Administration Agreement"), which was approved by the Board of Trustees on
November 5-6, 1998. The Co-Administrators receive, as compensation for their
services rendered under the Co-Administration Agreement, administration fees,
computed daily and paid monthly, at the indicated annual rate of the following
Funds' average daily net assets: 0.10% of each Money Market Fund; 0.22% of each
fixed income Fund; and 0.23% of each equity Fund.
Pursuant to the Co-Administration Agreement, Stephens has agreed to, among
other things, (i) maintain office facilities for the Funds, (ii) furnish
statistical and research data, data processing, clerical, and internal executive
and administrative services to the Trust, (iii) furnish corporate secretarial
services to the Trust, including coordinating the preparation and distribution
of materials for Board of Trustees meetings, (iv) coordinate the provision of
legal advice to the Trust with respect to regulatory matters, (v) coordinate the
preparation of reports to the Trust's shareholders and the SEC, including annual
and semi-annual reports, (vi) coordinating the provision of services to the
Trust by the Transfer Agent, Sub-Transfer Agent and the Custodian, and (vii)
generally assist in all aspects of the Trust's operations. Stephens bears all
expenses incurred in connection with the performance of its services.
82
<PAGE>
Also, pursuant to the Co-Administration Agreement, BAAI has agreed to,
among other things, (i) provide accounting and bookkeeping services for the
Funds, (ii) compute each Fund's net asset value and net income, (iii) accumulate
information required for the Trust's reports to shareholders and the SEC, (iv)
prepare and file the Trust's federal and state tax returns, (v) perform monthly
compliance testing for the Trust, and (vi) prepare and furnish the Trust monthly
broker security transaction summaries and transaction listings and performance
information. BAAI bears all expenses incurred in connection with the performance
of its services.
The Co-Administration Agreement may be terminated by a vote of a majority
of the Board of Trustees, by Stephens or by BAAI, respectively, on 60 days'
written notice without penalty. The Co-Administration Agreement is not
assignable without the written consent of the other party. Furthermore, the
Co-Administration Agreement provides that Stephens and BAAI shall not be liable
to the Funds or to their shareholders except in the case of Stephens' or BAAI's,
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
BNY serves as sub-administrator for the Funds pursuant to a
sub-administration agreement. Pursuant to its terms, BNY assists Stephens and
BAAI in supervising, coordinating and monitoring various aspects of the Funds'
administrative operations. For providing such services, BNY is entitled to
receive a monthly fee which is paid by BAAI from the management fees they
receive from the Funds.
The table set forth below states the net combined Administration fees paid
to Stephens and waived for the fiscal years ended April 30, 1997 and 1998 under
the previous administration arrangements. As of December 1, 1998, the
administration arrangements have been revised. Accordingly, the fees set forth
below are shown for the periods, May 1, 1998 through November 30, 1998 and from
December 1, 1998 through March 31, 1999. For the fiscal years ended April 30,
1997, 1998, and March 31, 1999 the Funds paid combined administrative fees as
follows:
<TABLE>
<CAPTION>
Net
Fees Net Fees Net Net Fees Net Net Fees
Paid Waived Fees Paid Waived Fees Paid Waived
1997 1997 1998 1998 1999 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Nations
Cash
Reserves $ 206,640 $1,511,966 $ 444,739 $3,310,637 $ 922,159 $5,759,841
Nations
Treasury
Reserves 112,671 839,649 281,755 1,603,245 67,964 536,800
Nations
Government
Reserves 33,788 55,996 416,493 87,380 492,620 244,173
Nations
Municipal
Reserves 23,309 29,152 216,243 48,585 272,415 168,418
Nations
Money
Market
Reserves 0 0 0 0 121,254 585,746
</TABLE>
83
<PAGE>
The table set forth below states the net Administration fees paid to
Stephens and waived for the fiscal period May 1, 1998 through November 30, 1998.
Administration Fees
Fees Paid Fees Waived
Nations Cash Reserves $390,477 $3,654,043
Nations Treasury Reserves 112,205 1,030,887
Nations Government Reserves 33,897 311,090
Nations Money Market Reserves 22,143 100,249
Nations Municipal Reserves 18,438 365,740
The table set forth below states the net Co-Administration fees paid to
First Data and waived for the fiscal period May 1, 1998 through November 30,
1998.
Co-Administration Fees
Fees Paid Fees Waived
Nations Cash Reserves $39,734 $0
Nations Treasury Reserves 11,370 0
Nations Government Reserves 3,441 0
Nations Money Market Reserves 1,991 0
Nations Municipal Reserves 1,860 0
The table set forth below states the net Sub-Administration fees paid to
BAAI and waived for the fiscal period May 1, 1998 through November 30, 1998.
Sub-Administration Fees
Fees Paid Fees Waived
Nations Cash Reserves $0 $0
Nations Treasury Reserves 0 0
Nations Government Reserves 0 0
Nations Money Market Reserves 0 0
Nations Municipal Reserves 0 0
The table set forth below states the net Co-Administration fees paid to BAAI
and waived for the fiscal period December 1, 1998 through March 31, 1999.
Co-Administration Fees
Fees Paid Fees Waived
Nations Cash Reserves $0 $0
Nations Treasury Reserves 0 0
Nations Government Reserves 0 0
Nations Money Market Reserves 0 0
Nations Municipal Reserves 0 0
84
<PAGE>
The table set forth below states the net Co-Administration fees paid to
Stephens and waived for the fiscal period December 1, 1998 through March 31,
1999.
Co-Administration Fees
Fees Paid Fees Waived
Nations Cash Reserves $225,030 $2,105,798
Nations Treasury Reserves 62,306 572,358
Nations Government Reserves 19,781 181,530
Nations Money Market Reserves 38,026 172,166
Nations Municipal Reserves 11,090 220,006
The table set forth below states the net Sub-Administration fees paid to BNY
and waived for the fiscal period December 1, 1998 through March 31, 1999.
Sub-Administration Fees
Fees Paid Fees Waived
Nations Cash Reserves $266,918 $0
Nations Treasury Reserves 95,874 0
Nations Government Reserves 30,261 0
Nations Money Market Reserves 59,094 0
Nations Municipal Reserves 17,197 0
Distribution and Shareholder Servicing Plans
Liquidity Class
The Trust has adopted a distribution plan (the "Liquidity Class
Distribution Plan" or the "Distribution Plan") for the Liquidity Class Shares of
the Funds in accordance with the provisions of Rule 12b-1 under the 1940 Act
which regulates circumstances under which an investment company may directly or
indirectly bear expenses relating to the distribution of its shares. Continuance
of the Distribution Plan must be approved annually by a majority of the Trustees
of the Trust and by a majority of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of the plan or in any agreements thereunder
(the "Qualified Trustees"). The Distribution Plan requires that quarterly
written reports of amounts spent under such Distribution Plan and the purposes
of such expenditures be furnished to and reviewed by the Trustees. The Liquidity
Class Plan may not be amended to increase materially the amount which may be
spent thereunder without approval by a majority of the outstanding Liquidity
Class Shares of the Trust. All material amendments of the Distribution Plan will
require approval by a majority of the Trustees and of the Qualified Trustees.
85
<PAGE>
Liquidity Class Shares of each Fund bear the costs of their distribution
fees as provided in a budget approved annually and reviewed quarterly by the
Trustees of the Trust, including those Trustees who are not interested persons
and have no financial interest in the Liquidity Class Plan or any related
agreements. The budget will be in an amount not to exceed .30% of the average
daily net assets of Liquidity Class Shares of each Fund and the Distributor will
be reimbursed only for its actual expenses incurred during a fiscal year. The
Distributor will also receive an additional fee of up to .30% of the average
daily net assets of Liquidity Class Shares of each Fund (.35% with respect to
Nations Treasury Reserves) which the Distributor can use to compensate certain
financial institutions which provide administrative and/or distribution related
services to Liquidity Class shareholders. These services may include
establishing and maintaining customer accounts and records; aggregating and
processing purchase and redemption requests from customers; placing net purchase
and redemption orders with the Distributor or transfer agent; automatically
investing customer account cash balances; providing periodic statements to
customers; arranging for wires; answering customer inquiries concerning their
investments; assisting customers in changing dividend options, account
designations, and addresses; performing sub-accounting functions; processing
dividend payments from a Trust on behalf of customers; and forwarding
shareholder communications from the Trust (such as proxies, shareholder reports,
and dividend distribution, and tax notices) to these customers with respect to
investments in the Trust. It is possible that an institution may offer different
classes of Shares to its customers and thus receive different compensation with
respect to different classes of Shares.
In addition, the Trustees have approved a shareholder servicing plan with
respect to Liquidity Class Shares of the Funds (the "Liquidity Class Servicing
Plan" or the "Servicing Plan"). Pursuant to the Servicing Plan, a Fund may
compensate or reimburse banks, broker/dealers or other financial institutions
that have entered into Shareholder Servicing Agreements with the Trust
("Servicing Agents") for certain activities or expenses of the Servicing Agents
in connection with shareholder services that are provided by the Servicing
Agents. The Servicing Plan provides that payments under the Servicing Plan will
be calculated daily and paid monthly at a rate or rates set from time to time by
the Board of Trustees, provided that the annual rate may not exceed 0.25% of the
average daily net asset value of the Liquidity Class Shares of each Fund.
The fees payable under the Servicing Plan are used primarily to compensate
or reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents under the Servicing Plan may include: (i) aggregating and
processing purchase and redemption requests for shares from customers and
transmitting promptly net purchase and redemption orders to the Distributor or
transfer agent; (ii) providing customers with a service that invests the assets
of their accounts in shares pursuant to specific or pre-authorized instructions;
(iii) processing dividend and distribution payments from the Trust on behalf of
customers; (iv) providing information periodically to customers showing their
positions in shares; (v) arranging for bank wires; (vi) responding to customers'
inquiries concerning their investment in shares; (vii) providing sub-accounting
with respect to shares beneficially owned by customers or providing the
information to the Trust necessary for sub-accounting; (viii) if required by
law, forwarding shareholder communications from the Trust (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; (ix) forwarding to customers proxy
statements and proxies containing any proposals regarding the Servicing Plan or
related agreements; (x) providing general shareholder liaison services; and (xi)
providing such other similar services as the Trust may reasonably request to the
extent such Servicing Agents are permitted to do so under applicable statutes,
rules or regulations.
86
<PAGE>
The fees payable under the Liquidity Class Distribution Plan and Liquidity
Class Servicing Plan (together, the "Liquidity Class Plans") are treated by the
Funds as an expense in the year they are accrued. At any given time, a Selling
Agent and/or Servicing Agent may incur expenses in connection with services
provided pursuant to its agreements with the Distributor and/or the Trust under
the Liquidity Class Plans which exceed the total of the payments made to the
Selling Agents and/or Servicing Agents by the Distributor or the Trust and
reimbursed by the Funds pursuant to the Liquidity Class Plans. Any such excess
expenses may be recovered in future years, so long as the Liquidity Class Plans
are in effect. Because there is no requirement under the Liquidity Class Plans
that the Distributor be paid or the Selling Agents and Servicing Agents be
compensated or reimbursed for all their expenses or any requirement that the
Liquidity Class Plans be continued from year to year, such excess amount, if
any, does not constitute a liability to a Fund, or the Distributor, or the
Trust. Although there is no legal obligation for the Fund to pay expenses
incurred by the Distributor, a Selling Agent or a Servicing Agent in excess of
payments previously made to the Distributor under the Liquidity Class Plans if
for any reason the Liquidity Class Plans are terminated, the Trustees will
consider at that time the manner in which to treat such expenses.
For the fiscal year ended March 31, 1999, the Funds paid 12b-1 fees to
Stephens, and shareholder servicing fees to Bank of America for Liquidity Class
Shares in the following amounts:
Net
Shareholder
Net Servicing
12b-1 Fees Plan Fees
Liquidity Paid to Paid to Bank Net Fees
Class Shares Stephens of America Waived Net Fees Paid
- ------------ -------- ---------- ------ -------------
Nations Cash $ 0 $1,853,098 $8,631,902 $1,853,098
Reserves
Nations Treasury 0 506,105 2,536,895 506,105
Reserves
Nations Government 0 66,377 309,623 66,377
Reserves
Nations Municipal 0 78,579 367,421 78,579
Reserves
Nations Money 0 $ 1,149 5,851 1,149
Market Reserves
Such distribution expenses for each Fund were attributable to the cost of
marketing the Funds.
87
<PAGE>
Market Class
The Trust has adopted a distribution plan (the "Market Class Distribution
Plan" or the "Distribution Plan") for the Market Class Shares of the Funds in
accordance with the provisions of Rule 12b-1 under the 1940 Act which regulates
circumstances under which an investment company may directly or indirectly bear
expenses relating to the distribution of its shares. Continuance of the
Distribution Plan must be approved annually by a majority of the Trustees of the
Trust and by a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of the plan or in any agreements thereunder
(the "Qualified Trustees"). The Distribution Plan requires that quarterly
written reports of amounts spent under such Distribution Plan and the purposes
of such expenditures be furnished to and reviewed by the Trustees, and the
Distribution Plan may not be amended to increase materially the amount which may
be spent thereunder without approval by a majority of the outstanding Market
Class Shares of the Trust. All material amendments of the Distribution Plan will
require approval by a majority of the Trustees and of the Qualified Trustees.
Pursuant to the Distribution Plan, a Fund may compensate or reimburse the
Distributor for any activities or expenses primarily intended to result in the
sale of a Fund's Market Class Shares, including for sales related services
provided by banks, broker/dealers or other financial institutions that have
entered into a Sales Support Agreement relating to the Market Class Shares with
the Distributor ("Selling Agents"). Payments under a Fund's Market Class Plan
will be calculated daily and paid monthly at a rate or rates set from time to
time by the Board of Trustees provided that the annual rate may not exceed 0.20%
of the average daily net asset value of each Fund's Market Class Shares.
The fees payable under the Market Class Distribution Plan are used
primarily to compensate or reimburse the Distributor for distribution services
provided by it, and related expenses incurred, including payments by the
Distributor to compensate or reimburse Selling Agents, for sales support
services provided, and related expenses incurred, by such Selling Agents.
Payments under the Market Class Plan may be made with respect to (i)
preparation, printing and distribution of prospectuses, sales literature and
advertising materials by the Distributor or, as applicable, Selling Agents,
attributable to distribution or sales support activities, respectively; (ii)
commissions, incentive compensation or other compensation to, and expenses of,
account executives or other employees of the Distributor or Selling Agents,
attributable to distribution or sales support activities, respectively; (iii)
overhead and other office expenses of the Distributor or Selling Agents,
attributable to distribution or sales support activities, respectively; (iv)
opportunity costs relating to the foregoing (which may be calculated as a
carrying charge in the Distributor's or Selling Agents' unreimbursed expenses
incurred in connection with distribution or sales support activities,
respectively); and (v) any other costs and expenses relating to distribution or
sales support activities. The overhead and other office expenses referenced
above may include, without limitation, (i) the expenses of operating the
Distributor's or Selling Agents' offices in connection with the sale of Fund
shares, including lease costs, the salaries and employee benefit costs of
administrative, operations and support personnel, utility costs, communication
costs and the costs of stationery and supplies, (ii) the costs of client sales
seminars and travel related to distribution and sales support activities, and
(iii) other expenses relating to distribution and sales support activities.
88
<PAGE>
In addition, the Trustees have approved a shareholder servicing plan with
respect to Market Class Shares of the Funds (the "Market Class Servicing Plan"
or the Servicing Plan"). Pursuant to the Servicing Plan, a Fund may compensate
or reimburse banks, broker/dealers or other financial institutions that have
entered into Shareholder Servicing Agreements with the Trust for certain
activities or expenses of the Servicing Agents in connection with shareholder
services that are provided by the Servicing Agents. The Servicing Plan provides
that payments under the Servicing Plan will be paid at a rate or rates set from
time to time by the Board of Trustees, provided that the annual rate may not
exceed 0.25% of the average daily net asset value of the Market Class Shares
beneficially owned by the Servicing Agents' clients.
The fees payable under the Servicing Plan are used primarily to compensate
or reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents under the Servicing Plan may include: (i) aggregating and
processing purchase and redemption requests for shares from customers and
transmitting promptly net purchase and redemption orders to the Distributor or
transfer agent; (ii) providing customers with a service that invests the assets
of their accounts in shares pursuant to specific or pre-authorized instructions;
(iii) processing dividend and distribution payments from the Trust on behalf of
customers; (iv) providing information periodically to customers showing their
positions in shares; (v) arranging for bank wires; (vi) responding to customers'
inquiries concerning their investment in shares; (vii) providing sub-accounting
with respect to shares beneficially owned by customers or providing the
information to the Trust necessary for sub-accounting; (viii) if required by
law, forwarding shareholder communications from the Trust (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; (ix) forwarding to customers proxy
statements and proxies containing any proposals regarding the Servicing Plan or
related agreements; (x) providing general shareholder liaison services; and (xi)
providing such other similar services as the Trust may reasonably request to the
extent such Servicing Agents are permitted to do so under applicable statutes,
rules or regulations.
The shareholder servicing plan with respect to the Market Class
Distribution Plan and the Market Class Servicing Plan (collectively, the
"Plans") will continue in effect only so long as such continuance is approved at
least annually by (i) a majority of the Board of Trustees, and (ii) a majority
of the Qualified Trustees, pursuant to a vote cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan may not be amended to increase
materially the amount which may be spent thereunder without approval of a
majority of the outstanding Shares of such Fund. All material amendments to a
Plan require the approval of a majority of the Board of Trustees and the
Qualified Trustees. The Plans require that quarterly written reports of the
amounts spent under the Plans and the purposes of such expenditures be furnished
to, and reviewed by, the Trustees.
For the fiscal year ended March 31, 1999, the Funds paid 12b-1 fees to
Stephens, and shareholder servicing fees to Bank of America for Market Class
Shares in the following amounts:
89
<PAGE>
Net
Shareholder
Net Servicing
12b-1 Fees Plan Fees
Market Paid to Paid to Bank Net Fees
Class Shares Stephens of America Waived Net Fees Paid
- ------------ -------- ---------- ------ -------------
Nations Cash $ 0 $4,323,627 $ 394,373 $4,323,627
Reserves
Nations Treasury 0 3,332,510 212,490 3,332,510
Reserves
Nations Government 0 1,154,876 123,124 1,154,876
Reserves
Nations Municipal 0 488,195 48,805 488,195
Reserves
Nations Money 0 2,069,945 0 2,069,945
Market Reserves
Adviser Class
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a
Shareholder Servicing Plan for the Adviser Class Shares of each Fund (the
"Adviser Class Servicing Plan"). Under the Adviser Class Servicing Plan, the
Trust may enter into Shareholder Servicing Agreements with broker/dealers, banks
and other financial institutions ("Servicing Agents") pursuant to which the
Servicing Agents will provide shareholder support services to their customers
who beneficially own Adviser Class Shares in the Funds. The Adviser Class
Servicing Plan permits the Trust to pay Servicing Agents a fee not exceeding
0.25% of the average daily net asset value of the Adviser Class Shares
beneficially owned by the Servicing Agents' clients.
The shareholder support services provided by Servicing Agents under the
Adviser Class Servicing Plan may include: (i) aggregating and processing
purchase and redemption requests for such Adviser Class Shares from customers
and transmitting promptly net purchase and redemption orders to the Distributor
or transfer agent; (ii) providing customers with a service that invests the
assets of their accounts in such Adviser Class Shares pursuant to specific or
pre-authorized instructions; (iii) processing dividend and distribution payments
from the Trust on behalf of customers; (iv) providing information periodically
to customers showing their positions in such Adviser Class Shares; (v) arranging
for bank wires; (vi) responding to customers' inquiries concerning their
investment in such Adviser Class Shares; (vii) providing sub-accounting with
respect to such Adviser Class Shares beneficially owned by customers or the
information necessary for sub-accounting; (viii) if required by law, forwarding
shareholder communications (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
customers; (ix) forwarding to customers proxy statements and proxies containing
any proposals regarding the Adviser Class Servicing Plan or related agreements;
(x) general shareholder liaison services; and (xi) providing such other similar
services as the Trust reasonably request to the extent the Servicing Agents are
permitted to do so under applicable statutes, rules or regulations.
The Adviser Class Servicing Plan also provides that to the extent any
portion of the fees payable under such Plan is deemed to be for services
primarily intended to result in the sale of Fund shares, such fees are deemed
approved and may be paid pursuant to the Servicing Plan and in accordance with
Rule 12b-1 under the 1940 Act.
For the fiscal year ended March 31, 1999, the Funds paid 12b-1 fees to
Stephens, and shareholder servicing fees to Bank of America for Adviser Class
Shares in the following amounts:
90
<PAGE>
Net
Shareholder
Net Servicing
12b-1 Fees Plan Fees
Adviser Paid to Paid to Bank Net Fees
Class Shares Stephens of America Waived Net Fees Paid
- ------------ -------- ---------- ------ -------------
Nations Cash $ 0 $1,790,000 $ 0 $1,790,000
Reserves
Nations Treasury 0 725,787 0 725,787
Reserves
Nations Government 0 229,673 0 229,673
Reserves
Nations Municipal 0 127,558 0 127,558
Reserves
Nations Money 0 9,000 0 9,000
Market Reserves
The Adviser Class Servicing Plan will continue in effect only so long as
such continuance is approved at least annually by (i) a majority of the Board of
Trustees, and (ii) a majority of the Qualified Trustees, pursuant to a vote cast
in person at a meeting called for the purpose of voting on the Adviser Class
Servicing Plan. The Adviser Class Servicing Plan may not be amended to increase
materially the amount which may be spent thereunder without approval of a
majority of the outstanding Adviser Class Shares of such Fund. All material
amendments to the Adviser Class Servicing Plan require the approval of a
majority of the Board of Trustees and the Qualified Trustees. The Adviser Class
Servicing Plan requires that quarterly written reports of the amounts spent
under the Adviser Class Servicing Plan and the purposes of such expenditures be
furnished to, and reviewed by, the Trustees.
Trust Class
The Trust has adopted a Shareholder Servicing Plan for the Trust Class
Shares of each Fund (the "Trust Class Servicing Plan"). Under the Trust Class
Servicing Plan, the Trust may enter into Shareholder Servicing Agreements with
broker/dealers, banks and other financial institutions ("Servicing Agents")
pursuant to which the Servicing Agents will provide shareholder support services
to their customers who beneficially own Trust Class Shares in the Funds. The
Trust Class Servicing Plan permits the Trust to pay Servicing Agents a fee not
exceeding 0.10% of the average daily net asset value of the Trust Class Shares
beneficially owned by the Servicing Agents' clients.
91
<PAGE>
The shareholder support services provided by Servicing Agents under the
Trust Class Servicing Plan may include: (i) aggregating and processing purchase
and redemption requests for such Trust Class Shares from customers and
transmitting promptly net purchase and redemption orders to the Distributor or
transfer agent; (ii) providing customers with a service that invests the assets
of their accounts in such Trust Class Shares pursuant to specific or
pre-authorized instructions; (iii) processing dividend and distribution payments
from the Trust on behalf of customers; (iv) providing information periodically
to customers showing their positions in such Trust Class Shares; (v) arranging
for bank wires; (vi) responding to customers' inquiries concerning their
investment in such Trust Class Shares; (vii) providing sub-accounting with
respect to such Trust Class Shares beneficially owned by customers or the
information necessary for sub-accounting; (viii) if required by law, forwarding
shareholder communications (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
customers; (ix) forwarding to customers proxy statements and proxies containing
any proposals regarding the Trust Class Servicing Plan or related agreements;
(x) general shareholder liaison services; and (xi) providing such other similar
services as the Trust reasonably request to the extent the Servicing Agents are
permitted to do so under applicable statutes, rules or regulations.
The Trust Class Servicing Plan will continue in effect only so long as
such continuance is approved at least annually by (i) a majority of the Board of
Trustees, and (ii) a majority of the Qualified Trustees, pursuant to a vote cast
in person at a meeting called for the purpose of voting on the Trust Class
Servicing Plan. The Trust Class Servicing Plan may not be amended to increase
materially the amount which may be spent thereunder without approval of a
majority of the outstanding Trust Class Shares of such Fund. All material
amendments to the Trust Class Servicing Plan require the approval of a majority
of the Board of Trustees and the Qualified Trustees. The Trust Class Servicing
Plan requires that quarterly written reports of the amounts spent under the
Trust Class Servicing Plan and the purposes of such expenditures be furnished
to, and reviewed by, the Trustees.
Daily Class
The Trust has adopted a distribution plan (the "Daily Class Distribution
Plan" or the "Distribution Plan") for the Daily Class Shares of the Funds in
accordance with the provisions of Rule 12b-1 under the 1940 Act which regulates
circumstances under which an investment company may directly or indirectly bear
expenses relating to the distribution of its shares. Continuance of the
Distribution Plan must be approved annually by a majority of the Trustees of the
Trust and by a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of the plan or in any agreements thereunder
(the "Qualified Trustees"). The Distribution Plan requires that quarterly
written reports of amounts spent under such Distribution Plan and the purposes
of such expenditures be furnished to and reviewed by the Trustees, and the
Distribution Plan may not be amended to increase materially the amount which may
be spent thereunder without approval by a majority of the outstanding Daily
Class Shares of the Trust. All material amendments of the Distribution Plan will
require approval by a majority of the Trustees and of the Qualified Trustees.
92
<PAGE>
Pursuant to the Distribution Plan, a Fund may compensate or reimburse the
Distributor for any activities or expenses primarily intended to result in the
sale of a Fund's Daily Class Shares, including for sales related services
provided by banks, broker/dealers or other financial institutions that have
entered into a Sales Support Agreement relating to the Daily Class Shares with
the Distributor ("Selling Agents"). Payments under a Fund's Daily Class Plan
will be calculated daily and paid monthly at a rate or rates set from time to
time by the Board of Trustees provided that the annual rate may not exceed 0.35%
of the average daily net asset value of each Fund's Daily Class Shares.
The fees payable under the Daily Class Distribution Plan are used
primarily to compensate or reimburse the Distributor for distribution services
provided by it, and related expenses incurred, including payments by the
Distributor to compensate or reimburse Selling Agents, for sales support
services provided, and related expenses incurred, by such Selling Agents.
Payments under the Daily Class Plan may be made with respect to (i) preparation,
printing and distribution of prospectuses, sales literature and advertising
materials by the Distributor or, as applicable, Selling Agents, attributable to
distribution or sales support activities, respectively; (ii) commissions,
incentive compensation or other compensation to, and expenses of, account
executives or other employees of the Distributor or Selling Agents, attributable
to distribution or sales support activities, respectively; (iii) overhead and
other office expenses of the Distributor or Selling Agents, attributable to
distribution or sales support activities, respectively; (iv) opportunity costs
relating to the foregoing (which may be calculated as a carrying charge in the
Distributor's or Selling Agents' unreimbursed expenses incurred in connection
with distribution or sales support activities, respectively); and (v) any other
costs and expenses relating to distribution or sales support activities. The
overhead and other office expenses referenced above may include, without
limitation, (i) the expenses of operating the Distributor's or Selling Agents'
offices in connection with the sale of Fund shares, including lease costs, the
salaries and employee benefit costs of administrative, operations and support
personnel, utility costs, communication costs and the costs of stationery and
supplies, (ii) the costs of client sales seminars and travel related to
distribution and sales support activities, and (iii) other expenses relating to
distribution and sales support activities.
In addition, the Trustees have approved a shareholder servicing plan with
respect to Daily Class Shares of the Funds (the "Daily Class Servicing Plan" or
the Servicing Plan"). Pursuant to the Servicing Plan, a Fund may compensate or
reimburse banks, broker/dealers or other financial institutions that have
entered into Shareholder Servicing Agreements with the Trust for certain
activities or expenses of the Servicing Agents in connection with shareholder
services that are provided by the Servicing Agents. The Servicing Plan provides
that payments under the Servicing Plan will be paid at a rate or rates set from
time to time by the Board of Trustees, provided that the annual rate may not
exceed 0.25% of the average daily net asset value of the Daily Class Shares
beneficially owned by the Servicing Agents' clients.
93
<PAGE>
The fees payable under the Servicing Plan are used primarily to compensate
or reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents under the Servicing Plan may include: (i) aggregating and
processing purchase and redemption requests for shares from customers and
transmitting promptly net purchase and redemption orders to the Distributor or
transfer agent; (ii) providing customers with a service that invests the assets
of their accounts in shares pursuant to specific or pre-authorized instructions;
(iii) processing dividend and distribution payments from the Trust on behalf of
customers; (iv) providing information periodically to customers showing their
positions in shares; (v) arranging for bank wires; (vi) responding to customers'
inquiries concerning their investment in shares; (vii) providing sub-accounting
with respect to shares beneficially owned by customers or providing the
information to the Trust necessary for sub-accounting; (viii) if required by
law, forwarding shareholder communications from the Trust (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; (ix) forwarding to customers proxy
statements and proxies containing any proposals regarding the Servicing Plan or
related agreements; (x) providing general shareholder liaison services; and (xi)
providing such other similar services as the Trust may reasonably request to the
extent such Servicing Agents are permitted to do so under applicable statutes,
rules or regulations.
The shareholder servicing plan with respect to the Daily Class
Distribution Plan and the Daily Class Servicing Plan (collectively, the "Plans")
will continue in effect only so long as such continuance is approved at least
annually by (i) a majority of the Board of Trustees, and (ii) a majority of the
Qualified Trustees, pursuant to a vote cast in person at a meeting called for
the purpose of voting on the Plan. Each Plan may not be amended to increase
materially the amount which may be spent thereunder without approval of a
majority of the outstanding Shares of such Fund. All material amendments to a
Plan require the approval of a majority of the Board of Trustees and the
Qualified Trustees. The Plans require that quarterly written reports of the
amounts spent under the Plans and the purposes of such expenditures be furnished
to, and reviewed by, the Trustees.
Service Class
The Trust has adopted a distribution plan (the "Service Class Distribution
Plan" or the "Distribution Plan") for the Service Class Shares of the Funds in
accordance with the provisions of Rule 12b-1 under the 1940 Act which regulates
circumstances under which an investment company may directly or indirectly bear
expenses relating to the distribution of its shares. Continuance of the
Distribution Plan must be approved annually by a majority of the Trustees of the
Trust and by a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of the plan or in any agreements thereunder
(the "Qualified Trustees"). The Distribution Plan requires that quarterly
written reports of amounts spent under such Distribution Plan and the purposes
of such expenditures be furnished to and reviewed by the Trustees, and the
Distribution Plan may not be amended to increase materially the amount which may
be spent thereunder without approval by a majority of the outstanding Service
Class Shares of the Trust. All material amendments of the Distribution Plan will
require approval by a majority of the Trustees and of the Qualified Trustees.
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Pursuant to the Distribution Plan, a Fund may compensate or reimburse the
Distributor for any activities or expenses primarily intended to result in the
sale of a Fund's Service Class Shares, including for sales related services
provided by banks, broker/dealers or other financial institutions that have
entered into a Sales Support Agreement relating to the Service Class Shares with
the Distributor ("Selling Agents"). Payments under a Fund's Service Class Plan
will be calculated daily and paid monthly at a rate or rates set from time to
time by the Board of Trustees provided that the annual rate may not exceed 0.75%
of the average daily net asset value of each Fund's Service Class Shares.
The fees payable under the Service Class Distribution Plan are used
primarily to compensate or reimburse the Distributor for distribution services
provided by it, and related expenses incurred, including payments by the
Distributor to compensate or reimburse Selling Agents, for sales support
services provided, and related expenses incurred, by such Selling Agents.
Payments under the Service Class Plan may be made with respect to (i)
preparation, printing and distribution of prospectuses, sales literature and
advertising materials by the Distributor or, as applicable, Selling Agents,
attributable to distribution or sales support activities, respectively; (ii)
commissions, incentive compensation or other compensation to, and expenses of,
account executives or other employees of the Distributor or Selling Agents,
attributable to distribution or sales support activities, respectively; (iii)
overhead and other office expenses of the Distributor or Selling Agents,
attributable to distribution or sales support activities, respectively; (iv)
opportunity costs relating to the foregoing (which may be calculated as a
carrying charge in the Distributor's or Selling Agents' unreimbursed expenses
incurred in connection with distribution or sales support activities,
respectively); and (v) any other costs and expenses relating to distribution or
sales support activities. The overhead and other office expenses referenced
above may include, without limitation, (i) the expenses of operating the
Distributor's or Selling Agents' offices in connection with the sale of Fund
shares, including lease costs, the salaries and employee benefit costs of
administrative, operations and support personnel, utility costs, communication
costs and the costs of stationery and supplies, (ii) the costs of client sales
seminars and travel related to distribution and sales support activities, and
(iii) other expenses relating to distribution and sales support activities.
In addition, the Trustees have approved a shareholder servicing plan with
respect to Service Class Shares of the Funds (the "Service Class Servicing Plan"
or the "Servicing Plan"). Pursuant to the Servicing Plan, a Fund may compensate
or reimburse banks, broker/dealers or other financial institutions that have
entered into Shareholder Servicing Agreements with the Trust for certain
activities or expenses of the Servicing Agents in connection with shareholder
services that are provided by the Servicing Agents. The Servicing Plan provides
that payments under the Servicing Plan will be paid at a rate or rates set from
time to time by the Board of Trustees, provided that the annual rate may not
exceed 0.25% of the average daily net asset value of the Service Class Shares
beneficially owned by the Servicing Agents' clients.
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The fees payable under the Servicing Plan are used primarily to compensate
or reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents under the Servicing Plan may include: (i) aggregating and
processing purchase and redemption requests for shares from customers and
transmitting promptly net purchase and redemption orders to the Distributor or
transfer agent; (ii) providing customers with a service that invests the assets
of their accounts in shares pursuant to specific or pre-authorized instructions;
(iii) processing dividend and distribution payments from the Trust on behalf of
customers; (iv) providing information periodically to customers showing their
positions in shares; (v) arranging for bank wires; (vi) responding to customers'
inquiries concerning their investment in shares; (vii) providing sub-accounting
with respect to shares beneficially owned by customers or providing the
information to the Trust necessary for sub-accounting; (viii) if required by
law, forwarding shareholder communications from the Trust (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; (ix) forwarding to customers proxy
statements and proxies containing any proposals regarding the Servicing Plan or
related agreements; (x) providing general shareholder liaison services; and (xi)
providing such other similar services as the Trust may reasonably request to the
extent such Servicing Agents are permitted to do so under applicable statutes,
rules or regulations.
The shareholder servicing plan with respect to the Service Class
Distribution Plan and the Service Class Servicing Plan (collectively, the
"Plans") will continue in effect only so long as such continuance is approved at
least annually by (i) a majority of the Board of Trustees, and (ii) a majority
of the Qualified Trustees, pursuant to a vote cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan may not be amended to increase
materially the amount which may be spent thereunder without approval of a
majority of the outstanding Shares of such Fund. All material amendments to a
Plan require the approval of a majority of the Board of Trustees and the
Qualified Trustees. The Plans require that quarterly written reports of the
amounts spent under the Plans and the purposes of such expenditures be furnished
to, and reviewed by, the Trustees.
Investor Class
The Trust has adopted a distribution plan (the "Investor Class
Distribution Plan" or the "Distribution Plan") for the Investor Class Shares of
the Funds in accordance with the provisions of Rule 12b-1 under the 1940 Act
which regulates circumstances under which an investment company may directly or
indirectly bear expenses relating to the distribution of its shares. Continuance
of the Distribution Plan must be approved annually by a majority of the Trustees
of the Trust and by a majority of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of the plan or in any agreements thereunder
(the "Qualified Trustees"). The Distribution Plan requires that quarterly
written reports of amounts spent under such Distribution Plan and the purposes
of such expenditures be furnished to and reviewed by the Trustees, and the
Distribution Plan may not be amended to increase materially the amount which may
be spent thereunder without approval by a majority of the outstanding Investor
Class Shares of the Trust. All material amendments of the Distribution Plan will
require approval by a majority of the Trustees and of the Qualified Trustees.
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Pursuant to the Distribution Plan, a Fund may compensate or reimburse the
Distributor for any activities or expenses primarily intended to result in the
sale of a Fund's Investor Class Shares, including for sales related services
provided by banks, broker/dealers or other financial institutions that have
entered into a Sales Support Agreement relating to the Investor Class Shares
with the Distributor ("Selling Agents"). Payments under a Fund's Investor Class
Plan will be calculated daily and paid monthly at a rate or rates set from time
to time by the Board of Trustees provided that the annual rate may not exceed
0.10% of the average daily net asset value of each Fund's Investor Class Shares.
The fees payable under the Investor Class Distribution Plan are used
primarily to compensate or reimburse the Distributor for distribution services
provided by it, and related expenses incurred, including payments by the
Distributor to compensate or reimburse Selling Agents, for sales support
services provided, and related expenses incurred, by such Selling Agents.
Payments under the Investor Class Plan may be made with respect to (i)
preparation, printing and distribution of prospectuses, sales literature and
advertising materials by the Distributor or, as applicable, Selling Agents,
attributable to distribution or sales support activities, respectively; (ii)
commissions, incentive compensation or other compensation to, and expenses of,
account executives or other employees of the Distributor or Selling Agents,
attributable to distribution or sales support activities, respectively; (iii)
overhead and other office expenses of the Distributor or Selling Agents,
attributable to distribution or sales support activities, respectively; (iv)
opportunity costs relating to the foregoing (which may be calculated as a
carrying charge in the Distributor's or Selling Agents' unreimbursed expenses
incurred in connection with distribution or sales support activities,
respectively); and (v) any other costs and expenses relating to distribution or
sales support activities. The overhead and other office expenses referenced
above may include, without limitation, (i) the expenses of operating the
Distributor's or Selling Agents' offices in connection with the sale of Fund
shares, including lease costs, the salaries and employee benefit costs of
administrative, operations and support personnel, utility costs, communication
costs and the costs of stationery and supplies, (ii) the costs of client sales
seminars and travel related to distribution and sales support activities, and
(iii) other expenses relating to distribution and sales support activities.
In addition, the Trustees have approved a shareholder servicing plan with
respect to Investor Class Shares of the Funds (the "Investor Class Servicing
Plan" or the Servicing Plan"). Pursuant to the Servicing Plan, a Fund may
compensate or reimburse banks, broker/dealers or other financial institutions
that have entered into Shareholder Servicing Agreements with the Trust for
certain activities or expenses of the Servicing Agents in connection with
shareholder services that are provided by the Servicing Agents. The Servicing
Plan provides that payments under the Servicing Plan will be paid at a rate or
rates set from time to time by the Board of Trustees, provided that the annual
rate may not exceed 0.25% of the average daily net asset value of the Investor
Class Shares beneficially owned by the Servicing Agents' clients.
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The fees payable under the Servicing Plan are used primarily to compensate
or reimburse Servicing Agents for shareholder services provided, and related
expenses incurred, by such Servicing Agents. The shareholder services provided
by Servicing Agents under the Servicing Plan may include: (i) aggregating and
processing purchase and redemption requests for shares from customers and
transmitting promptly net purchase and redemption orders to the Distributor or
transfer agent; (ii) providing customers with a service that invests the assets
of their accounts in shares pursuant to specific or pre-authorized instructions;
(iii) processing dividend and distribution payments from the Trust on behalf of
customers; (iv) providing information periodically to customers showing their
positions in shares; (v) arranging for bank wires; (vi) responding to customers'
inquiries concerning their investment in shares; (vii) providing sub-accounting
with respect to shares beneficially owned by customers or providing the
information to the Trust necessary for sub-accounting; (viii) if required by
law, forwarding shareholder communications from the Trust (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; (ix) forwarding to customers proxy
statements and proxies containing any proposals regarding the Servicing Plan or
related agreements; (x) providing general shareholder liaison services; and (xi)
providing such other similar services as the Trust may reasonably request to the
extent such Servicing Agents are permitted to do so under applicable statutes,
rules or regulations.
The shareholder servicing plan with respect to the Investor Class
Distribution Plan and the Investor Class Servicing Plan (collectively, the
"Plans") will continue in effect only so long as such continuance is approved at
least annually by (i) a majority of the Board of Trustees, and (ii) a majority
of the Qualified Trustees, pursuant to a vote cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan may not be amended to increase
materially the amount which may be spent thereunder without approval of a
majority of the outstanding Shares of such Fund. All material amendments to a
Plan require the approval of a majority of the Board of Trustees and the
Qualified Trustees. The Plans require that quarterly written reports of the
amounts spent under the Plans and the purposes of such expenditures be furnished
to, and reviewed by, the Trustees.
Investor A Shares
The Trust has adopted an Amended and Restated Shareholder Servicing and
Distribution Plan (the "Investor A Plan" or the "Distribution Plan") pursuant to
Rule 12b-1 under the 1940 Act with respect to each Fund's Investor A Shares.
Rule 12b-1 regulates circumstances under which an investment company may
directly or indirectly bear expenses relating to the distribution of its shares.
Continuance of the Distribution Plan must be approved annually by a majority of
the Trustees of the Trust and by a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust and who have no
direct or indirect financial interest in the operation of the plan or in any
agreements thereunder (the "Qualified Trustees"). The Distribution Plan requires
that quarterly written reports of amounts spent under such Distribution Plan and
the purposes of such expenditures be furnished to and reviewed by the Trustees,
and the Distribution Plan may not be amended to increase materially the amount
which may be spent thereunder without approval by a majority of the outstanding
Investor A Shares of the Trust. All material amendments of the Distribution Plan
will require approval by a majority of the Trustees and of the Qualified
Trustees.
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The Investor A Plan provides that each Fund may pay the Distributor or
banks, broker/dealers or other financial institutions that offer shares of the
Fund and that have entered into a Sales Support Agreement with the Distributor
("Selling Agents") or a Shareholder Servicing Agreement with the Trust,
("Servicing Agents"), up to 0.25% (on an annualized basis) of the average daily
net asset value of the Funds.
Payments under the Investor A Plan may be made to the Distributor for
providing the distribution-related services described in (i) above or to
Servicing Agents that have entered into a Shareholder Servicing Agreement with
the Trust for providing shareholder support services to their Customers which
hold of record or beneficially Investor A Shares of a Fund. Such shareholder
support services provided by Servicing Agents to holders of Investor A Shares of
the Funds may include (i) aggregating and processing purchase and redemption
requests for Investor A Shares from their Customers and transmitting promptly
net purchase and redemption orders to our distributor or transfer agent; (ii)
providing their Customers with a service that invests the assets of their
accounts in Investor A Shares pursuant to specific or pre-authorized
instructions; (iii) processing dividend and distribution payments from the Trust
on behalf of their Customers; (iv) providing information periodically to their
Customers showing their positions in Investor A Shares; (v) arranging for bank
wires; (vi) responding to their Customers' inquiries concerning their investment
in Investor A Shares; (vii) providing sub-accounting with respect to Investor A
Shares beneficially owned by their Customers or the information necessary to us
for sub-accounting; (viii) if required by law, forwarding shareholder
communications from the Trust (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
their Customers (ix) forwarding to their Customers proxy statements and proxies
containing any proposals regarding the Shareholder Servicing Agreement; (x)
providing general shareholder liaison services; and (xi) providing such other
similar services as the Trust may reasonably request to the extent the Selling
Agent is permitted to do so under applicable statutes, rules or regulations.
Expenses incurred by the Distributor pursuant to the Investor A Plan in
any given year may exceed the sum of the fees received under the Investor A
Plan. Any such excess may be recovered by the Distributor in future years so
long as the Investor A Plan is in effect. If the Investor A Plan were terminated
or not continued, a Fund would not be contractually obligated to pay the
Distributor for any expenses not previously reimbursed by the Fund.
Expenses incurred by the Distributor pursuant to the Investor A Plan in
any given year may exceed the sum of the fees received under the Investor A
Plan. Any such excess may be recovered by the Distributor in future years so
long as the Investor A Plan is in effect. If the Investor A Plan were terminated
or not continued, a Fund would not be contractually obligated to pay the
Distributor for any expenses not previously reimbursed by the Fund.
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Investor B Shares
The Trustees of the Trust have approved a Distribution Plan (the "Investor
B Distribution Plan" or the "Distribution Plan") with respect to Investor B
Shares of the Funds. Rule 12b-1 regulates circumstances under which an
investment company may directly or indirectly bear expenses relating to the
distribution of its shares. Continuance of the Distribution Plan must be
approved annually by a majority of the Trustees of the Trust and by a majority
of the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust and who have no direct or indirect financial interest in the operation
of the plan or in any agreements thereunder (the "Qualified Trustees"). The
Distribution Plan requires that quarterly written reports of amounts spent under
such Distribution Plan and the purposes of such expenditures be furnished to and
reviewed by the Trustees, and the Distribution Plan may not be amended to
increase materially the amount which may be spent thereunder without approval by
a majority of the outstanding Investor B Shares of the Trust. All material
amendments of the Distribution Plan will require approval by a majority of the
Trustees and of the Qualified Trustees.
Pursuant to the Investor B Distribution Plan, a Fund may compensate or
reimburse the Distributor for any activities or expenses primarily intended to
result in the sale of the Fund's Investor B Shares, including for sales related
services provided by banks, broker/dealers or other financial institutions that
have entered into a Sales Support Agreement relating to the Investor B Shares
with the Distributor ("Selling Agents"). Payments under a Fund's Investor B
Distribution Plan will be calculated daily and paid monthly at a rate or rates
set from time to time by the Board of Trustees provided that the annual rate may
not exceed 0.75% of the average daily net asset value of each Fund's Investor B
Shares.
The fees payable under the Investor B Distribution Plan are used primarily
to compensate or reimburse the Distributor for distribution services provided by
it, and related expenses incurred, including payments by the Distributor to
compensate or reimburse Selling Agents, for sales support services provided, and
related expenses incurred, by such Selling Agents. Payments under the Investor B
Distribution Plan may be made with respect to preparation, printing and
distribution of prospectuses, sales literature and advertising materials by the
Distributor or, as applicable, Selling Agents, attributable to distribution or
sales support activities, respectively, commissions, incentive compensation or
other compensation to, and expenses of, account executives or other employees of
the Distributor or Selling Agents, attributable to distribution or sales support
activities, respectively; overhead and other office expenses of the Distributor
relating to the foregoing (which may be calculated as a carrying charge in the
Distributor's or Selling Agents' unreimbursed expenses), incurred in connection
with distribution or sales support activities. The overhead and other office
expenses referenced above may include, without limitation, (i) the expenses of
operating the Distributor's or Selling Agents' offices in connection with the
sale of Fund shares, including lease costs, the salaries and employee benefit
costs of administrative, operations and support personnel, utility costs,
communication costs and the costs of stationery and supplies, (ii) the costs of
client sales seminars and travel related to distribution and sales support
activities, and (iii) other expenses relating to distribution and sales support
activities.
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The fees payable under the Investor B Distribution Plan are treated by the
Funds as an expense in the year they are accrued. At any given time, a Selling
Agent and/or Servicing Agent may incur expenses in connection with services
provided pursuant to its agreements with the Distributor under the Investor B
Distribution Plan which exceed the total of (i) the payments made to the Selling
Agents and Servicing Agents by the Distributor or the Trust and reimbursed by
the Fund pursuant to the Investor B Distribution Plan, and (ii) the proceeds of
contingent deferred sales charges paid to the Distributor and reallowed to the
Selling Agent, upon the redemption of their Customers' Investor B Shares. Any
such excess expenses may be recovered in future years, so long as the Investor B
Distribution Plan is in effect. Because there is no requirement under the
Investor B Distribution Plan that the Distributor be paid or the Selling Agents
and Servicing Agents be compensated or reimbursed for all their expenses or any
requirement that the Investor B Distribution Plan be continued from year to
year, such excess amount, if any, does not constitute a liability to a Fund or
the Distributor. Although there is no legal obligation for the Fund to pay
expenses incurred by the Distributor, a Selling Agent or a Servicing Agent in
excess of payments previously made to the Distributor under the Investor B
Distribution Plan or in connection with contingent deferred sales charges, if
for any reason the Investor B Distribution Plan is terminated, the Trustees will
consider at that time the manner in which to treat such expenses.
Investor C Shares
The Trustees of the Trust have approved an Amended and Restated
Distribution Plan in accordance with Rule 12b-1 under the 1940 Act for the
Investor C Shares of the Funds (the "Investor C Plan" or the "Distribution
Plan"). Rule 12b-1 regulates circumstances under which an investment company may
directly or indirectly bear expenses relating to the distribution of its shares.
Continuance of the Distribution Plan must be approved annually by a majority of
the Trustees of the Trust and by a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust and who have no
direct or indirect financial interest in the operation of the plan or in any
agreements thereunder (the "Qualified Trustees"). The Distribution Plan requires
that quarterly written reports of amounts spent under such Distribution Plan and
the purposes of such expenditures be furnished to and reviewed by the Trustees,
and the Distribution Plan may not be amended to increase materially the amount
which may be spent thereunder without approval by a majority of the outstanding
Investor C Shares of the Trust. All material amendments of the Distribution Plan
will require approval by a majority of the Trustees and of the Qualified
Trustees.
Pursuant to the Investor C Plan, each Fund may pay the Distributor for
certain expenses that are incurred in connection with the distribution of
shares. Payments under the Investor C Plan will be calculated daily and paid
monthly at a rate set from time to time by the Board of Trustees provided that
the annual rate may not exceed 0.75% of the average daily net asset value of
Investor C Shares of a Fund. Payments to the Distributor pursuant to the
Investor C Plan will be used (i) to compensate banks, other financial
institutions or a securities broker/dealer that have entered into a Sales
Support Agreement with the Distributor ("Selling Agents") for providing sales
support assistance relating to Investor C Shares, for promotional activities
intended to result in the sale of or Investor C Shares such as to pay for the
preparation, printing and distribution of prospectuses to other than current
shareholders, and (iii) to compensate Selling Agents for providing sales support
services with respect to their Customers who are, from time to time, beneficial
and record holders of Investor C Shares. Currently, substantially all fees paid
pursuant to the Investor C Plan are paid to compensate Selling Agents for
providing the services described in (i) and (iii) above, with any remaining
amounts being used by the Distributor to partially defray other expenses
incurred by the Distributor in distributing Investor C Shares. Fees received by
the Distributor pursuant to the Investor C Plan will not be used to pay any
interest expenses, carrying charges or other financing costs (except to the
extent permitted by the SEC) and will not be used to pay any general and
administrative expenses of the Distributor.
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Pursuant to the Investor C Plan, the Distributor may enter into Sales
Support Agreements with Selling Agents for providing sales support services to
their Customers who are the record or beneficial owners of Investor C Shares of
the Funds. Such Selling Agents will be compensated at the annual rate of up to
0.75% of the average daily net asset value of the Investor C Shares of the Funds
held of record or beneficially by such Customers. The sales support services
provided by Selling Agents may include providing distribution assistance and
promotional activities intended to result in the sales of shares such as paying
for the preparation, printing and distribution of prospectuses to other than
current shareholders.
Fees paid pursuant to the Investor C Plan are accrued daily and paid
monthly, and are charged as expenses of the relevant shares of a Fund as
accrued. Expenses incurred by the Distributor pursuant to the Investor C Plan in
any given year may exceed the sum of the fees received under the Investor C Plan
and payments received pursuant to contingent deferred sales charges. Any such
excess may be recovered by the Distributor in future years so long as the
Investor C Plan is in effect. If the Investor C Plan were terminated or not
continued, a Fund would not be contractually obligated to pay the Distributor
for any expenses not previously reimbursed by the Fund or recovered through
contingent deferred sales charges.
In addition, the Trustees have approved an Amended and Restated
Shareholder Servicing Plan ("Servicing Plan") with respect to the Investor C
Shares of the Funds (the "Investor C Servicing Plan"). Pursuant to the Investor
C Servicing Plan, each Fund may pay banks, broker/dealers or other financial
institutions that have entered into a Shareholder Servicing Agreement with
Nations Funds ("Servicing Agents") for certain expenses that are incurred by the
Servicing Agents in connection with shareholder support services that are
provided by the Servicing Agents. Payments under the Investor C Servicing Plan
will be calculated daily and paid monthly at a rate set from time to time by the
Board of Trustees, provided that the annual rate may not exceed 0.25% of the
average daily net asset value of the Funds' Investor C Shares. The shareholder
services provided by the Servicing Agents may include (i) aggregating and
processing purchase and redemption requests for such Investor C Shares from
Customers and transmitting promptly net purchase and redemption orders to our
distributor or transfer agent; (ii) providing Customers with a service that
invests the assets of their accounts in such Investor C Shares pursuant to
specific or pre-authorized instructions; (iii) dividend and distribution
payments from the Trust on behalf of Customers; (iv) providing information
periodically to Customers showing their positions in such Investor C Shares; (v)
arranging for bank wires; (vi) responding to Customers' inquiries concerning
their investment in such Investor C Shares; (vii) providing sub-accounting with
respect to such Investor C Shares beneficially owned by Customers or providing
the information to us necessary for sub-accounting; (viii) if required by law,
forwarding shareholder communications from the Trust (such as proxies,
shareholder reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; (ix) forwarding to Customers proxy
statements and proxies containing any proposals regarding the Shareholder
Servicing Agreement; (x) providing general shareholder liaison services; and
(xi) providing such other similar services as the Trust may reasonably request
to the extent the Servicing Agent is permitted to do so under applicable
statutes, rules or regulations.
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The shareholder servicing plan with respect to the Investor C Plan and the
Investor C Servicing Plan (collectively, the "Plans") will continue in effect
only so long as such continuance is approved at least annually by (i) a majority
of the Board of Trustees, and (ii) a majority of the Qualified Trustees,
pursuant to a vote cast in person at a meeting called for the purpose of voting
on the Plan. Each Plan may not be amended to increase materially the amount
which may be spent thereunder without approval of a majority of the outstanding
Shares of such Fund. All material amendments to a Plan require the approval of a
majority of the Board of Trustees and the Qualified Trustees. The Plans require
that quarterly written reports of the amounts spent under the Plans and the
purposes of such expenditures be furnished to, and reviewed by, the Trustees.
Primary B Shares
As stated in the Prospectus for the Funds' Primary B Shares, the Trust has
a Shareholder Administration Plan (the "Administration Plan") with respect to
such shares. Pursuant to the Administration Plan, the Trust may enter into
agreements ("Administration Agreements") with broker/dealers, banks and other
financial institutions that are dealers of record or holders of record or which
have a servicing relationship with the beneficial owners of Primary B Shares of
the Funds ("Servicing Agents"). The Administration Plan provides that pursuant
to the Administration Agreements, Servicing Agents shall provide the shareholder
support services as set forth therein to their customers who may from time to
time own of record or beneficially Primary B Shares ("Customers") in
consideration for the payment of up to 0.60% (on an annualized basis) of the net
asset value of such shares. Such services may include: (i) aggregating and
processing purchase, exchange and redemption requests for Primary B Shares from
Customers and transmitting promptly net purchase and redemption orders with the
Distributor or the transfer agents; (ii) providing Customers with a service that
invests the assets of their accounts in Primary B Shares pursuant to specific or
pre-authorized instructions; (iii) processing dividend and distribution payments
from the Trust on behalf of Customers; (iv) providing information periodically
to Customers showing their positions in Primary B Shares; (v) arranging for bank
wires; (vi) responding to Customer inquiries concerning their investment in
Primary B Shares; (vii) providing sub-accounting with respect to Primary B
Shares beneficially owned by Customers or the information necessary for
sub-accounting; (viii) if required by law, forwarding shareholder communications
(such as proxies, shareholder reports annual and semi-annual financial
statements and dividend, distribution and tax notices) to Customers; (ix)
forwarding to Customers proxy statements and proxies containing any proposals
regarding an Administration Agreement; (x) employee benefit plan recordkeeping,
administration, custody and trustee services; (xi) general shareholder liaison
services and (xii) providing such other similar services as may reasonably be
requested to the extent permitted under applicable statutes, rules, or
regulations.
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Marsico Shares
As stated in the Prospectus for the Funds' Marsico Shares, the Trust has a
Shareholder Administration Plan (the "Administration Plan") with respect to such
shares. Pursuant to the Administration Plan, the Trust may enter into agreements
("Administration Agreements") with broker/dealers, banks and other financial
institutions that are dealers of record or holders of record or which have a
servicing relationship with the beneficial owners of Marsico Shares of the Funds
("Servicing Agents"). The Administration Plan provides that pursuant to the
Administration Agreements, Servicing Agents shall provide the shareholder
support services as set forth therein to their customers who may from time to
time own of record or beneficially Marsico Shares ("Customers") in consideration
for the payment of up to 0.10% (on an annualized basis) of the net asset value
of such shares. Such services may include: (i) aggregating and processing
purchase, exchange and redemption requests for Marsico Shares from Customers and
transmitting promptly net purchase and redemption orders with the Distributor or
the transfer agents; (ii) providing Customers with a service that invests the
assets of their accounts in Marsico Shares pursuant to specific or
pre-authorized instructions; (iii) processing dividend and distribution payments
from the Trust on behalf of Customers; (iv) providing information periodically
to Customers showing their positions in Primary B Shares; (v) arranging for bank
wires; (vi) responding to Customer inquiries concerning their investment in
Marsico Shares; (vii) providing sub-accounting with respect to Marsico Shares
beneficially owned by Customers or the information necessary for sub-accounting;
(viii) if required by law, forwarding shareholder communications (such as
proxies, shareholder reports annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers; (ix) forwarding to
Customers proxy statements and proxies containing any proposals regarding an
Administration Agreement; (x) employee benefit plan recordkeeping,
administration, custody and trustee services; (xi) general shareholder liaison
services and (xii) providing such other similar services as may reasonably be
requested to the extent permitted under applicable statutes, rules, or
regulations.
The Trust has also adopted a Shareholder Servicing Plan for the Marsico
Class Shares of each Fund (the "Marsico Class Servicing Plan"). Under the
Marsico Class Servicing Plan, the Trust may enter into Shareholder Servicing
Agreements with broker/dealers, banks and other financial institutions
("Servicing Agents") pursuant to which the Servicing Agents will provide
shareholder support services to their customers who beneficially own Marsico
Class Shares in the Funds. The Marsico Class Servicing Plan permits the Trust to
pay Servicing Agents a fee not exceeding 0.25% of the average daily net asset
value of the Marsico Class Shares beneficially owned by the Servicing Agents'
clients.
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The shareholder support services provided by Servicing Agents under the
Marsico Class Servicing Plan may include: (i) aggregating and processing
purchase and redemption requests for such Marsico Class Shares from customers
and transmitting promptly net purchase and redemption orders to the Distributor
or transfer agent; (ii) providing customers with a service that invests the
assets of their accounts in such Marsico Class Shares pursuant to specific or
pre-authorized instructions; (iii) processing dividend and distribution payments
from the Trust on behalf of customers; (iv) providing information periodically
to customers showing their positions in such Marsico Class Shares; (v) arranging
for bank wires; (vi) responding to customers' inquiries concerning their
investment in such Marsico Class Shares; (vii) providing sub-accounting with
respect to such Marsico Class Shares beneficially owned by customers or the
information necessary for sub-accounting; (viii) if required by law, forwarding
shareholder communications (such as proxies, shareholder reports, annual and
semi-annual financial statements and dividend, distribution and tax notices) to
customers; (ix) forwarding to customers proxy statements and proxies containing
any proposals regarding the Marsico Class Servicing Plan or related agreements;
(x) general shareholder liaison services; and (xi) providing such other similar
services as the Trust reasonably request to the extent the Servicing Agents are
permitted to do so under applicable statutes, rules or regulations.
The Marsico Class Servicing Plan will continue in effect only so long as
such continuance is approved at least annually by (i) a majority of the Board of
Trustees, and (ii) a majority of the Qualified Trustees, pursuant to a vote cast
in person at a meeting called for the purpose of voting on the Marsico Class
Servicing Plan. The Marsico Class Servicing Plan may not be amended to increase
materially the amount which may be spent thereunder without approval of a
majority of the outstanding Marsico Class Shares of such Fund. All material
amendments to the Marsico Class Servicing Plan require the approval of a
majority of the Board of Trustees and the Qualified Trustees. The Marsico Class
Servicing Plan requires that quarterly written reports of the amounts spent
under the Marsico Class Servicing Plan and the purposes of such expenditures be
furnished to, and reviewed by, the Trustees.
Seafirst Shares
Seafirst Shares of the Acquiring Funds do not pay any fees under a
Distribution Plan. The Acquiring Funds have adopted a Shareholder Servicing Plan
with regard to the Seafirst Shares of the Acquiring Funds. The Shareholder
Servicing Plan provides that each Fund may pay Servicing Agents that have
entered into a Shareholder Servicing Agreement with the Acquiring Funds up to
0.25% (on an annual basis) of the average daily net asset value of the Seafirst
Shares of the Acquired Funds.
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The Trustees have adopted a Shareholder Servicing Plan ("Servicing Plan")
with respect to the Seafirst Shares of the Funds (the "Seafirst Servicing
Plan"). Pursuant to the Seafirst Servicing Plan, each Fund may pay banks,
broker/dealers or other financial institutions that have entered into a
Shareholder Servicing Agreement with Nations Funds ("Servicing Agents") for
certain expenses that are incurred by the Servicing Agents in connection with
shareholder support services that are provided by the Servicing Agents. Payments
under the Seafirst Servicing Plan will be calculated daily and paid monthly at a
rate set from time to time by the Board of Trustees, provided that the annual
rate may not exceed 0.25% of the average daily net asset value of the Funds'
Seafirst Shares. The shareholder services provided by the Servicing Agents may
include (i) aggregating and processing purchase and redemption requests for such
Seafirst Shares from Customers and transmitting promptly net purchase and
redemption orders to our distributor or transfer agent; (ii) providing Customers
with a service that invests the assets of their accounts in such Seafirst Shares
pursuant to specific or pre-authorized instructions; (iii) dividend and
distribution payments from the Trust on behalf of Customers; (iv) providing
information periodically to Customers showing their positions in such Seafirst
Shares; (v) arranging for bank wires; (vi) responding to Customers' inquiries
concerning their investment in such Seafirst Shares; (vii) providing
sub-accounting with respect to such Seafirst Shares beneficially owned by
Customers or providing the information to us necessary for sub-accounting;
(viii) if required by law, forwarding shareholder communications from the Trust
(such as proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to Customers; (ix)
forwarding to Customers proxy statements and proxies containing any proposals
regarding the Shareholder Servicing Agreement; (x) providing general shareholder
liaison services; and (xi) providing such other similar services as the Trust
may reasonably request to the extent the Servicing Agent is permitted to do so
under applicable statutes, rules or regulations.
The Seafirst Servicing Plan will continue in effect only so long as such
continuance is approved at least annually by (i) a majority of the Board of
Trustees, and (ii) a majority of the Qualified Trustees, pursuant to a vote cast
in person at a meeting called for the purpose of voting on the Seafirst
Servicing Plan. The Seafirst Servicing Plan may not be amended to increase
materially the amount which may be spent thereunder without approval of a
majority of the outstanding Shares of such Fund. All material amendments to the
Seafirst Servicing Plan require the approval of a majority of the Board of
Trustees and the Qualified Trustees. The Seafirst Servicing Plan requires that
quarterly written reports of the amounts spent under the Seafirst Servicing Plan
and the purposes of such expenditures be furnished to, and reviewed by, the
Trustees.
Expenses
The Administrator furnishes, without additional cost to the Trust and the
other registered investment companies in the Nations Funds Family (altogether,
the "Companies"), the services of the Treasurer and Secretary of the Companies
and such other personnel (other than the personnel of the Adviser) as are
required for the proper conduct of each Company's affairs. The Distributor bears
the incremental expenses of printing and distributing prospectuses used by the
Distributor or furnished by the Distributor to investors in connection with the
public offering of the Companies' shares and the costs of any other promotional
or sales literature, except that to the extent permitted under the Plans
relating to the Investor A, Investor B or Investor C Shares of each Fund,
sales-related expenses incurred by the Distributor may be reimbursed by the
Companies.
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The Companies pay or causes to be paid all other expenses of each Company,
including, without limitation: the fees of the Adviser, the Administrator and
Co-Administrator; the charges and expenses of any registrar, any custodian or
depository appointed by each Company for the safekeeping of its cash, fund
securities and other property, and any stock transfer, dividend or accounting
agent or agents appointed by each Company; brokerage commissions chargeable to
each Company in connection with fund securities transactions to which each
Company is a party; all taxes, including securities issuance and transfer taxes;
corporate fees payable by each Company to federal, state or other governmental
agencies; all costs and expenses in connection with the registration and
maintenance of registration of each Company and its shares with the SEC and
various states and other jurisdictions (including filing fees, legal fees and
disbursements of counsel); the costs and expenses of typesetting prospectuses
and statements of additional information of each Company (including supplements
thereto) and periodic reports and of printing and distributing such prospectuses
and statements of additional information (including supplements thereto) to each
Company's shareholders; all expenses of shareholders' and directors' meetings
and of preparing, printing and mailing proxy statements and reports to
shareholders; fees and travel expenses of directors or director members of any
advisory board or committee; all expenses incident to the payment of any
dividend or distribution, whether in shares or cash; charges and expenses of any
outside service used for pricing of each Company's shares; fees and expenses of
legal counsel and of independent auditors in connection with any matter relating
to each Company; membership dues of industry associations; interest payable on
Company borrowings; postage and long-distance telephone charges; insurance
premiums on property or personnel (including officers and directors) of each
Company which inure to its benefit; extraordinary expenses (including, but not
limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of each
Company's operation unless otherwise explicitly assumed by the Adviser), the
Administrator or Co-Administrator.
Expenses of each Company which are not directly attributable to the
operations of any class of shares or Fund are pro-rated among all classes of
shares or Fund of each Company based upon the relative net assets of each class
or Fund. Expenses of each Company which are not directly attributable to a
specific class of shares but are directly attributable to a specific Fund are
prorated among all the classes of shares of such Fund based upon the relative
net assets of each such class of shares. Expenses of each Company which are
directly attributable to a class of shares are charged against the income
available for distribution as dividends to such class of shares.
The Advisory Agreement, the Sub-Advisory Agreements, and the
Co-Administration Agreement require BAAI, TradeStreet, and the Co-Administrators
to reduce their fees to the extent required to satisfy any expense limitations
which may be imposed by the securities laws or regulations thereunder of any
state in which a Fund's shares are registered or qualified for sale, as such
limitations may be raised or lowered from time to time, and the aggregate of all
such investment advisory, sub-advisory, and administration fees shall be reduced
by the amount of such excess. The amount of any such reduction to be borne by
BAAI, TradeStreet, or the Co-Administrators shall be deducted from the monthly
investment advisory and administration fees otherwise payable to BAAI,
TradeStreet, and the Co-Administrators during such fiscal year. If required
pursuant to such state securities regulations, BAAI, TradeStreet and the
Co-Administrators will reimburse the Companies no later than the last day of the
first month of the next succeeding fiscal year, for any such annual operating
expenses (after reduction of all investment advisory and administration fees in
excess of such limitation).
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Transfer Agents and Custodians
First Data is located at One Exchange Place, 53 State Street, Boston,
Massachusetts 02109, and acts as transfer agent for each Companies Primary
Shares and Investor Shares. Under the transfer agency agreements, the transfer
agent maintains shareholder account records for the Company, handles certain
communications between shareholders and the Companies, and distributes dividends
and distributions payable by the Companies to shareholders, and produces
statements with respect to account activity for the Companies and its
shareholders for these services. The transfer agent receives a monthly fee
computed on the basis of the number of shareholder accounts that it maintains
for each Company during the month and is reimbursed for out-of-pocket expenses.
Bank of America serves as sub-transfer agent for each Fund's Primary
Shares.
The Bank of New York ("BONY") 90 Washington Street, New York, N.Y. 10286
serves as custodian for the Funds' assets. As custodian, BONY maintains the
Funds' securities cash and other property, delivers securities against payment
upon sale and pays for securities against delivery upon purchase, makes payments
on behalf of such Funds for payments of dividends, distributions and
redemptions, endorses and collects on behalf of such Funds all checks, and
receives all dividends and other distributions made on securities owned by such
Funds.
The SEC has amended Rule 17f-5 under the 1940 Act to permit boards to
delegate certain foreign custody matters to foreign custody managers and to
modify the criteria applied in the selection process. Accordingly, BONY serves
as Foreign Custody Manager, pursuant to a Foreign Custody Manager Agreement,
under which the Boards of Directors/Trustees retain the responsibility for
selecting foreign compulsory depositories, although BONY agrees to make certain
findings with respect to such depositories and to monitor such depositories.
Distributor
Stephens Inc. (the "Distributor") serves as the principal underwriter and
distributor of the shares of the Funds.
Pursuant to a distribution agreement (the "Distribution Agreement"), the
Distributor, as agent, sells shares of the Funds on a continuous basis and
transmits purchase and redemption orders that its receives to the Companies or
the Transfer Agent. Additionally, the Distributor has agreed to use appropriate
efforts to solicit orders for the sale of shares and to undertake such
advertising and promotion as it believes appropriate in connection with such
solicitation. Pursuant to the Distribution Agreement, the Distributor, at its
own expense, finances those activities which are primarily intended to result in
the sale of shares of the Funds, including, but not limited to, advertising,
compensation of underwriters, dealers and sales personnel, the printing of
prospectuses to other than existing shareholders, and the printing and mailing
of sales literature. The Distributor, however, may be reimbursed for all or a
portion of such expenses to the extent permitted by a distribution plan adopted
by the Companies pursuant to Rule 12b-1 under the 1940 Act.
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The Distribution Agreement will continue year to year as long as such
continuance is approved at least annually by (i) the Board of Directors/Trustees
or a vote of the majority (as defined in the 1940 Act) of the outstanding voting
securities of the Fund and (ii) a majority of the directors who are not parties
to the Distribution Agreement or "interested persons" of any such party by a
vote cast in person at a meeting called for such purpose. The Distribution
Agreement is not assignable and is terminable with respect to a Fund, without
penalty, on 60 days' notice by the Board of Trustees, the vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the Fund, or by
the Distributor.
Independent Accountants and Reports
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
shareholder reports to shareholders of record.
The annual financial statements will be audited by the Trust's independent
accountant. The Board of Trustees has selected PricewaterhouseCoopers LLP, 1177
Avenue of the Americas, New York, New York 10036, as the Trust's independent
accountant to audit the Trust's books and review the Trust's tax returns for the
Funds' fiscal year ended March 31, 2000. PricewaterhouseCoopers LLP, with
offices at 1177 Avenue of the Americas, New York, New York 10036 was the
independent accountants for Nations Cash Reserves, Nations Treasury Reserves,
Nations Government Reserves, Nations Municipal Reserves for the period ended
March 31, 1999, and for the Pacific Horizon California Tax-Exempt Money Market
Fund (the predecessor to Nations California Tax-Exempt Reserves), the Pacific
Horizon Asset Allocation Fund (the predecessor to Nations Asset Allocation
Fund), Pacific Horizon Capital Income Fund (the predecessor to Nations Capital
Income Fund), Pacific Horizon California Municipal Bond Fund (the predecessor to
Nations California Municipal Bond Fund), Pacific Horizon Intermediate Bond Fund
(the predecessor to Nations Intermediate Bond Fund) and Pacific Horizon Blue
Chip Fund (the predecessor to Nations Blue Chip Fund) for the fiscal year ended
February 28, 1999, and the period ended May 14, 1999. KPMG LLP, Two Nationwide
Plaza, Columbus, Ohio 43215 was the independent auditor for the Emerald Prime
Advantage Institutional Fund (predecessor to Nations Money Market Reserves) for
the fiscal period December 1, 1997 through May 15, 1998, and for the fiscal year
ended November 30, 1997. Certain financial information which appears in the
Prospectuses and in the financial statements has been audited by the
accountants.
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The Annual Report for Nations Cash Reserves, Nations Treasury Reserves,
Nations Government Reserves and Nations Municipal Reserves for the period ended
March 31, 1999, is hereby incorporated by reference in this SAI. The Annual
Report for the Emerald Prime Advantage Institutional Fund (the predecessor to
Nations Money Market Reserves) for the fiscal period December 1, 1997 through
May 15, 1998 and for the fiscal year ended November 30, 1997 is also
incorporated herein by reference. The Annual Reports for the Pacific Horizon
California Tax-Exempt Money Market Fund (the predecessor to Nations California
Tax-Exempt Reserves), Pacific Horizon Asset Allocation Fund (the predecessor to
Nations Asset Allocation Fund), Pacific Horizon Capital Income Fund (the
predecessor to Nations Capital Income Fund), Pacific Horizon California
Municipal Bond Fund (the predecessor to Nations California Municipal Bond Fund),
Pacific Horizon Intermediate Bond Fund (the predecessor to Nations Intermediate
Bond Fund) and the Pacific Horizon Blue Chip Fund (the predecessor to Nations
Blue Chip Fund) for the fiscal year ended February 28, 1999, and for the period
ended May 14, 1999, are also incorporated herein by reference. These Annual
Reports will be sent free of charge with this SAI to any shareholder who
requests this SAI.
Counsel
Morrison & Foerster LLP serves as legal counsel to the Companies. Their
address is 2000 Pennsylvania Avenue, N.W., Washington, D.C. 20006.
Morrison & Foerster LLP, counsel to the Trust and special counsel to Bank
of America has advised the Trust and Bank of America that Bank of America and
its affiliates may perform the services contemplated by the Investment Advisory
Agreement and this Prospectus without violation of the Glass-Steagall Act. Such
counsel has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and that future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such federal or state statutes, regulations and
judicial or administrative decisions or interpretations, could prevent such
entities from continuing to perform, in whole or in part, such services. If any
such entity were prohibited from performing any of such services, it is expected
that new agreements would be proposed or entered into with another entity or
entities qualified to perform such services.
FUND TRANSACTIONS AND BROKERAGE
General Brokerage Policy
Subject to policies established by the Board of Trustees of the Trust, the
Adviser is responsible for decisions to buy and sell securities for each Fund,
for the selection of broker/dealers, for the execution of such Fund's securities
transactions, and for the allocation of brokerage fees in connection with such
transactions. The Adviser's primary consideration in effecting a security
transaction is to obtain the best net price and the most favorable execution of
the order. Purchases and sales of securities on a securities exchange are
effected through brokers who charge a negotiated commission for their services.
Orders may be directed to any broker to the extent and in the manner permitted
by applicable law.
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In the over-the-counter market, securities are generally traded on a "net"
basis with dealers acting as principal for their own accounts without stated
commissions, although the price of a security usually includes a profit to the
dealer. In underwritten offerings, securities are purchased at a fixed price
that includes an amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
In placing orders for portfolio securities of a Fund, the Adviser is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that the Adviser will seek to execute each
transaction at a price and commission, if any, which provide the most favorable
total cost or proceeds reasonably attainable in the circumstances. In seeking
such execution, the Adviser will use its best judgment in evaluating the terms
of a transaction, and will give consideration to various relevant factors,
including, without limitation, the size and type of the transaction, the nature
and character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the general
execution and operational capabilities of the broker-dealer, the reputation,
reliability, experience and financial condition of the firm, the value and
quality of the services rendered by the firm in this and other transactions and
the reasonableness of the spread or commission, if any. In addition, the Adviser
will consider research and investment services provided by brokers or dealers
who effect or are parties to portfolio transactions of a Fund, the Adviser or
its other clients. Such research and investment services are those which
brokerage houses customarily provide to institutional investors and include
statistical and economic data and research reports on particular companies and
industries. Such services are used by the Adviser in connection with all of its
investment activities, and some of such services obtained in connection with the
execution of transactions for a Fund may be used in managing other investment
accounts. Conversely, brokers furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than those of a Fund. Services furnished by such brokers may be used by
the Adviser in providing investment advisory and investment management services
for the Trust.
Commission rates are established pursuant to negotiations with the broker
based on the quality and quantity of execution services provided by the broker
in the light of generally prevailing rates. The allocation of orders among
brokers and the commission rates paid are reviewed periodically by the Trustees
of the Trust. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions on foreign stock
exchanges involve payment of brokerage commissions which are generally fixed.
Transactions in both foreign and domestic over-the-counter markets are generally
principal transactions with dealers, and the costs of such transactions involve
dealer spreads rather than brokerage commissions. With respect to
over-the-counter transactions, the Adviser, where possible, will deal directly
with dealers who make a market in the securities involved except in those
circumstances in which better prices and execution are available elsewhere.
In certain instances there may be securities which are suitable for more
than one Fund as well as for one or more of the other clients of the Adviser.
Investment decisions for each Fund and for the Adviser's other clients are made
with the goal of achieving their respective investment objectives. It may happen
that a particular security is bought or sold for only one client even though it
may be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more other clients
are selling that same security. Some simultaneous transactions are inevitable
when several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security in a particular transaction as far as a Fund is concerned. The
Trust believes that over time its ability to participate in volume transactions
will produce superior executions for the Funds.
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The portfolio turnover rate for each Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the reporting period by
the monthly average value of the portfolio securities owned during the reporting
period. The calculation excludes all securities, including options, whose
maturities or expiration dates at the time of acquisition are one year or less.
Portfolio turnover may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements which enable the Funds to receive favorable tax
treatment.
The Funds may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group. A
Fund will engage in this practice, however, only when the Adviser, in its sole
discretion, believes such practice to be otherwise in the Fund's interests.
The Trust will not execute portfolio transactions through, or purchase or
sell portfolio securities from or to the distributor, the Adviser, the
administrator, the co-administrator or their affiliates, acting as principal
(including repurchase and reverse repurchase agreements), except to the extent
permitted by applicable law. In addition, the Trust will not give preference to
correspondents of Bank of America or its affiliates, with respect to such
transactions or securities. (However, the Adviser is authorized to allocate
purchase and sale orders for portfolio securities to certain financial
institutions, including, in the case of agency transactions, financial
institutions which are affiliated with Bank of America or its affiliates, and to
take into account the sale of Fund shares if the Adviser believes that the
quality of the transaction and the commission are comparable to what they would
be with other qualified brokerage firms.) In addition, a Fund will not purchase
securities during the existence of any underwriting or selling group relating
thereto of which the distributor, the Adviser, the administrator, or the
co-administrator, or any of their affiliates, is a member, except to the extent
permitted by the SEC. Under certain circumstances, the Funds may be at a
disadvantage because of these limitations in comparison with other investment
companies which have similar investment objectives but are not subject to such
limitations.
Certain affiliates of Bank of America Corporation and its subsidiary banks
may have deposit, loan or commercial banking relationships with the corporate
users of facilities financed by industrial development revenue bonds or private
activity bonds purchased by Nations California Municipal Bond Fund. Bank of
America Corporation or certain of its affiliates may serve as trustee, tender
agent, guarantor, placement agent, underwriter, or in some other capacity, with
respect to certain issues of municipal securities. Under certain circumstances,
Nations California Municipal Bond Fund may purchase municipal securities from a
member of an underwriting syndicate in which an affiliate of Bank of America
Corporation is a member. The Trust has adopted procedures pursuant to Rule 10f-3
under the 1940 Act, and intends to comply with the requirements of Rule 10f-3,
in connection with any purchases of municipal securities that may be subject to
such Rule.
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Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Trust as a principal in the purchase and sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
Each of the Funds may purchase securities from underwriting syndicates of which
Bank of America or any of its affiliates is a member under certain conditions,
in accordance with the provisions of a rule adopted under the 1940 Act and any
restrictions imposed by the Board of Governors of the Federal Reserve System.
Investment decisions for each Fund are made independently from those for
the Trust's other investment portfolios, other investment companies, and
accounts advised or managed by the Adviser. Such other investment portfolios,
investment companies, and accounts may also invest in the same securities as the
Funds. When a purchase or sale of the same security is made at substantially the
same time on behalf of one or more of the Funds and another investment
portfolio, investment company, or account, the transaction will be averaged as
to price and available investments allocated as to amount, in a manner which the
Adviser believes to be equitable to each Fund and such other investment
portfolio, investment company or account. In some instances, this investment
procedure may adversely affect the price paid or received by a Fund or the size
of the position obtained or sold by the Fund. To the extent permitted by law,
the Adviser may aggregate the securities to be sold or purchased for the Funds
with those to be sold or purchased for other investment portfolios, investment
companies, or accounts in executing transactions.
Brokerage Commissions
- -------------------------------------------------------------------------------
Fiscal Year Fiscal Year Fiscal Year
Ended February 28, Ended February 28 Ended February 28,
Fund* 1999 1998 1997
- -------------------------------------------------------------------------------
Nations Capital Income $ $296,651 $225,515
Fund
- -------------------------------------------------------------------------------
Nations Asset Allocation $ $125,211 $152,270
Fund+
- -------------------------------------------------------------------------------
Nations Blue Chip Master $ $748,649 $637,281
Portfolio
- -------------------------------------------------------------------------------
_____________
* The information in this chart reflects brokerage commissions paid by the
Pacific Horizon Capital Income Fund(the predecessor to Nations Capital Income
Fund), the Pacific Horizon Asset Allocation Fund (the predecessor to Nations
Asset Allocation Fund) and the Pacific Horizon Blue Chip Master Portfolio (the
predecessor to Nations Blue Chip Master Portfolio).
+ Until June 23,1997, Pacific Horizon Asset Allocation Fund(the predecessor to
Nations Asset Allocation Fund) invested all of its assets in the Allocation
Master Portfolio. Information contained in the chart above includes brokerage
commissions paid by the Asset Allocation Master Portfolio.
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Section 28(e) Standards
Under Section 28(e) of the Securities Exchange Act of 1934, the Adviser
shall not be "deemed to have acted unlawfully or to have breached its fiduciary
duty" solely because under certain circumstances it has caused the account to
pay a higher commission than the lowest available. To obtain the benefit of
Section 28(e), the Adviser must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided ...viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision making responsibilities." Accordingly,
the price to a Fund in any transaction may be less favorable than that available
from another broker/dealer if the difference is reasonably justified by other
aspects of the portfolio execution services offered.
Broker/dealers utilized by the Adviser may furnish statistical, research
and other information or services which are deemed by the Adviser to be
beneficial to the Funds' investment programs. Research services received from
brokers supplement the Adviser's own research and may include the following
types of information: statistical and background information on industry groups
and individual companies; forecasts and interpretations with respect to U.S. and
foreign economies, securities, markets, specific industry groups and individual
companies; information on political developments; fund management strategies;
performance information on securities and information concerning prices of
securities; and information supplied by specialized services to the Adviser and
to the Trust's Trustees with respect to the performance, investment activities
and fees and expenses of other mutual funds. Such information may be
communicated electronically, orally or in written form. Research services may
also include the providing of equipment used to communicate research
information, the arranging of meetings with management of companies and the
providing of access to consultants who supply research information.
The outside research assistance is useful to the Adviser since the brokers
utilized by the Adviser as a group tend to follow a broader universe of
securities and other matters than the Adviser's staff can follow. In addition,
this research provides the Adviser with a diverse perspective on financial
markets. Research services which are provided to the Adviser by brokers are
available for the benefit of all accounts managed or advised by the Adviser. In
some cases, the research services are available only from the broker providing
such services. In other cases, the research services may be obtainable from
alternative sources in return for cash payments. The Adviser is of the opinion
that because the broker research supplements rather than replaces its research,
the receipt of such research does not tend to decrease its expenses, but tends
to improve the quality of its investment advice. However, to the extent that the
Adviser would have purchased any such research services had such services not
been provided by brokers, the expenses of such services to the Adviser could be
considered to have been reduced accordingly. Certain research services furnished
by broker/dealers may be useful to the Adviser with clients other than the
Funds. Similarly, any research services received by the Adviser through the
placement of fund transactions of other clients may be of value to the Adviser
in fulfilling its obligations to the Funds. The Adviser is of the opinion that
this material is beneficial in supplementing its research and analysis; and,
therefore, it may benefit the Trust by improving the quality of the Adviser's
investment advice. The advisory fees paid by the Trust are not reduced because
the Adviser receives such services.
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Some broker/dealers may indicate that the provision of research services
is dependent upon the generation of certain specified levels of commissions and
underwriting concessions by the Adviser's clients, including the Funds.
DESCRIPTION OF SHARES
Description of the Shares of the Trust
Net investment income for the Funds for dividend purposes consists of (i)
interest accrued and original issue discount earned on a Fund's assets, (ii)
plus the amortization of market discount and minus the amortization of market
premium on such assets, (iii) less accrued expenses directly attributable to the
Fund and the general expenses of the Trust prorated to a Fund on the basis of
its relative net assets, plus dividend or distribution income on a Fund's
assets.
Prior to purchasing shares in one of the Funds, the impact of dividends or
distributions which are expected to be or have been declared, but not paid,
should be carefully considered. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution. All or a portion of such dividend or distribution, although in
effect a return of capital, may be subject to tax.
Shareholders receiving a distribution in the form of additional shares
will be treated as receiving an amount equal to the fair market value of the
shares received, determined as of the reinvestment date.
The Agreement and Declaration of Trust authorizes the issuance of an
unlimited number of shares of the Funds and different classes of each Fund. Each
Money Market Fund currently offers Capital Class Shares, Liquidity Class Shares,
Adviser Class Shares, Market Class Shares, Daily Class Shares, Service Class
Shares, Investor Class Shares and Trust Class Shares. Nations Cash Reserves also
offers Marsico Class Shares to investors and prospective investors of the
portfolios of The Marsico Investment Fund (currently consisting of Marsico Focus
Fund and Marsico Growth & Income Fund). Each Non-Money Market Fund offers
Investor A Shares, Investor B Shares, Investor C Shares and Primary A Shares.
Nations Asset Allocation Fund, Nations Intermediate Bond Fund and Nations Blue
Chip Fund also offer Seafirst Shares. Nations Asset Allocation Fund and Nations
Blue Chip Fund also offer Primary B Shares. Except for differences between
classes of a Fund pertaining to distribution arrangements, each share of a Fund
represents an equal proportionate interest in that Fund with each other share.
Shares are entitled upon liquidation to a pro rata share in the net assets of
the Funds. Shareholders have no preemptive rights. The Agreement and Declaration
of Trust provides that the Trustees of the Trust may create additional Funds or
classes of shares. All consideration received by the Trust for shares of any
additional series and all assets in which such consideration is invested would
belong to that Fund and would be subject to the liabilities related thereto.
Share certificates representing shares will not be issued.
The Funds use the so-called "equalization accounting method" to allocate a
portion of earnings and profits to redemption proceeds. This method permits a
fund to achieve more balanced distributions for both continuing and departing
shareholders. Continuing shareholders should realize tax savings or deferrals
through this method, and departing shareholders will not have their tax
obligations change. Although using this method will not affect a Fund's total
returns, it may reduce the amount that otherwise would be distributable to
continuing shareholders by reducing the effect of redemptions on dividend and
distribution amounts.
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Each Fund or class of a Fund will vote separately on matters pertaining
solely to such Fund or class. Such matters include matters relating to a Fund's
investment advisory agreement or a class' distribution plan. All Funds will vote
as a whole on matters affecting all Funds such as the election of Trustees and
the appointment of the Trust's independent accountant.
Purchase and Redemption of Shares
Money Market Funds. Purchases and redemptions of Money Market Funds may be
effected on days on which the Federal Reserve Bank of New York is open for
business (a "Business Day"). Purchases will be effected only when federal funds
are available for investment on the Business Day the purchase order is received
by the Distributor, the Transfer Agent or their respective agents. A purchase
order for a Money Market Fund must be received by the Distributor, the Transfer
Agent or their respective agents, by 3:00 p.m., Eastern time (12:00 noon,
Eastern time, with respect to Nations Municipal Reserves and Nations California
Tax-Exempt Reserves and 5:00 p.m., Eastern time, with respect to certain classes
of Nations Treasury Reserves, Nations Cash Reserves and Nations Money Market
Reserves). A purchase order for a Money Market Fund received after such time
will not be accepted; notice thereof will be given to the institution placing
the order and any funds received will be returned promptly to the sending
institution. If federal funds are not available by the close of regular trading
on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m., Eastern
time), the order will be canceled. The purchase price is the net asset value per
share next determined after acceptance of the order by the Distributor, the
Transfer Agent or their respective agents.
Redemption orders for Money Market Funds must be received on a Business
Day before 3:00 p.m., Eastern time (12:00 noon, Eastern time, with respect to
Nations Municipal Reserves and Nations California Tax-Exempt Reserves), and
payment will normally be wired the same day. The Trust reserves the right to
wire redemption proceeds within five Business Days after receiving a redemption
order if, in the judgment of the Bank of America, an earlier payment could
adversely impact a Fund. Redemption orders will not be accepted by the
Distributor, the Transfer Agent or their respective agents after 3:00 p.m.,
Eastern time (12:00 noon, Eastern time, with respect to Nations Municipal
Reserves and Nations California Tax-Exempt Reserves) for execution on that
Business Day. The redemption price is the net asset value per share next
determined after acceptance of the redemption order by the Distributor, the
Transfer Agent or their respective agents.
Non-Money Market Funds. Purchases and redemptions of Non-Money Market
Funds may be effected on any Business Day. Purchase orders for a Non-Money
Market Fund which are received by the Distributor, the Transfer Agent or their
respective agents before the close of regular trading on the Exchange (currently
4:00 p.m., Eastern time) on any Business Day are priced according to the net
asset value determined on that day. In the event that the Exchange closes early,
purchase orders received prior to the closing will be priced as of the time the
Exchange closes and purchase orders received after the Exchange closes will be
deemed received on the next Business Day and priced according to the net asset
value determined on the next Business Day. Purchase orders are not executed
until 4:00 p.m., Eastern time, on the Business Day on which immediately
available funds in payment of the purchase price are received by the Fund's
Custodian. Such payment must be received no later than 4:00 p.m., Eastern time,
by the third Business Day following the receipt of the order, as determined
above.
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Redemption orders for Non-Money Market Funds which are received by
Stephens, the Transfer Agent or their respective agents before the close of
regular trading on the Exchange on any Business Day are priced according to the
net asset value next determined after acceptance of the order, less any
applicable Contingent Deferred Sales Charge ("CDSC"). In the event that the
Exchange closes early, redemption orders received prior to closing will be
priced as of the time the Exchange closes and redemption orders received after
the Exchange closes will be deemed received on the next Business Day and priced
according to the net asset value determined on the next Business Day.
Redemption proceeds are normally sent by mail or wired within three
Business Days after receipt of the order by the Fund. Redemption proceeds are
normally remitted in federal funds wired to the redeeming Agent or investor
within three Business Days after receipt of the order by Stephens, the Transfer
Agent or their respective agents. Redemption orders are effected at the net
asset value per share next determined after receipt of the order by the Fund,
Stephens, the Transfer Agent or their respective agents, as the case may be,
less any applicable CDSC. The Agents are responsible for transmitting redemption
orders to Stephens, the Transfer Agent or their respective agents and for
crediting their Customer's account with the redemption proceeds on a timely
basis. Redemption proceeds for shares purchased by check may not be remitted
until at least 15 days after the date of purchase to ensure that the check has
cleared; a certified check, however, is deemed to be cleared immediately. No
charge for wiring redemption payments is imposed by Nations Funds. Except for
any CDSC which may be applicable, there is no redemption charge.
The right of redemption for the Non-Money Market Funds may be suspended or
the date of payment postponed when (a) trading on the New York Stock Exchange is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the New York Stock Exchange is closed for other than customary weekend and
holiday closings, (c) the SEC has by order permitted such suspension, or (d) an
emergency as determined by the SEC exists making disposal of portfolio
securities or the valuation of the net assets of a Fund of a Company not
reasonably practicable. The Exchange is closed for business on New Years Day,
Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Veterans Day, Thanksgiving Day and Christmas Day.
The Federal Reserve Bank observes the following holidays: New Years Day, Martin
Luther King Jr's Birthday, Presidents Day, Memorial Day, Independence Day, Labor
Day, Columbus Day, Veteran's Day, Thanksgiving Day and Christmas Day.
All Funds. The Trust is required to redeem for cash all full and
fractional shares of the Trust. The redemption price is the net asset value per
share of each Fund next determined after receipt by the Distributor of the
redemption order.
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The Trust reserves the right to reject a purchase order when the
Distributor determines that it is not in the best interest of the Trust and/or
shareholder(s) to accept such purchase order. The Trust reserves the right to
suspend the right of redemption and/or to postpone the date of payment upon
redemption for any period during which trading on the Exchange is restricted, or
during the existence of an emergency (as determined by the SEC by rule or
regulation) as a result of which disposal or valuation of the portfolio
securities is not reasonably practicable, or for such other periods as the SEC
has by order permitted. The Trust also reserves the right to suspend sales of
shares of a Fund for any period during which the Exchange, Bank of America, the
Distributor, the Administrator, the Co-Administrator, and/or the Custodian are
not open for business.
Exchanges
By use of the exchange privilege, the shareholder authorizes the transfer
agent or the shareholder's financial institution to rely on telephonic
instructions from any person representing himself to be the investor and
reasonably believed to be genuine. The transfer agent's or a financial
institution's records of such instructions are binding. Exchanges are taxable
transactions for Federal income tax purposes; therefore, a shareholder will
realize a capital gain or loss depending on whether the shares being exchanged
have a value which is more or less than their adjusted cost basis.
The Trust may limit the number of times the exchange privilege may be
exercised by a shareholder within a specified period of time. Also, the exchange
privilege may be terminated or revised at any time by the Trust upon such notice
as may be required by applicable regulatory agencies (presently sixty days for
termination or material revision), provided that the exchange privilege may be
terminated or materially revised without notice under certain unusual
circumstances.
The Prospectuses for each class of each Fund describe the exchange
privileges available to holders of such class of shares.
Determination of Net Asset Value
The net asset value per share of the Money Market Funds will be determined
as of 3:00 p.m., Eastern time (1:00 p.m., Eastern time, with respect to Nations
Municipal Reserves and Nations California Tax-Exempt Reserves and 5:00 p.m.,
Eastern time, with respect to Nations Treasury Reserves, Nations Cash Reserves
and Nations Money Market Reserves), on each day the Exchange is open for
business.
Net asset value per share of each Money Market Fund is calculated by
adding the value of its securities and other assets, subtracting its liabilities
and dividing by the number of outstanding shares. Securities will be valued by
the amortized cost method pursuant to Rule 2a-7 under the 1940 Act, which
involves valuing a security at its cost on the date of purchase and thereafter
(absent unusual circumstances) assuming a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuations in general
market rates of interest on the value of the instrument. While this method
provides certainty in valuation, it may result in periods during which value, as
determined by this method, is higher or lower than the price each Money Market
Fund would receive if it sold the instrument. During periods of declining
interest rates, the daily yield of each Money Market Fund may tend to be higher
than a like computation made by a company with identical investments utilizing a
method of valuation based upon market prices and estimates of market prices for
all of its portfolio securities. Thus, if the use of amortized cost by each
Money Market Fund resulted in a lower aggregate portfolio value on a particular
day, a prospective investor in each Money Market Fund would be able to obtain a
somewhat higher yield than would result from investment in a company utilizing
solely market values, and existing investors in each Money Market Fund would
experience a lower yield. The converse would apply in a period of rising
interest rates.
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The Money Market Funds use of amortized cost and the maintenance of the
Money Market Funds net asset value at $1.00 are permitted by regulations
promulgated by the SEC under the 1940 Act, provided that certain conditions are
met. The Trust will maintain a dollar-weighted average maturity in the Money
Market Funds of 90 days or less, will not purchase any instrument having a
remaining maturity of more than 397 days, and will limit its investments to
those U.S. dollar-denominated instruments which are permitted investments under
SEC regulations. The regulations also require the Trustees to establish
procedures which are reasonably designed to stabilize the net asset value per
share at $1.00 for the Money Market Funds. Such procedures include the
determination of the extent of deviation, if any, of the Money Market Funds
current net asset value per share calculated using available market quotations
from the Money Market Funds amortized cost price per share at such intervals as
the Trustees deem appropriate and reasonable in light of market conditions and
periodic reviews of the amount of the deviation and the methods used to
calculate such deviation. In the event that such deviation exceeds 1/2 of 1%,
the Trustees are required to consider promptly what action, if any, should be
initiated, and, if the Trustees believe that the extent of any deviation may
result in material dilution or other unfair results to Shareholders, the
Trustees are required to take such corrective action as they deem appropriate to
eliminate or reduce such dilution or unfair results to the extent reasonably
practicable. Such actions may include the sale of portfolio instruments prior to
maturity to realize capital gain or loss or to shorten average portfolio
maturity; withholding dividends; redeeming shares in kind; or establishing a net
asset value per share by using available market quotations. In addition, if the
Money Market Funds incur a significant loss or liability, the Trustees have the
authority to reduce pro rata the number of shares of the Money Market Funds in
each Shareholder's account and to offset each Shareholder's pro rata portion of
such loss or liability from the Shareholder's accrued but unpaid dividends or
from future dividends while each other Money Market Fund must annually
distribute at least 90% of its investment company taxable income.
Non-Money Market Funds
With respect to the Non-Money Market Funds, a security listed or traded on
an exchange is valued at its last sales price on the exchange where the security
is principally traded or, lacking any sales on a particular day, the security is
valued at the mean between the closing bid and asked prices on that day. Each
security traded in the over-the-counter market (but not including securities
reported on the NASDAQ National Market System) is valued at the mean between the
last bid and asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date. With respect to Nations
Intermediate Bond Master Portfolio and Nations California Municipal Bond Fund,
securities may be valued on the basis of prices provided by an independent
pricing service. Prices provided by the pricing service may be determined
without exclusive reliance on quoted prices, and may reflect appropriate factors
such as yield, type of issue, coupon rate maturity and seasoning differential.
Securities for which prices are not provided by the pricing service are valued
at the mean between the last bid and asked prices based upon quotes furnished by
market makers for such securities.
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With respect to the Non-Money Market Funds, securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees of the Trust. Short-Term
obligations having 60 days or less to maturity are valued at amortized cost,
which approximates market value.
Generally, trading in foreign securities, as well as U.S. Government
securities, money market instruments and repurchase agreements, is substantially
completed each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset value of
the shares of the Fund are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the New York
Stock Exchange. Occasionally, events affecting the value of such securities and
such exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange, which will not be reflected in the
computation of net asset value. If during such periods events occur which
materially affect the value of such securities, the securities will be valued at
their fair market value as determined in good faith by the Trustees.
For purposes of determining the net asset value per share of the Funds
that invest in foreign securities or engage in Foreign Currency Transactions,
all assets and liabilities of the Funds initially expressed in foreign
currencies will be converted into U.S. dollars at the mean between the bid and
offer prices of such currencies against U.S. dollars quoted by a major bank that
is a regular participant in the foreign exchange market or on the basis of a
pricing service that takes into account the quotes provided by a number of such
major banks.
The Trust may redeem shares involuntarily to reimburse the Funds for any
loss sustained by reason of the failure of a shareholder to make full payment
for shares purchased by the shareholder or to collect any charge relating to a
transaction effected for the benefit of a shareholder which is applicable to
such shares as provided in the related Prospectuses from time to time. The Trust
also may make payment for redemptions in readily marketable securities or other
property if it is appropriate to do so in light of the Trust's responsibilities
under the 1940 Act.
Under the 1940 Act, the Funds may suspend the right of redemption or
postpone the date of payment for shares of the Funds during any period when (a)
trading on the Exchange is restricted by applicable rules and regulations of the
SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. (The Funds may also suspend or
postpone the recordation of the transfer of their shares upon the occurrence of
any of the foregoing conditions.)
ADDITIONAL INFORMATION CONCERNING TAXES
The following information supplements and should be read in conjunction
with Prospectuses. The Prospectuses of the Funds describes generally the tax
treatment of distributions by the Funds. This section of the SAI includes
additional information concerning income taxes.
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General
The Trust intends to continue to qualify each Fund as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") as long as such qualification is in the best interest of
the Fund's shareholders. Each Fund will be treated as a separate entity for
Federal income tax purposes and, thus the provisions of the Code applicable to
regulated investment companies will generally be applied separately to each
Fund, rather than to the Trust as a whole. In addition, net capital gain, net
investment income, and operating expenses will be determined separately for each
Fund. As a regulated investment company, each Fund will not be taxed on its net
investment income and capital gain distributed to its shareholders.
Qualification as a regulated investment company under the Code requires,
among other things, that (a) each Fund derive at least 90% of its annual gross
income from dividends, interest, certain payments with respect to securities
loans, gain from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; and (b) the Fund diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, government securities
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
obligations and the securities of other regulated investment companies), or in
two or more issuers which the Fund controls and which are determined to be
engaged in the same or similar trades or businesses.
In addition, for tax years beginning on or before August 7, 1997, a
regulated investment company must, in general, have derived less than 30% of its
gross income from the sale or other disposition of securities or options thereon
held for less than three months.
The Funds must also distribute or be deemed to distribute to their
shareholders at least 90% of their net investment income (including, for this
purpose, net short-term capital gain) earned in each taxable year. In general,
these distributions must actually or be deemed to be made in the taxable year.
However, in certain circumstances, such distributions may be made in the 12
months following the taxable year. The Funds intend to pay out substantially all
of their net investment income and net capital gain (if any) for each year.
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Excise Tax
A 4% nondeductible excise tax will be imposed on each Fund (other than to
the extent of its tax-exempt interest income) to the extent it does not meet
certain minimum distribution requirements by the end of each calendar year. Each
Fund intends to actually or be deemed to distribute substantially all of its net
investment income and net capital gain by the end of each calendar year and,
thus, expects not to be subject to the excise tax.
Taxation of Fund Investments
Except as provided herein, gain and loss on the sale of portfolio
securities by a Fund will generally be capital gain and loss. Such gain and loss
will ordinarily be long-term capital gain and loss if the securities have been
held by the Fund for more than 12 months at the time of disposition of the
securities (however, see "Capital Gain Distributions" below).
Gain recognized on the disposition of a debt obligation purchased by the
Fund at a market discount (generally at a price less than its principal amount)
will be treated as ordinary income to the extent of the portion of market
discount which accrued, but was not previously recognized pursuant to an
available election, during the term the Fund held the debt obligation.
If an option granted by a Fund lapses or is terminated through a closing
transaction, such as a repurchase by the Fund of the option from its holder, the
Fund will realize a short-term capital gain or loss, depending on whether the
premium income is greater or less than the amount paid by the Fund in the
closing transaction. Some realized capital loss may be deferred if they result
from a position which is part of a "straddle," discussed below. If securities
are sold by a Fund pursuant to the exercise of a call option written by it, the
Fund will add the premium received to the sale price of the securities delivered
in determining the amount of gain or loss on the sale. If securities are
purchased by a Fund pursuant to the exercise of a put option written by it, the
Fund will subtract the premium received from its cost basis in the securities
purchased.
The amount of any gain or loss realized by a Fund on closing out a
"Section 1256 contract" generally will result in a realized capital gain or loss
for Federal income tax purposes. "Section 1256 contracts" include regulated
futures contracts, certain foreign currency contracts and nonequity options.
Section 1256 contracts held at the end of each fiscal year will be required to
be "marked to market" for Federal income tax purposes pursuant to Section 1256
of the Code. In this regard, they will be deemed to have been sold at market
value. Sixty percent (60%) of any net gain or loss recognized on these deemed
sales and sixty percent (60%) of any net realized gain or loss from any actual
sales, will generally be treated as long-term capital gain or loss, and the
remainder will be treated as short-term capital gain or loss. Transactions that
qualify as designated hedges are excepted from the "mark-to-market" rule and the
"60%/40%" rule.
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Under Section 988 of the Code, a Fund will generally recognize ordinary
income or loss to the extent gain or loss realized on the disposition of
portfolio securities is attributable to changes in foreign currency exchange
rates. In addition, gain or loss realized on the disposition of a foreign
currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, will generally be treated as ordinary
income or loss. The Funds will attempt to monitor Section 988 transactions,
where applicable, to avoid adverse tax impact.
Offsetting positions held by a Fund involving certain financial forward,
futures or options contracts may be considered, for tax purposes, to constitute
"straddles." "Straddles" are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of "straddles" is governed
by Section 1092 of the Code which, in certain circumstances, overrides or
modifies the provisions of Section 1256 of the Code. If a Fund were treated as
entering into "straddles" by engaging in certain financial forward, futures or
option contracts, such straddles could be characterized as "mixed straddles" if
the futures, forwards, or options comprising a part of such straddles were
governed by Section 1256 of the Code. The Fund may make one or more elections
with respect to "mixed straddles." Depending upon which election is made, if
any, the results with respect to the Fund may differ. Generally, to the extent
the straddle rules apply to positions established by the Fund, loss realized by
the Fund may be deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle and the conversion transaction
rules, short-term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital gain may be characterized as
short-term capital gain or ordinary income.
If a Fund enters into a "constructive sale" of any appreciated position in
stock, a partnership interest, or certain debt instruments, the Fund must
recognize gain (but not loss) with respect to that position. For this purpose, a
constructive sale occurs when the Fund enters into one of the following
transactions with respect to the same or substantially identical property: (i) a
short sale; (ii) an offsetting notional principal contract; or (iii) a futures
or forward contract.
If a Fund purchases shares in a "passive foreign investment company"
("PFIC"), the Fund may be subject to Federal income tax and an interest charge
imposed by the IRS upon certain distributions from the PFIC or the Fund's
disposition of its PFIC shares. If the Fund invests in a PFIC, the Fund intends
to make an available election to mark-to-market its interest in PFIC shares.
Under the election, the Fund will be treated as recognizing at the end of each
taxable year the difference, if any, between the fair market value of its
interest in the PFIC shares and its basis in such shares. In some circumstances,
the recognition of loss may be suspended. The Fund will adjust its basis in the
PFIC shares by the amount of income (or loss) recognized. Although such income
(or loss) will be taxable to the Fund as ordinary income (or loss)
notwithstanding any distributions by the PFIC, the Fund will not be subject to
Federal income tax or the interest charge with respect to its interest in the
PFIC under the election.
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Foreign Taxes
Income and dividends received by a Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Tax conventions between certain countries and the United States may
reduce or eliminate such taxes. In certain circumstances, a regulated investment
company is eligible to file an election with the IRS pursuant to which the
regulated investment company may pass-through to its shareholders foreign taxes
paid by the regulated investment company, which may be claimed either as a
credit or deduction by the shareholders. None of the Funds expects to qualify
for the election.
Capital Gain Distributions
Distributions which are designated by a Fund as capital gain distributions
will be taxed to shareholders as long-term term capital gain (to the extent such
dividends do not exceed the Fund's actual net capital gain for the taxable
year), regardless of how long a shareholder has held Fund shares. Such
distributions will be designated as capital gain distributions in a written
notice mailed by the Fund to the shareholders not later than 60 days after the
close of the Fund's taxable year.
Disposition of Fund Shares
A disposition of Fund shares pursuant to redemption (including a
redemption in-kind) or exchanges will ordinarily result in a taxable capital
gain or loss, depending on the amount received for the Shares (or are deemed to
receive in the case of an exchange) and the cost of your Shares.
If a shareholder exchanges or otherwise disposes of Fund shares within 90
days of having acquired such shares and if, as a result of having acquired those
shares, the shareholder subsequently pays a reduced sales charge or load on a
new purchase of shares of the Fund or a different regulated investment company,
the sales charge or load previously incurred acquiring the Fund's shares shall
not be taken into account (to the extent such previous sales charge or load does
not exceed the reduction in sales charge or load on the new purchase) for the
purpose of determining the amount of gain or loss on the disposition, but will
be treated as having been incurred in the acquisition of such other shares.
Also, any loss realized on a redemption or exchange of shares of the Fund will
be disallowed to the extent that substantially identical shares are acquired
within the 61-day period beginning 30 days before and ending 30 days after the
shares are disposed of.
If a shareholder holds Fund shares for six months or less, any loss on the
sale or exchange of those shares will be disallowed to the extent of the amount
of exempt-interest dividends (described below) received with respect to the
shares. The Treasury Department is authorized to issue regulations reducing the
six months holding requirement to a period of not less than the greater of 31
days or the period between regular dividend distributions where a Fund regularly
distributes at least 90% of its net tax-exempt interest, if any. No such
regulations have been issued as of the date of this SAI. In addition, if a
shareholder receives a capital gain distribution with respect to any Fund share
and such Fund share is held for six months or less, then (unless otherwise
disallowed) any loss on the sale or exchange of that Fund share will be treated
as a long-term capital loss to the extent of the capital gain distribution. The
foregoing recharacterization and disallowance rules do not apply to loss
realized under a periodic redemption plan.
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Federal Income Tax Rates
As of the printing of this SAI, the maximum individual tax rate applicable
to ordinary income is 39.6% (marginal tax rates may be higher for some
individuals to reduce or eliminate the benefit of exemptions and deductions);
the maximum individual marginal tax rate generally applicable to net capital
gain is 20%; and the maximum corporate tax rate applicable to ordinary income
and net capital gain is 35% (marginal tax rates may be higher for some
corporations to reduce or eliminate the benefit of lower marginal income tax
rates). Naturally, the amount of tax payable by an individual or corporation
will be affected by a combination of tax laws covering, for example, deductions,
credits, deferrals, exemptions, sources of income and other matters.
Corporate Shareholders
Corporate shareholders of the Funds may be eligible for the
dividends-received deduction on distributions attributable to a Fund's dividends
received from domestic corporations, which, if received directly by the
corporate shareholder, would qualify for such deduction. A distribution by a
Fund attributable to dividends of a domestic corporation will only qualify for
the dividends-received deduction if (i) the corporate shareholder generally
holds the Fund shares upon which the distribution is made for at least 46 days
during the 90 day period beginning 45 days prior to the date upon which the
shareholder becomes entitled to the distribution; and (ii) the Fund generally
holds the shares of the domestic corporation producing the dividend income for
at least 46 days during the 90 day period beginning 45 days prior to the date
upon which the Fund becomes entitled to such dividend income.
Foreign Shareholders
Under the Code, distributions of net investment income by the Fund to a
nonresident alien individual, foreign trust (i.e., trust which a U.S. court is
able to exercise primary supervision over administration of that trust and one
or more U.S. persons have authority to control substantial decisions of that
trust), foreign estate (i.e., the income of which is not subject to U.S. tax
regardless of source), foreign corporation, or foreign partnership (each, a
"foreign shareholder") will be subject to Federal withholding tax (at a rate of
30% or, if an income tax treaty applies, at the lower treaty rate, if any). Such
tax withheld generally is not refundable. Withholding will not apply if a
distribution paid by the Fund to a foreign shareholder is "effectively
connected" with a U.S. trade or business (or, if an income tax treaty applies,
is attributable to a U.S. permanent establishment of the foreign shareholder),
in which case the reporting and withholding requirements applicable to U.S.
persons will apply. Distributions of net capital gain are generally not subject
to tax withholding.
125
<PAGE>
New Regulations
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the backup withholding,
U.S. income tax withholding and information reporting rules applicable to
foreign shareholders. The New Regulations will generally be effective for
payments made after December 31, 2000, subject to certain transition rules.
Among other things, the New Regulations will permit the Funds to estimate the
portion of their distributions qualifying as capital gain distributions for
purposes of determining the portion of such distributions paid to foreign
shareholders which will be subject to U.S. income tax withholding. Prospective
investors are urged to consult their own tax advisors regarding the New
Regulations.
Backup Withholding
The Trust may be required to withhold, subject to certain exemptions, at a
rate of 31% ("backup withholding") on dividends, capital gain distributions, and
redemption proceeds (including proceeds from exchanges and redemptions in-kind)
paid or credited to an individual Fund shareholder, unless a shareholder
certifies that the Taxpayer Identification Number ("TIN") provided is correct
and that the shareholder is not subject to backup withholding, or the IRS
notifies the Trust that the shareholder's TIN is incorrect or the shareholder is
subject to backup withholding. Such tax withheld does not constitute any
additional tax imposed on the shareholder, and may be claimed as a tax payment
on the shareholder's Federal income tax return. An investor must provide a valid
TIN upon opening or reopening an account. Failure to furnish a valid TIN to the
Trust could subject the investor to penalties imposed by the IRS.
Additional Considerations for Nations Municipal Reserves, Nations California
Tax-Exempt Reserves and Nations California Municipal Bond Fund
If at least 50% of the value of a regulated investment company's total
assets at the close of each quarter of its taxable years consists of obligations
the interest on which is exempt from Federal income tax, it will qualify under
the Code to pay "exempt-interest dividends." Nations Municipal Reserves, Nations
California Tax-Exempt Reserves and Nations California Municipal Bond Fund (the
"Tax-Exempt Funds") intend to so qualify and are designed to provide investors
with a high level of income exempt from Federal income tax.
The portion of total dividends paid by a Tax-Exempt Fund with respect to
any taxable year that constitutes exempt-interest dividends will be the same for
all shareholders receiving dividends during such year. Distributions of capital
gain or from net investment income not attributable to interest on the Fund's
tax-exempt obligations will not constitute exempt-interest dividends and will be
taxable to its shareholders. The exemption of interest income derived from
investments in tax-exempt obligations for Federal income tax purposes may not
result in a similar exemption under the laws of a particular state or local
taxing authority.
126
<PAGE>
Not later than 60 days after the close of its taxable year, each
Tax-Exempt Fund will notify its shareholders of the portion of the dividends
paid with respect to such taxable year which constitutes exempt-interest
dividends. The aggregate amount of dividends so designated cannot exceed the
excess of the amount of interest excludable from gross income under Section 103
of the Code received by the Tax-Exempt Fund during the taxable year over any
amounts disallowed as deductions under Sections 265 and 171(a)(2) of the Code.
Interest on indebtedness incurred to purchase or carry shares of a Tax-Exempt
Fund will not be deductible to the extent that the Fund's distributions are
exempt from federal income tax.
In addition, the Federal alternative minimum tax ("AMT") rules ensure
that at least a minimum amount of tax is paid by taxpayers who obtain
significant benefit from certain tax deductions and exemptions. Some of these
deductions and exemptions have been designated "tax preference items" which must
be added back to taxable income for purposes of calculating AMT. Among the tax
preference items is tax-exempt interest from "private activity bonds." To the
extent that a Tax-Exempt Fund invests in private activity bonds, its
shareholders who pay AMT will be required to report that portion of Fund
dividends attributable to income from the bonds as a tax preference item in
determining their AMT. Shareholders will be notified of the tax status of
distributions made by a Tax-Exempt Fund. Persons who may be "substantial users"
(or "related persons" of substantial users) of facilities financed by private
activity bonds should consult their tax advisors before purchasing shares in a
Tax-Exempt Fund. Furthermore, shareholders will not be permitted to deduct any
of their share of Nations Municipal Reserves' expenses in computing their AMT.
With respect to a corporate shareholder of a Tax-Exempt Fund, exempt-interest
dividends paid by the Fund is included in the corporate shareholder's "adjusted
current earnings" as part of its AMT calculation, and may also affect its
Federal "environmental tax" liability. As of the printing of this SAI,
individuals are subject to an AMT at a maximum rate of 28% and corporations at a
maximum rate of 20%. Shareholders with questions or concerns about the AMT
should consult their tax advisors.
Additional Considerations for Nations California Tax-Exempt Reserves and Nations
California Municipal Bond Fund
If, at the close of each quarter of its taxable year, at least 50% of the
value of the total assets of a regulated investment company consists of
obligations the interest on which, if held by an individual, is exempt from
taxation by California ("California Exempt Securities"), then the regulated
investment company will be qualified to pay dividends exempt from California
state personal income tax to its non-corporate shareholders (hereinafter
referred to as "California exempt-interest dividends"). For this purpose,
California Exempt Securities are generally limited to California municipal
securities and certain U.S. Government and U.S. Possession obligations. The
California Funds intends to qualify under the above requirements so that they
can pay California exempt-interest dividends. If the California Funds do not so
qualify, no part of their respective dividends to shareholders will be exempt
from the California state personal income tax.
127
<PAGE>
Within sixty days after the close of its taxable year, the California
Funds will notify their respective shareholders of the portion of the dividends
paid by the respective Fund to each shareholder with respect to such taxable
year which is exempt from California state personal income tax. The total amount
of California exempt-interest dividends paid by the California Funds with
respect to any taxable year cannot exceed the excess of the amount of interest
received by the California Funds for such year on California Exempt Securities
over any amounts that, if the California Funds were treated as individuals,
would be considered expenses related to tax exempt income or amortizable bond
premium and would thus not be deductible under federal income or California
state personal income tax law. The percentage of total dividends paid for any
taxable year which qualifies as California exempt-interest dividends will be the
same for all shareholders receiving dividends from the Fund for such year.
In cases where shareholders are "substantial users" or "related persons"
with respect to California Exempt Securities held by the California Funds, such
shareholders should consult their tax advisors to determine whether California
exempt-interest dividends paid by the Fund with respect to such obligations
retain California state personal income tax exclusion. In this connection rules
similar to those regarding the possible unavailability of federal
exempt-interest dividend treatment to "substantial users" are applicable for
California state tax purposes. Interest on indebtedness incurred by a
shareholder to purchase or carry the California Funds shares is not deductible
for California state personal income tax purposes if the California Funds
distribute California exempt-interest dividends during the shareholder's taxable
year.
The foregoing is only a summary of some of the important California state
personal income tax considerations generally affecting the California Funds and
their shareholders. No attempt is made to present a detailed explanation of the
California state personal income tax treatment of the California Funds or their
shareholders, and this discussion is not intended as a substitute for careful
planning. Further, it should be noted that the portion of any California Funds
dividends constituting California exempt-interest dividends is excludable from
income for California state personal income tax purposes only. Any dividends
paid to shareholders subject to California state franchise tax or California
state corporate income tax may therefore be taxable for such purposes,
notwithstanding that all or a portion of such dividends is exempt from
California state personal income tax. Accordingly, potential investors in the
California Funds, including, in particular, corporate investors which may be
subject to either California franchise tax or California corporate income tax,
should consult their own tax advisors with respect to the application of such
taxes to the receipt of the California Funds dividends and as to their own
California state tax situation, in general.
128
<PAGE>
Other Matters
Investors should be aware that the investments to be made by the Funds may
involve sophisticated tax rules that may result in income or gain recognition by
the Fund without corresponding current cash receipts. Although the Funds will
seek to avoid significant noncash income, such noncash income could be
recognized by the Funds, in which case the Funds may distribute cash derived
from other sources in order to meet the minimum distribution requirements
described above.
The foregoing discussion and the discussions in the Prospectus applicable
to each shareholder address only some of the federal tax considerations
generally affecting investments in the Funds. Each investor is urged to consult
his or her tax advisor regarding specific questions as to federal, state, local
and foreign taxes.
PERFORMANCE INFORMATION
General
Yield information and other performance information for the Funds may be
obtained by calling the Trust at (800) 321-7854.
From time to time, a Fund's yield and total return may be quoted in
advertisements, shareholder reports, and other communications to shareholders.
Each Fund of the Trust also may quote information obtained from the Investment
Company Institute in its advertising materials and sales literature. In
addition, certain potential benefits of investing in world securities markets
may be discussed in promotional materials. Such benefits include, but are not
limited to: a) the expanded opportunities for investment in securities markets
outside the U.S.; b) the growth of securities markets outside the U.S. vis-a-vis
U.S. markets; c) the relative return associated with foreign securities markets
vis-a-vis U.S. markets; and d) a reduced risk of portfolio volatility resulting
from a diversified securities portfolio consisting of both U.S. and foreign
securities. Performance information is available by calling 1-800-321-7854.
Money Market Funds
From time to time the Money Market Funds may advertise the "current yield"
and "effective compound yield" of a class of shares of the respective Money
Market Fund. Nations Municipal Reserves and Nations California Tax-Exempt
Reserves may also advertise the "tax-equivalent yield" of a class of their
shares. Both yield figures are based on historical earnings and are not intended
to indicate future performance. The "yield" of the Money Market Funds refers to
the income generated by an investment in a Money Market Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in a Money
Market Fund is assumed to be reinvested. The "effective yield" will be slightly
higher than the "yield" because of the compounding effect of this assumed
reinvestment.
129
<PAGE>
Yield Calculations
The current yield of each class of the Money Market Funds will be
calculated daily based upon the seven days ending on the date of calculation
("base period"). The yield is computed by determining the net change (exclusive
of capital changes) in the value of a hypothetical pre-existing shareholder
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing such net change by the value of the account at the
beginning of the same period to obtain the base period return and multiplying
the result by (365/7). Realized and unrealized gain and loss are not included in
the calculation of the yield. The effective compound yield of the Money Market
Funds is determined by computing the net change, exclusive of capital changes,
in the value of a hypothetical pre-existing account having a balance of one
share at the beginning of the period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding 1, raising
the sum to a power equal to 365 divided by 7, and subtracting 1 from the result,
according to the following formula:
Effective Yield = [(Base Period Return + 1) 365/7)]- 1.
The current and the effective yields reflect the reinvestment of net
income earned daily on portfolio assets.
The yield of these Money Market Funds fluctuates, and the annualization of
a week's dividend is not a representation by the Trust as to what an investment
in the Money Market Fund will actually yield in the future. Actual yields will
depend on such variables as asset quality, average asset maturity, the type of
instruments the Money Market Fund invests in, changes in interest rates on money
market instruments, changes in the expenses of the Money Market Fund and other
factors.
The "tax equivalent yield" of Nations Municipal Reserves and Nations
California Tax-Exempt Reserves is calculated by determining the rate of return
that would have to be achieved on a fully taxable investment to produce the
after-tax equivalent of the Money Market Fund's yield, assuming certain tax
brackets for a Shareholder. See "Additional Information Concerning Taxes Federal
Income Tax Rates" below. This tax-exempt yield is then translated into
tax-equivalent yield according to the following formula:
TAX-EQUIVALENT YIELD = ( E ) + t
-----------
1 - p
E = tax-exempt yield p = stated income tax rate t = taxable yield
130
<PAGE>
Yields are one basis upon which investors may compare the Money Market
Funds with other money market funds; however, yield of other money market funds
and other investment vehicles may not be comparable because of the factors set
forth above and differences in the methods used in valuing portfolio
instruments.
Nations Cash Reserves and Nations Money Market Reserves may quote actual
return performance in advertising and other types of literature compared to
indices or averages of alternative financial products available to prospective
investors. The performance comparisons may include the average return of various
bank instruments, some of which may carry certain return guarantees offered by
leading banks and thrifts, as monitored by the Bank Rate Monitor, and those of
corporate and government security prices indices of various durations prepared
by Shearson Lehman Brothers and Salomon Brothers, Inc. These indices are not
managed for any investment goal.
Each Money Market Fund may quote information obtained from the Investment
Company Institute, national financial publications, trade journals and other
industry sources in its advertising and sales literature. In addition, the Money
Market Funds also may use comparative performance information computed by and
available from certain industry and general market research and publications,
such as Lipper Analytical Services, Inc.
Statistical and performance information compiled and maintained by CDA
Technologies, Inc. and Interactive Data Corporation may also be used. CDA is a
performance evaluation service that maintains a statistical data base of
performance, as reported by a diverse universe of independently-managed mutual
funds. Interactive Data Corporation is a statistical access service that
maintains a data base of various industry indicators, such as historical and
current price/earning information and individual stock and fixed income price
and return information.
Current interest rate and yield information on governmental debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. Also current rate information on municipal
debt obligations or various durations, as reported daily by the Bond Buyer, may
also be used. The Bond Buyer is published daily and is an industry accepted
source for current municipal bond market information.
Comparative information on the Consumer Price Index may also be included.
This index, as prepared by the U.S. Bureau of Labor Statistics, is the most
commonly used measure of inflation. It indicates the cost fluctuations of a
representative group of consumer goods. It does not represent a return on
investment.
Tax equivalent yield assumes a Federal Tax Rate of 39.6%.
The yield of the Liquidity Class, Adviser Class, Market Class Shares,
Investor Class Shares, Service Class Shares, Daily Class Shares and Trust Class
Shares of the Money Market Funds will normally be lower than the yield of the
Capital Class Shares because Liquidity Class, Adviser Class, Market Class
Shares, Investor Class Shares, Service Class Shares, Daily Class Shares and
Trust Class Shares are subject to distribution and/or shareholder servicing
expenses not charged to Capital Class Shares.
131
<PAGE>
For the 7-day period ended March 31, 1999, the yield of eah Fund was as follows:
<TABLE>
<CAPTION>
Effective Tax
Yield Tax Equiv.
Yield w/o Effective w/o Equiv. Yield
Yield Waivers Yield Waivers Yield w/o Waivers
----- ------- ----- ------- ----- -----------
Nations Cash Reserves
<S> <C> <C> <C> <C> <C> <C>
Capital Class 4.90% 4.67% 5.02% 4.79% N/A N/A
Liquidity Class 4.75% 3.82% 4.87% 3.94% N/A N/A
Adviser Class 4.65% 4.42% 4.76% 4.53% N/A N/A
Market Class 4.45% 4.18% 4.55% 4.28% N/A N/A
Investor Class N/A N/A N/A N/A N/A N/A
Service Class N/A N/A N/A N/A N/A N/A
Daily Class N/A N/A N/A N/A N/A N/A
Trust Class N/A N/A N/A N/A N/A N/A
Nations Money Market
Reserves
Capital Class 4.85% 4.59% 4.96% 4.70% N/A N/A
Liquidity Class 4.70% 3.74% 4.81% 3.85% N/A N/A
Adviser Class 4.60% 4.34% 4.70% 4.44% N/A N/A
Market Class 4.40% 4.14% 4.49% 4.23% N/A N/A
Investor Class N/A N/A N/A N/A N/A N/A
Service Class N/A N/A N/A N/A N/A N/A
Daily Class N/A N/A N/A N/A N/A N/A
Trust Class N/A N/A N/A N/A N/A N/A
Nations Treasury
Reserves
Capital Class 4.74% 4.49% 4.85% 4.60% N/A N/A
Liquidity Class 4.59% 3.59% 4.69% 3.69% N/A N/A
Adviser Class 4.49% 4.24% 4.59% 4.34% N/A N/A
Market Class 4.29% 4.01% 4.38% 4.10% N/A N/A
Investor Class N/A N/A N/A N/A N/A N/A
Service Class N/A N/A N/A N/A N/A N/A
Daily Class N/A N/A N/A N/A N/A N/A
Trust Class N/A N/A N/A N/A N/A N/A
132
<PAGE>
Nations Government
Reserves
Capital Class 4.88% 4.64% 5.00% 4.76% N/A N/A
Liquidity Class 4.73% 3.79% 4.84% 3.90% N/A N/A
Adviser Class 4.63% 4.39% 4.74% 4.50% N/A N/A
Market Class 4.43% 4.15% 4.53% 4.25% N/A N/A
Investor Class N/A N/A N/A N/A N/A N/A
Service Class N/A N/A N/A N/A N/A N/A
Daily Class N/A N/A N/A N/A N/A N/A
Trust Class N/A N/A N/A N/A N/A N/A
Nations Municipal
Reserves
Capital Class 2.88% 2.60% 2.92% 2.64% 4.77% 4.49%
Liquidity Class 2.73% 1.75% 2.77% 1.79% 4.52% 3.54%
Adviser Class 2.63% 2.35% 2.67% 2.39% 4.35% 4.07%
Market Class 2.43% 2.11% 2.46% 2.14% 4.02% 3.70%
Investor Class N/A N/A N/A N/A N/A N/A
Service Class N/A N/A N/A N/A N/A N/A
Daily Class N/A N/A N/A N/A N/A N/A
Trust Class N/A N/A N/A N/A N/A N/A
Nations California
Tax-Exempt Reserves*
Capital Class N/A N/A N/A N/A N/A N/A
Liquidity Class N/A N/A N/A N/A N/A N/A
Adviser Class 2.20% 2.20% 2.25% 2.25% N/A N/A
Market Class N/A N/A N/A N/A N/A N/A
Investor Class 2.15% 2.15% 2.17% 2.17% N/A N/A
Service Class N/A N/A N/A N/A N/A N/A
Daily Class 1.92% 1.92% 1.94% 1.94% N/A N/A
Trust Class N/A N/A N/A N/A N/A N/A
</TABLE>
_________________
*The yield for Nations California Tax-Exempt Reserves is for the 7-day period
ended March 31,1999.
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<PAGE>
Non-Money Market Funds
Yield is calculated separately for the Investor A, Investor C, Investor B,
Primary A, Primary B and Seafirst Shares of a Non-Money Market Fund by dividing
the net investment income per share for a particular class or series of shares
(as described below) earned during a 30-day period by the maximum offering price
per share on the last day of the period (for Primary A and Primary B Shares,
maximum offering price per share is the same as the net asset value per share)
and annualizing the result on a semi-annual basis by adding one to the quotient,
raising the sum to the power of six, subtracting one from the result and then
doubling the difference. For a class or series of shares in a Fund, net
investment income per share earned during the period is based on the average
daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements. This calculation can be
expressed as follows:
Yield = 2 [(a-b+1)(6)- 1]
-----------------
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = maximum offering price per share on the last day of the
period (again, for Primary A and Primary B Shares, this is
equivalent to net asset value per share).
For the purpose of determining net investment income earned during the
period (variable- "a" in the formula), dividend income on equity securities held
by a Fund is recognized by accruing 1/360 of the stated dividend rate of the
security each day that the security is in the portfolio. Each Fund calculates
interest earned on any debt obligations held in its portfolio by computing the
yield to maturity of each obligation held by it based on the market value of the
obligation (including actual accrued interest) at the close of business on the
last business day of each month, or, with respect to obligations purchased
during the month, the purchase price (plus actual accrued interest) and dividing
the result by 360 and multiplying the quotient by the market value of the
obligation (including actual accrued interest) in order to determine the
interest income on the obligation for each day of the subsequent month that the
obligation is in the portfolio. For purposes of this calculation, it is assumed
that each month contains 30 days. The maturity of an obligation with a call
provision is the next call date on which the obligation reasonably may be
expected to be called or, if none, the maturity date. With respect to debt
obligations purchased at a discount or premium, the formula generally calls for
amortization of the discount or premium. The amortization schedule will be
adjusted monthly to reflect changes in the market values of such debt
obligations.
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<PAGE>
Nations California Municipal Bond Fund calculates interest gained on
tax-exempt obligations issued without original issue discount and having a
current market discount by using the coupon rate of interest instead of the
yield to maturity. In the case of tax-exempt obligations that are issued with
original issue discount, where the discount based on the current market value
exceeds the then-remaining portion of original issue discount, the yield to
maturity is the imputed rate based on the original issue discount calculation.
Conversely, where the discount based on the current market value is less than
the remaining portion of the original issue discount, the yield to maturity is
based on the market value.
Expenses accrued for the period (variable "b" in the formula) include
recurring fees charged by Nations Funds to shareholder accounts in proportion to
the length of the base period. Undeclared earned income will be subtracted from
the maximum offering price per share (which for Primary A and Primary B Shares
is net asset value per share) (variable "d" in the formula). Undeclared earned
income is the net investment income which, at the end of the base period, has
not been declared as a dividend, but is reasonably expected to be and is
declared as a dividend shortly thereafter. A Fund's maximum offering price per
share for purposes of the formula includes the maximum sales charge, if any,
imposed by the Fund, as reflected in the Fund's prospectus.
The Funds may provide additional yield calculations in communications
(other than advertisements) to the holders of Investor A, Investor C or Investor
B Shares. These may be calculated based on the Investor A, Investor C or
Investor B Shares' net asset values per share (rather than their maximum
offering prices) on the last day of the period covered by the yield
computations. That is, some communications provided to the holders of Investor
A, Investor C or Investor B Shares may also include additional yield
calculations prepared for the holders of Primary A or Primary B Shares. Such
additional quotations, therefore, will not reflect the effect of the sales
charges mentioned above. Based on the foregoing calculations, the yield, taking
into account fee waivers and/or expense reimbursements, and the yield without
fee waivers and/or expense reimbursements for the 30-day period ended February
28, 1998 were as follows:
Thirty Day Yield For The Period Ended February 28, 1999
Tax
Equivalent
Yield Tax Yield
Without Equivalent Without
Yield Fee Yield Fee
Waivers Waivers
Nations California Municipal
Bond Fund
Investor A Shares 3.46% 3.46% 5.73% 5.73%
Investor B Shares 2.96% 2.96% 4.90% 4.90%
Investor C Shares N/A N/A N/A N/A
Primary A Shares N/A N/A N/A N/A
Nations Intermediate Bond Fund
Investor A Shares 4.88% 4.83% 8.08% 8.00%
Investor B Shares N/A N/A N/A N/A
Investor C Shares 4.53% 4.21% 7.50% 6.97%
Primary A Shares N/A N/A N/A N/A
Seafirst Shares 5.04% 4.99% 8.34% 8.26%
135
<PAGE>
The "tax-equivalent" yield is computed by: (a) dividing the portion of the yield
(calculated as above) that is exempt from Federal income tax by (b) one minus a
stated Federal income tax rate. The Federal income tax rate used in calculating
the "tax-equivalent" yield 39.6%. The state income tax rate used in calculating
the "tax-equivalent" yield of Nations California Municipal Bond Fund is [ ]%.
Hypothetical examples showing the level of taxable yield needed to produce
on after-tax equivalent to an assumed tax-free yield may be provided to
shareholders. Provided is such an illustration:
For Nations California Municipal Bond Fund:
- --------------------------------------------------------------------------------
Single Return $25,351-$61,400 $61,401-$128,100 $128,101-$278,450
- --------------------------------------------------------------------------------
Joint Return $42,351-$102,300 $102,301-$155,950 $155,951-$278,450
- --------------------------------------------------------------------------------
To match a
tax-free
yield of: A taxable investment would have to pay you:
- --------------------------------------------------------------------------------
4%
- --------------------------------------------------------------------------------
5%
- --------------------------------------------------------------------------------
6%
- --------------------------------------------------------------------------------
7%
- --------------------------------------------------------------------------------
8%
- --------------------------------------------------------------------------------
The tax-free yields used here are hypothetical and no assurance can be
made that the Funds will obtain any particular yield. A fund's yield fluctuates
as market conditions change. The tax brackets and the related yield calculations
are based on the 1998 Federal (28%, 31%, 36%) and California ([ ]%) tax rates
and assume a Federal tax benefit for the state and local taxes. Note the highest
1998 marginal Federal tax rate may be higher than 36% due to the phase-out of
allowable itemized deductions and personal exemptions for certain taxpayers.
This schedule does not take into account the 39.6% Federal tax rate applied to
taxable income in excess of $278,450.
There can be no assurance that all of a yield quoted by one of these Funds
will be tax-free since these Funds may invest in short-term taxable obligations
for temporary defensive periods as described in the Prospectuses. Also, the
above hypothetical examples are for illustration only. Tax laws and regulations
may be changed at any time by legislative or administrative actions and such
changes may make the information contained in such examples obsolete.
During the period for which certain yield quotations are given above, Bank
of America Adviser, the investment adviser and administrator to the Pacific
Horizon California Municipal Bond Fund (the predecessor of Nations California
Municipal Bond Fund) voluntarily waived fees or reimbursed certain expenses of
such shares, thereby increasing yield figures. Such waivers or expense
reimbursements may be discontinued at any time.
136
<PAGE>
Total Return Calculations
Total return measures both the net investment income generated by, and the
effect of any realized or unrealized appreciation or depreciation of the
underlying investments in a Non-Money Market Fund. The Non-Money Market Funds'
average annual and cumulative total return figures are computed in accordance
with the standardized methods prescribed by the SEC. Average annual total return
figures are computed by determining the average annual compounded rates of
return over the periods indicated in the advertisement, sales literature or
shareholders' report that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end
of the period of a hypothetical $1,000
payment made at the beginning of such period.
This calculation (i) assumes all dividends and distributions are reinvested at
net asset value on the appropriate reinvestment dates as described in the
Prospectuses, and (ii) deducts (a) the maximum sales charge from the
hypothetical initial $1,000 investment, and (b) all recurring fees, such as
advisory and administrative fees, charged as expenses to all shareholder
accounts.
The following figures, for the period ended February 28, 1999, reflect the
deduction of sales charges, if any, that would have been deducted from a sale of
shares.
137
<PAGE>
Inception
Inception Through
Through 2/28/99 2/28/99
Without Sales Including
Average Annual Total Returns Charges Sales Charges
---------------------------- ------- -------------
Nations Capital Income Fund
Investor A Shares 14.48 13.89
Investor B Shares 14.37 14.37
Investor C Shares 14.45 14.45
Nations Asset Allocation Fund
Investor A Shares 15.81 14.47
Investor B Shares 15.73 15.73
Investor C Shares 15.52 14.48
Seafirst Shares 13.40 13.40
Nations California Municipal Bond
Fund
Investor A Shares 8.14 7.00
Investor B Shares 8.10 7.46
Nations Intermediate Bond Fund
Investor A Shares 5.40 4.71
Investor C Shares 5.24 4.29
Seafirst Shares 7.25 7.25
Nations Blue Chip Fund
Investor A Shares 22.97 21.55
Investor B Shares 22.88 22.88
Investor C Shares 22.66 21.56
Seafirst Shares 17.92 17.92
The performance figures of the Funds as described above will vary from
time to time depending upon market and economic conditions, the composition of
their portfolios and operating expenses. These factors should be considered when
comparing the performance figures of the Funds with those of other investment
companies and investment vehicles.
Each Fund may quote information obtained from the Investment Company
Institute, national financial publications, trade journals and other industry
sources in its advertising and sales literature. In addition, the Funds may
compare the performance and yield of a class or series of shares to those of
other mutual funds with similar investment objectives and to other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
the performance and yield of a class of shares in a Fund may be compared to data
prepared by Lipper Analytical Services, Inc. Performance and yield data as
reported in national financial publications such as Money Magazine, Forbes,
Barron's, The Wall Street Journal, and The New York Times, or in publications of
a local or regional nature, also may be used in comparing the performance of a
class of shares in a Fund.
138
<PAGE>
Average Annual Total Return
10 Year
Period
Ended
One 2/28/99
Year 5-year or
Period period Inception
Ended ending through
2/28/99 2/28/99 2/28/99
------- ------- -------
Nations Capital Income Fund
Investor A Shares 4.64 12.38 15.92
Investor B Shares 4.33 12.31 15.89
Investor C Shares* 4.29 12.13 15.79
Nations Asset Allocation Fund
Investor A Shares 14.72 16.46 15.81
Investor B Shares 14.33 16.38 15.73
Investor C Shares* 14.23 16.16 15.52
Seafirst Shares 14.76 16.37 13.60
Nations California Municipal
Bond Fund
Investor A Shares 5.94 5.92 7.53
Investor B Shares 5.25 5.78 7.46
Nations Intermediate Bond Fund
Investor A Shares 4.89 5.75 5.40
Investor C Shares* 4.76 5.58 5.24
Seafirst Shares 4.88 5.41 7.33
Nations Blue Chip Fund
Investor A Shares 18.58 23.69 22.97
Investor B Shares 18.14 23.60 22.88
Investor C Shares* 17.96 23.37 22.66
Seafirst Shares 18.89 23.75 18.08
* Performance prior to October 21, 1996, February 28, 1997, November 20,
1996, November 11, 1996 and November 11, 1996 is represented by performance of
the A Shares (the predecessor to Investor A Shares) of the Capital Income,
California Municipal Bond, Intermediate Bond, Blue Chip and Asset Allocation
Funds, respectively. On the foregoing dates, K Shares (the predecessor to
Investor C Shares) of the above-listed Funds commenced operations. K shares,
unlike A shares, were sold without a front-end sales load but had a .75%
distribution or administrative service fee which would have reduced performance
if reflected.
139
<PAGE>
Aggregate Annual Total Return
<TABLE>
<CAPTION>
5-Year 5-Year
period period Inception Inception
FYE FYE ending ending through through
2/28/99 2/28/99 2/28/99 2/28/99 2/28/99 2/28/99
Without Including Without Including Without Including
Sales Sales Sales Sales Sales Sales
Charges Charges Charges Charges Charges Charges
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Nations Capital Income
Fund
Investor A Shares 4.64 -1.36 79.22 68.93 342.88 369.77
Investor B Shares 4.29 4.29 77.22 77.22 333.25 333.25
Investor C Shares* 4.33 4.33 78.70 78.70 364.53 364.53
Nations Asset
Allocation Fund
Investor A Shares 14.72 8.11 114.22 101.84 111.93 99.68
Investor B Shares 14.33 14.33 113.48 113.48 111.20 111.20
Investor C Shares* 14.23 14.23 111.49 111.49 109.23 109.23
Seafirst Shares 14.76 14.76 113.87 113.87 297.96 297.96
Nations California
Municipal Bond Fund
Investor A Shares 5.94 0.92 33.32 27.04 206.59 219.72
Investor B Shares 5.25 5.25 32.46 32.46 105.25 105.25
Nations Intermediate
Bond Fund
Investor A Shares 4.89 1.44 32.25 27.94 30.79 26.49
Investor C Shares* 4.76 4.76 31.19 31.19 29.74 29.74
Seafirst Shares 4.88 4.88 30.16 30.16 115.69 115.69
Nations Blue Chip Fund
Investor A Shares 18.58 11.78 189.55 172.95 188.97 172.27
Investor B Shares 18.14 18.14 188.48 188.48 187.90 187.90
Investor C Shares* 17.96 17.96 185.77 185.77 185.20 185.20
Seafirst Shares 18.89 18.89 190.23 190.23 511.30 511.30
</TABLE>
140
<PAGE>
* Performance prior to October 21, 1996, February 28, 1997, November 20, 1996,
November 11, 1996 and November 11, 1996 is represented by performance of the A
Shares (the predecessor to Investor A Shares) of the Capital Income, California
Municipal Bond, Intermediate Bond, Blue Chip and Asset Allocation Funds,
respectively. On the foregoing dates, K Shares (the predecessor to Investor C
Shares) of the above-listed Funds commenced operations. K shares, unlike A
shares, were sold without a front-end sales load but had a .75% distribution or
administrative service fee which would have reduced performance if reflected.
Fee waivers and/or expense reimbursements were in effect for the periods
presented. Primary B Shares were not offered during the period described above.
From time to time, the yields of each class of shares of a Money Market
Fund may be compared to the respective averages compiled by Donoghue's Money
Fund Report, a widely recognized independent publication that monitors the
performance of money market funds, or to the average yields reported by the Bank
Rate Monitor for money market deposit accounts offered by the 50 leading banks
and thrift institutions in the top five metropolitan statistical areas.
Each Fund may quote information obtained from the Investment Company
Institute, national financial publications, trade journals and other industry
sources in its advertising and sales literature. In addition, the Funds may
compare the performance and yield of a class or series of shares to those of
other mutual funds with similar investment objectives and to other relevant
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
the performance and yield of a class of shares in a Fund may be compared to data
prepared by Lipper Analytical Services, Inc. The performance and yield of a
class of shares in Nations Blue Chip Fund, Nations Capital Income Fund and
Nations Asset Allocation Fund may be compared to the Standard & Poor's 500 Stock
Index, an unmanaged index of a group of common stocks, the Consumer Price Index,
or the Dow Jones Industrial Average, a recognized unmanaged index of common
stocks of 30 industrial companies listed on the Exchange. The performance and
yield of a class of shares in Nations Intermediate Bond Fund may be compared to
the Shearson Lehman Intermediate Government Bond Index, an unmanaged index of
intermediate government securities. Performance and yield data as reported in
national financial publications such as Money Magazine, Forbes, Barron's, The
Wall Street Journal, and The New York Times, or in publications of a local or
regional nature, also may be used in comparing the performance of a class of
shares in a Fund.
Each Fund may quote information obtained from the Investment Company
Institute in its advertising materials and sales literature.
141
<PAGE>
Ibbotson Data. Ibbotson Associates of Chicago, Illinois, ("Ibbotson")
provides historical returns of the capital markets in the United States. The
Funds may compare the performance of their share classes or series to the
long-term performance of the U.S. capital markets in order to demonstrate
general long-term risk versus reward investment scenarios. Performance
comparisons could also include the value of a hypothetical investment in common
stocks, long-term bonds or treasuries.
The capital markets tracked by Ibbotson are common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury Bills, and the U.S. rate of
inflation. These capital markets are based on the returns of several different
indices. For common stocks, the S&P is used. For small capitalization stocks,
return is based on the return achieved by Dimensional Fund Advisors (DFA) Small
Company Fund. This fund is a market-value-weighted index of the ninth and tenth
deciles of the Exchange, plus stocks listed on the American Stock Exchange and
over-the-counter with the same or less capitalization as the upperbound of the
Exchange ninth docile. At year-end 1995, the DFA Small Company Fund contained
approximately 2,663 stocks, with a weighted average market capitalization of
$165.75 million. The unweighted average market capitalization was $82.97
million, while the median was $56.0 million.
Unlike an investment in a common stock mutual fund, an investment in bonds
that are held to maturity provides a fixed and stated rate of return. Bonds have
a senior priority in liquidation or bankruptcy to common stocks, and interest on
bonds is generally paid from assets of the corporation before any distributions
to common shareholders. Bonds rated in the two highest rating categories are
considered high quality and to present minimal risks of default. See Schedule A
for a more complete explanation of these ratings of corporate bonds. An
advantage of investing in government bonds is that, in many cases, they are
backed by the credit and taxing power of the United States government, and
therefore, such securities may present little or no risk of default. Although
government securities fluctuate in price, they are highly liquid and may be
purchased and sold with relatively small transaction costs (direct purchase of
Treasury securities can be made with no transaction costs).
Long-term corporate bond returns are based on the performance of the
Salomon Brothers Long-Term-High-Grade Corporate Bond Index and include nearly
all "Aaa-" and "Aa-" rated bonds. Returns on intermediate-term government bonds
are based on a one-bond portfolio constructed each year, containing a bond which
is the shortest noncallable bond available with a maturity not less than 5
years. This bond is held for the calendar year and returns are recorded. Returns
on long-term government bonds are based on a one-bond portfolio constructed each
year, containing a bond that meets several criteria, including having a term of
approximately 20 years. The bond is held for the calendar year and returns are
recorded. Returns on U.S. Treasury Bills are based on a one-bill portfolio
constructed each month, containing the shortest-term bill having not less than
one month to maturity. The total return on the bill is the month end price
divided by the previous month-end price, minus one. Data up to 1976 is from the
U.S. Government Bond file at the University of Chicago's Center for Research in
Security Prices; the Wall Street Journal is the source thereafter. Inflation
rates are based on the CPI. Ibbotson calculates total returns in the same method
as the Funds.
142
<PAGE>
Cumulative total return is computed by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
CTR = (ERV-P) 100
-------
P
Where: CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such period
P = initial payment of $1,000.
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectuses, and (ii) deducts (a) the maximum sales charge from the
hypothetical initial $1,000 investment, and (b) all recurring fees, such as
advisory and administrative fees, charged as expenses to all shareholder
accounts.
Cumulative Total Return
<TABLE>
<CAPTION>
10 Year 10 Year
Period Period
Ended Ended
2/28/99 2/28/99
5 Year 5 Year or or
Period Period Inception Inception
FYE FYE Ended Ended through through
2/28/99 2/28/99 2/28/99 2/28/99 2/28/99 2/28/99
Without Including Without Including Without Including
Sales Sales Sales Sales Sales Sales
Charges Charges Charges Charges Charges Charges
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Nations Capital
Income Fund
Investor A 4.64 -1.36 79.22 68.93 338.14 312.85
Shares
Investor B 4.29 4.29 77.22 77.22 333.25 333.25
Shares
Investor C 4.33 4.33 78.70 78.70 336.86 336.86
Shares
143
<PAGE>
Nations Asset
Allocation Fund
Investor A 14.72 8.11 114.22 101.84 111.93 99.68
Shares
Investor B 14.33 14.33 113.48 113.48 111.20 111.20
Shares
Investor C 14.23 14.23 111.49 111.49 109.23 109.23
Shares
Seafirst Shares 14.76 14.76 113.87 113.87 257.86 257.86
Nations California
Municipal Bond Fund
Investor A 5.94 .92 33.32 27.04 106.58 96.77
Shares
Investor B 5.25 5.25 32.46 32.46 105.25 105.25
Shares
Nations
Intermediate Bond
Fund
Investor A 4.89 1.44 32.25 27.94 30.79 26.49
Shares
Investor C 4.76 4.76 31.19 31.19 29.74 29.74
Shares
Seafirst Shares 4.88 4.88 30.16 30.16 102.87 102.87
Nations Blue Chip
Fund
Investor A 18.58 11.78 189.55 172.95 188.97 172.27
Shares
Investor B 18.14 18.14 188.48 188.48 187.90 187.90
Shares
Investor C 17.96 17.96 185.77 185.77 185.20 185.20
Shares
Seafirst Shares 18.89 18.89 190.23 190.23 427.16 427.16
</TABLE>
* Primary A Shares of the Trust do not carry a sales charge.
The Primary Shares and Investor A, B and C Shares of the Funds may also
quote their distribution rates, which express the historical amount of income
dividends paid to their shareholders during a one-month or a three-month period
as a percentage of the maximum offering price per share on the last day of such
period. The performance figures of the Funds as described above will vary from
time to time depending upon market and economic conditions, the composition of
their portfolios and operating expenses. These factors should be considered when
comparing the performance figures of the Funds with those of other investment
companies and investment vehicles.
144
<PAGE>
The "yield" and "effective yield" of each class of shares of a Money
Market Fund may be compared to the respective averages compiled by Donoghue's
Money Fund Report, a widely recognized independent publication that monitors the
performance of money market funds, or to the average yields reported by the Bank
Rate Monitor for money market deposit accounts offered by the 50 leading banks
and thrift institutions in the top five metropolitan statistical areas. Each
Fund may quote information obtained from the Investment Company Institute,
national financial publications, trade journals and other industry sources in
its advertising and sales literature. In addition, the Funds also may compare
the performance and yield of a class or series of shares to those of other
mutual funds with similar investment objectives and to other relevant indices or
to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance and yield of a class of shares in a Fund may be compared to data
prepared by Lipper Analytical Services, Inc. Performance and yield data as
reported in national financial publications such as Money Magazine, Forbes,
Barron's, The Wall Street Journal, and The New York Times, or in publications of
a local or regional nature, also may be used in comparing the performance of a
class of shares in a Fund.
5% SHAREHOLDERS
The following table sets forth certain information concerning each person
who, to the Trust's knowledge, is a record owner of 5% or more of the Shares of
a class of a Fund. Information is given as of July 20, 1999.
Class;
Amount of
Shares
Owned;
Type of Percentage Percentage
Fund Name and Address Ownership of Class of Fund
---- ---------------- --------- -------- -------
Asset Paco
Allocation Attn: Mutual Funds Primary A 74.07%
Fund Unit #38615 256,217.348
PO Box 513577
Los Angeles, CA
90051-1577
Paco - Cash Account Primary A 16.06%
Attn: Mutual Funds 55,553.060
Unit #38615
PO Box 513577
Los Angeles, CA
90051-1577
Bank of America Trst Primary A 6.08%
Cherry 21,041.940
Deferred
Compensation Trust
DTD 1/25/96 A/C
01-002-0008437
Attn Kate Long Rm 03
231 La Salle
Chicago, IL 60604-1407
145
<PAGE>
Stephens Inc Primary B 100%
Attn: Cindy Cole 1.072
111 Center Street
Little Rock, AR 72201
Vanguard Fiduciary Investor A 5.16%
Trust Company 133,146.321
FBO Kirkland & Ellis
Def Contribution
Retirement Plan 91926
PO Box 2600
Valley Forge, PA
19482-2600
State Street Bank & Investor C 97.50%
Trust Co TTEE 80,750.710
FBO, Coastgear &
Company
Attn: Kevin Smith
105 Rosemont Ave
Westwood, MA 02090
Seafirst Bank Seafirst 100%
FBO Retirement Class
Services
PO Box 84248
Seattle, WA
98124-5548
Blue Chip Fund Paco - Cash Account Primary A 38.26%
Attn: Mutual Funds 331,977.554
Unit #38615
PO Box 513577
Los Angeles, CA
90051-1577
Paco Primary A 33.31%
Attn: Mutual Funds 289,007.977
Unit #38615
PO Box 513577
Los Angeles, CA
90051-1577
Nationsbank of Texas Primary A 18.24%
NA 158,282.192
Attn Tony Farrer (B
Shares)
1401 Elm Street 11th
Floor
Dallas, TX
75202-2911
Bank of America NT & Investor A 6.1330%
SA 649,449.576
The Private Bank
Attn Common Trust
Funds Unit 38329
PO Box 3577
Los Angeles, CA
90051-1577
State Street Bank & Investor C 85.80%
Trust Co TTEE 264,468.474
FBO, Coastgear &
Company
Attn: Kevin Smith
105 Rosemont Ave
Westwood, MA 02090
Corelink Financial Investor C 6.13%
Inc 18,885.721
PO Box 4054
Concord, CA
94524-4054
Seafirst Bank Seafirst 100%
FBO Retirement Class
Services 13,866,672.392
PO Box 84248
Seattle, WA
98124-5548
146
<PAGE>
California Paco - Cash Account Primary A 52.89%
Municipal Bond Attn: Mutual Funds 727,732.310
Fund Unit #38615
PO Box 513577
Los Angeles, CA
90051-1577
Paco Primary A 33.87%
Attn: Mutual Funds 466,020.169
Unit #38615
PO Box 513577
Los Angeles, CA
90051-1577
Nationsbank of Texas Primary A 9.00%
NA 123,783.347
Attn Tony Farrer
1401 Elm Street 11th
Floor
Dallas, TX
75202-2911
Stephens Inc Investor C 100%
Attn: Cindy Cole 3.337
111 Center Street
Little Rock, AR
72201
BA Investment Investor B 8.31%
Services, Inc. 34,199.726
FBO 405015951
185 Berry St.
3rd Floor #12640
San Francisco, CA
94107
BA Investment Investor B 8.12%
Services, Inc. 33,422.460
FBO 436339241
185 Berry St.
3rd Floor #12640
San Francisco, CA
94107
BA Investment Investor B 6.46%
Services, Inc. 26,590.419
FBO 404377331
185 Berry St.
3rd Floor #12640
San Francisco, CA
94107-1729
BA Investment Investor B 5.76%
Services, Inc. 23,695.774
FBO 435242481
185 Berry St.
3rd Floor #12640
San Francisco, CA
94107-1729
BA Investment Investor B 5.19%
Services, Inc. 21,366.415
FBO 428124871
185 Berry St.
3rd Floor #12640
San Francisco, CA
94107-1729
California BA Investment Advisor; 80.61%
Tax-Exempt Services Inc 330,361,140.560
Reserves for the Benefit of
Customers
Attn H David Jones
III PO Box 7042 San
Francisco, CA 94120-
7042
147
<PAGE>
Stephens Inc Daily; 100%
Attn: Cindy Cole 25.060
111 Center Street
Little Rock, AR
72201
Stephens Inc Capital; 100%
Attn: Cindy Cole 25.250
111 Center Street
Little Rock, AR
72201
National Financial Investor; 48.40%
for the Exclusive 276,898,841.770
Benefit of our
Customers
200 Liberty St
1 World Financial Ctr
Attn Mutual Funds
5th Flr
New York, NY 10281
BA Investment Investor; 45.91%
Services Inc 262,667,899.600
for the Benefit of
Customers
Unit 17852 Attn H
David Jones 3rd
PO Box 7042
San Francisco, CA
94120
Stephens Inc Market; 100%
Attn: Cindy Cole 25.060
111 Center Street
Little Rock, AR
72201
Stephens Inc Liquidity; 100%
Attn: Cindy Cole 25.060
111 Center Street
Little Rock, AR
72201
Bank of America NT & Trust; 99.96%
SA Trst/Cus 378,004,155.810
Attn Common Tr FDS
Unit 38329
Terminal Anex
PO Box 513577
Los Angeles, CA
90051-1577
Cash Reserves Security Pacific Advisor; 27.47%
Cash Management 854,362,100.000
c/o Bank of
America-GPO M/C 5533
Attn Regina Olsen
1850 Gateway Blvd #
5533
Concord, CA
94520-3275
Bankers Trust FBO Advisor 8.83%
Tenneco Salary - 90,046,127.760
193024
PO Box 9014
Church Street Station
New York, NY 10008
BA Investment Daily; 49.87%
Services Inc 2,748,154,422.950
for the Benefit of
Customers
Unit 17852 Attn H
David Jones 3rd
PO Box 7042
San Francisco, CA
94120
148
<PAGE>
National Financial Daily; 23.60%
for the Exclusive 1,300,564,893.070
Benefit of our
Customers
200 Liberty St
1 World Financial Ctr
Attn Mutual Funds
5th Flr
New York, NY 10281
Bank of America NT & Capital; 11.20%
SA 325,089,215.210
Private Bank
Attn Common Tr Fds
Unit 38329
Terminal Annex
PO Box 513577
Los Angeles, CA
90051-1577
The Anschutz Capital; 10.38%
Corporation 301,282,494.040
Attn Thomas G Kundert
555 Seventeenth
Street
Suite 2400
Denver, CO 80202
General Motors Capital; 6.89%
Acceptance Corp 200,000,000.000
Attn E Wayne Crawford
3031 W Grand Blvd
Ste 695
M/C 482-206-695
Detroit, MI 48202
Hare & Co, Bank of Capital; 5.63%
New York 163,529,099.840
Attn Stif/Master Note
One Wall Street 2nd
Fl
New York, NY 10286
BA Investment Investor; 59.65%
Services Inc 2,147,225,460.340
for the Benefit of
Customers
Unit 17852 Attn H
David Jones 3rd
PO Box 7042
San Francisco, CA
94120
Silicon Valley Bank Investor; 20.61%
Attn: Jess R 741,825,568.880
Gutierrez
3003 Tasman Drive
Mshg 110
Santa Clara, CA
95054
National Financial Investor; 10.63%
for the Exclusive 382,742,123.430
Benefit of our
Customers
200 Liberty St
1 World Financial Ctr
Attn Mutual Funds
5th Flr
New York, NY 10281
NationsBank SWP Service 100%
Disbursement NC Shares
NationsBank 11,000,000.00
Sweep/Autoborrow
First Citizens Bldg
128 S Tryon St
NC1-006-08-03
Charlotte, NC 28255
149
<PAGE>
BA Investment Service; 12.24%
Services Inc 380,650,624.500
for the Benefit of
Customers
Attn H David Jones
III PO Box 7042 San
Francisco, CA 94120-
7042
Bank of America NT & Trust 99.39%
SA Shares
Financial Mgmt & 1,731,854,059.930
Trust Services
Attn Common Tr FDS
Unit 38329
Terminal Annex
PO Box 513577
Los Angeles, CA
90051-1577
NationsBank SWP Market 100%
Disbursement NC Class
NationsBank 1,820,000,000.000
Sweep/Autoborrow
First Citizens Bldg
128 S Tryon St NC
01-006-08-03
Charlotte, NC 28255
The Bank of New York Capital 15.70%
as Agent for its Class
Securities Lending 745,000,000.000
Customers
101 Barclay Street
New York, NY 10286
NationsBank of Texas Capital 13.96%
NA Class
Attn: David Thayer 662,378,021.120
1401 Elm Street 11th
Floor
Dallas, TX 75202
Charter Capital 11.59%
Communications Class
Operating LLC 550,000,000.000
Attn Ralph Kelly
12444 Powerscourt Dr
Ste 100
Saint Louis, MO
63131-3617
NationsBank of Texas Liquidity 30.27%
NA Agent FBO Class
Global Finance Sweep 554,479,620.440
Customers
Attn Steven Edwards
1201 Main Street
TX1-609-21-04
Dallas, TX 75202
Hans-Werner Hector Liquidity 6.68%
33-B Eugenia Avenue Class
Kiawah Island, SC 122,270,694.160
29455-5608
Olen Commercial Liquidity 5.41%
Realty Corp Class
PO Box 7069 99,012,870.830
Newport Beach, CA
92658-7069
150
<PAGE>
Lennar Land Partners Liquidity 4.91%
Investments Class
Attn Wayneright 90,000,000.000
Malcolm
700 NW 107th Ave
Miami, FL 33172
NationsBank of Texas Liquidity 40.00%
NA Agent FBO Class
Global Finance Sweep 82,988,902.990
Customers
Attn Steven Edwards
1201 Main Street
TX1-609-21-04
Dallas, TX 75202
ECT Securities LTD Liquidity 19.77%
Partnership Class
c/o Enron Corp 45,580,681.440
Attn Donna Lowry EB
2881
P O Box 1188
Houston, TX
77251-1188
Janet Sue Beck Liquidity 8.47%
Separate Property Class
6211 Raintree Ct 19,515,599.270
Dallas, TX 75240
Nations Paco - Cash Account Primary A 52.00%
Capital Income Attn: Mutual Funds 167,083.271
Fund Unit #38615
PO Box 513577
Los Angeles, CA
90051-1577
Paco Primary A 44.18%
Attn: Mutual Funds 141,955.442
Unit #38615
PO Box 513577
Los Angeles, CA
90051-1577
State Street Bank & Investor C 79.41%
Trust Co TTEE 84,804.867
FBO, Coastgear &
Company
Attn: Kevin Smith
105 Rosemont Ave
Westwood, MA 02090
Corelink Financial Investor C 8.08%
Inc 8,631.107
PO Box 4054
Concord, CA
94524-4054
Government BA Investment
Reserves Services Inc Advisor; 7.18%
for the Benefit of 22,941,090.740
Customers
Attn H David Jones
III PO Box 7042 San
Francisco, CA 94120-
7042
Guilford Glazer TTEE Advisor; 6.21%
9440 Santa Monica 19,846,762.590
Blvd Ste 610
Beverly Hills, CA
90210-4619
National Financial Daily; 100%
for the Exclusive 23,596,460.820
Benefit of our
Customers
200 Liberty St
1 World Financial Ctr
Attn Mutual Funds
5th Flr
New York, NY 10281
151
<PAGE>
Chase Manhattan Bank Capital; 38.77%
FBO Global Trust 49,130,402.860
Attn Dave Sturman
450 W 33rd St Fl 15
New York, NY 10001-
2603
Lone Star Capital; 16.63%
Technologies Inc 21,070,175.750
Attn Charles J
Keszler
PO Box 803546
Dallas, TX
75380-3546
U S Bank Trust NA Capital; 10.96%
ESCR Kaiser Aluminum 13,883,754.640
Corp/Dol
Attn Corp Trust Srvcs
601 Union St Ste 2120
Seattle, WA
98101-2331
Skinner Corporation Capital; 7.23%
Attn Debbie Sokvitne 9,163,659.190
1326 5th Ave Ste 711
Seattle, WA
98101-2640
Bank of America NT & Capital; 5.51%
SA 6,978,016.860
Trst Financial Mgmnt
& Trust Svcs
Attn Common Tr FDS
Unit 38329
Terminal Annex
PO Bxo 513577
Los Angeles, CA
90051-1577
Collins & 194th Adviser 15.77%
Associates Ltd Class
DBA Ocean 1 7,164,994.310
Condominium Corporate
19250 Collins Ave
N Miami Beach, FL
33160
Ocean Two by Chicago Adviser 10.75%
Title Class
Insurance Co as 4,886,184.830
Escrow Agent
File #309900567
Attn Team Acctg
1818 S Australian Ave
West Palm Beach, FL
33409
L Frank Pitts DBA Adviser 6.72%
Pitts Oil Company Class
4600 Greenville Ave 3,055,744.510
Ste 200
Dallas, TX 75206
Geneva Assoc Adviser 5.6107%
Merchant Banking Class
Partners I LLC 2,549,859.550
Attn Maggie Styers
PO Box 21962
Greensboro, NC
27420-1962
152
<PAGE>
Collins & 194th Adviser 5.3687%
Associates Ltd Class
by Chicago Title 2,439,882.300
Insurance Co as
Escrow Agent
c/o State Accounting
1818 S Australian
Ave Suite 210
West Palm Beach, FL
33409
North Kansas City Adviser 5.0391%
Hospital Class
Attn Mike Wright 2,290,103.270
2800 Clay Edwards Dr
No Kansas City, MO
64116
BA Investment Investor; 63.9042%
Services Inc 189,509,978.870
for the Benefit of
Customers
Unit 17852 Attn H
David Jones 3rd
PO Box 7042
San Francisco, CA
94120
National Financial Investor; 23.4291%
for the Exclusive 69,479,710.090
Benefit of Our
Customers
200 Liberty St
1 World Financial Ctr
Attn Mutual Funds
5th Flr
New York, NY 10281
Hare & Co, Bank of Investor; 6.6310%
New York 19,664,381.380
Attn Stif/Master Note
One Wall Street 2nd
Fl
New York, NY 10286
Nationsbank SWP Market 100.0000%
Disbursement NC Class
Nationsbank 350,500,000.000
Sweep/Autoborrow
First Citizens Bldg
128 S Tryon St
NC1-006-08-03
Charlotte, NC 28255
Stephens Inc. Daily 100.0000%
Attn: Cindy Cole Shares
111 Center Street 10.000
Little Rock, AR
72201
NationsBank SWP Service 99.9980%
Disbursement NC Shares
NationsBank 500,000.000
Sweep/Autoborrow
First Citizens Bldg
128 S Tryon St
NC1-006-08-03
Charlotte, NC 28255
Stephens Inc. Investor 100.0000%
Attn: Cindy Cole Class
111 Center Street 10.000
Little Rock, AR
72201
153
<PAGE>
Bank of America NT & Trust 100.0000%
SA Shares
Financial Mgmt & 166,598,173.250
Trust Services
Attn Common Tr FDS
Unit 38329
Terminal Annex
PO Box 513577
Los Angeles, CA
90051-1577
Flagler Co Board of Capital 29.2637%
Commissioners #1 Fund Class
PO Box 787 38,699,900.840
201 East Moody Blvd
Bunnel, FL 32110
Reese M Rowling Capital 24.6158%
500 N Water St Suite Class
1100N 32,553,248.210
Corpus Christi, TX
78471-0000
Cannan Capital 15.2630%
Communications Inc Class
City National Bldg 20,184,615.710
807 8th Street Ste
503
Wichita Falls, TX
76301-3304
Orbital Imaging Capital 7.7881%
Corporation Class
Attn Martha Darden 10,299,359.330
21700 Atlanta Blvd
Dulles, VA
20166-6801
Novabus of America Capital 5.4636%
Inc Class
General Account 7,225,420.830
Dan Alexander A/S
PO Box 5670
Roswell, MN
88202-5670
Norwest Bank as TTEE Liquidity 17.0017%
for Pace Academy Class
6 St Marquette Avenue 9,778,412.330
Minneapolis, MN
55479
Liquidity 15.7451%
Comptrust AGC Class
Workers Comp Trust 9,055,663.930
Fund SC
Attn Vicky Petit
P O Box 30277
Charlotte, NC 28230
Liquidity 15.5047%
J&E Oil Inc Class
300 E Edinburg 8,917,434.470
Elsa, TX 78543
SQL Financials Inc Liquidity 12.1706%
Attn Bill Fielder Class
3950 Johns Creek Ct 6,999,848.310
Ste 100
Suwanee, GA 30024
154
<PAGE>
Liquidity 11.9756%
Comptrust AGC Class
Workers Comp Trust 6,887,663.440
Fund NC
Attn Vicky Petit
P O Box 30277
Charlotte, NC 28230
Texas New Mexico Liquidity 11.6637%
Power Company Class
Attn Cash Manager 6,708,278.560
PO Box 2943
Fort Worth, TX 76113
Municipal BA Investment Advisor; 50.2120%
Reserves Services Inc 24,808,484.550
for the Benefit of
Customers
Attn H David Jones
III PO Box 7042 San
Francisco, CA 94120-
7042
Black Hills Energy Advisor; 10.2345%
Resources Inc 5,056,628.270
2323 S Shepherd Dr
Ste 1150
Houston, TX
77019-7022
Jack Kirk Advisor; 6.5976%
1533 NW Blue Ridge 3,259,694.330
Dr Seattle, WA 98177
-5418
The Lynn E Barr Advisor; 5.5772%
and Linda D. Barr 2,755,563.140
Trst as Amended and
Restated in PO Box
2000 Benicia, CA
94510-0809
National Financial Daily; 72.1198%
for the Exclusive 149,622,265.300
Benefit of our
Customers 200 Liberty
St 1 World Financial
Ctr Attn Mutual Funds
5th Flr New York, NY
10281
BA Investment Daily; 27.8796%
Services Inc 57,840,018.350
for the Benefit of
Customers Unit 17852
Attn H David Jones
3rd PO Box 7042 San
Francisco, CA 94120
BA Investment Daily; 99.9790%
Services Inc 366,589,273.260
for the Benefit of
Customers Unit 17852
Attn H David Jones
3rd PO Box 7042 San
Francisco, CA 94120
The Anschutz Capital; 98.5184%
Corporation 50,046,805.050
Attn Thomas G Kundert
555 Seventeenth
Street Suite 2400
Denver, CO 80202
155
<PAGE>
BA Investment Investor; 97.6307%
Services Inc 155,085,857.290
for the Benefit of
Customers Unit 17852
Attn H David Jones
3rd PO Box 7042 San
Francisco, CA 94120
Phil McDaniel Adviser Class 16.6370%
51 Water Street 5,952,628.760
St Augustine, FL
32084-0000
Timothy A Braswell Adviser Class 15.0493%
17925 S E Village 5,384,562.490
Circle Tequesta,
FL 33469
Addlestone Adviser Class 10.0446%
International Attn 3,593,897.440
Nathan Addlestone
PO Box 979 Charleston,
SC 29402-0979
Heritage Bag Company Adviser Class 10.0054%
1648 Diplomat
Drive Carrollton, TX
3,579,869.300 75006-
6847
Nationsbank SWP Market Class 100.0000%
Disbursement NC 164,500,000.000
Nationsbank
Sweep/Autoborrow
First Citizens Bldg
128 S Tryon St
NC1-006-08-03
Charlotte, NC 28255
Stephens Inc. Daily Shares 100.0000%
Attn: Cindy Cole 10.000
111 Center Street
Little Rock, AR
72201
Stephens Inc. Service 100.0000%
Attn: Cindy Cole Shares
111 Center Street 10.000
Little Rock, AR
72201
Stephens Inc. Investor Class 100.0000%
Attn: Cindy Cole 10.000
111 Center Street
Little Rock, AR
72201
Bank of America FM & Trust 100.0000%
TS Oper CA Shares
Attn Common Tr FDS 611,268,616.610
Unit 38329
Terminal Annex
PO Box 513577
Los Angeles, CA
90051-1577
156
<PAGE>
NationsBank of Texas Capital 56.3356%
NA Class
Attn David Thayer 102,556,077.870
1401 Elm Street 11th
Floor
Dallas, TX 75202
Daniel R Harper TTEE Capital Class 16.0763%
Daniel R Harper 29,266,046.950
Revocable Living
Trust U/A DTD 7/13/90
14860 Six Mile Cypress
Pkwy Ft Myers, FL 33912-
4406
Michael S. Egan Liquidity 29.4843%
Attn Robin Segaul Class
333 East Las Olas 48,094,557.630
Blvd
Ft Lauderdale, FL
33301
W Ray Wallace Liquidity 14.9960%
P O Box 568887 Class
Dallas, TX 75356 24,461,283.200
Vintec Company Liquidity 11.2789%
1501 Malloy Ln Class
P O Box 1258 18,398,045.570
Murfreesboro, TN
37133
Sheldon H Solow Liquidity 10.1064%
Personal & Class
Confidential 16,485,500.000
9 W 57th St
New York, NY
10019-2701
WRW Equities LTD Liquidity 6.1047%
5500 Preston Rd #220 Class
Dallas, TX 75205 9,957,958.340
Johnson Ezell Liquidity 6.0103%
Corporation Class
FBO Neil Ezell 9,803,968.090
18167 US Highway 19
N Ste 660
Clearwater, FL
33764-6569
Money Market MSP Acquisition Corp Liquidity 49.3667%
Reserves 314 Main St Ste 300 Class
Fort Worth, TX 4,644,464.830
76102-7407
Micro Craft Inc Liquidity 24.0152%
Attn Tom Headlee Class
P O Box 370 2,259,371.500
Tullahoma, TN 37388
Undiscovered Liquidity 18.0696%
Managers LLC Class
Attn James Vetter 1,700,000.000
700 N Pearl Ste 2400
LB342
Dallas, TX
75201-2832
157
<PAGE>
Volunteers of Liquidity 8.1927%
America Inc Class
Attn Accounting 770,774.600
110 S Union St
Alexandria, VA
22314-3351
Central Carolina Bank Advisors 48.9556%
Attn Cash Management Class
111 Corcoran Street 3,190,089.090
2nd Flr MO 2-1
Durham, NC 27701
Town of Smithfield Advisors 27.4002%
Bond Fund Class
Attn Suzanne Pittman 1,785,475.040
310 Institute St
Smithfield, VA
23430-1114
Ottenheimer Advisors 9.2492%
Equipment Co Inc Class
Attn Mark Ottenheimer 602,702.110
2607 N Rolling Rd
Ste 210
Baltimore, MD 21244
Dolphin Mall Advisors 7.2698%
Associates LP Class
Wage Program 473,721.770
Attn Marie Ammatteo
200 S Park Rd Ste 200
Hollywood, FL
33021-8541
Nationsbank SWP Market 100.0000%
Disbursement NC Class
Nationsbank 821,000,000.000
Sweep/Autoborrow
First Citizens Bldg
128 S Tryon St
NC1-006-08-03
Charlotte, NC 28255
Stephens Inc. Daily Shares 100.0000%
Attn: Cindy Cole 10.000
111 Center Street
Little Rock, AR
72201
NationsBank SWP Service 99.9996%
Disbursement NC Shares
NationsBank 2,500,000.000
Sweep/Autoborrow
First Citizens Bldg
128 S Tryon St
NC1-006-08-03
Charlotte, NC 28255
Stephens Inc. Investor Class 100.0000%
Attn: Cindy Cole 10.000
111 Center Street
Little Rock, AR
72201
Stephens Inc. Trust Shares 100.0000%
Attn Cindy Cole 10.000
111 Center Street
Little Rock, AR
72201
158
<PAGE>
Arkansas State Capital 11.8901%
Treasury Class
Attn Treasury 99,300,857.160
Management
State Capitol
Building Rm 220
Little Rock, AR
72201
NationsBank of Texas Capital 9.4306%
NA Class
Attn David Thayer 78,760,713.970
1401 Elm Street 11th
Floor
Dallas, TX 75202
Dallas ISD General Capital 7.9207%
Fund Class
Attn Dick Williams 66,150,560.610
Room 218C
3700 Ross Avenue
Dallas, TX 75204
Cendant Corporation Capital Class 7.0074
Attn Kim Sanborn 58,522,835.220
6 Sylvan Way
Parsippany, NJ 07054
Agrium U S Inc Capital Class 5.5380%
Attn Treasury 46,251,255.080
Department
13131 Lake
FraserDrive SE
Calgary AB Canada
T2J 7E8
Treasury National Financial Daily; 8.3017%
Reserves for the Exclusive 51,346,149.790
Benefit of our
Customers
200 Liberty St
1 World Financial Ctr
Attn Mutual Funds
5th Flr
New York, NY 10281
National Rv Holdings Daily; 5.0620%
Inc 31,308,281.140
Attn Kenneth Ashley
3411 N Perris Blvd
Perris, CA
92571-3100
Clark County Public 8,846,161.340 7.8179%
Administration
Attn Jared E Shafer
1700 Pinto Ln
Las Vegas, NV
89106-4102
Los Angeles Capital; 19.5425%
Department of 61,050,961.690
Airports
Attn Sandee Parks
515 S Flower St
Los Angeles, CA
90071-2201
Hare & Co, Bank of Capital; 8.5979%
New York 26,860,046.930
Attn Stif/Master Note
One Wall Street 2nd
Fl
New York, NY 10286
159
<PAGE>
E D Fund Capital; 8.4522%
Attn Duane Hill 26,404,719.940
3300 Zinfandel Dr
Rancho Cordova, CA
95670-6043
CDO Capital LLC Capital; 7.5125%
Cash Reserve Account 23,469,019.900
Attn Tom Gohde
6111 N River Rd
Rosemont, IL
60018-5158
California Capital; 6.4820%
Independent System 20,249,711.240
Operator
Attn Chief Financial
Officer
151 Blue Ravine Rd
Folsom, CA
95630-4704
Save Mart Capital; 6.0819%
Supermarkets 19,000,000.000
Attn Linda Kline
PO Box 4278
Modesto, CA
95352-4278
BA Investment Investor; 53.0392%
Services Inc 155,539,577.330
for the Benefit of
Customers
Unit 17852 Attn H
David Jones 3rd
PO Box 7042
San Francisco, CA
94120
Hare & Co, Bank of 100,613,314.580 34.3093%
New York
Attn Stif/Master Note
One Wall Street 2nd
Fl
New York, NY 10286
Hare & Co, Bank of Adviser 16.6953%
New York Class
Attn Stif/Master Note 59,161,080.800
One Wall Street 2nd
Fl
New York, NY 10286
Central Carolina Bank Adviser 10.6672%
Attn Cash Management Class
111 Corcoran Street 37,800,111.220
2nd Flr MO 2-1
Durham, NC 27701
Primus Adviser 5.6284%
Telecommunications Class
International Inc 19,944,679.880
Attn Andy Dolan
1700 Old Meadow Road
Suite 300
McLean, VA 22102
Stephens Inc Daily 100.0000%
Attn: Cindy Cole Shares
111 Center Street 10.000
Little Rock, AR
72201
Nationsbank SWP Market 100.0000%
Disbursement NC Class
Nationsbank 1,331,500,000.000
Sweep/Autoborrow
First Citizens Bldg
128 S Tryon St
NC1-006-08-03
Charlotte, NC 28255
160
<PAGE>
NationsBank SWP Service 99.9996%
Disbursement NC Shares
NationsBank 2,500,000.000
Sweep/Autoborrow
First Citizens Bldg
128 S Tryon St
NC1-006-08-03
Charlotte, NC 28255
Stephens Inc. Investor Class 100.0000%
Attn: Cindy Cole 10.000
111 Center Street
Little Rock, AR
72201
Bank of America NT & Trust 100.0000%
SA Shares
Financial Mgmt & 638,299,127.360
Trust Services
Attn Common Tr FDS
Unit 38329
Terminal Annex
PO Box 513577
Los Angeles, CA
90051-1577
Mindspring Capital 47.1119%
Enterprises Inc Class
1430 W Peachtree St 377,638,847.380
NW
Atlanta, GA 30309
NationsBank of Texas Capital 19.6530%
NA Class
Attn: David Thayer 157,534,168.790
1401 Elm Street 11th
Floor
Dallas, TX 75202
Banc of America LLC Capital Class 8.6375%
Attn Mutual Funds 69,235,962.290
600 Montgomery St
San Francisco, CA
94111
Commercial Financial Capital 5.1777%
Svcs Inc Class
Operating Account 41,503,176.430
Attn Accounting
Department
2448 E 81st St Ste
5200
Tulsa, OK 74137-4248
Nations Paco - Cash Account Primary A 85.0993%
Intermediate Attn: Mutual Funds 773,710.492
Bond Fund Unit #38615
PO Box 513577
Los Angeles, CA
90051-1577
Paco Primary A 14.9004%
Attn: Mutual Funds 135,472.483
Unit #38615
PO Box 513577
Los Angeles, CA
90051-1577
161
<PAGE>
Nations Corelink Financial Investor C 99.9487%
Intermediate Inc 7,201.550
Bond Fund PO Box 4054
Concord, CA
94524-4054
Nations Seafirst Bank Seafirst
Intermediate FBO Retirement Class
Bond Fund Services 2,943,694.026 99.9999%
PO Box 84248
Seattle, WA
98124-5548
Nations Bank of America NT & Investor A 75.0197%
Intermediate SA 3,742,327.004
Bond Fund The Private Bank
Attn Common Trust
Funds Unit 38329
PO Box 3577
Los Angeles, CA
90051-1577
Union Bank Trust Investor A 5.9001%
Nominee 294,321.649
FBO Angelus Sanitary
Can Machine Co
Emp Welfare BP
610001305-00
PO Box 85484
San Diego, CA
92186-5484
As of August 1998, Bank of America Corporation and its affiliates owned of
record more than 25% of the outstanding shares of the companies acting as agent,
fiduciary, or custodian for its customers and may be deemed a controlling person
of such companies under the 1940 Act.
162
<PAGE>
SCHEDULE A
----------
DESCRIPTION OF RATINGS
The following summarizes the highest six ratings used by Standard & Poor's
Corporation ("S&P") for corporate and municipal bonds. The first four ratings
denote investment-grade securities.
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay
principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher-rated categories.
BB, B - Bonds rated BB and B are regarded, on balance as predominantly
speculative with respect to capacity to pay interest and repay principal
in accordance with the terms of the obligation. Debt rated BB has less
near-term vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to inadequate capacity
to meet timely interest and principal payments. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to pay
interest and repay principal.
To provide more detailed indications of credit quality, the AA, A and BBB,
BB and B ratings may be modified by the addition of a plus or minus sign to show
relative standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's Investors
Service, Inc. ("Moody's") for corporate and municipal bonds. The first four
denote investment grade securities.
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
A-1
<PAGE>
Ba - Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not as well
safeguarded during both good times and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B - Bond that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate
bonds rated Aa through B. The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category. With regard to municipal bonds, those
bonds in the Aa, A and Baa groups which Moody's believes possess the strongest
investment attributes are designated by the symbols Aal, A1 or Baal,
respectively.
The following summarizes the highest four ratings used by Duff & Phelps
Credit Rating Co. ("D&P") for bonds, each of which denotes that the securities
are investment grade.
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more than
for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A - Bonds that are rated A have protection factors which are average
but adequate. However risk factors are more variable and greater in periods
of economic stress.
BBB - Bonds that are rated BBB have below average protection factors
but still are considered sufficient for prudent investment. Considerable
variability in risk exists during economic cycles.
A-2
<PAGE>
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may modified by the addition of a plus or minus sign to show relative
standing within these major categories.
The following summarizes the highest four ratings used by Fitch Investors
Service, Inc. ("Fitch") for bonds, each of which denotes that the securities are
investment grade:
AAA - Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA - Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds rated
in the AAA and AA categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated
F-1+.
A - Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for
short-term municipal notes and variable-rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best
quality, enjoying strong protection from established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high
quality, with ample margins of protection although not so large as in the
preceding group.
The following summarizes the two highest ratings used by S&P for
short-term municipal notes:
SP-1 - Indicates very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety characteristics
are given a "plus" (+) designation.
SP-2 - Indicates satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of
which denotes that the securities are investment grade, are D-1, D-2, and D-3.
D&P employs three designations, D-1+, D-1 and D-1-, within the highest rating
category. D-1+ indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is judged to be "outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations." D-1 indicates very high
certainty of timely payment. Liquidity factors are excellent and supported by
good fundamental protection factors. Risk factors are considered to be minor.
D-1 indicates high certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D-2 indicates good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small. D-3 indicates satisfactory liquidity and other protection factors which
qualify the issue as investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.
The following summarizes the two highest rating categories used by Fitch
for short-term obligations each of which denotes that the securities are
investment grade:
F-1+ securities possess exceptionally strong credit quality. Issues
assigned this rating are regarded as having the strongest degree of assurance
for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this
rating reflect an assurance of timely payment only slightly less in degree than
issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this rating
have a satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned the F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
A-3
<PAGE>
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of senior short-term
promissory obligations. Issuers rated Prime-2 (or related supporting
institutions) are considered to have a strong capacity for repayment of senior
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
For commercial paper, D&P uses the short-term debt ratings described
above.
For commercial paper, Fitch uses the short-term debt ratings described
above.
Thomson BankWatch, Inc. ("BankWatch") ratings are based upon a qualitative
and quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries. BankWatch ratings do not
constitute a recommendation to buy or sell securities of any of these companies.
Further, BankWatch does not suggest specific investment criteria for individual
clients.
BankWatch long-term ratings apply to specific issues of long-term debt and
preferred stock. The long-term ratings specifically assess the likelihood of
untimely payment of principal or interest over the term to maturity of the rated
instrument. The following are the four investment grade ratings used by
BankWatch for long-term debt:
AAA - The highest category; indicates ability to repay principal and
interest on a timely basis is extremely high.
AA - The second highest category; indicates a very strong ability to
repay principal and interest on a timely basis with limited incremental risk
versus issues rated in the highest category.
A - The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable
to adverse developments (both internal and external) than obligations with
higher ratings.
BBB - The lowest investment grade category; indicates an acceptable
capacity to repay principal and interest. Issues rated "BBB" are, however,
more vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
Long-term debt ratings may include a plus (+) or minus (-) sign to
indicate where within a category the issue is placed.
The BankWatch short-term ratings apply to commercial paper, other senior
short-term obligations and deposit obligations of the entities to which the
rating has been assigned. The BankWatch short-term ratings specifically assess
the likelihood of an untimely payment of principal or interest.
TBW-1 The highest category; indicates a very high likelihood that
principal and interest will be paid on a timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for
issues rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that while
more susceptible to adverse developments (both internal and
external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is
considered adequate.
A-4
<PAGE>
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
The following summarizes the four highest long-term debt ratings used by
IBCA Limited and its affiliate, IBCA Inc. (collectively "IBCA"):
AAA - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest
is substantial such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk
significantly.
AA - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest
is substantial. Adverse changes in business, economic or financial
conditions may increase investment risk albeit not very significantly.
A - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions may
lead to increased investment risk.
BBB - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest
is adequate, although adverse changes in business, economic or financial
conditions are more likely to lead to increased investment risk than for
obligations in other categories.
A plus or minus sign may be appended to a rating below AAA to denote
relative status within major rating categories.
The following summarizes the two highest short-term debt ratings used by
IBCA:
A1+ When issues possess a particularly strong credit feature, a
rating of A1+ is assigned.
A1 - Obligations supported by the highest capacity for timely
repayment.
A2 - Obligations supported by a good capacity for timely repayment.
A-5
<PAGE>
NATIONS INSTITUTIONAL RESERVES
ONE BANK OF AMERICA PLAZA
33rd Floor
Charlotte, NC 28255
1-800-626-2275
FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. Exhibits
All references to the "Registration Statement" in the following list of
Exhibits refer to the Registrant's Registration Statement on Form N-1A (File
Nos. 33-33144; 811-6030)
- --------------------------------------------------------------------------------
Exhibit Letter Description
- --------------------------------------------------------------------------------
(a) Articles of Incorporation:
(a)(1) Declaration of Trust, dated January 22, 1990,
incorporated by reference to Post-Effective Amendment
No. 22, filed August 27, 1998.
(a)(2) Classification of Shares, dated February 5, 1998,
incorporated by reference to Post-Effective Amendment
No. 22, filed August 27, 1998.
- --------------------------------------------------------------------------------
(b) By-Laws:
By-Laws, dated January 22, 1990, incorporated by
reference to Post-Effective Amendment No. 22, filed
August 27, 1998.
- --------------------------------------------------------------------------------
(c) Instruments Defining Rights of Securities Holders:
Not Applicable
- --------------------------------------------------------------------------------
(d) Investment Advisory Contracts:
(d)(1) Investment Advisory Agreement between Nations
Institutional Reserves and NationsBanc Advisors, Inc.,
("NBAI"), incorporated by reference to Post-Effective
Amendment No. 17, filed January 19, 1996.
(d)(2) Sub-Advisory Agreement among NBAI, TradeStreet
Investment Associates, Inc. and Nations Institutional
Reserves, incorporated by reference to Post-Effective
Amendment No. 17, filed January 19,
C-1
<PAGE>
Exhibit Letter Description
1996.
(d)(3) Sub-Advisory Agreement among NBAI, Chicago Equity
Partners Corporation, and Nations Institutional
Reserves, to be filed by amendment.
- --------------------------------------------------------------------------------
(e) Underwriting Contract:
Distribution Agreement between Nations Institutional
Reserves and Stephens Inc., incorporated by reference to
Post-Effective Amendment No. 22, filed August 27, 1998.
- --------------------------------------------------------------------------------
(f) Bonus or Profit Sharing Contracts:
Deferred Compensation Plan, to be filed by amendment
- --------------------------------------------------------------------------------
(g) Custodian Agreement:
(g)(1) Custody Agreement between Nations Institutional Reserves and
The Bank of New York, to be filed by amendment.
- --------------------------------------------------------------------------------
(h) Other Material Contracts:
(h)(1) Co-Administration Agreement between Nations
Institutional Reserves, Stephens Inc. and NBAI, to be
filed by amendment.
(h)(2) Sub-Administration Agreement between Nations
Institutional Reserves, The Bank of New York and NBAI,
to be filed by amendment.
(h)(3) Transfer Agency Agreement, to be filed by amendment.
(h)(4) Supplement to Transfer Agency Agreement, to be filed by
amendment.
(h)(5) Amendment to Transfer Agency and Services Agreement, to
be filed by amendment.
(h)(6) Shareholder Servicing Plan, Adviser Shares, Exhibit I amended
February 24, 1999, incorporated by reference to
Post-Effective Amendment No. 22, filed August 27, 1998.
(h)(7) Shareholder Servicing Plan, Investor B Shares, to be
filed by amendment.
C-2
<PAGE>
Exhibit Letter Description
(h)(8) Shareholder Servicing Plan, Investor C Shares, to be
filed by amendment.
(h)(9) Shareholder Servicing Plan, Daily Shares, to be filed by
amendment.
(h)(10) Shareholder Servicing Plan, Investor Shares, to be filed
by amendment.
(h)(11) Shareholder Servicing Plan, Liquidity Shares,
incorporated by reference to Post-Effective Amendment
No. 22, filed August 27, 1998.
(h)(12) Shareholder Servicing Plan, Market Shares, incorporated
by reference to Post-Effective Amendment No. 22, filed
August 27, 1998.
(h)(13) Shareholder Servicing Plan, Service Shares, to be filed
by amendment.
(h)(14) Shareholder Administration Plan, Trust Shares, to be
filed by amendment.
- --------------------------------------------------------------------------------
(i) Legal Opinion
Opinion and Consent of Counsel, filed herewith.
- --------------------------------------------------------------------------------
(j) Other Opinions
Consent of Independent Accountants -- PricewaterhouseCoopers
LLP, filed herewith.
Consent of Independent Auditors -- KPMG LLP, filed
herewith.
- --------------------------------------------------------------------------------
(k) Omitted Financial Statements
Not Applicable
- --------------------------------------------------------------------------------
(l) Initial Capital Agreements:
Not Applicable
- --------------------------------------------------------------------------------
(m) Rule 12b-1 Plan:
(m)(1) Administration Plan, Primary B Shares, to be filed by
amendment.
(m)(2) Shareholder Servicing and Distribution Plan, Investor A
Shares, to be filed by amendment.
(m)(3) Distribution Plan, Investor B Shares, to be filed by
amendment.
C-3
<PAGE>
Exhibit Letter Description
(m)(4) Distribution Plan, Investor C Shares, to be filed by
amendment.
(m)(5) Distribution Plan, Daily Shares, to be filed by amendment.
(m)(6) Distribution Plan, Investor Shares, to be filed by amendment.
(m)(7) Distribution Plan, Liquidity Shares, incorporated by
reference to Post-Effective Amendment No. 22, filed
August 27, 1998.
(m)(8) Distribution Plan, Market Shares, incorporated by
reference to Post-Effective Amendment No. 22, filed
August 27, 1998.
(m)(9) Distribution Plan, Service Shares, to be filed by amendment.
- --------------------------------------------------------------------------------
(n) Financial Data Schedule:
Not Applicable
- --------------------------------------------------------------------------------
(o) Rule 18f-3 Plan:
Plan entered into by Registrant pursuant to Rule 18f-3 under the
Investment Company Act of 1940, incorporated by reference to
Post-Effective Amendment No. 22, filed August 27, 1998.
- --------------------------------------------------------------------------------
(p) Powers of Attorney for Edmund L. Benson, Charles B.
Walker, A. Max Walker, Thomas S. Word, Jr., William H.
Grigg, James Ermer and Thomas F. Keller, incorporated by
reference to Amendment No. 10, filed June 30, 1994.
Power of Attorney for Carl E. Mundy, Jr., James B.
Sommers and Cornelius J. Pings, to be filed by amendment.
- --------------------------------------------------------------------------------
ITEM 24. Persons Controlled by of Under Common Control with the Fund
No person is controlled by or under common control with the Registrant.
ITEM 25. Indemnification
Article VIII of the Agreement of Declaration of Trust provides for the
indemnification of Registrant's trustees and employees Indemnification of
Registrant's administrators, principal underwriter, custodian and transfer agent
is provided for, respectively, in the:
1. Co-Administration Agreement with Stephens Inc. and NBAI;
C-4
<PAGE>
2. Sub--Administration Agreement with The Bank of New York;
3. Distribution Agreement with Stephens Inc.;
4. Custody Agreement with The Bank of New York; and
5. Transfer Agency Agreement with First Data Investor Services Group,
Inc.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant by the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, officers or
controlling persons in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
ITEM 26. Business and Other Connections of the Investment Adviser
To the knowledge of the Registrant, none of the directors or officers of
NBAI, the adviser to the Registrant's portfolios, or TradeStreet or Chicago
Equity, the investment sub-advisers, except those set forth below, are or have
been, at any time during the past two calendar years, engaged in any other
business, profession, vocation or employment of a substantial nature, except
that certain directors and officers also hold various positions with, and engage
in business for, the company that owns all the outstanding stock (other than
directors' qualifying shares) of NBAI, TradeStreet or Chicago Equity,
respectively, or other subsidiaries of Bank of America Corporation.
(a) NBAI performs investment advisory services for the Registrant and
certain other customers. NBAI is a wholly owned subsidiary of NationsBank, N.A.
("NationsBank"), which in turn is a wholly owned banking subsidiary of Bank of
America Corporation. Information with respect to each director and officer of
the investment adviser is incorporated by reference to Form ADV filed by NBAI
with the SEC pursuant to the Investment Advisers Act of 1940, as amended (the
"Advisers Act") (file no. 801-49874).
(b) TradeStreet performs investment sub-advisory services for the
Registrant and certain other customers. TradeStreet is a wholly owned subsidiary
of NationsBank, which in turn is a wholly owned banking subsidiary of Bank of
America Corporation. Information with respect to each director and officer of
the investment sub-adviser is incorporated by reference to Form ADV filed by
TradeStreet with the SEC pursuant to the Advisers Act (file no. 801-50372).
C-5
<PAGE>
(d) Chicago Equity performs investment sub-advisory services for the
Registrant and certain other customers. Chicago Equity is a wholly owned
subsidiary of Bank of America Corporation. Information with respect to each
director and officer of the investment sub-adviser is incorporated by reference
to Form ADV filed by Gartmore with the SEC pursuant to the Advisers Act (file
no. 801-55997)
ITEM 27. Principal Underwriters
(a) Stephens, distributor for the Registrant, does not presently act as
investment adviser for any other registered investment companies, but does act
as principal underwriter for Nations Fund Trust, Nations Fund, Inc., Nations
Fund Portfolios, Inc., Nations LifeGoal Fund, Inc., Nations Annuity Trust, the
Overland Express Funds, Inc., Stagecoach Inc., Stagecoach Funds, Inc. and
Stagecoach Trust, and is the exclusive placement agent for Master Investment
Trust, Managed Series Investment Trust, Life & Annuity Trust and Master
Investment Portfolio, all of which are registered open-end management investment
companies, and has acted as principal underwriter for the Liberty Term Trust,
Inc., Nations Government Income Term Trust 2003, Inc., Nations Government Income
Term Trust 2004, Inc. and the Managed Balanced Target Maturity Fund, Inc.,
closed-end management investment companies.
(b) Information with respect to each director and officer of the principal
underwriter is incorporated by reference to Form ADV filed by Stephens Inc. with
the SEC pursuant to the Investment Company Act of 1940, as amended (the "1940
Act") (file No. 501-15510).
(c) Not applicable.
ITEM 28. Location of Accounts and Records
(1) NBAI, One Bank of America Plaza, Charlotte, NC 28255 (records relating
to its function as Investment Adviser and Co-Administrator).
(2) TradeStreet, One Bank of America Plaza, Charlotte, NC 28255 (records
relating to its function as Sub-Adviser).
(3) Chicago Equity, 231 South LaSalle, Chicago, IL 60697 (records
relating to its function as Sub-Advisor).
(4) Stephens, 111 Center Street, Little Rock, AR 72201 (records relating
to its function as Distributor and Co-Administrator).
(5) First Data, 101 Federal Street, Boston, MA 02110 (records relating to
its function as Transfer Agent).
(6) Bank of New York, 90 Washington Street, New York, NY 10286 (records
relating to its function as Custodian and Sub-Administrator)
C-6
<PAGE>
ITEM 29. Management Services
Not Applicable
ITEM 30. Undertakings
Not Applicable
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Little Rock, State of Arkansas on the
30th day of July, 1999.
NATIONS INSTITUTIONAL RESERVES
By: *
---------------------------
A. Max Walker
President and Chairman
of the Board of Trustees
By: /s/ Richard H. Blank, Jr.
---------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated:
SIGNATURES TITLE DATE
---------- ----- ----
* President and Chairman July 30, 1999
- -------------------------- of the Board of Trustees
(A. Max Walker) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Treasurer and Secretary July 30, 1999
- ------------------------- (Principal Financial and
(Richard H. Blank, Jr.) Accounting Officer)
* Trustee July 30, 1999
- --------------------------
(Edmund L. Benson, III)
* Trustee July 30, 1999
- --------------------------
(James Ermer)
* Trustee July 30, 1999
- --------------------------
(William H. Grigg)
* Trustee July 30, 1999
- --------------------------
(Thomas F. Keller)
* Trustee July 30, 1999
- --------------------------
(Carl E. Mundy, Jr.)
* Trustee July 30, 1999
- --------------------------
(Cornelius J. Pings)
* Trustee July 30, 1999
- --------------------------
(Charles B. Walker)
* Trustee July 30, 1999
- --------------------------
(Thomas S. Word)
* Trustee July 30, 1999
- --------------------------
(James B. Sommers)
/s/ Richard H. Blank, Jr.
- -------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
<PAGE>
NATIONS INSTITUTIONAL RESERVES
EXHIBIT INDEX
Exhibit
Number Description
EX-23.i Opinion and Consent of Counsel
EX-23.j.1 Consent of Independent Accountants-PricewaterhouseCoopers LLP
EX-23.j.2 Consent of Independent Accountants-KPMG LLP
EX-23.i
[MORRISON & FOERSTER LLP LETTERHEAD]
July 30, 1999
The Capitol Mutual Funds
111 Center Street
Little Rock, Arkansas 72201
Re: Units of Beneficial Interest in the
Funds of The Capitol Mutual Funds
(d/b/a Nations Reserves)
Ladies and Gentlemen:
We refer to Post-Effective Amendment No. 29 and Amendment No. 30 to the
Registration Statement on Form N-1A (SEC File Nos. 33-33144; 811-6030) (the
"Registration Statement") of The Capitol Mutual Funds (the "Trust") relating
to the registration of an indefinite number of units of Beneficial Interest
in the Trust (collectively, the "Shares").
We have been requested by the Trust to furnish this opinion as Exhibit
23.i to the Registration Statement.
We have examined such records, documents, instruments, certificates of
public officials and of the Trust, made such inquiries of the Trust, and
examined such questions of law as we have deemed necessary for the purpose of
rendering the opinion set forth herein. We have assumed the genuineness of
all signatures and the authenticity of all items submitted to us as originals
and the conformity with originals of all items submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion
that:
The issuance and sale of the Shares by the Trust have been duly and
validly authorized by all appropriate action, and assuming delivery by sale
or in accord with the dividend reinvestment plan of each of the Trust's
portfolios in accordance with the
<PAGE>
The Capitol Mutual Funds
July 30, 1999
Page 2
description set forth in the Registration Statement, the Shares will be
validly issued, fully paid and nonassessable.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
reference to our Firm under the heading "Counsel" in the Statement of
Additional Information.
Very truly yours,
/S/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 29 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated May 28, 1999, relating to the financial
statements and financial highlights appearing in the March 31, 1999 Annual
Report to Shareholders of Nations Cash Reserves, Nations Money Market Reserves,
Nations Treasury Reserves, Nations Government Reserves, and Nations Municipal
Reserves, portfolios of Nations Reserves, formerly Nations Institutional
Reserves, which is also incorporated by reference into the Registration
Statement. We also consent to the reference to us under the heading "Financial
highlights" in the Prospectuses and under the heading "Independent Accountants
and Reports" in the Statement of Additional Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 27, 1999
INDEPENDENT ACCOUNTANTS' CONSENT
--------------------------------
We consent to the use of our reports for the Emerald International Equity Fund
and the Emerald Prime Advantage Institutional Fund both dated July 1, 1998 as
incorporated by reference herein and to the use of our name under the headings,
"Financial highlights" in the following Prospectuses:
o International Funds Prospectus - Investor A, B and C Shares
o Nations Funds Prospecuts - Primary A Shares
o Money Market Funds Prospectus - Capital Class Shares
and "Independent Accountants and Reports" in the following Statements of
Additional Information:
o Nations Reserves - Capital, Adviser, Liquidity, Market Investor, Service
Daily, Trust, Investor A, Investor B, Investor C, Primary A, Primary B,
Marisco and Seafirst Shares
o Nations Fund Portfolios, Inc.; Nations Fund, Inc. and Nations Fund Trust -
Investor Shares, Primary Shares, Daily Shares and Marisco Shares
KPMG LLP
Columbus, Ohio
July 29, 1999
