<PAGE> 1
[NATIONS FUNDS LOGO]
International
Stock
Funds
Annual Report For The
Year Ended March 31, 1998
[PICTURE OF TREE]
Investments For A Lifetime(SM)
Nations
International
Equity Fund
Nations
International
Growth Fund
Nations
Pacific Growth
Fund
Nations
Emerging Markets
Fund
<PAGE> 2
[BACKGROUND DEPICTING BASKETS]
This Report is submitted for
the general information of
shareholders of Nations Funds.
This material must be preceded or
accompanied by a current Nations
Funds prospectus.
Nations Funds Distributor:
Stephens Inc. Stephens Inc., which
is not affiliated with NationsBank,
N.A., is not a bank, and securities
offered by it are not guaranteed by
any bank or insured by the FDIC.
Stephens Inc., member NYSE, SIPC.
Nations Funds Investment Adviser:
NationsBanc Advisors, Inc.
Nations Funds Investment Sub-
Advisers: TradeStreet Investment
Associates, Inc., Gartmore Global
Partners, Boatmen's Capital
Management, Inc. and Marsico
Capital Management, LLC.
- -----------------
[DOWNWARD ARROW]
NOT FDIC-
INSURED
- -----------------
May Lose Value
- -----------------
No Bank Guarantee
- -----------------
<PAGE> 3
PRESIDENTS'
MESSAGE
Dear Shareholder:
The past 12 months have been very rewarding for many
investors. Even with domestic markets feeling the
effects of the Asian financial crisis, the Standard &
Poor's 500 Composite Stock Price Index (S&P 500
Index) -- a widely known indicator of stock market
activity -- returned 47.98%.*
Even though the markets have experienced recent
success, the prudent investor realizes these conditions
cannot continue indefinitely. While the markets have
continued to perform well during the first three months
of 1998, we encourage you to consider:
-- BUILDING A DIVERSIFIED PORTFOLIO. A portfolio
comprised of different types of investments --
stocks, bonds, money market instruments -- has the
potential to serve you best in volatile markets.
-- CHOOSING AN INVESTMENT STRATEGY THAT COMPLEMENTS
YOUR LIFESTYLE AND FINANCIAL OBJECTIVES, and
maintaining that strategy as you pursue your
investment goals.
-- INVESTING FOR THE LONG TERM. If you can afford to
invest throughout inevitable market fluctuations,
you should benefit since historically, market prices
have generally gone up over the long term. This is
often a better strategy than attempting to "time"
the market.
-- INVESTING ON A REGULAR BASIS. This technique, known
as dollar-cost averaging, may enable you to buy more
shares when prices are lower and fewer when prices
are higher. Systematic investing generally provides
an easy, disciplined way to increase your assets.
Such a strategy does not assure a profit and does
not protect against loss in declining markets. Since
this strategy involves continuous investment in
securities regardless of fluctuating price levels,
you should carefully consider your financial ability
to continue your purchases through periods of
declining price levels.
Following these guidelines may help you create an
investment portfolio with the potential to make the
most of current market conditions, as well as those to
come.
With Nations Funds as a component of that portfolio,
your investment is part of over $33 billion in assets
under management. We are very pleased with the overall
performance of the Funds over the past 12 months.
Please refer to the individual fund commentary for
performance results.
NEW OPPORTUNITIES FOR YOUR DIVERSIFIED PORTFOLIO
We have continued to expand the Nations Funds family of
funds, including the addition of two new growth funds
managed by Tom Marsico, one of
* The S&P 500 Index is an unmanaged index of 500 widely
held common stocks. It is unavailable for investment.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
<PAGE> 4
PRESIDENTS'
MESSAGE CONTINUED...
the most respected portfolio managers in the industry.
Mr. Marsico is widely known in the investment community
for having managed the Janus Twenty Fund and Janus
Growth and Income Fund; during his tenure of nearly 10
years at Janus, these Funds grew from $7 million in
assets to more than $7 billion.
In addition, we created Nations Annuity Trust, which
consists of eight investment portfolios that serve as
underlying investment vehicles for annuity products.
One of those products, Nations Variable Annuity issued
by Hartford Life Insurance Company, is now available
for your long-term tax-deferred investing needs.
RECOGNITION FOR SUPERIOR SHAREHOLDER SERVICES
The Nations Funds product line and its performance,
however, lacks importance if it isn't backed by
helpful, professional services to its shareholders.
That's why, among all the Funds' accomplishments this
year, we are particularly proud of the recognition the
industry bestowed on Nations Funds.
In its first year as a participant in the annual survey
conducted by DALBAR, Inc. -- an independent research
firm that measures customer service and establishes
benchmarks in the financial services industry --
Nations Funds was honored with the Key Honors Award for
superior customer service. This award "designates those
firms that demonstrate their commitment to the
shareholder by providing consistently solid service."
NATIONS FUNDS PROVIDES INVESTMENTS FOR A LIFETIME
We want to thank you for your confidence in Nations
Funds, and for making them part of your investment
strategy. As we strive to provide an ever-diverse range
of investment products, we recognize that the
strongest, most important asset is you, the
shareholder.
Sincerely,
<TABLE>
<S> <C>
/S/ A. MAX WALKER /S/ ROBERT H. GORDON
A. MAX WALKER ROBERT H. GORDON
PRESIDENT AND CHAIRMAN PRESIDENT
OF THE BOARD NATIONSBANC ADVISORS, INC.
</TABLE>
March 31, 1998
P.S.: If you have any questions or comments on your
annual report or the information in it, please contact
us at 1-800-321-7854 or send us a message from the
Nations Funds Web Site at
WWW.NATIONSBANK.COM/NATIONSFUNDS.
<PAGE> 5
TABLE
OF
CONTENTS
<TABLE>
<S> <C>
NATIONS FUNDS SPECTRUM 2
INTERNATIONAL MARKET OVERVIEW 4
PORTFOLIO MANAGER COMMENTARY
Nations International Equity Fund 6
Nations International Growth Fund 12
Nations Pacific Growth Fund 18
Nations Emerging Markets Fund 23
FINANCIAL STATEMENTS
Schedules of Investments 28
Statements of Assets and Liabilities 42
Statements of Operations 44
Statements of Changes in Net Assets 45
Schedules of Capital Stock Activity 47
Financial Highlights 52
Notes to Financial Statements 60
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NATIONS FUNDS [DALBAR LOGO]
RECOGNIZED FOR
OUTSTANDING DALBAR, Inc., is a well-respected research firm
CUSTOMER SERVICE that measures customer service levels and
establishes benchmarks in the financial services
In recognition of our industry.
commitment to retail
shareholders through
consistently providing
superior customer service,
Nations Funds was awarded
DALBAR Key Honors in 1997.
---------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
The
Nations Funds
Family At A Glance
STABILITY
- ---------------- CURRENT INCOME
- ----------------------------------------------------------------------------------
GROWTH & INCOME
-----------------------
MONEY SHORTER INTERMEDIATE LONGER TERM LARGE CAPITALIZATION
MARKET MATURITY MATURITY DOMESTIC VALUE FUNDS
FUNDS BOND FUNDS BOND FUNDS AND GLOBAL
BOND FUNDS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- - Nations - Nations Short- - Nations - Nations Global - Nations
Prime Fund Intermediate Strategic Fixed Government Value Fund
Government Income Fund Income Fund
- - Nations Government Fund - Nations
Money Market - Nations - Nations Managed
Fund - Nations Government Diversified Value Index
Short-Term Securities Fund Income Fund Fund
- - Nations Income Fund
Treasury Fund - Nations - Nations - Nations
- - Nations Tax - Nations Short- Intermediate U.S. Government Equity Income
Exempt Fund Term Municipal Municipal Bond Fund Fund
Income Fund Bond Fund
- Nations - Nations
- Nations Municipal Balanced Assets
State-Specific Income Fund Fund
Intermediate
Municipal Bond - Nations
Funds State-Specific
Long-Term
Municipal Bond
Funds
</TABLE>
RISK (VARIABILITY)
POTENTIAL RETURN
2
<PAGE> 7
[NATIONS FUNDS LOGO]
Investments For A Lifetime(SM)
<TABLE>
<CAPTION>
GROWTH & INCOME
- -------------------------
GROWTH
- ----------------------------------------------------------
AGGRESSIVE GROWTH
-------------------------------------------------------------------------------
LARGE LARGE MID SMALL
CAPITALIZATION CAPITALIZATION INTERNATIONAL CAPITALIZATION CAPITALIZATION REGION-SPECIFIC
FUNDS GROWTH FUNDS EQUITY FUNDS FUNDS FUNDS INTERNATIONAL FUNDS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- - Nations - Nations - Nations - Nations - Nations - Nations
Marsico Marsico Focused International Emerging Small Company Emerging
Growth Equities Fund Growth Fund Growth Fund Growth Fund Markets Fund
& Income
Fund - Nations - Nations - Nations - Nations
Disciplined International Managed Pacific Growth
- - Nations Equity Fund Equity Fund SmallCap Fund
Managed Index Fund
Index Fund - Nations
Capital Growth - Nations
Fund Managed
SmallCap
Value Index
Fund
</TABLE>
The Nations Funds family also includes Nations Equity Index Fund, which seeks
investment results that correspond, before fees and expenses, to the total
return of the Standard and Poor's 500 Composite Stock Price Index.
LIFEGOAL PORTFOLIOS
- - LifeGoal Income and Growth Portfolio
- - LifeGoal Balanced Growth Portfolio
- - LifeGoal Growth Portfolio
3
<PAGE> 8
INTERNATIONAL
MARKET OVERVIEW
Over the 12-month period ended March 31, 1998, the
divergence in trends among the world's major economies
sharpened dramatically. Most notably, in the wake of
the Asian financial crisis that sparked turmoil in the
global markets during the second half of the reporting
period, Japanese economic growth continued to weaken,
and its underlying trend now appears downward. In the
rest of the Pacific region, a major contraction is
under way.
So far, there is little evidence that the Asian crisis
is resulting in significantly slower growth in the
Western economies. Economic activity in Continental
Europe was robust at the end of 1997 and in the first
part of 1998. In the United Kingdom, growth eased
somewhat later in the period, but this was due more to
a stronger currency than to the so-called "Asian
contagion." Inflation in Japan and the Western
economies remained low and fell in the first part of
1998, largely because of declining oil prices. However,
the trend in wage growth in the U.K. is still upward.
Inflation is increasing in the Pacific Rim, reflecting
the substantial weakness in some currency exchange
rates. In Latin America, growth has slowed, but
interest rates have dropped sharply in Brazil, and the
region appears to be rebounding remarkably well from
the impact of the Asian crisis.
The performance of international stock markets
generally followed these broader economic trends during
the reporting period. Overall returns, as measured by
the benchmark Morgan Stanley Capital International
Europe, Australasia and Far East (MSCI EAFE) Index,*
rose by 18.61% in U.S. dollar terms for the period.
While returns from the U.K., Continental Europe and
several non-Asian emerging markets -- primarily in
Latin America and Eastern Europe -- rose substantially,
the opposite was true for Japan and the rest of the
Pacific region. A stronger U.S. dollar dampened returns
in most international markets, with the exception of
the U.K., where the pound ended the period a fraction
higher against the dollar than it had been at the start
of the period. Core Continental European currencies,
such as the German mark and French franc, were weaker
against the dollar, as was the Japanese yen.
Looking forward, we expect economic growth in the
Pacific Rim to be slightly negative in 1998, well below
the 7% growth of recent years. Japan's economy is
likely to remain stalled at 0% growth this year, with a
significant risk of recession. Elsewhere, we continue
to believe that the risk of disinflation in the Western
economies remains very low. These economies are well
positioned to withstand the impact of the Asian crisis,
and they should benefit from the lower oil prices and
*The Morgan Stanley Capital International Europe,
Australasia and Far East Index is an unmanaged,
capitalization-weighted index that tracks stocks traded
on sixteen exchanges in Europe, Australia and the Far
East. It is unavailable for investment.
Source for all statistical data -- Gartmore Global
Partners.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
4
<PAGE> 9
INTERNATIONAL
MARKET OVERVIEW CONTINUED...
lower interest rates that have resulted from the
crisis. A growth rate of just under 3% is predicted for
Continental Europe this year, with inflation remaining
at current levels. In the U.K., economic growth is
likely to slow to a greater extent than in the U.S.,
reflecting its sharper tightening in economic policy
over the past 18 months. Weak growth in Brazil could
hold back overall market returns in Latin America, but
growth in most other countries should remain steady.
European stock markets as a whole outperformed the U.S.
stock market (as measured by MSCI Indexes) over the
reporting period in local currency terms, but
underperformed in U.S. dollar terms because of the
dollar's strength. Given the level of corporate
activity, a reasonably favorable economic outlook for
Europe and the increasing likelihood of Economic and
Monetary Union (EMU)** taking place in January 1999, we
see no reason why European markets should not perform
well during the coming year. Many emerging markets,
particularly in Latin America, offer ongoing
opportunities for competitive returns. While markets in
the Far East and Japan are likely to remain depressed,
we anticipate finding selective opportunities in growth
stocks at extremely favorable price levels. Of course,
these markets are likely to remain relatively volatile.
In our view, international markets should continue to
offer long-term investors the potential for both growth
and diversification in the coming year.
ANDREW FLEMING
CHIEF INVESTMENT OFFICER
GARTMORE GLOBAL PARTNERS
March 31, 1998
**EMU (Economic and Monetary Union): An agreement among
member countries of the European Union to create a
single European currency, the euro, and establish a
single European market to allow the free movement of
citizens, capital, goods and services. The first phase
of EMU is scheduled to begin on January 1, 1999. The
participating countries are expected to be Austria,
Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, Netherlands, Portugal and Spain.
5
<PAGE> 10
Nations
International Equity
Fund Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MR. WATSON SHARES HIS VIEWS
ON NATIONS INTERNATIONAL EQUITY FUND'S PERFORMANCE FOR
THE 12-MONTH PERIOD ENDED MARCH 31, 1998 AND HIS CURRENT
OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGER PLEASE DESCRIBE THE FUND'S PHILOSOPHY AND STYLE.
Stephen Watson is Principal The Fund emphasizes growth at a reasonable price in
Portfolio Manager of Nations selecting regions, countries and stocks. By combining good
International Equity Fund and growth stock selection with active regional and country
is the Head of the allocation, we aim to build a portfolio that strategically
International and Global overweights growing markets while tactically avoiding those
Portfolio Team for Gartmore with less favorable prospects. The investment process is
Global Partners, investment driven by fundamental research that includes both
sub-adviser to the Fund. macroeconomic and company-level analysis, carried out by
INVESTMENT OBJECTIVE regionally focused investment teams.
The Fund seeks long-term WHAT WERE INTERNATIONAL ECONOMIC AND MARKET CONDITIONS LIKE
capital growth by investing DURING THE REPORTING PERIOD?
primarily in equity securities Global equity markets had a tumultuous ride over the 12
of non-United States companies months ended March 31, 1998. The ups and downs of the
in Europe, Australia, the Far markets during this period reflected a combination of
East and other regions, extraordinary political and economic developments,
including developing countries. particularly -- but not entirely -- in the Far East. The
PERFORMANCE REVIEW spring of 1997 was marked by two significant political
For the 12-month period ended milestones: the buildup to Britain's handover of Hong Kong
March 31, 1998, Nations to China on July 1, 1997, and, in the United Kingdom, the
International Equity Fund May 1997 election of a new Labour government, ending 19
Primary A Shares provided a years of Conservative Party rule.
total return of 16.06%. The reporting period began with stock markets in the Far
East in a positive mode, a situation that quickly changed
following the devaluation of Thailand's currency, the baht,
on July 2, 1997. The weakness of the Thai baht precipitated
the first of successive rounds of currency devaluations and
stock market declines across the Pacific Rim.
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
Source for all statistical data -- Gartmore Global Partners.
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL
RISKS, INCLUDING FOREIGN TAXATION, CURRENCY RISKS, RISKS
ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS
AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
6
<PAGE> 11
Nations
International Equity
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
By the end of September 1997, Japan, which had been the star
performer among major non-U.S. stock markets the previous
calendar quarter, had become the worst-performing market
represented in the benchmark Morgan Stanley Capital
International Europe, Australasia and Far East (MSCI EAFE)
Index.** Depreciation of the yen, weak consumer spending and
the economic and financial turmoil of its Pacific Rim
neighbors all contributed to the slide in the Japanese stock
market.
While events in Asia hurt stock markets globally, most of
the impact outside the Pacific Rim was confined to the third
quarter of the reporting period and primarily affected
companies with exposure to Asia in terms of revenue.
Otherwise, stock markets in the U.K. and Continental
Europe -- particularly those in Italy, Spain and Portugal,
which are aiming to benefit from participation in Economic
and Monetary Union (EMU) -- rose throughout most of the
period, fueled by increasing merger and acquisition
activity, positive corporate news and favorable economic
data.
In the emerging markets, Latin America was initially hit
harder by the Asian downturn than were most developed
markets. However, Latin American stock markets generally
recovered enough to post modest gains by the end of the
reporting period. Asian stock markets also staged partial
recoveries in the first three months of 1998.
THE FUND'S UNDERWEIGHT POSITION WHAT COUNTRY OR REGIONAL ALLOCATION DECISIONS CONTRIBUTED
IN JAPAN RELATIVE TO THE MSCI THE MOST TO THE FUND'S PERFORMANCE?
EAFE INDEX PROVIDED THE MOST The Fund's underweight position in Japan relative to the
BENEFIT FROM A REGIONAL MSCI EAFE Index provided the most benefit from a regional
ALLOCATION PERSPECTIVE. allocation perspective. Our emphasis on emerging markets
outside of the Far East, specifically Brazil and Mexico,
also added value. In Europe, an overweight stance toward
Switzerland also helped performance.
WHAT COUNTRY OR REGIONAL ALLOCATION DECISIONS DETRACTED FROM
THE FUND'S PERFORMANCE?
The decision to maintain an overweight position in the Far
East through the first half of the reporting period had a
negative impact on performance, as this region
underperformed the benchmark MSCI EAFE Index. However, we
reduced the Fund's exposure to Southeast Asia during the
period, focusing on markets such as Hong Kong and Australia,
where the potential for long-term appreciation was
considered stronger.
In Europe, the Fund's underweighting in France detracted
from performance, as the French market outperformed the MSCI
EAFE Index. Also dampening the Fund's returns was its
underweight stance toward the U.K., although we
substantially increased exposure to this market over the
period.
**Morgan Stanley Capital International Europe, Australasia
and Far East Index is an unmanaged, capitalization-weighted
index that tracks stocks traded on sixteen exchanges in
Europe, Australia and the Far East. It is unavailable for
investment.
</TABLE>
7
<PAGE> 12
Nations
International Equity
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
DID ANY PARTICULAR SECTOR DECISIONS CONTRIBUTE TO THE FUND'S
PERFORMANCE?
Our heavy emphasis on the pharmaceutical sector in
Switzerland added value, with both Novartis and Roche
Holding outperforming the Swiss market index. In Italy, the
Fund's significant holdings in telecommunication
stocks -- through Telecom Italia Mobile and its parent,
Telecom Italia -- benefited the Fund, as the share prices of
both companies outperformed the MSCI Italy Index.***
IN EUROPE, THE FUND WAS HELPED WHAT ARE SOME EXAMPLES OF STOCKS HELD BY THE FUND THAT
BY HEAVY EXPOSURE TO SOME OF PERFORMED PARTICULARLY WELL?
THE BEST PERFORMING SECTORS. In Europe, the Fund was helped by heavy exposure to some of
the best performing sectors, including insurance, support
services, electronics, pharmaceuticals and
telecommunications. Individually, shares in Bank of Ireland,
Lloyds TSB Group, the German software company SAP and
Britain's mobile telephone company, Vodafone Group,
substantially outperformed the benchmark MSCI EAFE Index.
Elsewhere, the Fund took profits on Australia's News Corp.
Ltd. (parent company of motion picture studio 20th Century
Fox), whose share price was boosted by the success of the
movie Titanic.
WHAT IMPACT DID CURRENCY HAVE ON THE FUND'S PERFORMANCE?
A broadly stronger U.S. dollar throughout most of the
reporting period had a negative impact on performance.
However, the British pound ended the period a fraction
stronger against the dollar than it had been at the start of
the period, providing some benefit to U.S. investors. The
Fund was particularly vulnerable to further drops in the
Japanese yen relative to the dollar, so in November 1997, we
placed a currency hedge on the Fund's yen exposure as a
protective measure. We removed the hedge in January 1998 as
the Japanese government's efforts to stimulate the economy
caused the yen to rally. This hedging strategy benefited
Fund performance.
WHAT IS YOUR INTERNATIONAL ECONOMIC AND MARKET OUTLOOK FOR
THE YEAR AHEAD?
The primary concern is the impact of the Asian slowdown on
companies not only within the region, but also in Europe and
Latin America. In Japan, it has become clear that the
government's repeated attempts to stimulate economic growth
through fiscal policy will not provide a long-term solution
to the stagnant Japanese economy. Instead, Japan needs to
make serious efforts to deregulate and open up its economy
to foreign investors. In the meantime, with weakening
domestic demand combined with close trade and investment
links with the rest of the Pacific region, the outlook for
Japanese corporate earnings has been revised downward.
***Portfolio holdings were current as of March 31, 1998, are
subject to change and may not be representative of current
holdings.
</TABLE>
8
<PAGE> 13
Nations
International Equity
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
In Continental Europe, the pending transition to Economic
and Monetary Union in 1999 should continue to temper
government spending plans and encourage more cross-border
equity investment. The upcoming September 1998 election in
Germany, while important, is unlikely to disrupt stock
markets because both candidates favor a strong, unified
Europe. Overall, Europe should continue to experience a
positive interest-rate environment, corporate restructurings
and improving earnings -- all contributing to a favorable
investment backdrop for stocks.
WHAT INVESTMENT OPPORTUNITIES DO YOU ANTICIPATE IN THIS
ENVIRONMENT?
We believe that major investment opportunities will be found
in Continental Europe and the U.K. Although the U.K. economy
is experiencing a slowdown in the manufacturing sector, the
services industry is booming. On the Continent, the economic
climate remains buoyant heading into EMU, with peripheral
markets such as Spain and Italy particularly strong because
of increasingly favorable macroeconomic environments.
Mergers and acquisitions across many sectors -- particularly
in banking, insurance and pharmaceuticals -- should also
help support European stock markets. In addition, the
electronics and technology services sector appears poised
for continued success due to increased demand related to the
millennium computer "bug" and the transition to EMU.
Elsewhere, we see growth opportunities in Latin America,
especially in Brazil, where valuations appear reasonable and
the privatization process is on track.
HOW ARE YOU POSITIONING THE FUND TO TAKE ADVANTAGE OF THESE
ANTICIPATED DEVELOPMENTS?
We are presently increasing the Fund's exposure to both the
U.K. and Continental Europe, concentrating investments in
growth sectors such as financial services,
telecommunications, services and pharmaceuticals. Outside of
Europe, we continue to favor Latin America over the Pacific
Rim and expect to concentrate on large-capitalization stocks
that are likely to benefit from positive economic
conditions. We will, however, selectively seek opportunities
in the Far East among companies that offer a combination of
inexpensive valuations, reasonable growth prospects and
sound balance sheets.
</TABLE>
9
<PAGE> 14
Nations
International Equity
Fund
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/98)
[PIE CHART]
20.9% Great Britain
2.6% Australia
2.6% Mexico
2.9% Spain
3.8% Brazil
3.6% Sweden
4.0% Italy
7.0% Netherlands
7.9% Germany
8.0% Switzerland
15.0% Other
10.2% France
11.5% Japan
<TABLE>
<C> <S> <C>
TOP TEN HOLDINGS
(AS A % OF NET ASSETS AS OF 3/31/98)
-----------------------------------------
1 Novartis AG 2.7%
-----------------------------------------
2 Schweiz Ruckversicherungs 2.3%
-----------------------------------------
3 TOTAL, "B" Shares ord 1.7%
-----------------------------------------
4 Pinault-Printemps-Redoute SA 1.7%
-----------------------------------------
5 ING Groep N.V. 1.6%
-----------------------------------------
6 Telecom Italia Mobile Spa 1.5%
-----------------------------------------
7 Banco de Santander SA ord 1.5%
-----------------------------------------
8 Bank of Ireland 1.5%
-----------------------------------------
9 Lloyds TSB Group plc 1.5%
-----------------------------------------
10 Aegon N.V. 1.4%
-----------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT AS
OF MARCH 31, 1998, ARE SUBJECT TO
CHANGE AND MAY NOT BE REPRESENTATIVE
OF CURRENT HOLDINGS.
10
<PAGE> 15
Nations
International Equity
Fund Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period 'MSCI
(Fiscal Year Covered) 'International Equity $16,727' EAFE Index $18,516'
<S> <C> <C>
Dec. 2, 1991 10000 10000
1991 10416 10520
9700 9279
10171 9484
9934 9636
1992 9523 9273
10071 10393
10393 11447
11338 12214
1993 12114 12328
12023 12767
12310 13428
12771 13450
1994 12429 13322
11876 13580
12147 13690
13034 14271
1995 13479 14861
14225 15301
14463 15555
14421 15547
1996 14621 15806
14413 15570
16094 17602
15729 17490
1997 14807 16131
Mar. 31 1998 16727 18516
</TABLE>
Investor B Shares (as of 3/31/98)*
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period 'MSCI
(Fiscal Year Covered) 'International Equity $14,787' EAFE Index $15,927'
<S> <C> <C>
June 7, 1993 10000 10000
9747 9846
10581 10506
1993 11279 10604
11174 10982
11406 11550
11808 11569
1994 11479 11459
10942 11681
11167 11775
11967 12276
1995 12351 12782
13005 13161
13193 13379
13114 13373
1996 13264 13595
13040 13392
14535 15141
14169 15044
1997 13299 13875
Mar. 31, 1998 14787 15927
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
SINCE INCEPTION
(12/2/91 through 3/31/98) 8.47%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations International Equity
Fund from the date each class of shares
was first offered. The Morgan Stanley
Capital International Europe,
Australasia and Far East Index ("MSCI
EAFE Index") is an unmanaged,
capitalization-weighted index that
tracks stocks traded on sixteen
exchanges in Europe, Australia and the
Far East. It is unavailable for
investment. The performance shown
reflects the performance of Primary A
and Investor B Shares. The performance
of Primary B, Investor A and Investor C
Shares may vary based on the
differences in sales loads and fees
paid by the shareholders investing in
each class.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
SINCE INCEPTION NAV CDSC*
(6/7/93 through 3/31/98) 8.77% 8.47%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
PRIMARY A PRIMARY B INVESTOR A INVESTOR B INVESTOR C
<S> <C> <C> <C> <C> <C> <C>
Inception Date 12/2/91 6/28/96 6/3/92 6/7/93 6/17/92
NAV CDSC*
- ---------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 16.06% 15.09% 15.77% 14.93% 9.93% 15.05%
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
3 Years 12.09% NA 11.81% 11.06% 10.24% 11.23%
5 Years 10.68% NA 10.41% NA NA 9.69%
Since Inception 8.47% 7.93% 8.15% 8.77% 8.47% 8.00%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
11
<PAGE> 16
Nations
International Growth
Fund Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MR. O'NEILL SHARES HIS VIEWS
ON NATIONS INTERNATIONAL GROWTH FUND'S PERFORMANCE FOR
THE PERIOD ENDED MARCH 31, 1998 AND HIS CURRENT OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGER PLEASE DESCRIBE THE FUND'S PHILOSOPHY AND STYLE.
Brian O'Neill is Portfolio The Fund emphasizes bottom-up stock selection, driven
Manager of Nations primarily by internally generated research. We look for
International Growth Fund and companies that satisfy four key criteria: above-average
is the Principal Senior earnings growth, strong management, acceptable valuation and
Investment Manager of the appropriate balance-sheet characteristics. Although
Global Portfolio Team for bottom-up stock selection is the focus of our investment
Gartmore Global Partners, process, we also rely on macroeconomic analysis to identify
investment sub-adviser to the the global themes that are most likely to provide investment
Fund. Gartmore Global Partners opportunities, as well as sector analysis to identify
assumed the role of investment industry trends.
sub-adviser to the Fund in July WHAT WERE INTERNATIONAL ECONOMIC AND MARKET CONDITIONS LIKE
1997. DURING THE REPORTING PERIOD?
Global equity markets had a tumultuous ride over the 12
INVESTMENT OBJECTIVE months ended March 31, 1998. The ups and downs of the
The Fund seeks long-term markets during this period reflected a combination of
capital growth by investing extraordinary political and economic developments,
primarily in equity securities particularly -- but not entirely -- in the Far East. Turmoil
of companies domiciled in in Asia led to weaker growth elsewhere in the world. This,
countries outside the United together with low inflation in both the United Kingdom and
States and listed on major Continental Europe, created an environment that benefited
stock exchanges primarily in certain sectors, including financial stocks, utilities,
Europe and the Pacific Basin. pharmaceuticals and services, while hurting cyclical stocks,
such as steel and paper, as well as other economically
PERFORMANCE REVIEW sensitive sectors, such as manufacturing. In Japan and the
For the period from May 17, rest of Asia, however, the financial sector came under
1997 to March 31, 1998, Nations pressure largely because of problem loans.
International Growth Fund The reporting period began with stock markets in the Far
Primary A Shares provided a East in a positive mode, a situation that quickly changed
total return of 7.39%.** following the devaluation of Thailand's currency, the baht,
on July 2, 1997. The weakness of the Thai baht precipitated
the first of successive rounds of currency devaluations and
stock market declines across the Pacific Rim.
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
**The performance shown includes the effect of fee waivers
by the investment adviser which has the effect of increasing
total return.
Source for all statistical data -- Gartmore Global Partners
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL
RISKS, INCLUDING FOREIGN TAXATION, CURRENCY RISKS, RISKS
ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS
AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
12
<PAGE> 17
Nations
International Growth
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
By the end of September 1997, Japan, which had been the star
performer among major non-U.S. stock markets the previous
calendar quarter, had become the worst-performing market
represented in the benchmark Morgan Stanley Capital
International Europe, Australasia and Far East (MSCI EAFE)
Index.*** Depreciation of the yen, weak consumer spending
and the economic and financial turmoil of its Pacific Rim
neighbors all contributed to the slide in the Japanese stock
market.
While events in Asia hurt stock markets globally, most of
the impact outside the Pacific Rim was confined to the third
quarter of the reporting period and primarily affected
companies with exposure to Asia in terms of revenue.
Otherwise, stock markets in the U.K. and Continental
Europe -- particularly those in Italy, Spain and Portugal,
which are aiming to benefit from participation in Economic
and Monetary Union (EMU) -- rose throughout most of the
period, fueled by increasing merger and acquisition
activity, positive corporate news and favorable economic
data.
ALTHOUGH THE FUND IS MANAGED In the emerging markets, Latin America was initially hit
PRIMARILY IN A BOTTOM-UP STYLE, harder by the Asian downturn than were most developed
ITS OVERWEIGHT STANCE IN markets. However, Latin American stock markets generally
CONTINENTAL EUROPE AND recovered enough to post modest gains by the end of the
UNDERWEIGHT POSITION IN JAPAN reporting period. Asian stock markets also staged partial
PROVIDED THE MOST BENEFIT FROM recoveries in the first three months of 1998.
A REGIONAL ALLOCATION WHAT COUNTRY OR REGIONAL ALLOCATION DECISIONS CONTRIBUTED
PERSPECTIVE. THE MOST TO THE FUND'S PERFORMANCE?
Although the Fund is managed primarily in a bottom-up style,
its overweight stance in Continental Europe and underweight
position in Japan (relative to the benchmark MSCI EAFE
Index) provided the most benefit from a regional allocation
perspective. An overweighting in Ireland, one of the better
performing markets in the MSCI EAFE Index, also added value.
DID ANY PARTICULAR SECTOR DECISIONS CONTRIBUTE TO THE FUND'S
PERFORMANCE?
Within Europe, the Fund benefited from significant exposure
to some of the best performing sectors, including financial
services, support services and pharmaceuticals. An
underweight position in financial stocks in Japan also
contributed to the Fund's performance.
WHAT ARE SOME EXAMPLES OF STOCKS HELD BY THE FUND THAT
PERFORMED PARTICULARLY WELL?
Individually, shares in Bank of Ireland and CRH, an Irish
building materials company, added to performance. Other
top-performing stocks included German software company SAP,
British fund management
***Morgan Stanley Capital International Europe, Australasia
and Far East Index is an unmanaged, capitalization-weighted
index that tracks stocks traded on sixteen exchanges in
Europe, Australia and the Far East. It is unavailable for
investment.
</TABLE>
13
<PAGE> 18
Nations
International Growth
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
company Invescape, and British pharmaceutical giant
SmithKline Beecham. In Australia, the Fund invested in
Woolworths, Telstra and News Corp. Ltd., all of which posted
strong gains.+
WHAT INVESTMENT DECISIONS DETRACTED FROM THE FUND'S
PERFORMANCE?
The Fund began the period with heavy exposure to both Asian
and non-Asian emerging markets, which had a negative impact
on portfolio returns, as these markets underperformed. We
substantially reduced these positions over the period. In
the U.K., the Fund's exposure to Standard Chartered Bank,
which suffered from Asian exposure, hurt performance.
Performance was also hindered by its lack of exposure to
financial stocks in Germany and Switzerland.
WHAT IMPACT DID CURRENCY HAVE ON THE FUND'S PERFORMANCE?
A broadly stronger U.S. dollar throughout most of the
reporting period had a negative impact on performance.
However, the British pound ended the period a fraction
stronger against the dollar than it had been at the start of
the period, providing some benefit to U.S. investors.
WHAT IS YOUR INTERNATIONAL ECONOMIC AND MARKET OUTLOOK FOR
THE YEAR AHEAD?
The primary concern is the impact of the Asian slowdown on
companies not only within the region, but also in Europe and
Latin America. In Japan, it has become clear that the
government's repeated attempts to stimulate economic growth
through fiscal policy will not provide a long-term solution
to the stagnant Japanese economy. Instead, Japan needs to
make serious efforts to deregulate and open up its economy
to foreign investors. In the meantime, with weakening
domestic demand combined with close trade and investment
links with the rest of the Pacific region, the outlook for
Japanese corporate earnings has been revised downward.
In Continental Europe, the pending transition to Economic
and Monetary Union in 1999 should continue to temper
government spending plans and encourage more cross-border
equity investment. The upcoming September 1998 election in
Germany, while important, is unlikely to disrupt stock
markets because both candidates favor a strong, unified
Europe. Overall, Europe should continue to experience a
positive interest-rate environment, corporate restructurings
and improving earnings -- all contributing to a favorable
investment backdrop for stocks.
+Portfolio holdings were current as of March 31, 1998, are
subject to change and may not be representative of current
holdings.
</TABLE>
14
<PAGE> 19
Nations
International Growth
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
WHAT INVESTMENT OPPORTUNITIES DO YOU ANTICIPATE IN THIS
ENVIRONMENT?
We believe that major investment opportunities will be found
in Continental Europe and the U.K. Although the U.K. economy
is experiencing a slowdown in the manufacturing sector, the
services industry is booming. On the Continent, the economic
climate remains buoyant heading into EMU, with peripheral
markets such as Spain and Italy particularly strong because
of increasingly favorable macroeconomic environments.
Mergers and acquisitions across many sectors -- particularly
in banking, insurance and pharmaceuticals -- should also
help support European stock markets. In addition, the
electronics and technology services sector appears poised
for continued success due to increased demand related to the
millennium computer "bug" and the transition to EMU.
Overall, within Europe, we believe that the sectors in which
the Fund is currently maintaining heavy exposure
(particularly banking, insurance and pharmaceuticals) will
tend to be favored, while cyclical stocks in which the Fund
is currently underweighted (such as oil) may weaken.
Outside of Europe, we see growth opportunities in Latin
America, especially in Brazil, where valuations appear
reasonable and the privatization process is on track.
HOW ARE YOU POSITIONING THE FUND TO TAKE ADVANTAGE OF THESE
ANTICIPATED DEVELOPMENTS?
We have begun to increase the Fund's exposure to the U.K.,
with a particular emphasis on growth sectors such as
financial services, pharmaceuticals and services. We remain
cautious about Asia and will be very selective, avoiding
exposure to many of the region's stock markets. We are more
optimistic about Latin America, especially Brazil, where we
expect to concentrate investments in large-capitalization
stocks poised to benefit from an improving economic
scenario. In Japan, we expect the Fund to remain
underweighted, focusing on companies that appear best able
to cope with the difficult market environment. The Fund's
Japanese holdings will favor defensive stocks such as
pharmaceuticals, as well as exporters who stand to benefit
from the weak yen.
</TABLE>
15
<PAGE> 20
Nations
International Growth
Fund
PORTFOLIO BREAKDOWN (AS A % OF NET ASSET VALUE AS OF 3/31/98)
[PIE CHART]
2.2% Brazil
3.2% Ireland
3.7% Australia
19.0% Great Britain
4.1% Hong Kong
4.1% Italy
4.3% Sweden
5.3% Switzerland
14.1% Japan
5.9% Spain
6.5% Netherlands
11.5% France
9.5% Germany
6.6% Other
<TABLE>
<C> <S> <C>
TOP TEN HOLDINGS
(AS A % OF NET ASSET VALUE AS OF 3/31/98)
-----------------------------------------
1 SAP AG 3.7%
-----------------------------------------
2 Novartis AG 3.5%
-----------------------------------------
3 Amvescap plc 3.2%
-----------------------------------------
4 Telecom Italia Spa 3.1%
-----------------------------------------
5 Bank of Scotland 2.9%
-----------------------------------------
6 Accor SA 2.9%
-----------------------------------------
7 Gas Natural SDG SA 2.7%
-----------------------------------------
8 Alcatel Alsthom Cie Generale 2.7%
-----------------------------------------
9 Getronics N.V. 2.5%
-----------------------------------------
10 Smithkline Beecham ord 2.4%
-----------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT AS
OF MARCH 31, 1998, ARE SUBJECT TO
CHANGE AND MAY NOT BE REPRESENTATIVE
OF CURRENT HOLDINGS.
16
<PAGE> 21
Nations
International Growth
Fund Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period 'MSCI
(Fiscal Year Covered) 'International Growth $16,906' EAFE Index $15,625'
<S> <C> <C>
July 26 1993 10000 10000
10629 10307
1993 11550 10403
11672 10773
11664 11331
12162 11350
1994 11547 11242
11422 11460
12137 11552
12897 12043
1995 13164 12540
13843 12912
14531 13126
14423 13119
1996 14635 13338
14703 13138
16375 14854
16170 14758
1997 14933 13612
Mar. 31 1998 16906 15625
</TABLE>
Investor B Shares (as of 3/31/98)*
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period 'MSCI
(Fiscal Year Covered) 'International Growth $11,014' EAFE Index $11,904'
<S> <C> <C>
July 1 1996 10000 10000
9897 9995
1996 10020 10162
10043 10010
11155 11316
10974 11244
1997 10107 10371
Mar. 31 1998 11014 11904
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
SINCE INCEPTION
(7/26/93 through 3/31/98) 11.84%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations International Growth
Fund from the date each class of shares
was first offered. The Morgan Stanley
Capital International Europe,
Australasia and Far East Index ("MSCI
EAFE Index") is an unmanaged,
capitalization-weighted index that
tracks stocks traded on sixteen
exchanges in Europe, Australia and the
Far East. It is unavailable for
investment. The performance shown
reflects the performance of Primary A
and Investor B Shares. The performance
of Investor A and Investor C Shares may
vary based on the differences in sales
loads and fees paid by the shareholders
investing in each class.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
SINCE INCEPTION NAV CDSC*
(7/1/96 through 3/31/98) 7.80% 5.68%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
PRIMARY A INVESTOR A INVESTOR B INVESTOR C
<S> <C> <C> <C> <C> <C>
Inception Date 7/26/93 1/2/68 7/1/96 9/19/97
NAV CDSC*
- ------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 14.81% 14.58% 13.53% 8.53% 7.04%
- ------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
3 Years 13.91% 13.65% NA NA NA
5 Years NA 11.63% NA NA NA
10 Years NA 8.90% NA NA NA
Since Inception 11.84% 11.77% 7.80% 5.68% 7.04%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
Figures at net asset value (NAV) do not reflect any sales charges.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
The performance shown includes the effect of fee waivers by the investment
adviser, which has the effect of increasing total return.
The performance shown reflects the performance of the Pilot International Equity
Fund which was reorganized into Nations International Growth Fund on May 23,
1997.
17
<PAGE> 22
Nations
Pacific Growth
Fund Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MS. TEOH SHARES HER VIEWS ON
NATIONS PACIFIC GROWTH FUND'S PERFORMANCE FOR THE
12-MONTH PERIOD ENDED MARCH 31, 1998 AND HER CURRENT
OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGER PLEASE DESCRIBE THE FUND'S PHILOSOPHY AND STYLE.
Seok Teoh is Principal The Fund emphasizes growth at a reasonable price in
Portfolio Manager of Nations selecting regions, markets and stocks. By combining active,
Pacific Growth Fund and bottom-up stock selection with risk-controlled country
Portfolio Manager on the Far allocation, we aim to build a portfolio with optimal
East Team of Gartmore Global risk/return characteristics. Local contacts, fundamental
Partners, investment research and seasoned judgment are vital to our investment
sub-adviser to the Fund. process.
INVESTMENT OBJECTIVE WHAT WERE REGIONAL ECONOMIC AND MARKET CONDITIONS LIKE
The Fund seeks long-term DURING THE REPORTING PERIOD?
capital growth by investing During the 12 months ended March 31, 1998, stock markets in
primarily in equity securities the Pacific region (excluding Japan) plunged to levels not
of companies in the Pacific seen since April 1993. At the beginning of the period, the
Basin and the Far East markets of Hong Kong, Korea and Taiwan were buoyant leading
(excluding Japan). up to the transfer of Hong Kong to China on July 1, 1997.
PERFORMANCE REVIEW One day after the handover, however, Thailand devalued its
For the 12-month period ended currency, the baht, as a first step toward a much-needed
March 31, 1998, Nations Pacific economic overhaul. This triggered a wave of currency
Growth Fund Primary A Shares devaluations across Asia -- prompted in part by speculative
provided a total return of attacks on regional currencies -- leading to soaring
(28.35)%. interest rates, a general squeeze on credit, multiple bank
failures, several corporate bankruptcies and plummeting
stock market levels.
In October 1997, Taiwan's central bank reversed an earlier
decision to support its local currency through intervention,
which led to higher interest rates. As a result, Hong Kong,
whose currency is pegged to the U.S. dollar, was also forced
to raise interest rates to defend against currency
speculators. By November 1997, the crisis had spread to
Korea, which joined Indonesia and Thailand in seeking
emergency credit from the International Monetary Fund (IMF)
to prevent debt moratoriums.
Pacific Rim stock markets started to recover during January
1998, with Korea and Thailand posting huge gains, but the
rebound in Korea was short-lived. Indonesia, plagued by food
riots and President Suharto's refusal to cooperate with IMF
reforms, continued to suffer stock market setbacks.
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
Source for all statistical data -- Gartmore Global Partners.
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL
RISKS, INCLUDING FOREIGN TAXATION, CURRENCY RISKS, RISKS
ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS
AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
18
<PAGE> 23
Nations
Pacific Growth
Fund Portfolio Manager Commentary continued ...
<TABLE>
<S> <C>
THE FUND'S PERFORMANCE WAS The Australian stock market -- which had offered a measure
HELPED BY OUR EARLY MOVE TO AN of stability during the worst of the Pacific Rim market
OVERWEIGHT STANCE IN AUSTRALIA. decline -- began to lose some of its buoyancy toward the end
of the reporting period because of a fall in commodity
stocks and concerns about the effects of the Asian financial
crisis on intraregional trade.
WHAT COUNTRY ALLOCATION DECISIONS CONTRIBUTED THE MOST TO
THE FUND'S PERFORMANCE?
The Fund's performance was helped by our early move to an
overweight stance in Australia, which became a relative
"safe haven" for investors in the Pacific region during the
crisis. Early in the period, the Fund benefited from an
initially overweight exposure to Hong Kong. Our decision to
underweight the Malaysian stock market during the period was
also beneficial.
WHAT COUNTRY ALLOCATION DECISIONS DETRACTED FROM THE FUND'S
PERFORMANCE?
The Fund's underweight position in Taiwan, which
consistently outperformed the benchmark Morgan Stanley
Capital International Combined Far East (ex Japan) Free
Index (MSCI Far East Index)** during the period, was the
biggest detriment to the Fund's performance. While we have
been steadily increasing exposure to the Taiwanese stock
market, access to direct investments for foreign investors
remains limited.
A SUBSTANTIAL WEIGHTING IN DID ANY PARTICULAR SECTOR DECISIONS CONTRIBUTE TO THE FUND'S
FINANCIAL AND UTILITY STOCKS IN PERFORMANCE?
HONG KONG ADDED VALUE TO THE A substantial weighting in financial and utility stocks in
FUND. Hong Kong added value to the Fund, as both sectors sustained
momentum for much of the period. For example, financial
stocks rose 27.2% in U.S. dollar terms during the period,
while the broad blue-chip stocks in Hong Kong fell 1.2%.
Conversely, low exposure to financial stocks in southeast
Asian markets such as Indonesia and Thailand helped the
Fund. In addition, the Fund benefited from its emphasis on
the stocks of export-oriented issuers in Korea, Singapore
and Taiwan.
WHAT ARE SOME EXAMPLES OF STOCKS HELD BY THE FUND THAT
PERFORMED PARTICULARLY WELL?
Among the Fund's best performing stocks were Telstra (an
Australia-based telecommunications company), HSBC Holdings
(Hong Kong's largest commercial bank) and Siliconware
(Taiwan), an electronics firm.***
**The Morgan Stanley Capital International Combined Far East
(ex Japan) Free Index is an unmanaged,
capitalization-weighted index that tracks 7 countries and
represents only those securities that are available for
investment by international investors. It is unavailable for
investment.
***Portfolio holdings were current as of March 31, 1998, are
subject to change and may not be representative of current
holdings.
</TABLE>
19
<PAGE> 24
Nations
Pacific Growth
Fund Portfolio Manager Commentary continued ...
<TABLE>
<S> <C>
WHAT INVESTMENT DECISIONS HINDERED OVERALL FUND PERFORMANCE
DURING THE PERIOD?
Overexposure to mid-capitalization stocks in Malaysia and
Indonesia hurt performance, as did heavy exposure to
financial stocks in Malaysia and Singapore early in the
period. Among individual stocks, Rashid Hussain (Malaysia),
Woodside Petroleum (Australia) and RHB Capital (Malaysia)
had disappointing performance.
WHAT IS YOUR REGIONAL ECONOMIC AND MARKET OUTLOOK FOR THE
YEAR AHEAD?
Developments in Japan will be crucial to the performance of
stock markets throughout Asia because of Japan's importance
as an economic engine for the region. Outside of Japan,
Malaysia continues to be the market that matters most. It
remains a significant part of the benchmark MSCI Far East
Index, and we are wary of its prospects -- particularly in
the banking sector, which we believe is vulnerable to
further trouble.
The health of the Chinese economy will be another key factor
that could help or hinder a medium-term recovery in Asia.
Strong deflationary pressure in China, caused by massive
restructuring plans, could hamper the pace of economic
recovery in Asia during the coming year.
Also important will be the outcome of the standoff between
Indonesian President Suharto and the IMF, which is pressing
for economic reforms and an end to political cronyism. Left
unaddressed, conditions in Indonesia could result in
hyperinflation.
In Hong Kong, the recent budget demonstrated the former
colony's fiscal strength and the government's commitment to
stability in the residential property market.
WHAT INVESTMENT OPPORTUNITIES DO YOU ANTICIPATE IN THIS
ENVIRONMENT?
We believe that the property sector in Hong Kong could be
favorable if the outlook for interest rates improves. In
Thailand, we are encouraged by progress in restructuring the
corporate and banking sectors. Otherwise, markets such as
Taiwan, the Philippines and Singapore should continue to
offer opportunities for bargain hunters, as current stock
values are low and longer-term earnings prospects are
positive.
</TABLE>
20
<PAGE> 25
Nations
Pacific Growth
Fund Portfolio Manager Commentary continued ...
<TABLE>
<S> <C>
HOW ARE YOU POSITIONING THE FUND TO TAKE ADVANTAGE OF THESE
ANTICIPATED DEVELOPMENTS?
We have already begun to take advantage of current low
prices for selected stocks in Taiwan, the Philippines and
Singapore. In Taiwan, we favor domestic companies and
exporters. The Fund remains underweighted in Hong Kong but
not aggressively so. We will seek to add selectively to the
Fund's Hong Kong property stocks, but only if the
interest-rate outlook is positive. In Thailand, we expect to
add to the Fund's blue-chip stock holdings if this is
justified by the medium-term outlook for profits.
</TABLE>
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/98)
[PIE CHART]
0.9% Other
1.0% New Zealand
1.3% Indonesia
2.2% South Korea
2.3% Thailand
4.7% Philippines
9.4% Malaysia
10.9% Singapore
11.3% Taiwan
18.5% Australia
37.5% Hong Kong
<TABLE>
<C> <S> <C>
TOP TEN HOLDINGS
(AS A % OF NET ASSETS AS OF 3/31/98)
-----------------------------------------
1 HSBC Holdings plc 6.4%
-----------------------------------------
2 Telstra Corporation Ltd., ADR 5.2%
-----------------------------------------
3 Hutchison Whampoa Ltd. 4.5%
-----------------------------------------
4 Taiwan American Fund Ltd. 4.2%
-----------------------------------------
5 Hang Seng Bank Ltd. 3.7%
-----------------------------------------
6 CLP Holdings Ltd. 3.4%
-----------------------------------------
7 Cheung Kong Holdings Ltd. 3.4%
-----------------------------------------
8 Sun Hung Kai Properties 3.2%
-----------------------------------------
9 Rothmans of Pall Mall 3.1%
-----------------------------------------
10 ASE Test Ltd., GDR 3.0%
-----------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT AS
OF MARCH 31, 1998, ARE SUBJECT TO
CHANGE AND MAY NOT BE REPRESENTATIVE
OF CURRENT HOLDINGS.
21
<PAGE> 26
Nations
Pacific Growth
Fund Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period 'Pacific Growth 'MSCI Far
(Fiscal Year Covered) Fund $7,517' East Index $7,389'
<S> <C> <C>
June 30 1995 10000 10000
9710 10383
1995 9745 10894
10266 11101
10383 11168
10282 10670
1996 10773 9796
10491 8763
11509 10514
9938 9135
1997 7238 7190
Mar. 31 1998 7517 7389
</TABLE>
Investor B Shares (as of 3/31/98)*
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period 'Pacific Growth 'MSCI Far
(Fiscal Year Covered) Fund $7,097' East Index $7,389'
<S> <C> <C>
June 30 1995 10000 10000
9690 10383
1995 9698 10894
10188 11101
10279 11168
10148 10670
1996 10609 9796
10309 8763
11279 10514
9718 9135
1997 7054 7190
Mar. 31 1998 7097 7389
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
SINCE INCEPTION
(6/30/95 through 3/31/98) (9.86)%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations Pacific Growth Fund
from the date each class of shares was
first offered. The Morgan Stanley
Capital International Combined Far East
(ex Japan) Free Index ("MSCI Far East
Index") is an unmanaged,
capitalization-weighted index that
tracks 7 countries and represents only
those securities that are available for
investment by international investors.
It is unavailable for investment. The
performance shown reflects the
performance of Primary A and Investor B
Shares. The performance of Primary B,
Investor A, and Investor C Shares may
vary based on the differences in sales
loads and fees paid by the shareholders
investing in each class.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
SINCE
INCEPTION NAV CDSC*
(6/30/95 through
3/31/98) (10.75)% (11.72)%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
PRIMARY A PRIMARY B INVESTOR A INVESTOR B INVESTOR C
<S> <C> <C> <C> <C> <C> <C>
Inception Date 6/30/95 6/28/96 6/30/95 6/30/95 6/30/95
NAV CDSC*
- ------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE (28.35)% (28.77)% (28.59)% (29.04)% (32.57)% (28.91)%
- ------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
Since Inception (9.86)% (17.22)% (10.12)% (10.75)% (11.72)% (10.53)%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
22
<PAGE> 27
Nations
Emerging Markets
Fund Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MR. EHRMANN SHARES HIS VIEWS
ON NATIONS EMERGING MARKETS FUND'S PERFORMANCE FOR THE
12-MONTH PERIOD ENDED MARCH 31, 1998 AND HIS CURRENT
OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGER PLEASE DESCRIBE THE FUND'S PHILOSOPHY AND STYLE.
Philip Ehrmann is Principal The Fund emphasizes growth at a reasonable price in
Portfolio Manager of Nations selecting regions, markets and stocks. By combining active,
Emerging Markets Fund and is bottom-up stock selection with risk-controlled country
the Head of the Emerging allocation, we aim to build a portfolio with optimal
Markets Team for Gartmore risk/return characteristics. Because emerging markets can
Global Partners, investment change rapidly, the ability to move freely between markets
sub-adviser to the Fund. to take advantage of shifting economic conditions is
INVESTMENT OBJECTIVE important to our active management style. Therefore, we
The Fund seeks long-term emphasize larger, more liquid securities.
capital growth by investing WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE IN THE
primarily in equity securities EMERGING MARKETS ARENA DURING THE REPORTING PERIOD?
of companies in emerging market Without question, the overriding influence on emerging
countries, such as those in markets during the 12 months ended March 31, 1998, was the
Latin America, Eastern Europe, precipitous fall in stock markets across Asia. Although the
the Pacific Basin, the Far storm clouds had been gathering since the beginning of the
East, Africa and India. period -- with deteriorating economic fundamentals putting
PERFORMANCE REVIEW pressure on corporate earnings across the region -- what
For the 12-month period ended became a fully blown Asian currency crisis sparked a global
March 31, 1998, Nations decline in stock values in October 1997, from which
Emerging Markets Fund Primary A non-Asian emerging markets could hardly escape.
Shares provided a total return The Asian crisis, however, did not prevent emerging markets
of (6.39)%. outside the region from rising for the period as a whole --
testimony to the diverse nature of these markets. Latin
American markets came under heavy pressure but recovered
their poise fairly quickly and ended the period 11.2% higher
in U.S. dollar terms as measured by the International
Finance Corporation (IFC) Latin America Index. Mexico's rise
was particularly strong (+25.2% in U.S. dollar terms), while
Brazil (+12.5%) and Argentina (+14.0%) enjoyed reasonably
good returns in U.S. dollar terms.
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
Source for all statistical data -- Gartmore Global Partners
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL
RISKS, INCLUDING FOREIGN TAXATION, CURRENCY RISKS, RISKS
ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS
AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
23
<PAGE> 28
Nations
Emerging Markets
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
Among emerging European markets, Portugal soared 86.1% and
Hungary gained 46.7% in U.S. dollar terms. Elsewhere, India
registered a gain of 5.1% in U.S. dollar terms. Russia
attracted investor interest and was added to the benchmark
IFC Investables Index in November 1997.**
HOW DID U.S. STOCK MARKET VOLATILITY IN 1997 AFFECT THE
EMERGING MARKETS?
Emerging markets clearly felt the impact of stock market
volatility in the U.S. during the period. Historically, the
correlation between the emerging markets and the U.S. stock
market has been relatively low. For example, over the past
five years, the correlation between the Standard & Poor's
500 Composite Stock Price Index (S&P 500 Index) and the IFC
Composite was only about 0.4. (The higher the correlation
between the two indexes, the more they would be expected to
rise and fall in lockstep. A perfect correlation would be
1.0.) For the reporting period, however, the correlation
between the IFC Composite and the S&P 500 was unusually
high, at approximately 0.8. This higher correlation was
somewhat of an anomaly, reflecting the extreme effects of
the October 1997 plunge on Wall Street, which sent stock
markets down across the world.+
The Fund gained the most WHAT COUNTRY OR REGIONAL ALLOCATION DECISIONS CONTRIBUTED
benefit from an underweighting THE MOST TO THE FUND'S PERFORMANCE?
in the Far East relative to the The Fund gained the most benefit from an underweighting in
IFC Investables Index. In the Far East relative to the IFC Investables Index. In
particular, our early reduction particular, our early reduction in exposure to Malaysia and
in exposure to Malaysia and lack of exposure to Thailand added relative value, as these
lack of exposure to Thailand markets were among the hardest hit by the Asian financial
added relative value. crisis. At the same time, the Fund's overweight position in
Latin America added value, as did exposure to emerging
European markets such as Hungary, Poland and Portugal.
WHAT OTHER INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S
PERFORMANCE?
The Fund enjoyed notably strong relative performance in
Israel, primarily due to its investment in Supersol, the
country's leading food retailer; this investment has
recently been sold. In South Africa, the Fund's investment
in Nedcor helped lead to outperformance. In Brazil, the Fund
realized higher returns through investments in such leading
companies as Telebras.++
**The IFC Latin America Index is an unmanaged,
capitalization-weighted index which tracks stocks in
Argentina, Brazil, Chile, Colombia, Mexico, Peru and
Venezuela. It is unavailable for investment.
+The IFC Composite is used in the computations as opposed to
the IFC Investables Index because of the composite's longer
history. The IFC Composite Index is a
capitalization-weighted index, investing in 32 countries
from the perspective of domestic investors. It is unmanaged
and unavailable for investment. The S&P 500 index is a
market-capitalization-weighted Index that measures the
market value of 400 industrial stocks, 60 transportation and
utility company stocks and 40 financial issues. It is
unmanaged and unavailable for investment.
++Portfolio holdings were current as of March 31, 1998, are
subject to change and may not be representative of current
holdings.
The IFC Investables Index is an unmanaged,
capitalization-weighted index which tracks more than 4,400
stocks in 25 emerging markets in Asia, Latin America,
Eastern Europe, Africa and the Middle East. It is
unavailable for investment.
</TABLE>
24
<PAGE> 29
Nations
Emerging Markets
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
WHAT ARE SOME EXAMPLES OF STOCKS IN THE FUND THAT PERFORMED
PARTICULARLY WELL?
Among the Fund's best performing individual stocks were oil
and gas company Tatneft (Russia), Yapi Kredi Bank (Turkey),
Hellenic Bottling (Greece) and cement company Cimpor
(Portugal).
WHAT INVESTMENT DECISIONS HINDERED OVERALL PORTFOLIO
PERFORMANCE DURING THE PERIOD?
The Fund was underweighted in Turkey, where the stock market
rose impressively during the period. In terms of stock
selection, performance was also hurt by our decision to hold
United Engineers (Malaysia), a cash-rich company that was
effectively forced to acquire a nearly bankrupt construction
company in the wake of the Asian crisis. Other stocks with
disappointing performance for the period included LG
Information & Communications (Korea) and Resorts World
(Malaysia).
WHAT IS YOUR ECONOMIC AND MARKET OUTLOOK FOR THE EMERGING
MARKETS IN THE YEAR AHEAD?
In Latin America, most stock market valuations remain
reasonable. This is particularly true in Brazil, where
cyclical economic conditions are favorable and interest
rates are still high but falling rapidly. Monetary policy
has been tightened in Mexico, which we had expected and
believe to be appropriate. Low oil prices, if they persist,
could restrain output growth in Mexico, but this restraint
is not unwelcome if it causes Mexican authorities to
maintain tight monetary policy.
In Asia, progress will likely be slow. The process of
recapitalizing the Thai, Korean and Indonesian banking
systems is only beginning. Until economic and corporate
fundamentals stabilize, these markets are likely to remain
vulnerable and volatile.
WHAT INVESTMENT OPPORTUNITIES DO YOU ANTICIPATE IN THIS
ENVIRONMENT?
Thailand and Korea are emerging from the Asian crisis with
some credit and may present selective opportunities.
Similarly, Malaysia, which has avoided an external debt
crisis, has announced reforms in the recent budget which, if
implemented, would provide clear evidence of an improving
trend.
In Brazil, confidence has been bolstered by a rapid
reduction in domestic interest rates, which have fallen from
over 40% at the peak of the Asian currency debacle to less
than 30%.
Among European emerging markets, economic and market
fundamentals look positive in Hungary and Poland. In
addition, Greece has now committed itself to fiscal and
monetary discipline that is likely to act as the precursor
to lower interest rates and sustained growth. However, the
Portuguese stock market, having outperformed other markets
in the IFC Investables Index so strongly, could suffer from
profit-taking.
</TABLE>
25
<PAGE> 30
Nations
Emerging Markets
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
HOW ARE YOU POSITIONING THE FUND TO TAKE ADVANTAGE OF THESE
ANTICIPATED DEVELOPMENTS?
We are likely to maintain the Fund's overweightings in
Hungary, Poland and Latin America. In Asia, we have begun to
reduce the magnitude of the Fund's substantial
underweighting by adding positions for the first time in
almost two years. The Fund's Asian investments, however, are
focused only on the strongest business franchises currently
selling at what we believe to be deeply depressed prices.
</TABLE>
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/98)
[PIE CHART]
26.6% Other
4.8% Taiwan
3.9% Greece
4.5% Chile
4.6% Malaysia
5.1% India
5.2% Argentina
5.3% Hong Kong
7.0% South Africa
14.4% Mexico
18.6% Brazil
<TABLE>
<C> <S> <C>
TOP TEN HOLDINGS
(AS A % OF NET ASSETS AS OF 3/31/98)
-----------------------------------------
1 Telebras, ADR 5.1%
-----------------------------------------
2 East European Development 3.2%
Fund
-----------------------------------------
3 Petroleo Brasileiros NPV 2.5%
-----------------------------------------
4 Carso Global Telecom, ADR 2.5%
-----------------------------------------
5 Amalgamated Banks of South 2.3%
Africa
-----------------------------------------
6 Compania Vale do Rio Doce, 2.2%
ADR
-----------------------------------------
7 Grupo Carso SA de CV, ADR 2.2%
-----------------------------------------
8 Grupo Televisa SA, GDR 1.9%
-----------------------------------------
9 Formosa Fund, IDR 1.9%
-----------------------------------------
10 CEMIG Companhia, New, ADR 1.9%
-----------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT AS
OF MARCH 31, 1998, ARE SUBJECT TO
CHANGE AND MAY NOT BE REPRESENTATIVE
OF CURRENT HOLDINGS.
26
<PAGE> 31
Nations
Emerging Markets
Fund Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) 'Emerging Markets $10,839' 'IFC Investables Index $9,460'
<S> <C> <C>
June 30 1995 10000 10000
9880 9853
1995 9782 9560
10342 10147
10761 10850
10410 10492
1996 10636 10314
11580 11304
12680 12079
12312 10993
1997 10318 8814
Mar. 31 1998 10839 9460
</TABLE>
Investor B Shares (as of 3/31/98)*
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) 'Emerging Markets $10,252' 'IFC Investables Index $9,460'
<S> <C> <C>
June 30 1995 10000 10000
9850 9853
1995 9730 9560
10260 10147
10650 10850
10280 10492
1996 10471 10314
11377 11304
12433 12079
12040 10993
1997 10069 8814
Mar. 31 1998 10252 9460
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
SINCE INCEPTION
(6/30/95 through 3/31/98) 2.97%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations Emerging Markets Fund
from the date each class of shares was
first offered. The IFC Investables
Index is an unmanaged,
capitalization-weighted index which
tracks more than 4,400 stocks in 25
emerging markets in Asia, Latin
America, Eastern Europe, Africa and the
Middle East. It is unavailable for
investment. The performance shown
reflects the performance of Primary A
and Investor B Shares. The performance
of Primary B, Investor A and Investor C
Shares may vary based on the
differences in sales loads and fees
paid by the shareholders investing in
each class.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
SINCE INCEPTION NAV CDSC*
(6/30/95 through 3/31/98) 1.97% 0.91%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
PRIMARY A PRIMARY B INVESTOR A INVESTOR B INVESTOR C
<S> <C> <C> <C> <C> <C> <C>
Inception Date 6/30/95 6/28/96 6/30/95 6/30/95 6/30/95
NAV CDSC*
- -----------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE (6.39)% (6.80)% (6.60)% (7.25)% (11.89)% (7.17)%
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
Since Inception 2.97% 0.02% 2.74% 1.97% 0.91% 2.19%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
27
<PAGE> 32
NATIONS FUNDS
Nations International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 93.5%
ARGENTINA -- 0.9%
115,000 Banco de Galicia y Buenos Aires SA de
C.V., ADR........................... $ 2,817,500
268,182 Dalmine Siderca SA................... 713,468
217,000 Perez Compac, ADR.................... 2,947,273
70,000 Y.P.F. Sociedad Anonima, ADR......... 2,380,000
------------
8,858,241
------------
AUSTRALIA -- 2.6%
420,000 Australia & New Zealand Bank Group
Ltd................................. 2,806,720
1,500,000 Fosters Brewing Group ord............ 3,265,243
230,000 National Australia Bank Ltd. ord..... 3,273,381
550,000 News Corporation Ltd................. 3,628,158
2,100,000 Quantas Airway Ltd................... 3,431,979
160,000 Rio Tinto Ltd........................ 2,101,401
60,000 Telestra Corporation Ltd., ADR....... 3,090,000
687,000 WMC Ltd.............................. 2,354,588
------------
23,951,470
------------
BRAZIL -- 3.4%
110,000 CEMIG Companhia, New, ADR............ 5,225,000
150,000 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar, ADR............ 3,450,000
235,000 Companhia Cervejaria Brahma, ADR..... 3,642,500
210,000 Compania Vale Do Rio Doce, ADR....... 4,935,000
130,000 Electrobras, ADR..................... 3,217,500
97,000 Petroleo Brasileiros SA, ADR......... 2,271,061
69,000 Telebras, ADR........................ 8,957,063
------------
31,698,124
------------
CHILE -- 0.8%
130,000 Cia de Telecomunicaciones de Chile
SA, ADR............................. 3,583,125
120,000 Enersis SA, ADR...................... 3,787,500
------------
7,370,625
------------
DENMARK -- 1.1%
110,000 Tele Danmark A/S, Series B........... 9,977,678
------------
FRANCE -- 10.2%
120,000 AXA-UAP.............................. 12,347,391
78,000 Cap Gemini Sogeti SA................. 9,157,971
12,000 Carrefour SA......................... 7,063,947
20,375 Pinault-Printemps-Redoute SA......... 15,740,061
170,000 Schneider SA......................... 13,077,978
45,000 Societe Generale..................... 8,999,274
95,000 Societe National Elf Aquitaine....... 12,440,932
135,475 TOTAL, "B" Shares ord................ 16,255,689
------------
95,083,243
------------
GERMANY -- 7.3%
155,000 Bayerische Hypotheken-UND Wechsel
Bank................................ 8,458,733
10,600 Bayerische Motoren Werke AG.......... 11,712,549
157,000 Bayerische Vereinsbank............... 11,452,114
180,000 Hoechst AG........................... 7,046,333
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
GERMANY -- (CONTINUED)
17,000 Mannesmann AG........................ $ 12,437,120
140,000 RWE AG............................... 7,526,678
132,000 Veba AG.............................. 9,357,504
------------
67,991,031
------------
GREAT BRITAIN -- 20.9%
451,750 Bass plc............................. 8,658,821
1,700,000 BG plc............................... 8,821,974
500,000 British Land Company plc ord......... 6,277,495
660,290 British Petroleum Company ord........ 9,527,899
806,000 British Telecommunications ord....... 8,770,080
700,000 Diageo plc........................... 8,237,748
700,000 Electra Investment Trust plc ord..... 7,054,231
388,000 E.M.A.P. ord......................... 7,307,005
285,000 General Accident plc ord............. 7,032,301
402,600 Glaxo Wellcome plc ord............... 10,830,407
272,000 Kingfisher ord....................... 5,095,117
887,200 Lloyds TSB Group plc................. 13,797,245
95,000 Misys plc............................ 4,704,104
470,000 Next ord............................. 4,555,453
430,000 Pearson ord.......................... 6,982,249
460,000 Provident Financial plc ord.......... 7,307,674
430,000 Prudential Corporation............... 6,320,015
1,000,000 Shell Transport and Trading ord...... 7,348,855
295,000 Siebe plc............................ 6,434,600
940,000 Smithkline Beecham ord+.............. 11,880,369
910,740 Southern Electric plc+............... 8,293,702
700,000 Unilever ord......................... 6,620,665
161,000 United Utilities ord................. 2,386,545
1,089,177 Vodafone Group plc ord............... 11,386,390
231,000 Zeneca Group plc ord................. 9,953,496
------------
195,584,440
------------
HONG KONG -- 1.9%
240,000 Cheung Kong Holdings Ltd............. 1,703,512
428,000 CLP Holdings Ltd..................... 2,154,168
247,000 Hang Seng Bank Ltd................... 2,414,631
1,109,000 Hong Kong Telecommunications......... 2,289,933
69,800 HSBC Holdings plc.................... 2,134,887
380,000 Hutchinson Whampoa Ltd............... 2,672,706
275,000 Sun Hung Kai Properties.............. 1,872,088
430,000 Swire Pacific, "A" Shares............ 2,275,220
------------
17,517,145
------------
HUNGARY -- 0.1%
32,000 Magyar Olaj-ES Gazipare, GDR......... 980,800
------------
INDIA -- 0.2%
190,000 Reliance Industries Ltd., GDS++...... 1,586,500
42,500 State Bank of India, GDR++........... 751,719
------------
2,338,219
------------
IRELAND -- 2.0%
700,000 Bank of Ireland ord.................. 13,815,525
70,000 Elan Corp plc, ADR................... 4,523,750
------------
18,339,275
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<PAGE> 33
NATIONS FUNDS
Nations International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
ITALY -- 4.0%
70,000 ENI Spa ADR.......................... $ 4,742,500
750,000 Ente Nazionale Idrocarburi Spa....... 5,106,208
2,690,000 Telecom Italia Mobile Spa............ 14,443,497
1,650,000 Telecom Italia Spa................... 12,992,874
------------
37,285,079
------------
JAPAN -- 11.3%
320,000 Bank of Tokyo -- Mitsubushi.......... 3,888,243
280,000 Daichi Pharmaceutical Company........ 3,549,222
400,000 Fujitsu Ltd.......................... 4,170,261
127,000 Honda Motor Company.................. 4,572,286
477 Japan Tobacco Inc.................... 3,563,413
150,000 Marui Company, Ltd................... 2,306,394
227,000 Matsushita Electric Industrial
Company Ltd......................... 3,643,578
150,000 Matsushita Electric Works............ 1,473,842
503,000 Mitsui Fudosan Company............... 4,791,374
400,000 NCR Japan Ltd........................ 1,338,084
240,000 NEC Corporation...................... 2,412,151
38,000 Nidec Corporation.................... 1,767,110
1,000,000 Nippon Sanso......................... 2,550,159
1,207 Nippon Telephone & Telegraph
Corporation......................... 10,048,903
98 NTT Data Communications Systems
Company............................. 4,358,822
350,000 Ricoh Company........................ 3,517,720
20,000 Rohm Company......................... 1,830,114
600,000 Sakura Bank Ltd...................... 2,128,633
80,000 Secom Company Ltd.................... 4,890,306
28,000 Shinko Electric Industries Company... 1,163,473
204,000 Shiseido Company Ltd................. 2,341,046
150,000 Shochiku Company Ltd................. 644,665
11,000 Shohkoh Fund Company................. 3,671,479
62,000 Sony Corporation..................... 5,254,828
275,000 Sumitomo Electric Industries......... 3,547,722
100,000 Takeda Chemical Industries........... 2,542,659
67,000 TDK Corporation...................... 5,176,074
135,000 Tokyo Broadcasting Systems Inc....... 1,549,222
255,000 Tokyo Electric Power Company......... 4,819,801
470,000 Toshiba Ceramics Company Ltd......... 1,829,589
100,000 Toyota Motor Company................. 2,662,666
157,000 Yamanouchi Pharmaceutical Company.... 3,603,375
------------
105,607,214
------------
MALAYSIA -- 0.4%
800,000 Berjaya Sports Toto Berhad........... 2,169,863
800,000 Petronas Gas Berhad.................. 2,126,027
------------
4,295,890
------------
MEXICO -- 2.6%
475,000 Carso Global Telecom, ADR............ 3,586,250
260,000 Cifra SA de CV, ADR Series 'B'....... 4,680,000
282,000 Empresas ICA SA de CV, ADR........... 3,384,000
405,000 Grupo Carso SA de CV, ADR++.......... 5,103,000
100,000 Grupo Televisa SA, GDR............... 3,662,500
97,000 Panamerican Beverages, Class A....... 3,892,125
------------
24,307,875
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
NETHERLANDS -- 7.0%
111,475 Aegon N.V............................ $ 13,536,879
135,000 Baan Company......................... 6,447,510
140,000 Fortis Amev N.V...................... 8,248,904
260,000 ING Groep N.V........................ 14,734,018
160,000 Royal Dutch Petroleum................ 9,044,095
92,816 Wolters Kluwer....................... 13,249,583
------------
65,260,989
------------
PERU -- 0.3%
116,000 Telefonica del Peru SA, Class B, ADR
.................................... 2,501,250
------------
PHILIPPINES -- 0.2%
550,000 Manila Electric Company, Series B.... 1,801,136
------------
PORTUGAL -- 0.9%
55,000 Cimpor-Cimentos de Portugal, SGPS,
SA.................................. 1,936,023
136,000 Portugal Telecom SA.................. 7,066,118
------------
9,002,141
------------
SINGAPORE -- 0.5%
2,461,000 Singapore Tech Engineering........... 2,178,415
1,441,000 Singapore Telecommunications......... 2,533,234
------------
4,711,649
------------
SPAIN -- 2.9%
280,000 Banco de Santander SA ord............ 13,934,515
853,000 Iberdrola SA......................... 12,946,861
------------
26,881,376
------------
SWEDEN -- 3.6%
179,800 Atlas Copco AB "B"................... 5,213,548
94,000 Electrolux AB "B".................... 7,754,031
200,000 Ericsson (L.M.) Telephone Company,
Class B............................. 9,498,813
330,000 Forenings Sparbanken AB.............. 10,868,017
------------
33,334,409
------------
SWITZERLAND -- 8.0%
53,000 Credit Suisse Group.................. 10,597,915
14,000 Novartis AG.......................... 24,763,652
750 Roche Holdings AG.................... 8,113,158
9,775 Schweiz Ruckversicherungs............ 21,462,319
17,000 Zurich Versicherungs Ltd. ........... 9,863,633
------------
74,800,677
------------
TAIWAN -- 0.3%
73,800 Advanced Semi-Conductor Engineering
GDR................................. 2,643,885
------------
THAILAND -- 0.1%
110,000 Advanced Information Service Public
Company Ltd., Alien Shares.......... 855,400
------------
TOTAL COMMON STOCKS
(Cost $675,581,310).................. 872,979,261
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<PAGE> 34
NATIONS FUNDS
Nations International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE BONDS -- 0.5%
CAYMAN ISLANDS -- 0.3%
JPY 564,000,000 AB International Cayman, 0.500%
08/01/07....................... $ 3,289,031
------------
JAPAN -- 0.2%
JPY 246,000,000 Sanwa International Bermuda
Trust, 1.250% 08/01/05......... 1,815,132
------------
TOTAL CONVERTIBLE BONDS
(Cost $6,828,440)............... 5,104,163
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- ----------
<C> <S> <C>
INVESTMENT COMPANY -- 0.3% (Cost $1,935,258)
TAIWAN -- 0.3%
150,000 Taiwan American Fund Ltd. ........... 2,475,000
------------
PREFERRED STOCKS -- 1.0%
BRAZIL -- 0.4%
380,000,000 Banco Bradesco....................... 3,927,001
------------
GERMANY -- 0.6%
12,450 SAP AG............................... 5,290,788
------------
TOTAL PREFERRED STOCKS
(Cost $5,422,701)................... 9,217,789
------------
RIGHT -- 0.0%# (Cost $0)
FRANCE -- 0.0%#
78,000 Cap Gemini SA........................ 240,900
------------
TOTAL INVESTMENTS
(Cost $689,767,709(a)).................... 95.3% 890,017,113
OTHER ASSETS AND
LIABILITIES (NET)......................... 4.7 43,865,356
----- ------------
NET ASSETS................................. 100.0% $933,882,469
==== ===========
</TABLE>
- ---------------
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $223,171,647 and gross
depreciation of $30,566,995 for federal income tax purposes. At March 31,
1998, the aggregate cost of securities for federal income tax purposes was
$697,412,461.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the 1933 Act. These
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers.
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE> 35
NATIONS FUNDS
Nations International Equity Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1998
At March 31, 1998 sector diversification was as follows (unaudited):
<TABLE>
<CAPTION>
% OF NET
SECTOR DIVERSIFICATION ASSETS VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS:
Services.................................................... 24.7% $230,968,565
Consumer Goods.............................................. 16.1 150,076,974
Energy...................................................... 15.4 143,759,507
Finance -- Banks............................................ 12.0 112,139,052
Finance -- Others........................................... 10.5 97,706,763
Capital Equipment........................................... 7.2 67,353,948
Materials................................................... 2.1 19,480,570
Multi-Industry.............................................. 1.8 17,105,157
Other....................................................... 3.7 34,388,725
----- ------------
TOTAL COMMON STOCKS......................................... 93.5 872,979,261
CONVERTIBLE BONDS........................................... 0.5 5,104,163
INVESTMENT COMPANY.......................................... 0.3 2,475,000
PREFERRED STOCKS............................................ 1.0 9,217,789
RIGHT....................................................... 0.0# 240,900
----- ------------
TOTAL INVESTMENTS........................................... 95.3% 890,017,113
OTHER ASSETS AND LIABILITIES (NET).......................... 4.7 43,865,356
----- ------------
NET ASSETS.................................................. 100.0% $933,882,469
===== ============
</TABLE>
- ---------------
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
31
<PAGE> 36
NATIONS FUNDS
Nations International Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 94.8%
AUSTRALIA -- 3.7%
182,000 Australia & New Zealand Bank Group
Ltd. ............................... $ 1,216,245
140,000 Brambles Industries Ltd.............. 2,913,245
1,070,000 MIM Holdings Ltd. ................... 623,010
541,000 News Corporation Ltd. ............... 3,568,788
300,000 Southern Pacific Petroleum NL+....... 510,132
64,600 Telstra Corporation Ltd., ADR........ 3,326,900
1,000,000 Woolworths Ltd. ..................... 3,738,323
------------
15,896,643
------------
BRAZIL -- 1.6%
2,500,000 Light -- Servicos de Electricidade... 956,464
47,000 Telebras, ADR........................ 6,101,188
------------
7,057,652
------------
FRANCE -- 11.5%
47,941 Accor SA............................. 12,293,555
61,000 Alcatel Alsthom Cie Generale......... 11,441,497
15,000 L'Oreal.............................. 6,967,180
15,000 Promodes............................. 7,206,677
54,000 Societe National Elf Aquitaine....... 7,071,688
30,000 Synthelabo........................... 4,160,955
------------
49,141,552
------------
GERMANY -- 8.2%
50,000 Bayerische Vereinsbank............... 3,647,170
87,900 Deutsche Pfandbrief &
Hypothekenbank...................... 6,646,822
93,000 Hoechst AG........................... 3,640,605
7,100 Mannesmann AG........................ 5,194,327
40,000 SAP AG............................... 15,950,290
------------
35,079,214
------------
GREAT BRITAIN -- 19.0%
1,250,000 Amvescap plc......................... 13,517,540
1,426,000 Astec (BSR) plc...................... 2,816,804
1,500,000 Azlan Group plc+..................... 1,393,604
1,050,000 Bank of Scotland..................... 12,418,141
405,381 Granada Group plc.................... 7,288,242
250,000 Hyder plc............................ 4,090,835
3,984 Reckitt & Coleman plc................ 73,828
961,500 Securicor plc........................ 6,566,963
1,069,000 Shell Transport and Trading ord...... 7,855,926
804,706 Smithkline Beecham ord............... 10,170,430
462,894 Standard Chartered Bank plc.......... 6,706,621
1,425,000 WPP Group plc........................ 8,050,888
------------
80,949,822
------------
HONG KONG -- 4.1%
198,000 HSBC Holdings plc.................... 6,055,984
780,000 Hutchinson Whampoa Ltd. ............. 5,486,082
394,000 Sun Hung Kai Properties.............. 2,682,192
581,000 Swire Pacific, Class A............... 3,074,193
------------
17,298,451
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
HUNGARY -- 0.7%
30,000 Gedeon Richter GDR................... $ 3,146,250
------------
IRELAND -- 3.2%
215,000 Bank of Ireland ord.................. 4,247,852
408,991 CRH plc.............................. 6,142,382
50,000 Elan Corporation plc, ADR............ 3,231,250
------------
13,621,484
------------
ITALY -- 4.1%
600,000 Ente Nazionale Idrocarburi Spa....... 4,084,966
1,700,000 Telecom Italia Spa................... 13,386,597
------------
17,471,563
------------
JAPAN -- 14.1%
195,000 Bank of Tokyo-Mitsubishi............. 2,369,398
143,000 Daichi Pharmaceutical Company........ 1,812,638
545,000 Dainippon Ink & Chemicals Inc. ...... 1,839,490
509,000 Fujitsu Ltd. ........................ 5,306,657
350,000 Hitachi Ltd. ........................ 2,546,409
88,000 Ito-Yokado Company Ltd. ............. 4,765,498
423,000 Kao Corporation...................... 5,552,222
300 Keyence Corporation.................. 41,403
300,000 Matsushita Electric Industrial
Company Ltd. ....................... 4,815,301
471,000 Ricoh Company........................ 4,733,846
74,000 Secom Company Ltd. .................. 4,523,533
225,000 Shimano Inc. ........................ 4,843,428
230,000 Shin-Etsu Chemicals Company Ltd. .... 4,554,285
80,000 TDK Corporation...................... 6,180,386
500,000 Toppan Printing Company.............. 6,150,385
------------
60,034,879
------------
MEXICO -- 1.3%
97,000 Grupo Carso SA de CV, ADR............ 1,222,200
745,000 Grupo Financiero Banamex Accival,
Series 'B' Npv...................... 1,894,439
63,300 Grupo Televisa SA, GDR+.............. 2,318,362
------------
5,435,001
------------
NETHERLANDS -- 6.5%
249,506 Getronics N.V. ...................... 10,697,127
241,775 Numico N.V. ......................... 8,674,737
58,469 Wolters Kluwer....................... 8,346,512
------------
27,718,376
------------
PAKISTAN -- 0.4%
58,000 Hub Power Company Ltd. GDR........... 1,558,750
------------
SOUTH KOREA -- 0.0%#
1,504 Samsung Electronics Ltd.,
GDR 1/2 Vtg++...................... 40,608
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE> 37
NATIONS FUNDS
Nations International Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SPAIN -- 5.9%
304,000 Empresa Nacional De Electricidad..... $ 7,303,274
188,000 Gas Natural SDG SA................... 11,605,308
125,000 Repsol SA............................ 6,371,909
------------
25,280,491
------------
SWEDEN -- 4.3%
288,000 Atlas Copco AB "A"+.................. 8,404,949
42,000 Atlas Copco AB "B"................... 1,217,848
187,000 Ericsson (L.M.) Telephone Company,
Class B............................. 8,881,390
------------
18,504,187
------------
SWITZERLAND -- 5.3%
3,856 Nestle SA............................ 7,364,143
8,500 Novartis AG.......................... 15,035,075
------------
22,399,218
------------
TURKEY -- 0.9%
7,227,487 Arcelik A.S. ........................ 624,302
10,000,000 Bati Cimento......................... 894,638
1,233,225 Migros Turk T.A.S. .................. 1,090,609
22,594,421 Trakya Cam Sanyii A.S. .............. 1,068,777
------------
3,678,326
------------
TOTAL COMMON STOCKS
(Cost $273,369,968)................. 404,312,467
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
PREFERRED STOCKS -- 1.9%
BRAZIL -- 0.6%
28,000,000 Centrais Electricas Brasileiras-
Electrobras B....................... $ 1,383,993
5,200,000 Petroleo Brasileiros NPV............. 1,239,402
------------
2,623,395
------------
GERMANY -- 1.3%
75,000 Henkel KGaA.......................... 5,446,441
------------
TOTAL PREFERRED STOCKS
(Cost $5,884,052)................... 8,069,836
------------
TOTAL INVESTMENTS
(Cost $279,254,020(a)).................... 96.7% 412,382,303
OTHER ASSETS AND LIABILITIES (NET)......... 3.3 14,040,726
----- ------------
NET ASSETS................................. 100.0% $426,423,029
===== ============
</TABLE>
- ---------------
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $146,150,083 and gross
depreciation of $13,024,296 for federal income tax purposes. At March 31,
1998, the aggregate cost of securities for federal income tax purposes was
$279,256,516.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the 1933 Act. These
securities may be resold in transactions exempt from registration, normally
to qualified institutional buyers.
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
33
<PAGE> 38
NATIONS FUNDS
Nations International Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1998
At March 31, 1998 sector diversification was as follows (unaudited):
<TABLE>
<CAPTION>
% OF NET
SECTOR DIVERSIFICATION ASSETS VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS:
Finance..................................................... 14.4% $ 61,402,404
Consumer Goods.............................................. 15.2 64,986,279
Services.................................................... 30.9 131,674,206
Energy...................................................... 9.2 39,161,427
Materials................................................... 3.5 15,122,582
Capital Equipment........................................... 13.8 58,915,071
Multi-Industry.............................................. 4.0 17,070,717
Other....................................................... 3.8 15,979,781
----- ------------
TOTAL COMMON STOCKS......................................... 94.8 404,312,467
PREFERRED STOCKS............................................ 1.9 8,069,836
----- ------------
TOTAL INVESTMENTS........................................... 96.7% 412,382,303
OTHER ASSETS AND LIABILITIES (NET).......................... 3.3 14,040,726
----- ------------
NET ASSETS.................................................. 100.0% $426,423,029
===== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<PAGE> 39
NATIONS FUNDS
Nations Pacific Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 92.8%
AUSTRALIA -- 18.5%
95,000 Australia and New Zealand Banking
Group Ltd. .......................... $ 634,853
157,000 Coles Myer Ltd. ord .................. 784,287
101,000 Commonwealth Bank of Australia........ 1,200,407
470,000 Fosters Brewing Group ord............. 1,023,109
31,000 Lend Lease Corporation Ltd. ord ...... 721,992
68,000 National Australia Bank Ltd. ord...... 967,782
73,000 News Corporation Ltd. ................ 481,556
49,000 Rio Tinto Ltd. ....................... 643,554
183,000 Southern Pacific Petroleum NL+........ 311,181
57,000 Telstra Corporation Ltd., ADR......... 2,935,500
111,000 Woodside Petroleum Ltd. .............. 734,432
-----------
10,438,653
-----------
HONG KONG -- 35.8%
1,700,000 Beijing Datang Power+................. 784,325
270,000 Cheung Kong Holdings Ltd. ............ 1,916,450
900,000 China Aerospace International Ltd. ... 275,853
379,000 China Resources Enterprises........... 767,909
383,000 CLP Holdings Ltd. .................... 1,927,678
213,000 Hang Seng Bank Ltd. .................. 2,082,252
377,000 Hong Kong Electric Holdings Ltd. ..... 1,294,178
100,000 Hong Kong Land Holdings ord........... 172,000
619,000 Hong Kong Telecommunications.......... 1,278,150
119,000 HSBC Holdings plc..................... 3,639,707
360,000 Hutchinson Whampoa Ltd. .............. 2,532,038
263,000 Sun Hung Kai Properties............... 1,790,397
117,000 Swire Pacific, Class A................ 619,072
58,000 Swire Pacific, Class B................ 55,764
300,000 VTech Holdings Ltd. .................. 1,116,962
-----------
20,252,735
-----------
INDONESIA -- 1.3%
41,700 Gulf Indonesia Resources Ltd.+........ 750,600
-----------
MALAYSIA -- 9.4%
123,000 Berjaya Sports Toto Berhad............ 333,616
137,000 Genting Berhad........................ 469,178
110,000 Malayan Banking Berhad................ 421,918
318,000 Malaysian International Shipping...... 609,863
438,000 Malaysian Resources Corporation
Berhad............................... 254,400
517,000 Multi Purpose Holdings Berhad......... 228,047
460,000 Petronas Gas Berhad................... 1,222,466
211,000 Rothmans of Pall Mall................. 1,763,151
-----------
5,302,639
-----------
NEW ZEALAND -- 1.0%
117,000 Telecom Corporation of New Zealand.... 556,966
-----------
PHILIPPINES -- 4.3%
1,680,000 Ayala Corporation, Class B............ 776,443
1,520,000 Ayala Land Inc., Class B.............. 732,603
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
PHILIPPINES -- (CONTINUED)
70,000 Manila Electric Company,
Series B............................. $ 229,235
26,000 Philippine Long Distance Telephone
Company.............................. 724,416
-----------
2,462,697
-----------
SINGAPORE -- 10.9%
103,000 City Developments..................... 506,871
27,000 Creative Technology ord............... 594,986
248,200 Natsteel Ltd. ........................ 385,628
90,000 Overseas Chinese Banking Corporation,
Alien Shares......................... 506,964
113,564 Singapore Press Holdings,
Alien Shares......................... 1,300,485
581,000 Singapore Telecommunications.......... 1,021,380
1,170,073 ST Engineering........................ 1,035,719
213,000 Venture Manufacturing................. 791,086
-----------
6,143,119
-----------
SOUTH KOREA -- 2.2%
14,800 Samsung Display Devices............... 694,585
10,000 Samsung Electronics Ltd. ............. 527,076
1,524 Samsung Electronics Ltd.,
GDR 1/2 Vtg++....................... 41,148
-----------
1,262,809
-----------
TAIWAN -- 7.1%
47,000 ASE Test Ltd., GDR++.................. 1,683,775
34,000 Siliconware Precision Industries
Company, GDR......................... 639,200
43,000 Taiwan Semiconductor -- SP ADR........ 1,125,525
45,200 Yageo Corporation, GDR................ 553,700
-----------
4,002,200
-----------
THAILAND -- 2.3%
40,000 Advanced Information Service Public
Company Ltd., Alien Shares........... 311,055
173,000 Electricity Generating, Alien
Shares............................... 404,473
199,000 National Petro-Chemical Company, Alien
Shares............................... 175,737
38,000 PTT Exploration and Production Public
Company Ltd., Alien Shares........... 430,699
-----------
1,321,964
-----------
TOTAL COMMON STOCKS
(Cost $51,639,415).................... 52,494,382
-----------
INVESTMENT COMPANY -- 4.2% (Cost $2,211,075)
TAIWAN -- 4.2%
143,000 Taiwan American Fund Ltd.............. 2,359,500
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<PAGE> 40
NATIONS FUNDS
Nations Pacific Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <S> <C>
BONDS -- 1.7% (Cost $896,026)
HONG KONG -- 1.7%
$1,000,000.. Hutchinson Whampoa,
6.950% 08/01/07..................... $ 950,000
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
- -----------
<C> <S> <C>
WARRANTS -- 0.4%
INDONESIA -- 0.0%#
230,000 Bank Dagang Nasional Indonesia,
Expire 02/14/00..................... 1,303
-----------
PHILIPPINES -- 0.4%
474,000 Jollibee Foods Company,
Expire 03/25/03..................... 250,363
-----------
TOTAL WARRANTS
(Cost $299,684)..................... 251,666
-----------
TOTAL INVESTMENTS
(Cost $55,046,200(a))..................... 99.1% 56,055,548
OTHER ASSETS AND
LIABILITIES (NET)......................... 0.9 489,099
----- -----------
NET ASSETS................................. 100.0% $56,544,647
===== ===========
</TABLE>
- ---------------
(a) Federal Income Tax Information: Net unrealized depreciation of investment
securities was comprised of gross appreciation of $4,209,369 and gross
depreciation of $4,467,898 for federal income tax purposes. At March 31,
1998, the aggregate cost of securities for federal income tax purposes was
$56,314,077.
(b) Cash of $188,444 has been segregated at the broker at March 31, 1998 as
collateral for open futures contracts.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the 1933 Act. These
securities may be resold in transactions exempt from registration to
qualified institutional buyers.
# Amount represents less than 0.1%.
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS APPRECIATION
- -------------------------------------------------------------
<C> <S> <C>
FUTURES CONTRACTS -- LONG POSITION
30 SIMEX MSCI Taiwan Index Future,
10 Year, Expires April 1998..... $57,288(b)
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE> 41
NATIONS FUNDS
Nations Pacific Growth Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1998
At March 31, 1998 sector diversification was as follows (unaudited):
<TABLE>
<CAPTION>
% OF NET
SECTOR DIVERSIFICATION ASSETS VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS:
Finance..................................................... 27.6% $15,583,902
Consumer Goods.............................................. 6.9 3,903,222
Services.................................................... 20.5 11,597,538
Energy...................................................... 13.0 7,338,667
Materials................................................... 2.1 1,204,919
Capital Equipment........................................... 7.9 4,452,073
Multi-Industry.............................................. 8.7 4,943,967
Other....................................................... 6.1 3,470,094
----- -----------
TOTAL COMMON STOCKS......................................... 92.8 52,494,382
INVESTMENT COMPANY.......................................... 4.2 2,359,500
BONDS....................................................... 1.7 950,000
WARRANTS.................................................... 0.4 251,666
----- -----------
TOTAL INVESTMENTS........................................... 99.1% 56,055,548
OTHER ASSETS AND LIABILITIES (NET).......................... 0.9 489,099
----- -----------
NET ASSETS.................................................. 100.0% $56,544,647
===== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<PAGE> 42
NATIONS FUNDS
Nations Emerging Markets Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS -- 80.3%
ARGENTINA -- 5.2%
500,000 Astra Cia Argentina de Petroleo SA.... $ 950,138
40,000 Banco De Galicia, ADR................. 980,000
250,000 Dalmine Siderca SA.................... 665,096
60,000 Perez Compac, ADR..................... 814,914
15,000 Y.P.F. Sociedad Anonima, ADR.......... 510,000
-----------
3,920,148
-----------
BRAZIL -- 8.9%
30,000 CEMIG Companhia, New, ADR............. 1,425,000
10,000 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar, ADR............. 230,000
50,000 Electrobras, ADR...................... 1,237,500
30,000 Telebras, ADR......................... 3,894,375
-----------
6,786,875
-----------
CHILE -- 4.5%
50,000 Cia de Telecomunicaciones de Chile SA,
ADR.................................. 1,378,125
45,000 Enersis SA, ADR....................... 1,420,313
35,000 Santa Isabel SA, ADR.................. 636,562
-----------
3,435,000
-----------
EGYPT -- 2.2%
40,000 Commercial International Bank, GDR.... 745,000
5,000 Commercial International Bank,
GDR++................................ 93,125
40,000 Suez Cement Company, GDR.............. 866,000
-----------
1,704,125
-----------
GREAT BRITAIN -- 1.1%
150,000 Antofagasta Holdings ord.............. 813,563
-----------
GREECE -- 3.9%
9,000 Alpha Credit Bank..................... 696,965
40,000 Hellenic Bottling Company SA.......... 1,151,439
45,000 Hellenic Telecommunication ORG........ 1,126,408
-----------
2,974,812
-----------
HONG KONG -- 5.3%
2,000,000 Beijing Datang Power "H".............. 922,735
150,000 CLP Holdings Ltd. .................... 754,965
130 Formosa Fund, IDR..................... 1,436,500
130,000 Hutchinson Whampoa Ltd. .............. 914,347
-----------
4,028,547
-----------
HUNGARY -- 3.5%
39,500..... Demasz GDR............................ 648,590
35,000 Matav ADR............................. 1,089,375
30,000 MOL Magyar Olaj-es Gazipari -- SP
GDR.................................. 919,500
-----------
2,657,465
-----------
INDIA -- 5.1%
30,000 Hindalco Industries, GDR.............. 532,500
25,000 Indian Hotels Company Ltd., GDR....... 415,625
140,000 Reliance Industries Ltd., GDS++....... 1,169,000
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
INDIA -- (CONTINUED)
45,000 State Bank of India, GDR++............ $ 795,938
5,000 State Bank of India, Registered GDR... 88,438
70,000 Videsh Sanchar Nigam Ltd., GDR........ 875,000
-----------
3,876,501
-----------
ISRAEL -- 1.1%
450,000 Bank Leumi Le Israel.................. 850,943
-----------
MALAYSIA -- 4.6%
300,000 Berjaya Sports Toto Berhad............ 813,699
350,000 Petronas Gas Berhad................... 930,137
250,000 Resorts World Berhad.................. 551,370
349,500 Telekom Malaysia...................... 1,206,493
-----------
3,501,699
-----------
MEXICO -- 14.4%
150,000 Alfa SA de CV......................... 847,428
250,000 Carso Global Telecom, ADR............. 1,887,500
30,000 Cifra SA ADR V........................ 540,000
15,000 Consorcio Ara SA , ADR+++............. 678,750
50,000 Empress ICA, ADR...................... 600,000
130,000 Grupo Carso SA de CV, ADR............. 1,638,000
1,000,000 Grupo Corvi SA+....................... 469,814
20,000 Grupo Imsa SA de CV, ADR.............. 395,000
40,000 Grupo Televisa SA, GDR+............... 1,465,000
200,000 Kimberly Clark de Mexico 'A'.......... 1,028,894
35,000 Panamerican Beverages Class A......... 1,404,375
-----------
10,954,761
-----------
PERU -- 1.3%
45,000 CPT Telefonica del Peru, ADR.......... 970,312
-----------
POLAND -- 1.1%
50,000 Bank Handlowy W. Warszawie ord+....... 804,115
-----------
PORTUGAL -- 3.0%
20,000 Cimpor-Cimentos de Portugal, SGPS,
SA................................... 704,008
25,000 Mundial Confianca SA.................. 807,621
15,000 Portugal Telecommunications, ADR...... 786,562
-----------
2,298,191
-----------
RUSSIA -- 2.2%
15,000 Lukoil Oil Company ADR................ 1,050,000
25,000 Tatneft, ADR.......................... 580,000
-----------
1,630,000
-----------
SOUTH AFRICA -- 7.0%
190,000 Amalgamated Banks of South Africa..... 1,726,244
60,000 Barlow Ltd. .......................... 488,531
41,212 Barlow Ltd., ADR...................... 338,710
45,000 Nedcor Ltd., GDR...................... 1,304,325
70,000 Rembrandt Group....................... 578,294
30,000 South African Breweries............... 890,080
-----------
5,326,184
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE> 43
NATIONS FUNDS
Nations Emerging Markets Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1998
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SOUTH AFRICA -- (CONTINUED)
SOUTH KOREA -- 2.0%
40,400 LG Electronics Inc.+.................. $ 557,141
5,500 LG Information Comm Limited........... 191,011
15,000 Samsung Electronics Ltd. ............. 790,614
-----------
1,538,766
-----------
TAIWAN -- 3.0%
50,000 China Steel GDS....................... 702,500
50,000 Siliconware Precision Industries
Company, GDR......................... 940,000
25,000 Taiwan Semiconductor SP ADR........... 654,375
-----------
2,296,875
-----------
TURKEY -- 0.9%
20,000,000 Yapi Kredi Bankasi.................... 691,031
-----------
TOTAL COMMON STOCKS
(Cost $57,681,589).................... 61,059,913
-----------
PREFERRED STOCKS -- 9.6%
BRAZIL -- 9.6%
105,558,172 Banco Bradesco NPV.................... 1,090,861
1,350,000 Cia Cervejaria Brahma NPV............. 1,018,734
30,000,000 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar.................. 691,293
70,000 Compania Vale do Rio Doce, ADR........ 1,645,000
8,000,000 Petroleo Brasileiros NPV.............. 1,906,772
3,000,000 Telecomunicacoes de Sao Paulo SA
NPV.................................. 973,615
-----------
TOTAL PREFERRED STOCKS
(Cost $5,499,475).................... 7,326,275
-----------
INVESTMENT COMPANIES -- 6.9%
SAUDI ARABIA -- 1.9%
180,000 The Saudi Arabia Investment Fund+..... 1,417,500
-----------
SUPRANATIONAL -- 3.2%
60,000..... East European Development Fund+....... 2,445,000
-----------
TAIWAN -- 1.8%
100,000 Taiwan Index Fund..................... 1,350,000
-----------
TOTAL INVESTMENT COMPANIES
(Cost $4,813,972).................... 5,212,500
-----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------
<C> <S> <C>
CONVERTIBLE BONDS -- 1.3% (Cost $890,363)
GERMANY -- 1.3%
DEM
1,500,000 Elektrim SA Conv. 2.000% 05/30/04... $ 956,369
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
----------
<C> <S> <C>
WARRANTS -- 0.0%#
BRAZIL -- 0.0%#
59,969 Cia Cervejaria Brahma,
Expire 04/30/03+..................... 6,514
4,990 Cia Cervejaria Brahma, Preferred
Shares, Expire 04/30/03+............. 351
-----------
TOTAL WARRANTS
(Cost $3,285)........................ 6,865
-----------
TOTAL INVESTMENTS
(Cost $68,888,684(a))...................... 98.1% 74,561,922
OTHER ASSETS AND
LIABILITIES (NET).......................... 1.9 1,463,912
----- -----------
NET ASSETS.................................. 100.0% $76,025,834
===== ===========
</TABLE>
- ---------------
(a) Federal Income Tax Information: Net unrealized appreciation of investment
securities was comprised of gross appreciation of $9,850,137 and gross
depreciation of $5,058,524 for federal income tax purposes. At March 31,
1998, the aggregate cost of securities for federal income tax purposes was
$69,770,309.
+ Non-income producing security.
++ Security exempt from registration under Rule 144A of the 1933 Act. These
securities may be resold in transactions exempt from registration to
qualified institutional buyers.
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
39
<PAGE> 44
NATIONS FUNDS
Nations Emerging Markets Fund
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1998
At March 31, 1998 sector diversification was as follows (unaudited):
<TABLE>
<CAPTION>
% OF NET
SECTOR DIVERSIFICATION ASSETS VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS:
Finance..................................................... 16.5% $12,550,712
Consumer Goods.............................................. 18.3 13,929,807
Services.................................................... 1.9 1,465,000
Energy...................................................... 8.0 6,108,244
Basic Industries............................................ 5.0 3,833,902
Utilities................................................... 22.5 17,093,290
Other....................................................... 8.1 6,078,958
----- -----------
TOTAL COMMON STOCKS......................................... 80.3 61,059,913
PREFERRED STOCKS............................................ 9.6 7,326,275
INVESTMENT COMPANIES........................................ 6.9 5,212,500
CONVERTIBLE BONDS........................................... 1.3 956,369
WARRANTS.................................................... 0.0# 6,865
----- -----------
TOTAL INVESTMENTS........................................... 98.1% 74,561,922
OTHER ASSETS AND LIABILITIES (NET).......................... 1.9 1,463,912
----- -----------
NET ASSETS.................................................. 100.0% $76,025,834
===== ===========
</TABLE>
- ---------------
# Amount represents less than 0.1%.
SEE NOTES TO FINANCIAL STATEMENTS.
40
<PAGE> 45
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) MARCH 31, 1998
Comprehensive Abbreviation Listing for all 3/31/98 Nations International Stock
Funds:
<TABLE>
<S> <C>
GENERAL ABBREVIATIONS:
ADR American Depositary Receipt
GDR Global Depositary Receipt
GDS Global Depositary Share
ord Ordinary Shares
IDR International Depositary Receipt
CURRENCY ABBREVIATIONS:
DEM German Deutschmark
JPY Japanese Yen
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<PAGE> 46
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES MARCH 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL PACIFIC EMERGING
EQUITY GROWTH GROWTH MARKETS
-----------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value. See accompanying schedules........... $ 890,017,113 $412,382,303 $56,055,548 $74,561,922
Cash........................................................ 41,847,055 20,542,056 -- 1,320,989
Segregated cash............................................. -- -- 188,444 --
Foreign currency............................................ 862,853 277 26,793 --
Short-term investments held as collateral for loaned
securities................................................ 163,327,773 70,756,747 5,423,837 10,284,763
Dividends receivable........................................ 3,369,740 2,220,292 50,374 106,112
Interest receivable......................................... 216,795 75,918 23,398 4,712
Receivable for Fund shares sold............................. 1,198,853 22,350 7,483 57,145
Receivable for investment securities sold................... -- 6,086,765 2,156,210 917,687
Unamortized organization costs.............................. -- -- 70,441 65,657
Prepaid expenses and other assets........................... -- 200,283 20,401 --
-------------- ------------ ----------- -----------
Total Assets............................................ 1,100,840,182 512,286,991 64,022,929 87,318,987
-------------- ------------ ----------- -----------
LIABILITIES:
Collateral on securities loaned............................. 163,327,773 70,756,747 5,423,837 10,284,763
Payable for Fund shares redeemed............................ 2,495,576 14,381,370 209,559 139,737
Payable for investment securities purchased................. -- 268,677 742,924 648,590
Due to custodian............................................ -- -- 901,498 --
Investment advisory fee payable............................. 716,641 326,494 44,137 70,613
Administration fee payable.................................. 79,626 37,707 4,904 6,418
Shareholder servicing and distribution fees payable......... 55,822 9,328 4,268 2,920
Transfer agent fees payable................................. 50,832 2,677 18,011 18,618
Custodian fees payable...................................... 72,875 13,559 22,914 8,482
Accrued Directors' fees and expenses........................ 46,304 1,183 26,965 28,966
Accrued expenses and other payables......................... 112,264 66,220 79,265 84,046
-------------- ------------ ----------- -----------
Total Liabilities....................................... 166,957,713 85,863,962 7,478,282 11,293,153
-------------- ------------ ----------- -----------
NET ASSETS.................................................. $ 933,882,469 $426,423,029 $56,544,647 $76,025,834
============== ============ =========== ===========
Investments, at cost........................................ $ 689,767,709 $279,254,020 $55,046,200 $68,888,684
============== ============ =========== ===========
Foreign currency, at cost................................... $ 868,849 $ 276 $ 26,878 $ --
============== ============ =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<PAGE> 47
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) MARCH 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL PACIFIC EMERGING
EQUITY GROWTH GROWTH MARKETS
----------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS CONSIST OF:
Paid in capital............................................. $739,237,529 $280,063,665 $87,183,976 $79,618,148
Distributions in excess of net investment income............ (5,384,256) (6,766,050) (705,720) (947,937)
Accumulated net realized gain/(loss) on investments sold,
forward foreign exchange contracts, foreign currencies and
net other assets.......................................... (86,195) 20,211,170 (31,002,449) (8,318,655)
Net unrealized appreciation of investments, forward foreign
exchange contracts, foreign currencies and net other
assets.................................................... 200,115,391 132,914,244 1,068,840 5,674,278
------------ ------------ ----------- -----------
$933,882,469 $426,423,029 $56,544,647 $76,025,834
============ ============ =========== ===========
NET ASSETS:
Primary A Shares............................................ $885,328,974 $401,104,697 $54,409,223 $73,796,652
Primary B Shares............................................ 24,551 -- 27,040 37,059
Investor A Shares........................................... 13,476,703 24,353,088 871,364 651,994
Investor B Shares........................................... 34,118,799 499,903 1,194,682 1,247,166
Investor C Shares........................................... 933,442 465,341 42,338 292,963
SHARES OUTSTANDING:
Primary A Shares............................................ 59,776,205 20,651,928 7,475,095 6,960,615
Primary B Shares............................................ 1,659 -- 3,701 3,507
Investor A Shares........................................... 918,704 1,267,413 119,567 61,701
Investor B Shares........................................... 2,343,461 26,162 164,185 118,927
Investor C Shares........................................... 65,078 23,960 5,844 27,978
PRIMARY A SHARES:
Net asset value, offering and redemption price per share.... $14.81 $19.42 $7.28 $10.60
PRIMARY B SHARES:
Net asset value, offering and redemption price per share.... $14.80 -- $7.31 $10.57
INVESTOR A SHARES:
Net asset value, offering and redemption price per share.... $14.67 $19.21 $7.29 $10.57
INVESTOR B SHARES:
Net asset value and offering price per share*............... $14.56 $19.11 $7.28 $10.49
INVESTOR C SHARES:
Net asset value, offering and redemption price per share.... $14.34 $19.42 $7.24 $10.47
</TABLE>
- ---------------
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE> 48
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH
--------------------------------------
FOR THE PERIOD FOR THE PERIOD
INTERNATIONAL MAY 17, 1997 SEPTEMBER 1, 1996 PACIFIC EMERGING
EQUITY TO MARCH 31, 1998 TO MAY 16, 1997(a) GROWTH MARKETS
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding
taxes of $2,142,075, $821,983,
$786,594, $135,326 and $120,900,
respectively).......................... $ 16,969,125 $ 6,407,430 $ 7,140,010 $ 1,951,047 $ 1,480,659
Interest (Net of foreign withholding
taxes of $111, $202, $0, $0 and $0,
respectively).......................... 2,065,725 430,734 802,520 306,304 155,206
Securities lending income................ 433,329 135,182 -- 36,189 99,189
------------ ----------- ------------ ------------ ------------
Total investment income.............. 19,468,179 6,973,346 7,942,530 2,293,540 1,735,054
------------ ----------- ------------ ------------ ------------
EXPENSES:
Investment advisory fee.................. 9,260,334 4,636,964 3,861,385 894,307 988,113
Administration fee....................... 1,028,926 537,125 530,382 99,243 88,825
Transfer agent fees...................... 740,177 372,279 171,149 83,622 64,846
Custodian fees........................... 396,240 211,364 665,565 105,850 75,930
Legal and audit fees..................... 100,828 70,224 100,216 38,173 38,100
Registration and filing fees............. 63,410 80,738 91,602 51,463 65,470
Directors' fees and expenses............. 14,253 6,262 20,064 21,641 28,962
Amortization of organization costs....... -- 745 37,697 31,307 29,181
Other.................................... 95,268 130,720 209,580 33,758 32,857
------------ ----------- ------------ ------------ ------------
Subtotal............................. 11,699,436 6,046,421 5,687,640 1,359,364 1,412,284
Shareholder servicing and distribution
fees:
Primary B Shares....................... 16,264 -- -- 1,682 888
Investor A Shares...................... 31,043 52,736 47,496 5,247 2,429
Investor B Shares...................... 354,345 3,604 3,286 17,160 14,188
Investor C Shares...................... 8,691 2,525 -- 651 2,007
------------ ----------- ------------ ------------ ------------
Total expenses....................... 12,109,779 6,105,286 5,738,422 1,384,104 1,431,796
Fees waived by investment advisor...... -- (145,205) -- -- --
------------ ----------- ------------ ------------ ------------
Net expenses........................... 12,109,779 5,960,081 5,738,422 1,384,104 1,431,796
------------ ----------- ------------ ------------ ------------
NET INVESTMENT INCOME.................... 7,358,400 1,013,265 2,204,108 909,436 303,258
------------ ----------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain/(loss) from:
Security transactions.................. 29,012,202 18,930,388 28,301,833 (24,413,554) (8,114,675)
Futures contracts...................... -- -- -- 10,599 --
Forward foreign exchange contracts and
foreign currency transactions........ (545,795) (8,477,773) (15,093,732) (455,702) (106,265)
------------ ----------- ------------ ------------ ------------
Net realized gain/(loss) on
investments............................ 28,466,407 10,452,615 13,208,101 (24,858,657) (8,220,940)
------------ ----------- ------------ ------------ ------------
Change in unrealized appreciation/
(depreciation) of:
Securities............................. 104,451,318 1,237,968 80,091,698 (8,548,178) (2,212,673)
Futures contracts...................... -- -- -- 57,828 --
Forward foreign exchange contracts,
foreign currencies, and other net
assets............................... (94,950) 6,863,993 (21,403,153) (4) 1,403
------------ ----------- ------------ ------------ ------------
Net change in unrealized
appreciation/(depreciation) of
investments............................ 104,356,368 8,101,961 58,688,545 (8,490,354) (2,211,270)
------------ ----------- ------------ ------------ ------------
Net realized and unrealized gain/(loss)
on investments......................... 132,822,775 18,554,576 71,896,646 (33,349,011) (10,432,210)
------------ ----------- ------------ ------------ ------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.............. $140,181,175 $19,567,841 $ 74,100,754 $(32,439,575) $(10,128,952)
============ =========== ============ ============ ============
</TABLE>
- ---------------
<TABLE>
<C> <S>
(a) Represents financial information for the Pilot International Equity Fund, which was reorganized into International Growth
on May 23, 1997.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE> 49
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY INTERNATIONAL GROWTH
--------------------------------- ------------------------------------------
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED
3/31/98 3/31/97 3/31/98 5/16/97(a) 8/31/96(a)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income............................ $ 7,358,400 $ 5,698,475 $ 1,013,265 $ 2,204,108 $ 3,316,017
Net realized gain on investments................. 28,466,407 22,414,798 10,452,615 13,208,101 23,727,437
Net change in unrealized
appreciation/(depreciation) of investments..... 104,356,368 (15,761,745) 8,101,961 58,688,545 19,084,589
-------------- -------------- ------------ ------------ ------------
Net increase in net assets resulting from
operations..................................... 140,181,175 12,351,528 19,567,841 74,100,754 46,128,043
Distributions to shareholders from net investment
income:
Primary A Shares............................... (12,160,544) (7,716,230) -- (6,573,825) (11,112,928)
Primary B Shares............................... (20,914) (4,088) -- -- --
Investor A Shares.............................. (135,551) (63,728) -- (224,687) (765,596)
Investor B Shares.............................. -- (126,291) -- (3,305) --
Investor C Shares.............................. (7,186) (2,790) -- -- --
Distributions to shareholders in excess of net
investment income:
Primary A Shares............................... (3,213,345) (404,655) -- -- --
Primary B Shares............................... (5,527) (1,165) -- -- --
Investor A Shares.............................. (35,818) (4,380) -- -- --
Investor B Shares.............................. -- (16,858) -- -- --
Investor C Shares.............................. (1,899) (325) -- -- --
Distributions to shareholders from net realized
gain on investments:
Primary A Shares............................... (11,816,851) (29,318,724) (10,545,414) (12,568,191) (9,018,759)
Primary B Shares............................... (31,085) (109,072) -- -- --
Investor A Shares.............................. (166,025) (346,966) (474,429) (530,391) (648,034)
Investor B Shares.............................. (423,555) (1,189,816) (5,610) (8,620) --
Investor C Shares.............................. (13,591) (22,984) (9,640) -- --
Distributions to shareholders in excess of net
realized gain on investments:
Primary A Shares............................... -- (2,311,831) -- -- --
Primary B Shares............................... -- (6,656) -- -- --
Investor A Shares.............................. -- (25,025) -- -- --
Investor B Shares.............................. -- (96,313) -- -- --
Investor C Shares.............................. -- (1,858) -- -- --
Net increase/(decrease) in net assets from Fund
share transactions:
Primary A Shares............................... (197,330,395) 154,790,642 (307,213,938) 69,928,965 192,468,109
Primary B Shares............................... (5,644,652) 5,673,834 -- -- --
Investor A Shares.............................. 2,306,817 2,071,832 (3,574,492) (2,070,774) (2,137,000)
Investor B Shares.............................. (6,953,440) (2,414,814) (91,091) 339,208 183,218
Investor C Shares.............................. (155,174) 354,805 447,103 -- --
-------------- -------------- ------------ ------------ ------------
Net increase/(decrease) in net assets............ (95,627,560) 131,058,072 (301,899,670) 122,389,134 215,097,053
NET ASSETS:
Beginning of period.............................. 1,029,510,029 898,451,957 728,322,699 605,933,565 390,836,512
-------------- -------------- ------------ ------------ ------------
End of period.................................... $ 933,882,469 $1,029,510,029 $426,423,029 $728,322,699 $605,933,565
============== ============== ============ ============ ============
Undistributed net investment
income/(distributions in excess of net
investment income) at end of period............ $ (5,384,256) $ (1,238,945) $(6,766,050) $ 2,415,558 $ 7,013,267
============== ============== ============ ============ ============
</TABLE>
- ---------------
<TABLE>
<C> <S>
(a) Represents financial information for the Pilot International Equity Fund, which was reorganized into International Growth
on May 23, 1997.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<PAGE> 50
NATIONS FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PACIFIC GROWTH EMERGING MARKETS
---------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
3/31/98 3/31/97 3/31/98 3/31/97
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income....................................... $ 909,436 $ 414,727 $ 303,258 $ 63,670
Net realized gain/(loss) on investments..................... (24,858,657) (4,963,671) (8,220,940) 353,894
Net change in unrealized appreciation/(depreciation) of
investments............................................... (8,490,354) 6,509,268 (2,211,270) 6,577,488
------------ ------------ ------------ -----------
Net increase/(decrease) in net assets resulting from
operations................................................ (32,439,575) 1,960,324 (10,128,952) 6,995,052
Distributions to shareholders from net investment income:
Primary A Shares.......................................... (2,134,835) (404,835) (727,867) (106,255)
Primary B Shares.......................................... (5,431) (201) (1,293) (33)
Investor A Shares......................................... (33,937) (9,546) (6,803) (825)
Investor B Shares......................................... (4,905) (145) -- --
Investor C Shares......................................... (1,211) -- (1,349) (108)
Distributions to shareholders in excess of net investment
income:
Primary A Shares.......................................... -- (266,788) -- (372,176)
Primary B Shares.......................................... -- (711) -- (115)
Investor A Shares......................................... -- (5,269) -- (2,891)
Investor B Shares......................................... -- -- -- --
Investor C Shares......................................... -- -- -- (377)
Distributions to shareholders from net realized gain on
investments:
Primary A Shares.......................................... -- -- -- (328,396)
Primary B Shares.......................................... -- -- -- (327)
Investor A Shares......................................... -- -- -- (3,682)
Investor B Shares......................................... -- -- -- (7,629)
Investor C Shares......................................... -- -- -- (1,071)
Distributions to shareholders in excess of net realized gain
on investments:
Primary A Shares.......................................... -- -- -- --
Primary B Shares.......................................... -- -- -- --
Investor A Shares......................................... -- -- -- --
Investor B Shares......................................... -- -- -- --
Investor C Shares......................................... -- -- -- --
Net increase/(decrease) in net assets from Fund share
transactions:
Primary A Shares.......................................... (34,964,986) 26,496,408 7,900,127 22,988,246
Primary B Shares.......................................... (474,147) 620,742 (233,288) 285,704
Investor A Shares......................................... (1,206,953) 1,042,976 (135,253) 341,961
Investor B Shares......................................... (609,915) 8,985 (124,384) 164,903
Investor C Shares......................................... (33,731) 42,848 82,133 181,271
------------ ------------ ------------ -----------
Net increase/(decrease) in net assets....................... (71,909,626) 29,484,788 (3,376,929) 30,133,252
NET ASSETS:
Beginning of year........................................... 128,454,273 98,969,485 79,402,763 49,269,511
------------ ------------ ------------ -----------
End of year................................................. $56,544,647 $128,454,273 $ 76,025,834 $79,402,763
============ ============ ============ ===========
Distributions in excess of net investment income at end of
year...................................................... $ (705,720) $ (75,460) $ (947,937) $ (426,539)
============ ============ ============ ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<PAGE> 51
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY
YEAR ENDED YEAR ENDED
MARCH 31, 1998 MARCH 31, 1997(a)
---------------------------- ----------------------------
SHARES DOLLARS SHARES DOLLARS
------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold...................................................... 16,261,463 $ 225,114,284 26,915,662 $ 361,667,261
Issued as reinvestment of dividends....................... 652,332 8,724,798 986,163 13,366,394
Redeemed.................................................. (31,547,092) (431,169,477) (16,427,294) (220,243,013)
----------- ------------- ----------- -------------
Net increase/(decrease)................................... (14,633,297) $(197,330,395) 11,474,531 $ 154,790,642
=========== ============= =========== =============
PRIMARY B SHARES:
Sold...................................................... 42,344 $ 588,718 514,246 $ 6,923,373
Issued as reinvestment of dividends....................... 2,881 39,297 5,046 68,239
Redeemed.................................................. (465,256) (6,272,667) (97,602) (1,317,778)
----------- ------------- ----------- -------------
Net increase/(decrease)................................... (420,031) $ (5,644,652) 421,690 $ 5,673,834
=========== ============= =========== =============
INVESTOR A SHARES:
Sold...................................................... 2,453,987 $ 33,605,813 650,277 $ 8,611,306
Issued as reinvestment of dividends....................... 22,397 294,781 29,635 394,417
Redeemed.................................................. (2,283,782) (31,593,777) (524,532) (6,933,891)
----------- ------------- ----------- -------------
Net increase.............................................. 192,602 $ 2,306,817 155,380 $ 2,071,832
=========== ============= =========== =============
INVESTOR B SHARES:
Sold...................................................... 107,834 $ 1,474,514 140,712 $ 1,846,991
Issued as reinvestment of dividends....................... 32,097 413,593 106,501 1,416,247
Redeemed.................................................. (656,611) (8,841,547) (433,659) (5,678,052)
----------- ------------- ----------- -------------
Net (decrease)............................................ (516,680) $ (6,953,440) (186,446) $ (2,414,814)
=========== ============= =========== =============
INVESTOR C SHARES:
Sold...................................................... 57,122 $ 754,497 48,335 $ 623,770
Issued as reinvestment of dividends....................... 1,732 22,428 2,084 26,628
Redeemed.................................................. (71,328) (932,099) (22,531) (295,593)
----------- ------------- ----------- -------------
Net increase/(decrease)................................... (12,474) $ (155,174) 27,888 $ 354,805
=========== ============= =========== =============
</TABLE>
- ---------------
<TABLE>
<C> <S>
(a) International Equity's Primary B Shares commenced operations on June 28, 1996.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<PAGE> 52
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH
YEAR ENDED
PERIOD ENDED PERIOD ENDED AUGUST 31, 1996
MARCH 31, 1998(b) MAY 16, 1997(a) (000'S OMITTED)(a)
---------------------------- -------------------------- ---------------------------
SHARES DOLLARS SHARES DOLLARS SHARES DOLLARS
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold.............................. 3,038,140 $ 53,328,448 8,260,617 $142,214,264 12,865,700 $214,270,222
Issued as reinvestment of
dividends....................... 407,058 7,111,302 754,676 13,087,605 967,150 15,490,662
Redeemed.......................... (20,833,048) (367,653,688) (4,945,134) (85,372,904) (2,235,753) 37,292,775
----------- ------------- ---------- ------------ ---------- ------------
Net increase...................... 17,387,850 $(307,213,938) 4,070,159 $ 69,928,965 11,597,097 $192,468,109
=========== ============= ========== ============ ========== ============
INVESTOR A SHARES:
Sold.............................. 360,796 $ 6,487,197 32,085 $ 545,765 73,001 $ 1,223,500
Issued as reinvestment of
dividends....................... 17,200 287,627 27,150 471,335 55,029 877,050
Redeemed.......................... (573,834) (10,349,316) (177,638) (3,087,874) (258,097) (4,237,550)
----------- ------------- ---------- ------------ ---------- ------------
Net increase/(decrease)........... (195,838) $ (3,574,492) (118,403) $ (2,070,774) (130,067) $ (2,137,000)
=========== ============= ========== ============ ========== ============
INVESTOR B SHARES:
Sold.............................. 27,001 $ 485,097 23,599 $ 404,922 11,018 $ 183,218
Issued as reinvestment of
dividends....................... 324 5,592 663 11,467 -- --
Redeemed.......................... (31,750) (581,780) (4,496) (77,181) -- --
----------- ------------- ---------- ------------ ---------- ------------
Net increase...................... (4,425) $ (91,091) 19,766 $ 339,208 11,018 $ 183,218
=========== ============= ========== ============ ========== ============
INVESTOR C SHARES:
Sold.............................. 29,720 $ 549,400 -- -- -- --
Issued as reinvestment of
dividends....................... 480 8,384 -- -- -- --
Redeemed.......................... (6,240) (110,681) -- -- -- --
----------- ------------- ---------- ------------ ---------- ------------
Net increase...................... 23,960 $ 447,103 -- -- -- --
=========== ============= ========== ============ ========== ============
</TABLE>
- ---------------
(a) Represents financial information for the Pilot International Equity Fund,
which was reorganized into International Fund on May 23, 1997.
(b) International Growth's Investor C Shares commenced operations on September
19, 1997.
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE> 53
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
PACIFIC GROWTH
YEAR ENDED YEAR ENDED
MARCH 31, 1998 MARCH 31, 1997(a)
-------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold...................................................... 5,065,224 $ 48,258,632 5,886,080 $ 61,730,754
Issued as reinvestment of dividends....................... 69,485 634,466 19,030 199,151
Redeemed.................................................. (9,468,232) (83,858,084) (3,392,989) (35,433,497)
---------- ------------ ---------- ------------
Net increase/(decrease)................................... (4,333,523) $(34,964,986) 2,512,121 $ 26,496,408
========== ============ ========== ============
PRIMARY B SHARES:
Sold...................................................... 12,212 $ 131,159 67,793 $ 707,717
Issued as reinvestment of dividends....................... 385 4,285 56 591
Redeemed.................................................. (68,336) (609,591) (8,409) (87,566)
---------- ------------ ---------- ------------
Net increase/(decrease)................................... (55,739) $ (474,147) 59,440 $ 620,742
========== ============ ========== ============
INVESTOR A SHARES:
Sold...................................................... 2,477,765 $ 25,160,986 869,893 $ 9,124,829
Issued as reinvestment of dividends....................... 3,065 30,487 1,339 14,016
Redeemed.................................................. (2,600,292) (26,398,426) (766,685) (8,095,869)
---------- ------------ ---------- ------------
Net increase/(decrease)................................... (119,462) $ (1,206,953) 104,547 $ 1,042,976
========== ============ ========== ============
INVESTOR B SHARES:
Sold...................................................... 16,918 $ 140,464 47,220 $ 485,528
Issued as reinvestment of dividends....................... 683 4,760 -- --
Redeemed.................................................. (83,096) (755,139) (45,803) (476,543)
---------- ------------ ---------- ------------
Net increase/(decrease)................................... (65,495) $ (609,915) 1,417 $ 8,985
========== ============ ========== ============
INVESTOR C SHARES:
Sold...................................................... 1,133 $ 9,969 4,398 $ 46,738
Issued as reinvestment of dividends....................... 90 1,209 14 145
Redeemed.................................................. (5,284) (44,909) (409) (4,035)
---------- ------------ ---------- ------------
Net increase/(decrease)................................... (4,061) $ (33,731) 4,003 $ 42,848
========== ============ ========== ============
</TABLE>
- ---------------
(a) Pacific Growth's Primary B Shares commenced operations on June 28, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
49
<PAGE> 54
NATIONS FUNDS
- --------------------------------------------------------------------------------
SCHEDULE OF CAPITAL STOCK ACTIVITY (CONTINUED)
<TABLE>
<CAPTION>
EMERGING MARKETS
YEAR ENDED YEAR ENDED
MARCH 31, 1998 MARCH 31, 1997(a)
-------------------------- --------------------------
SHARES DOLLARS SHARES DOLLARS
--------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES:
Sold...................................................... 3,664,626 $ 43,349,290 3,555,779 $ 38,563,526
Issued as reinvestment of dividends....................... 17,560 217,038 34,126 355,453
Redeemed.................................................. (3,424,356) (35,666,201) (1,487,854) (15,930,733)
---------- ------------ ---------- ------------
Net increase.............................................. 257,830 $ 7,900,127 2,102,051 $ 22,988,246
========== ============ ========== ============
PRIMARY B SHARES:
Sold...................................................... 18,046 $ 213,142 29,362 $ 317,536
Issued as reinvestment of dividends....................... 66 819 29 305
Redeemed.................................................. (41,001) (447,249) (2,995) (32,137)
---------- ------------ ---------- ------------
Net increase/(decrease)................................... (22,889) $ (233,288) 26,396 $ 285,704
========== ============ ========== ============
INVESTOR A SHARES:
Sold...................................................... 172,116 $ 1,807,093 118,447 $ 1,294,139
Issued as reinvestment of dividends....................... 527 6,503 658 6,821
Redeemed.................................................. (189,410) (1,948,849) (86,867) (958,999)
---------- ------------ ---------- ------------
Net increase/(decrease)................................... (16,767) $ (135,253) 32,238 $ 341,961
========== ============ ========== ============
INVESTOR B SHARES:
Sold...................................................... 22,244 $ 245,247 37,467 $ 402,741
Issued as reinvestment of dividends....................... -- -- 726 7,402
Redeemed.................................................. (35,815) (369,631) (23,492) (245,240)
---------- ------------ ---------- ------------
Net increase/(decrease)................................... (13,571) $ (124,384) 14,701 $ 164,903
========== ============ ========== ============
INVESTOR C SHARES:
Sold...................................................... 10,163 $ 105,986 17,883 $ 183,109
Issued as reinvestment of dividends....................... 110 1,349 105 1,555
Redeemed.................................................. (2,221) (25,202) (337) (3,393)
---------- ------------ ---------- ------------
Net increase.............................................. 8,052 $ 82,133 17,651 $ 181,271
========== ============ ========== ============
</TABLE>
- ---------------
(a) Emerging Market's Primary B Shares commenced operations on June 28, 1996.
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE> 55
[THIS PAGE INTENTIONALLY LEFT BLANK.]
51
<PAGE> 56
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
NET ASSET NET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT AND UNREALIZED (DECREASE) IN FROM NET IN EXCESS OF
BEGINNING INCOME/ GAIN/(LOSS) NET ASSET VALUE INVESTMENT NET INVESTMENT
OF PERIOD (LOSS) ON INVESTMENTS FROM OPERATIONS INCOME INCOME
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY
PRIMARY A SHARES
Year ended 03/31/1998#................ $13.13 $ 0.11 $ 1.95 $ 2.06 $(0.17) $(0.05)
Year ended 03/31/1997#................ 13.50 0.08 0.11 0.19 (0.11) (0.00)***
Period ended 03/31/1996(a)#........... 11.75 0.07 1.80 1.87 (0.06) (0.04)
Year ended 05/31/1995#................ 12.06 0.14 (0.20) (0.06) (0.03) --
Year ended 05/31/1994#................ 10.60 0.09 1.44 1.53 (0.05) --
Year ended 05/31/1993#................ 10.40 0.09 0.21 0.30 (0.08) --
Period ended 05/31/1992*.............. 10.00 0.08 0.36 0.44 (0.04) --
PRIMARY B SHARES
Year ended 03/31/1998#................ $13.11 $ 0.04 $ 1.91 $ 1.95 $(0.08) $(0.02)
Period ended 03/31/1997*#............. 13.65 0.01 (0.09)(c) (0.08) (0.01) (0.00)***
INVESTOR A SHARES
Year ended 03/31/1998#................ $13.01 $ 0.07 $ 1.94 $ 2.01 $(0.15) $(0.04)
Year ended 03/31/1997#................ 13.39 0.05 0.11 0.16 (0.09) (0.00)***
Period ended 03/31/1996(a)#........... 11.67 0.04 1.78 1.82 (0.04) (0.04)
Year ended 05/31/1995#................ 12.00 0.11 (0.20) (0.09) (0.02) --
Year ended 05/31/1994#................ 10.56 0.06 1.44 1.50 (0.04) --
Period ended 05/31/1993*#............. 10.38 0.07 0.21 0.28 (0.08) --
INVESTOR B SHARES
Year ended 03/31/1998#................ $12.83 $(0.03) $ 1.92 $ 1.89 -- --
Year ended 03/31/1997#................ 13.27 (0.05) 0.10 0.05 $(0.04) $(0.00)***
Period ended 03/31/1996(a)#........... 11.56 (0.02) 1.78 1.76 -- (0.03)
Year ended 05/31/1995#................ 11.96 0.05 (0.22) (0.17) (0.01) --
Period ended 05/31/1994*#............. 10.51 (0.00)*** 1.51 1.51 (0.04) --
INVESTOR C SHARES
Year ended 03/31/1998#................ $12.74 $(0.01) $ 1.89 $ 1.88 $(0.10) $(0.02)
Year ended 03/31/1997#................ 13.13 0.02 0.10 0.12 (0.06) (0.00)***
Period ended 03/31/1996(a)#........... 11.45 (0.03) 1.75 1.72 -- (0.02)
Year ended 05/31/1995#................ 11.86 0.02 (0.21) (0.19) -- --
Year ended 05/31/1994#................ 10.49 (0.03) 1.43 1.40 (0.01) --
Period ended 05/31/1993*# ............ 10.10 0.00*** 0.48 0.48 (0.07) --
<CAPTION>
DISTRIBUTIONS
FROM NET
REALIZED
CAPITAL GAINS
-------------
<S> <C>
INTERNATIONAL EQUITY
PRIMARY A SHARES
Year ended 03/31/1998#................ $(0.16)
Year ended 03/31/1997#................ (0.42)
Period ended 03/31/1996(a)#........... (0.02)
Year ended 05/31/1995#................ (0.12)
Year ended 05/31/1994#................ (0.02)
Year ended 05/31/1993#................ (0.02)
Period ended 05/31/1992*.............. --
PRIMARY B SHARES
Year ended 03/31/1998#................ $(0.16)
Period ended 03/31/1997*#............. (0.42)
INVESTOR A SHARES
Year ended 03/31/1998#................ $(0.16)
Year ended 03/31/1997#................ (0.42)
Period ended 03/31/1996(a)#........... (0.02)
Year ended 05/31/1995#................ (0.12)
Year ended 05/31/1994#................ (0.02)
Period ended 05/31/1993*#............. (0.02)
INVESTOR B SHARES
Year ended 03/31/1998#................ $(0.16)
Year ended 03/31/1997#................ (0.42)
Period ended 03/31/1996(a)#........... (0.02)
Year ended 05/31/1995#................ (0.12)
Period ended 05/31/1994*#............. (0.02)
INVESTOR C SHARES
Year ended 03/31/1998#................ $(0.16)
Year ended 03/31/1997#................ (0.42)
Period ended 03/31/1996(a)#........... (0.02)
Year ended 05/31/1995#................ (0.12)
Year ended 05/31/1994#................ (0.02)
Period ended 05/31/1993*# ............ (0.02)
</TABLE>
- ---------------
<TABLE>
<C> <S>
* International Equity's Primary A, Primary B, Investor A, Investor B and Investor C Shares commenced operations on
December 2, 1991, June 28, 1996, June 3, 1992, June 7, 1993 and June 17, 1992, respectively.
*** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and does not reflect the deduction of any
applicable sales charges.
+++ Unaudited.
# Per share net investment income/(loss) has been calculated using the monthly average shares method.
## Amount represents less than 0.01%.
(a) Fiscal year end changed to March 31. Prior to this, the fiscal year end was May 31.
(b) Average commission rate paid per share of securities purchased and sold by the Fund.
(c) The amount shown at this caption for each share outstanding throughout the period may not accord with the net realized
and unrealized gain/(loss) for the period because of the timing of purchases and withdrawals of shares in relation to
the fluctuating market values of the portfolio.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE> 57
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WITHOUT WAIVERS
AND/OR
EXPENSE
REIMBURSEMENTS
---------------
RATIO OF RATIO OF RATIO OF
DISTRIBUTIONS TOTAL NET ASSET NET ASSETS OPERATING NET INVESTMENT OPERATING
IN EXCESS OF DIVIDENDS VALUE END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO EXPENSES TO
NET REALIZED AND END OF TOTAL PERIOD AVERAGE TO AVERAGE TURNOVER AVERAGE NET
CAPITAL GAINS DISTRIBUTIONS PERIOD RETURN++ (IN 000'S) NET ASSETS NET ASSETS RATE ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-- $(0.38) $14.81 16.06% $885,329 1.14% 0.76% 64% 1.14%
$(0.03) (0.56) 13.13 1.32 976,855 1.16 0.62 36 1.16
-- (0.12) 13.50 16.01 849,731 1.17+ 0.65+ 26 1.18+
(0.10) (0.25) 11.75 (0.46) 572,940 1.03 1.17 92 1.04
-- (0.07) 12.06 14.37 401,559 1.17 0.75 39 1.18
-- (0.10) 10.60 3.14 118,873 1.30 1.03 41 1.32
-- (0.04) 10.40 4.43+++ 83,970 1.33+ 1.81+ 11 1.43+
-- $(0.26) $14.80 15.09% $ 25 1.64% 0.26% 64% 1.64%
$(0.03) (0.46) 13.11 (0.66) 5,526 1.66+ 0.12+ 36 1.66+
-- $(0.35) $14.67 15.77% $ 13,477 1.39% 0.51% 64% 1.39%
$(0.03) (0.54) 13.01 1.08 9,443 1.41 0.37 36 1.41
-- (0.10) 13.39 15.66 7,643 1.42+ 0.40+ 26 1.43+
(0.10) (0.24) 11.67 (0.69) 4,877 1.28 0.92 92 1.29
-- (0.06) 12.00 14.00 3,219 1.42 0.50 39 1.43
-- (0.10) 10.56 2.91 839 1.55+ 0.78+ 41 1.62+
-- $(0.16) $14.56 14.93% $ 34,119 2.14% (0.24)% 64% 2.14%
$(0.03) (0.49) 12.83 0.28 36,698 2.16 (0.38) 36 2.16
-- (0.05) 13.27 15.25 40,426 1.99+ (0.17)+ 26 2.00+
(0.10) (0.23) 11.56 (1.30) 31,372 1.78 0.42 92 1.79
-- (0.06) 11.96 14.32 17,349 1.92+ (0.00)+## 39 1.93+
-- $(0.28) $14.34 15.05% $ 933 1.97% (0.07)% 64% 1.97%
$(0.03) (0.51) 12.74 0.77 988 1.66 0.12 36 1.66
-- (0.04) 13.13 15.09 652 2.09+ (0.27)+ 26 2.10+
(0.10) (0.22) 11.45 (1.56) 495 2.03 0.17 92 2.04
-- (0.03) 11.86 13.21 339 2.17 (0.25) 39 2.18
-- (0.09) 10.49 4.97 200 2.30+ 0.03+ 41 2.32+
<CAPTION>
AVERAGE
COMMISSION
RATE PAID(b)
------------
<S> <C>
$0.0050
0.0279
0.0272
==
==
$0.0050
0.0279
$0.0050
0.0279
0.0272
==
--
$0.0050
0.0279
0.0272
==
$0.0050
0.0279
0.0272
==
--
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<PAGE> 58
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE NET AND UNREALIZED (DECREASE) IN FROM NET FROM NET
BEGINNING INVESTMENT GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT REALIZED
OF PERIOD INCOME/(LOSS) INVESTMENTS FROM OPERATIONS INCOME CAPITAL GAINS
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH
PRIMARY A SHARES*
Period ended 03/31/1998#............ $18.43 $ 0.03 $ 1.30 $ 1.33 $ -- $(0.34)
Period ended 05/16/1997............. 17.05 0.05 1.84 1.89 (0.17) (0.34)
Year ended 08/31/1996............... 16.24 0.18 1.48 1.66 (0.46) (0.39)
Year ended 08/31/1995#.............. 16.34 0.13 0.17 0.30 (0.11) (0.29)
Year ended 08/31/1994#.............. 14.14 0.11 2.24 2.35 -- (0.15)
Period ended 08/31/1993#(a)......... 13.15 (0.01) 1.00 0.99 -- --
INVESTOR A SHARES*
Period ended 03/31/1998#............ $18.27 $(0.01) $ 1.29 $ 1.28 $ -- $(0.34)
Period ended 05/16/1997............. 16.90 (0.05) 1.90 1.85 (0.14) (0.34)
Year ended 08/31/1996............... 16.14 0.04 1.57 1.61 (0.46) (0.39)
Year ended 08/31/1995#.............. 16.29 0.08 0.17 0.25 (0.11) (0.29)
Year ended 08/31/1994#.............. 14.13 0.07 2.24 2.31 -- (0.15)
Period ended 08/31/1993#(b)......... 11.85 0.02 2.26 2.28 -- --
INVESTOR B SHARES*
Period ended 03/31/1998#............ $18.32 $(0.11) $ 1.24 $ 1.13 $ -- $(0.34)
Period ended 05/16/1997............. 17.04 (0.05) 1.79 1.74 (0.12) (0.34)
Period ended 08/31/1996(c).......... 17.54 -- (0.50) (0.50) -- --
INVESTOR C SHARES**
Period ended 03/31/1998#............ $18.49 $(0.09) $ 1.36 $ 1.27 $ -- $(0.34)
</TABLE>
- ---------------
<TABLE>
<C> <S>
* The financial information for the fiscal periods through May 23, 1997 reflect the financial information for the Pilot
International Equity Funds' Pilot Shares, Class A Shares and Class B Shares, which were reorganized into the Primary A
Shares, Investor A Shares and Investor B Shares, respectively, as of May 23, 1997. Prior to July 1997, the
investment manager to International Growth was Kleinwort Benson. Effective July 1997, the investment manager to
International Growth was Gartmore Global Partners.
** International Growth's Investor C Shares commenced operations on September 19, 1997.
(a) Shares were initially issued on July 26, 1993.
(b) Prior to a tax-free reorganization into Pilot Administration Shares (subsequently renamed Class A Shares) effective July
12, 1993, the Pilot Kleinwort Benson International Equity Portfolio (subsequently renamed the Pilot International
Equity Fund) was a separate portfolio of Kleinwort Benson Investment Strategies known as Kleinwort Benson
International Equity Fund. The predecessor portfolio was advised by Kleinwort Benson International Investment Limited
and had a December 31 year end.
(c) Shares were initially issued on July 1, 1996.
(d) Average commission rate paid per share of securities purchased and sold by the Fund.
(e) Excludes transfer of assets effective August 6, 1993 from a collective trust for which Boatmen's Trust Company served as
Trustee.
+ Annualized.
++ Total return represents aggregate total return for the period indicated and does not reflect the deduction of any
applicable sales charges.
# Per share net investment income/(loss) has been calculated using the monthly average shares method.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<PAGE> 59
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF RATIO OF
NET ASSET NET ASSETS OPERATING RATIO OF NET INVESTMENT
TOTAL VALUE END OF EXPENSES TO OPERATING EXPENSES INCOME TO PORTFOLIO AVERAGE
DIVIDENDS AND END OF TOTAL PERIOD AVERAGE NET TO AVERAGE NET ASSETS AVERAGE NET TURNOVER COMMISSION
DISTRIBUTIONS PERIOD RETURN++ (IN 000'S) ASSETS WITHOUT WAIVERS ASSETS RATE RATE PAID(D)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(0.34) $19.42 7.39% $401,105 1.15%+ 1.17%+ 0.21%+ 11% $0.0190
(0.51) 18.43 11.28 701,033 1.18+ 1.18+ 0.47+ 34 0.0107
(0.85) 17.05 10.64 579,019 1.08 1.08 0.69 22 0.0160
(0.40) 16.24 2.08 363,212 1.18 1.18 0.82 36 --
(0.15) 16.34 16.75 307,561 1.12 1.12 0.75 35 --
-- 14.14 7.53 195,548 1.31+ 1.31+ (0.56)+ 27(e) --
$(0.34) $19.21 7.18% $ 24,353 1.40%+ 1.42%+ (0.04)%+ 11% $0.0190
(0.48) 18.27 11.14 26,730 1.42+ 1.42+ 0.29+ 34 0.0107
(0.85) 16.90 10.40 26,730 1.32 1.32 0.48 22 0.0160
(0.40) 16.14 1.77 27,625 1.42 1.42 0.50 36 --
(0.15) 16.29 16.48 44,990 1.37 1.37 0.48 35 --
-- 14.13 19.24 55,816 2.17+ 2.17 0.25+ 27(e) --
$(0.34) $19.11 6.34% $ 500 2.15%+ 2.17%+ (0.79)%+ 11% $0.0190
(0.46) 18.32 10.37 560 2.18+ 2.18+ (0.61)+ 34 0.0107
-- 17.04 (2.85) 184 2.06+ 2.06+ (0.32)+ 22 0.0160
$(0.34) $19.42 7.04% $ 465 2.15%+ 2.17%+ (0.79)%+ 11% $0.0190
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<PAGE> 60
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
NET ASSET NET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT AND UNREALIZED (DECREASE) IN FROM NET IN EXCESS OF
BEGINNING INCOME/ GAINS/(LOSS) NET ASSET VALUE INVESTMENT NET INVESTMENT
OF PERIOD (LOSS) ON INVESTMENTS FROM OPERATIONS INCOME INCOME
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC GROWTH
PRIMARY A SHARES
Year ended 03/31/1998#.................. $10.41 $ 0.09 $(3.01) $(2.92) $(0.21) $ --
Year ended 03/31/1997................... 10.24 0.04 0.19 0.23 (0.03) (0.03)
Period ended 03/31/1996**#.............. 10.00 (0.02) 0.29 0.27 -- (0.03)
PRIMARY B SHARES
Year ended 03/31/1998#.................. $10.39 $ 0.05 $(3.01) $(2.96) $(0.12) $ --
Period ended 03/31/1997**............... 10.34 0.01 0.07 0.08 (0.02) (0.01)
INVESTOR A SHARES
Year ended 03/31/1998#.................. $10.37 $ 0.07 $(2.98) $(2.91) $(0.17) $ --
Year ended 03/31/1997................... 10.23 0.00*** 0.19 0.19 (0.03) (0.02)
Period ended 03/31/1996**#.............. 10.00 (0.04) 0.29 0.25 -- (0.02)
INVESTOR B SHARES
Year ended 03/31/1998#.................. $10.30 $(0.01) $(2.98) $(2.99) $(0.03) $ --
Year ended 03/31/1997................... 10.18 (0.05) 0.19 0.14 (0.01) (0.01)
Period ended 03/31/1996**#.............. 10.00 (0.10) 0.29 0.19 -- (0.01)
INVESTOR C SHARES
Year ended 03/31/1998#.................. $10.34 $ 0.01 $(2.98) $(2.97) $(0.13) $ --
Year ended 03/31/1997................... 10.20 0.00*** 0.14 0.14 -- --
Period ended 03/31/1996**#.............. 10.00 (0.09) 0.29 0.20 -- --
</TABLE>
- ---------------
<TABLE>
<C> <S>
** Pacific Growth's Primary A, Investor A, Investor B and
Investor C Shares commenced operations on June 30, 1995.
Pacific Growth's Primary B Shares commenced operations on
June 28, 1996.
*** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the
period indicated and does not reflect the deduction of any
applicable sales charges.
# Per share net investment income/(loss) has been calculated
using the monthly average shares method.
(b) Average commission rate paid per share of securities
purchased and sold by the Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
56
<PAGE> 61
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT
DIVIDENDS NET ASSET END OF EXPENSES TO INCOME/(LOSS) PORTFOLIO AVERAGE
AND VALUE TOTAL PERIOD AVERAGE TO AVERAGE TURNOVER COMMISSION
DISTRIBUTIONS END OF PERIOD RETURN++ (IN 000'S) NET ASSETS NET ASSETS RATE RATE PAID(B)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(0.21) $ 7.28 (28.35)% $ 54,409 1.37% 0.94% 123% $0.0070
(0.06) 10.41 2.18 122,887 1.42 0.39 78 0.0126
(0.03) 10.24 2.66 95,210 1.76+ (0.27)+ 23 0.0178
$(0.12) $ 7.31 (28.77)% $ 27 1.87% 0.44% 123% $0.0070
(0.03) 10.39 0.75 618 1.92+ (0.11)+ 78 0.0126
$(0.17) $ 7.29 (28.59)% $ 871 1.62% 0.69% 123% $0.0070
(0.05) 10.37 1.86 2,480 1.67 0.14 78 0.0126
(0.02) 10.23 2.52 1,375 2.01+ (0.52)+ 23 0.0178
$(0.03) $ 7.28 (29.04)% $ 1,195 2.37% (0.06)% 123% $0.0070
(0.02) 10.30 1.18 2,367 2.42 (0.61) 78 0.0126
(0.01) 10.18 1.88 2,324 2.76+ (1.27)+ 23 0.0178
$(0.13) $ 7.24 (28.91)% $ 42 2.20% 0.11% 123% $0.0070
-- 10.34 1.57 102 1.92 (0.11) 78 0.0126
-- 10.20 2.00 60 2.65+ (1.16)+ 23 0.0178
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
57
<PAGE> 62
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
<TABLE>
<CAPTION>
NET ASSET NET NET REALIZED NET INCREASE/ DIVIDENDS DISTRIBUTIONS
VALUE INVESTMENT AND UNREALIZED (DECREASE) IN FROM NET IN EXCESS OF
BEGINNING INCOME/ GAIN/(LOSS) ON NET ASSET VALUE INVESTMENT NET INVESTMENT
OF PERIOD (LOSS) INVESTMENTS FROM OPERATIONS INCOME INCOME
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EMERGING MARKETS
PRIMARY A SHARES
Year ended 03/31/1998#.............. $11.41 $ 0.04 $(0.76) $(0.72) $(0.09) $ --
Year ended 03/31/1997 #............. 10.34 0.01 1.21 1.22 (0.02) (0.07)
Period ended 03/31/1996*#........... 10.00 (0.03) 0.37 0.34 -- (0.00)***
PRIMARY B SHARES
Year ended 03/31/1998 #............. $11.40 $(0.02) $(0.75) $(0.77) $(0.06) $ --
Period ended 03/31/1997 *#.......... 10.71 (0.04) 0.82 0.78 (0.01) (0.02)
INVESTOR A SHARES
Year ended 03/31/1998#.............. $11.39 $ 0.01 $(0.75) $(0.74) $(0.08) $ --
Year ended 03/31/1997 #............. 10.32 (0.01) 1.21 1.20 (0.02) (0.05)
Period ended 03/31/1996*#........... 10.00 (0.05) 0.37 0.32 -- --
INVESTOR B SHARES
Year ended 03/31/1998#.............. $11.31 $(0.07) $(0.75) $(0.82) $ -- $ --
Year ended 03/31/1997 #............. 10.26 (0.09) 1.20 1.11 -- --
Period ended 03/31/1996*#........... 10.00 (0.11) 0.37 0.26 -- --
INVESTOR C SHARES
Year ended 03/31/1998#.............. $11.34 $(0.05) $(0.75) $(0.80) $(0.07) $ --
Year ended 03/31/1997 #............. 10.27 (0.04) 1.20 1.16 (0.01) (0.02)
Period ended 03/31/1996*#........... 10.00 (0.10) 0.37 0.27 -- --
<CAPTION>
DISTRIBUTIONS
FROM NET
REALIZED
CAPITAL GAINS
-------------
<S> <C>
EMERGING MARKETS
PRIMARY A SHARES
Year ended 03/31/1998#.............. $ --
Year ended 03/31/1997 #............. (0.06)
Period ended 03/31/1996*#........... --
PRIMARY B SHARES
Year ended 03/31/1998 #............. $ --
Period ended 03/31/1997 *#.......... (0.06)
INVESTOR A SHARES
Year ended 03/31/1998#.............. $ --
Year ended 03/31/1997 #............. (0.06)
Period ended 03/31/1996*#........... --
INVESTOR B SHARES
Year ended 03/31/1998#.............. $ --
Year ended 03/31/1997 #............. (0.06)
Period ended 03/31/1996*#........... --
INVESTOR C SHARES
Year ended 03/31/1998#.............. $ --
Year ended 03/31/1997 #............. (0.06)
Period ended 03/31/1996*#........... --
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Emerging Market's Primary A, Investor A, Investor B and
Investor C Shares commenced operations on June 30, 1995.
Emerging Market's Primary B Shares commenced operations on
June 28, 1996.
*** Amount represents less than $0.01 per share.
+ Annualized.
++ Total return represents aggregate total return for the
period indicated and does not reflect the deduction of any
applicable sales charges.
# Per share net investment income/(loss) has been calculated
using the monthly average shares method.
(a) Average commission rate paid per share of securities
purchased and sold by the Fund.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
58
<PAGE> 63
NATIONS FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
RATIO OF RATIO OF
TOTAL NET ASSETS OPERATING NET INVESTMENT
DIVIDENDS NET ASSET END OF EXPENSES TO INCOME TO PORTFOLIO AVERAGE
AND VALUE TOTAL PERIOD AVERAGE NET AVERAGE NET TURNOVER COMMISSION
DISTRIBUTIONS END OF PERIOD RETURN++ (IN 000'S) ASSETS ASSETS RATE RATE PAID(A)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$(0.09) $10.60 (6.39)% $73,797 1.57% 0.36% 63% $0.0020
(0.15) 11.41 11.97 76,483 1.74 0.13 31 0.0003
0.00*** 10.34 3.42 47,560 2.13+ (0.38)+ 17 0.0004
$(0.06) $10.57 (6.80)% $ 37 2.07% (0.14)% 63% $0.0020
(0.09) 11.40 7.34 301 2.24+ (0.37)+ 31 0.0003
$(0.08) $10.57 (6.60)% $ 652 1.82% 0.11% 63% $0.0020
(0.13) 11.39 11.74 894 1.99 (0.12) 31 0.0003
-- 10.32 3.20 477 2.38+ (0.63)+ 17 0.0004
$ 0.00 $10.49 (7.25)% $ 1,247 2.57% (0.64)% 63% $0.0020
(0.06) 11.31 10.88 1,499 2.74 (0.87) 31 0.0003
-- 10.26 2.60 1,209 3.13+ (1.38)+ 17 0.0004
$(0.07) $10.47 (7.17)% $ 293 2.40% (0.47)% 63% $0.0020
(0.09) 11.34 11.34 226 2.24 (0.37) 31 0.0003
-- 10.27 2.70 23 3.02+ (1.27)+ 17 0.0004
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
59
<PAGE> 64
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
Nations Fund, Inc. (the "Company") and Nations Fund Portfolios, Inc. ("Nations
Portfolios") are each registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end investment company. At March 31, 1998,
the Company offered eight separate portfolios and Nations Portfolios offered
three separate portfolios. Information presented in these financial statements
pertains to the international stock portfolios of the Company and Nations
Portfolios (each a "Fund" and collectively, the "Funds"). The financial
statements for the other portfolios of the Company and Nations Portfolios are
presented under separate cover. The Funds currently offer five classes of
shares: Primary A Shares, Primary B Shares, Investor A Shares, Investor B Shares
(formerly Investor N Shares) and Investor C Shares. Shareholders of a Fund have
equal voting rights on matters affecting all shareholders of the Fund. In
addition, each class of shares of a Fund has exclusive voting rights on matters
that relate solely to its class and separate voting rights on matters in which
the interests of one class of shares differ from the interests of any other
class.
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates. The following is a summary of the
significant accounting policies followed by the Funds in the preparation of
their financial statements.
Securities Valuation: Equity securities which are traded on a recognized stock
exchange or on the NASDAQ system are valued at the last sales price on the
securities exchange or market on which such securities are primarily traded.
Securities traded only on over-the-counter markets (other than on the NASDAQ
system) are valued at the closing over-the-counter bid prices or, if no sale
occurred on such day, at the mean of the current bid and asked prices. Certain
securities may be valued by one or more market makers. Debt obligations are
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 general market conditions. Securities for which market
quotations are not readily available and certain other assets are valued by the
investment adviser under the supervision of the Board of Directors. Short-term
investments that mature in 60 days or less are valued at amortized cost.
Foreign Currency Translation: The books and records of the Funds are maintained
in U.S. dollars. Foreign currencies, investments and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains and losses between trade date and
settlement date of investment securities transactions, foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of a Fund and the amounts actually received. The effects
of changes in foreign currency exchange rates on investments in securities are
not segregated in the Statements of Operations from the effects of changes in
market prices of those securities, but are included with the net realized and
unrealized gain or loss on investment securities.
Forward Foreign Currency Transactions: Generally, a Fund may enter into forward
currency exchange contracts only under two circumstances: (i) when the Fund
enters into a contract for the purchase or sale of a security denominated in a
foreign currency, to "lock" in the U.S. exchange rate of the transaction, with
such period being a short-dated contract covering the period between transaction
date and settlement date; and (ii) when the investment adviser or sub-adviser
believes that the currency of a particular foreign country may experience a
substantial movement against the U.S. dollar. Forward foreign currency contracts
are valued at the forward rate and are marked-to-market daily. The change in
market value is recorded by the Fund as an unrealized gain or loss. When the
contract is closed or offset with the same counterparty, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed or offset.
60
<PAGE> 65
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Forward foreign currency contracts will be used primarily to protect the Funds
from adverse currency movements and will generally not be entered into for terms
greater than one year. The use of forward foreign currency contracts does not
eliminate fluctuations in the underlying prices of the Fund's investment
securities, however, it does establish a rate of exchange that can be achieved
in the future. The use of forward contracts involves the risk that anticipated
currency movements will not be accurately predicted. A forward contract would
limit the risk of loss due to a decline in the value of a particular currency,
however, it also would limit any potential gain that might result should the
value of the currency increase instead of decrease. These contracts may involve
market risk in excess of the unrealized gain or loss reflected in the Statements
of Assets and Liabilities. In addition, the Funds could be exposed to risks if
counterparties to the contracts are unable to meet the terms of their contracts.
The counterparty risk exposure is, therefore, closely monitored and contracts
are only executed with high credit quality financial institutions.
Federal Income Tax: Each Fund intends to continue to qualify as a regulated
investment company by complying with the requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and by
distributing substantially all of its earnings to its shareholders.
Therefore, no Federal income or excise tax provision is applicable. The Funds
may be subject to foreign taxes on income, gains on investments or currency
repatriation, a portion of which may be recoverable. The Funds will accrue such
taxes and recoveries as applicable, based upon their current interpretation of
tax rules and regulations that exist in the markets in which they invest.
Securities Transactions and Investment Income: Securities transactions are
accounted for on a trade date basis. Realized gains and losses are computed
based on the specific identification of the securities sold. Interest income,
adjusted for accretion of discounts and amortization of premiums, is earned from
settlement date and is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that certain dividends from foreign
securities are recorded as soon as the Funds are informed of the ex-dividend
date. Each Fund's investment income and realized and unrealized gains and losses
are allocated among its classes based upon the relative net assets of each class
of shares.
Dividends and Distributions to Shareholders: Distributions from net investment
income, if any, for the Funds are declared and paid each calendar quarter. These
distributions are recorded on ex-date. Each Fund will distribute net realized
capital gains (including net short-term capital gains) annually after the fiscal
year in which the capital gains were earned, unless offset by any available
capital loss carryforward. Income distributions and capital gain distributions
on a Fund level are determined in accordance with Federal income tax regulations
which may differ from generally accepted accounting principles.
Certain reclassifications are made to each Fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryforwards) under Federal income tax regulations. These reclassifications are
due to different book and tax accounting for foreign currency, amortization of
organization costs, investments in passive foreign investment companies and the
Fund's use of the tax accounting practice known as equalization.
Reclassifications for the year ended March 31, 1998 were as follows:
<TABLE>
<CAPTION>
INCREASE/ INCREASE/
INCREASE/ (DECREASE) (DECREASE)
(DECREASE) UNDISTRIBUTED ACCUMULATED
PAID-IN NET INVESTMENT NET REALIZED
CAPITAL INCOME GAIN/(LOSS)
------------------------------------------
<S> <C> <C> <C>
International Equity....... $7,321,707 $ 4,077,073 $(11,398,780)
International Growth....... (38,442) (10,194,873) 10,233,315
Pacific Growth............. (31,076) 640,623 (609,547)
Emerging Markets........... (18,921) (87,344) 106,265
</TABLE>
Expenses: General expenses of the Company or Nations Portfolios are allocated
to the relevant Funds based upon relative net assets. Operating expenses
directly attributable to a Fund or a class of shares are charged to such Fund's
or class's operations. Expenses of each Fund not directly attributable to the
operations of any class of shares are prorated among the classes based on the
relative net assets of each class of shares. The Funds bear all costs in
connection with their organization, including the fees and expenses of
registering and qualifying their shares for distribution under Federal and state
securities regulations. All such costs are being amortized on a straight-line
basis over a period of five years from commencement of operations.
61
<PAGE> 66
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT ADVISORY FEE, SUB-ADVISORY FEE, ADMINISTRATION FEE AND RELATED
PARTY TRANSACTIONS
Each of the Company and Nations Portfolios has, on behalf of its Funds, entered
into an investment advisory agreement (the "Investment Advisory Agreements")
with NationsBanc Advisors, Inc. ("NBAI"), a wholly-owned subsidiary of
NationsBank, N.A. ("NationsBank"), pursuant to which NBAI provides investment
advisory services to the Funds. Under the terms of these Investment Advisory
Agreements, NBAI is entitled to receive an advisory fee calculated daily and
payable monthly based on the following annual rates multiplied by the average
daily net assets of each Fund:
<TABLE>
<CAPTION>
ANNUAL RATE
-----------
<S> <C>
International Equity, International Growth and
Pacific Growth..................................... 0.90%
Emerging Markets.................................... 1.10
</TABLE>
Each of the Company and Nations Portfolios has, on behalf of the Funds, entered
into a sub-advisory agreement (the "Sub-Advisory Agreements") with NBAI and
Gartmore Global Partners ("Gartmore"). Gartmore is a joint venture structured as
a general partnership between NB Partner Corp., a wholly-owned subsidiary of
NationsBank, and Gartmore U.S. Limited, an indirect wholly-owned subsidiary of
Gartmore Investment Management plc ("Gartmore plc"), which is a United Kingdom
("U.K.") holding company for a leading U.K. based international fund management
group of companies. National Westminster Bank plc and its affiliated entities
own 100% of the equity of Gartmore plc.
Under the terms of the Sub-Advisory Agreements, Gartmore is entitled to receive
a sub-advisory fee from NBAI at the following annual rates of each Fund's
average daily net assets:
<TABLE>
<CAPTION>
ANNUAL RATE
-----------
<S> <C>
International Equity and Pacific Growth............. 0.70%
International Growth................................ 0.40
Emerging Markets.................................... 0.85
</TABLE>
Prior to July 11, 1997, Kleinwort Benson Investment Management Americas, Inc.
("Kleinwort Benson") served as the investment sub-advisor to the Nations
International Growth Fund. Kleinwort Benson was entitled to a fee at an annual
rate equal to 0.40% of the Fund's average daily net assets up to $325 million
and 0.25% of such net assets in excess of $325 million, less any waivers.
Stephens Inc. ("Stephens") serves as the administrator of the Company and
Nations Portfolios. First Data Investor Services Group, Inc. ("First Data"), a
wholly-owned subsidiary of First Data Corporation, serves as co-administrator of
the Company and Nations Portfolios. Stephens and First Data are entitled to
receive a combined fee, computed daily and paid monthly, at the annual rate of
0.10% of the average daily net assets of each Fund. Effective November 18, 1997,
NBAI became the sub-administrator of the Company and Nations Portfolios pursuant
to a sub-administration agreement with Stephens. Prior to that date NationsBank
served as the sub-administrator. For the year ended March 31, 1998, Stephens
earned $687,097 from the Funds for its administration services, of which
$126,268 and $50,641 was paid to NationsBank and NBAI, respectively, for their
services as sub-administrator.
The investment adviser, sub-adviser, administrator and co-administrator may,
from time to time, voluntarily reduce their fees payable by each Fund. For the
period ended March 31, 1998, the fee waivers were as follows:
<TABLE>
<CAPTION>
FEES WAIVED
BY ADVISER
-----------
<S> <C>
International Growth................................ $145,205
</TABLE>
The Bank of New York ("BONY") acts as custodian of the Funds' assets. First Data
serves as the transfer agent for the Funds' shares. NationsBank of Texas, N.A.
("NationsBank of Texas") served as the sub-transfer agent for the Primary Shares
of the Funds for the year ended March 31, 1998, and earned approximately $20,570
for providing such services.
Stephens serves as the distributor of the Funds' shares. For the year ended
March 31, 1998, the Funds were informed that the distributor received $109,390
in contingent deferred sales charges from shares which were subject to such
charges. A substantial portion of these fees were paid to affiliates of
NationsBank and NBAI.
The Company and Nations Portfolios pay each unaffiliated Director an annual fee
of $1,000 ($3,000 for the Chairman of the Board), plus $500 per Fund and an
additional $1,000 for each in-person board meeting, and $500 for each telephonic
board meeting attended. The Company and Nations Portfolios also
62
<PAGE> 67
NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
reimburse expenses incurred by each unaffiliated Director in attending such
meetings.
The Company's and Nations Portfolio's eligible Directors may participate in
non-qualified deferred compensation and retirement plans which may be terminated
at any time. All benefits provided under these plans are unfunded and any
payments to plan participants are paid solely out of the Funds' assets. Income
earned on each plan participant's deferral account is tied to the rate of return
of the eligible mutual funds selected by the participants or, if no funds are
selected, to the rate of return of Nations Treasury Fund, another portfolio of
the Company. The expense for the deferred compensation and retirement plans is
included in "Directors' fees and expenses" in the Statements of Operations.
The Funds placed a portion of their portfolio transactions with firms that could
be deemed to be affiliates of Gartmore plc.
A significant portion of each Fund's Primary A Shares represent investments by
fiduciary accounts over which NationsBank N.A. has either sole or joint
investment discretion.
3. SHAREHOLDER SERVICING AND
DISTRIBUTION PLANS
The Company and Nations Portfolios each have adopted a shareholder
administration plan for Primary B Shares of each Fund and shareholder servicing
plans and distribution plans for the Investor A, Investor B and Investor C
Shares of each Fund. The administration plan permits the Funds to compensate
institutions for shareholder administration services provided to their customers
that own Primary B Shares. The shareholder servicing plans permit the Funds to
compensate or reimburse servicing agents for shareholder services provided by
the servicing agents. The distribution plans, adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940, permit the Funds to compensate or
reimburse the distributor (and for Investor A Shares, the distributor and/or
selling agents) for activities or expenses primarily intended to result in the
sale of the classes' shares. Payments are made at an annual rate, as a
percentage of average daily net assets set from time to time by the Board of
Directors, and are charged as expenses of each Fund directly to the applicable
class. A substantial portion of the expenses incurred pursuant to these plans
are paid to affiliates of NationsBank and NBAI.
At March 31, 1998, the actual rates in effect and plan limits, as a percentage
of average daily net assets, were as follows:
<TABLE>
<CAPTION>
ACTUAL RATE PLAN LIMIT
-------------------------
<S> <C> <C>
Primary B Administration Plan........... 0.50% 0.60%
Investor A Shareholder Servicing and
Distribution Plan...................... 0.25% 0.25%
Investor B and Investor C Shareholder
Servicing Plans........................ 0.25% 0.25%
Investor B Distribution Plan............ 0.75% 0.75%
Investor C Distribution Plan............ 0.75%* 0.75%
</TABLE>
- ---------------
* Reflects a rate change effective August 1, 1997 from 0.25%.
4. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, excluding
U.S. government securities and short-term investments, for the year ended March
31, 1998 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------------------------
<S> <C> <C>
International Equity............... $626,343,458 $885,143,668
International Growth............... 53,991,740 398,985,062
Pacific Growth..................... 116,294,364 151,562,094
Emerging Markets................... 61,939,983 53,856,074
</TABLE>
There were no purchases or sales of long-term U.S. government securities for the
year ended March 31, 1998.
5. CAPITAL STOCK
As of March 31, 1998, 420,000,000,000 shares of $.001 par value capital stock
were authorized for the Company and 150,000,000,000 shares of $.001 par value
capital stock were authorized for Nations Portfolios. The Company's and Nations
Portfolios' Articles of Incorporation authorize the Boards of Directors to
classify or reclassify any authorized, but unissued shares into one or more
additional classes or series of shares. See Schedule of Capital Stock Activity.
6. FOREIGN SECURITIES
Each Fund may invest in foreign securities. Investing in securities of foreign
companies and foreign governments involves special risks and considerations
not typically associated with investing in U.S. companies and the U.S.
government. These risks include revaluation of currencies, less reliable
information about issuers, different securities
63
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NATIONS FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
transaction clearance and settlement practices, and future adverse political and
economic developments. These risks are heightened for investments in emerging
markets countries. Moreover, securities of many foreign companies and foreign
governments and their markets may be less liquid and their prices more volatile
than those of securities of comparable U.S. companies and the U.S. government.
7. LINE OF CREDIT
The Company and Nations Portfolios participate in an uncommitted line of credit
provided by BONY, 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 0.50% on an annualized basis. The Agreement requires,
among other things, that each participating Fund maintain a ratio of no less
than 4 to 1 net assets (not including funds borrowed pursuant to the Agreement)
to aggregate amount of indebtedness pursuant to the Agreement.
At March 31, 1998, there were no loans outstanding under this Agreement. For the
year ended March 31, 1998, borrowings by the Funds under the Agreement were as
follows:
<TABLE>
<CAPTION>
AVERAGE AVERAGE
AMOUNT AVERAGE DEBT
FUND OUTSTANDING SHARES PER SHARE
- ----------------------------------------------------------------
<S> <C> <C> <C>
International Growth...... $289,863 32,884,886 $--(a)
Emerging Markets.......... 47,945 8,017,247 --(a)
</TABLE>
- ---------------
(a) Amount represents less than $0.01 per share.
The average amount outstanding was calculated based on daily balances in the
period.
8. LENDING OF PORTFOLIO SECURITIES
Under an agreement with BONY, the Funds have the ability to lend their
securities to approved brokers, dealers and other financial institutions. Loans
of portfolio securities are collateralized by cash, in an amount at least equal
to the market value of the securities on loan. The cash collateral received is
invested in Nations Cash Reserves, a portfolio of Nations Institutional
Reserves. A portion of the income generated by the investment of collateral, net
of any rebate paid by BONY to borrowers, is remitted to BONY as lending agent,
and the remainder is paid to the Fund. Generally, in the event of counterparty
default, the Fund has the right to use the collateral to offset losses incurred.
There would be potential loss to the Fund in the event the Fund is delayed or
prevented from exercising its right to dispose of the collateral. The Fund bears
risk in the event that invested collateral is not sufficient to meet obligations
due on the loans.
At March 31, 1998 the following Funds had securities on loan:
<TABLE>
<CAPTION>
MARKET VALUE MARKET VALUE
FUND OF LOANED SECURITIES OF COLLATERAL
- ---------------------------------------------------------------
<S> <C> <C>
International Equity..... $148,921,331 $163,327,773
International Growth..... 66,565,773 70,756,747
Pacific Growth........... 4,981,875 5,423,837
Emerging Markets......... 9,825,157 10,284,763
</TABLE>
9. CAPITAL LOSS CARRYFORWARD
At March 31, 1998, the following Funds had available for Federal income tax
purposes the following unused capital losses expiring March 31:
<TABLE>
<CAPTION>
FUND 2004 2005 2006
- --------------------------------------------------------------------
<S> <C> <C> <C>
Pacific Growth.................. $102,682 $3,864,576 $8,011,681
Emerging Markets................ -- -- 3,825,214
</TABLE>
Under the current tax law, capital and currency losses realized after October 31
may be deferred and treated as occurring on the first day of the following
fiscal year. For the fiscal year ended March 31, 1998, the following Funds
elected to defer losses occurring between November 1, 1997 and March 31, 1998
under these rules:
<TABLE>
<CAPTION>
POST-OCTOBER CAPITAL
SHORT-TERM
FUND LOSS DEFERRAL
- --------------------------------------------------------------
<S> <C>
Pacific Growth.......................... $18,406,407
Emerging Markets........................ 4,493,441
</TABLE>
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NATIONS FUNDS
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. REORGANIZATION
On May 23, 1997, the International Growth Fund, a newly established portfolio,
acquired the assets and certain liabilities of the Pilot International Equity
Fund pursuant to a plan of reorganization approved by its shareholders. The
acquisition was accomplished by a tax-free exchange of shares of the
International Growth Fund in an amount equal to the outstanding shares of the
Pilot International Equity Fund. The financial statements of the International
Growth Fund reflect the historical financial results of the Pilot International
Equity Fund prior to the reorganization. Additionally, the fiscal year-end of
the Pilot International Equity Fund for financial reporting purposes was changed
to coincide with that of the Company.
11. SUBSEQUENT EVENT
NationsBank of Texas merged into NationsBank on May 6, 1998. NationsBank began
serving as sub-transfer agent for the Primary Shares of the Funds on that date
and is providing the same services as were previously provided by NationsBank of
Texas.
65
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NATIONS FUNDS
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND DIRECTORS OF NATIONS FUNDS
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Nations International Equity
Fund, Nations International Growth Fund, Nations Pacific Growth Fund and Nations
Emerging Markets Fund (portfolios of Nations Fund, Inc. or Nations Fund
Portfolios, Inc., hereafter referred to as the "Funds") at March 31, 1998, and
the results of each of their operations, the changes in each of their net assets
and the financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 1998 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where securities purchased had not been received by the
custodian, provide a reasonable basis for the opinion expressed above. The
financial statements of Nations International Growth Fund, formerly Pilot
International Equity Fund, for the periods ended May 16, 1997 were audited by
other independent accountants whose report dated June 20, 1997 expressed an
unqualified opinion on those statements.
Price Waterhouse LLP
Boston, Massachusetts
May 28, 1998
66
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NATIONS FUNDS
- --------------------------------------------------------------------------------
TAX INFORMATION (UNAUDITED)
For the year ended March 31, 1998, the amount of long-term capital gain
designated by the Company was as follows:
<TABLE>
<CAPTION>
FUND 28% RATE GAIN 20% RATE GAIN TOTAL
---- ------------- ------------- -----------
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Equity............................ $ 23,556 $6,706,859 $ 6,730,415
International Growth............................ 6,352,188 4,682,905 11,035,093
</TABLE>
For the year ended March 31, 1998, the total amount of income received by
International Equity, International Growth, Pacific Growth and Emerging Markets
from sources within foreign countries and possessions of the United States was
$0.3108, $0.3064, $0.2807 and $0.2360 per share, respectively (representing a
total of $19,614,979, $6,955,475, $2,188,414 and $1,694,682, respectively). The
total amount of taxes paid by International Equity, International Growth,
Pacific Growth and Emerging Markets to such countries was $0.0339, $0.0362,
$0.0174 and $0.0168 per share, respectively (representing a total of $2,142,075,
$822,185, $135,326 and $120,900, respectively).
67
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NATIONS FUNDS
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MEETING OF SHAREHOLDERS
SPECIAL MEETING OF SHAREHOLDERS OF THE NATIONS INTERNATIONAL GROWTH FUND
On October 10, 1997, the Company held a Meeting of Shareholders of the Nations
International Growth Fund in Charlotte, North Carolina. An amendment adding the
Fund to an existing Investment Sub-Advisory Agreement among NBAI, Nations Funds,
Inc. and Gartmore Global Partners (the "Amendment") was approved by the
following votes: 22,346,450 For, 165,805 Against, and 441,230 Abstaining. Also,
changes to certain of the fundamental restrictions of the Fund were approved by
the following votes: 22,214,128 For, 201,124 Against, and 440,593 Abstaining.
68
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<PAGE> 74
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